As debate about the different approaches to evaluating individual employee performance continues, one of the top concerns companies have when it comes to assessing organizational performance is the extent to which the human resources function is providing value.
Roughly 63 percent of HR practitioners tagged HR value management as a top priority of their organization’s performance management process, according to a 2014 performance management survey by Human Capital Media Advisory Group, the research arm of Talent Management magazine. Making sure a company’s investment in HR is bringing valuable returns joined strategic management as the top performance management priorities, according to the survey (Figure 1).
The survey, conducted in May, included 93 HR practitioners from companies of varying sizes and industries.
Perhaps less surprising, the next highest priority HR practitioners said their companies have when measuring performance is financial management. Of the companies surveyed, 45 percent ranked it as a top area of focus.
Among the areas talent professionals say are the lowest priorities in measuring organizational performance are innovation management (11 percent), service management (9 percent) and procurement (7 percent), according to the survey.
Overall, companies continue to invest in performance management programs, as nearly 60 percent of respondents said they have had a system in place for more than a year. Meanwhile, 15 percent of HR professionals said their companies started to invest in performance management within the past 12 months, while 12 percent said they plan to implement a program within the next year, the survey showed.
Most HR practitioners say their companies measure organizational performance quarterly. About a quarter said their firms measure it on a monthly basis — an increase from 2013 HCM survey data, when 18 percent said their companies measured performance monthly (Figure 2).
In reporting performance to executives, most HR practitioners said they present revenue-to-budget figures, followed by return on investment and cost-to-budget figures, according to the survey.
When it comes to the tools companies use to report organizational performance, 81 percent of practitioners surveyed said they use standard reporting tools, followed by dashboards/scorecards (59 percent) and workflow and collaboration tools (41 percent).
Companies appear slow to adopt some of the measurement tools related to data analytics. Just 21 percent said their companies use data integration and warehousing tools to measure organizational performance, 18 percent said they use advanced analytics and data mining tools and just 10 percent said they use online analytical processing tools (Figure 3).
In any event, HR practitioners report that their companies anticipate an increase in overall performance management tool usage during the next two years.
In fact, the majority of HR practitioners report an expected increase in their company’s use of every organizational performance management tool during the next two years — save for data integration and warehousing, and online analytical processing tools. These tools are expected to drop off in use (Figure 4).
In terms of program satisfaction, HR professionals say their companies are happiest with initiatives aimed at integrating business processes and those that manage a comprehensive set of performance indicators, according to the survey. Nearly 55 percent of companies surveyed indicated that they were satisfied with efforts in those two areas, while about half of the companies were also happy with the execution of program strategy.
Companies, however, are not content with the ability of their performance management programs to propel organizational change. Of those surveyed, 26 percent replied that they were dissatisfied with their program’s agility in steering the organization.
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