Performance and Compensation Management
According to Sachdeva, Mittal and Solanki (2009), technological solutions are vitally important for aggregating and using relevant human resource management information for performance and compensation decisions. These authors note that, "Human resource information systems are extremely important for acquiring, maintaining, utilizing and deriving human resources pertinent information. They are essential to make speedy and useful employee related decisions" (Sachdeva et al., 2009, p. 43). The specific attributes and techniques that are typically used by human resource practitioners for these purposes are discussed further below.
Performance Management Systems
Performance management systems represent powerful tools for HR managers by providing:
1. Better insight into individual performance for informed decisions;
2. Improved ability to manage goals and change direction; and,
3. Ability to tighten the reins so everyone remains on track (Managing employee performance, 2009, p. 6).
The studies to date have confirmed that organizations that employ performance management applications enjoy increased operating income growth, a feature that is desperately needed during periods of economic downturn (Managing employee performance, 2009). In some cases, companies have outsourced some or all of their human resource function in an effort to concentrate on their core competencies. A growing body of evidence, though, indicates that companies that retain some or all of their HR resources and use them in new ways can reap a number of benefits, and performance management systems can help achieve this in cost-effective ways as part of an overall financial management strategy. Performance management systems that are used for talent management purposes can provide executives and HR managers with the timely information required to assist in making informed talent decisions (Managing employee performance, 2009). A growing number of companies are using talent management applications that provide ongoing review and feedback that can help in career planning, taking advantage of employees' strengths and developing customized training opportunities where necessary (Sachdeva et al., 2009).
Studies have also shown that companies that engaged in downsizing efforts in isolation from other needed structural changes remained at a distinct competitive disadvantage. As one industry analyst observed, "Successful companies treat employees as assets and involve them in finding ways to prosper. One goal is to make smarter cuts. The performance management system provides better insight into performance, supporting better decisions on staff reductions" (Managing employee performance, 2009, p. 6). During times when staff reductions must be made as well as boom times when companies are prospering, performance management systems can help identify top performers companies will want to groom for more responsible positions in the future. By using the information provided by performance management systems on a routine basis, managers will be in a better position to make important decisions concerning career path directions for their employees (Managing employee performance, 2009). In many settings, the types of expertise that exist within an organization may also be distributed unevenly; therefore, performance management systems can also help determine where companies enjoy an abundance of a certain type of talent and ensure that any reductions in staff are aligned with these strengths and weaknesses (Managing employee performance, 2009). Besides these advantages, talent management applications can also help improve the succession planning function as described further below.
Succession Planning. Just as performance management systems can help identify where a company's talent is distributed, they can also help identify several factors that can be used to facilitate the succession planning needs of companies, even during periods of economic downturn. In this regard, Frauenheim (2009) reports, "Despite the economic uncertainty, organizations can use planning tools to do such things as determine what share of their employees is eligible to retire within five years, and take steps to groom or hire key replacements" (p. 21). Given the increasingly multicultural and bilingual characteristics of American society and the multinational aspects of many companies, the observation by Frauenheim concerning succession planning needs and language skill requirements is particularly timely: "Now is also a good time to try to map the workforce to corporate growth strategies such as deciding whether the organization should be hiring more people with a particular language skill" (2009, p. 21).
Perhaps more importantly, SMEs can also use performance management systems to help them identify high potential employees for leadership positions. According to one authority, "Often organizations promote employees to higher-level positions based on a 'gut feel' of management potential, or recent project-based successes. Some succeed and some do not - a costly exercise in trial and error" (Linking learning and talent management, 2009, p. 5). By taking advantage of the integration of learning...
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