Source: E-mail dt. 26 August 2011
Empowering Performance Management with Employees in IT Industries
Dr. A. Lakshmi
Director, School of Management, K.S.Rangasamy College of Technology, Tiruchengode.
Assistant Professor and Research Scholar, School of Management,
K.S.Rangasamy College of Technology,Tiruchengode, Tamilnadu, India.
Performance management is the process of creating a work environment or setting in which people are enabled to perform to the best of their abilities. Performance management is a whole work system that begins when a job is defined and ends when an employee leaves the organization. Performance is the sum of behavior plus results. Performance management has two goals, the first goal is to create competency in people and the second goal is to create growth in employees. Compensation is a systematic approach for providing monetary value to employees in exchange for work performed. It may be given for several purposes namely assisting in recruitment, job performance and job satisfaction. It is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness. Performance based pay is a type of compensation system where it has two major types i.e., pay for group performance and pay for individual performance. According to Development Dimensions International (DDI), performance management systems are active in 91% of 3,600+ organizations studied. The current trends in Performance use the Strategic HR which is the link between Employee Performance Management and Organizational Performance. A number of common practices emerged in Industries and Software-aided performance management systems are uniquely suited to enable organizations to meet challenge. The best practices are Simplicity, Alignment with Business Objectives and Strategy, Decentralized Control, Training, Less Emphasis on Rating, Employee Participation and "Ownership", competencies, team-based objectives in individual performance plans, Flexibility, measurement process and Employee development. Organization must use compensation as one of their most important communication tools. It can be utilized to send a message about the organization’s expectations and goal achievement rewards to the employees. It should include measurement system for awarding variable pay.
An effective strategy is to align the goals of the organization with the practice by creating a more direct relationship between performance and compensation. Performance based plan is a development process utilizing a strategy of inclusion, participate in every step, implement a developed plan with the highest possible level and incorporates adequate incentives to enhance the desired behaviors.
An organization review various compensation plans. Selection of an appropriate plan is highly dependent on the specific characteristics. Performance can improve by step procedure i) survey ii) reward iii) standardize iv) communicate. Performance is the sum of behavior plus results, Performance = behavior + results. Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness.
Compensation structure is comprised of three levels i) foundation range ii) career range iii) expert range. Human performance improvement is a powerful tool that can be used to help build intellectual capital, establish and maintain a high performance workplace, enhance profitability and encourage productivity.
Definition of Performance
Performance management is the process of creating a work environment or setting in which people are enabled to perform to the best of their abilities. Performance management is a whole work system that begins when a job is defined as needed. It ends when an employee leaves your organization.
Definition of compensation
Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non-monetary benefits to employees. Compensation is a systematic approach to providing monetary value to employees in exchange for work performed.
Needs of performance and Compensation Management
A good compensation package is important to motivate the employees to increase the organizational productivity. It helps in running an organization effectively and accomplishing its goals. The most competitive compensation will help the Organization to attract and sustain the best talent. The components of a compensation system include: Job Descriptions, Job Analysis, Job Evaluation, Pay Structures, Salary Surveys and Policies and Regulations. The Different types of compensation include: Base Pay, Commissions, Overtime Pay, Bonuses, Profit Sharing, Merit Pa, Stock Options, Travel/Meal/Housing Allowance and Benefits including dental, insurance, medical, vacation, leaves, retirement, taxes.
Current Trends in Performance and Compensation Management
Most of the organizations are utilizing performance management systems / performance management software. The current trends in performance are Strategic HR - The Link between Employee Performance Management and Organizational Performance and 90% of companies surveyed, perceive improved management of their workforce as key to gaining competitive advantage. Organizations are aligning their employee performance goals with corporate performance goals through technology solutions. Increased Integration of HR Functions and Increased Automation of Performance Management and HR Functions.
Online performance management systems
HR executives identify improvement of HCM (Human Capital Management) technology as a key response to their business challenges. The main areas of focus are hiring management solutions, pre-employment assessment, employee self-service and performance management. Most of the organizations are stuck in paper-based performance evaluation systems with annual reviews. As companies transition to online performance management systems, some key ingredients are: Scalability, Employee self-service and Integration.
Web - Based Solutions
Halogen Software offers E-Compensation, a leading web-based solution that helps streamline the compensation process by: Suggesting pay adjustments based on appraisal scores and other criteria, Providing convenient access to key background information on every employee, Automatically verifying all recommendations against established budgets and pay guidelines and flagging those outside corporate policy and Automating workflow and reminders to keep the whole process moving until final approvals are in place
Best Practices in Industries
The ideally suited to support performance management best practices are software-based systems. Understanding and implementing the following practices becomes the challenge for performance-focused organizations. They are Simplicity, Alignment with Business Objectives and Strategy, Decentralized Control, Training, Less Emphasis on Rating and Employee Participation and "Ownership".
Best compensation management practices are part of an overall employee performance management strategy and it include: Establishing pay and classification practices that enable the organization to attract and retain qualified, high quality employees, Rewarding sustained high performance, Ensuring compliance with any local or federal regulations, Supporting managers in achieving organizational goals and Training and advising supervisors on compensation and management concepts.
Great 10 Reasons for Managing Compensation:
Required and Missing in an Organization
Each and every organization is following the practice of performance analysis at the beginning state of the work. Based on the performance the compensation is provided either in the form of monetary or non monetary. After that the practice is slowly flawed. Because of the reason the performance of the employees in organization gets down and leads to less productivity. The analysis of performance and compensation is required in all stages and at all work. It should be a continuous process in all organization.
An example of the good performing organization is TVS because it follows the continuous process of analyzing performance and providing compensation. The worst performing organization is Life Insurance Companies, because they are not following the process.
Performance based pay is a type of compensation system where it has two major types: pay for group performance, pay for individual performance. Organization must understand the performance standards necessary to achieve the desired level of compensation and must be provided with accurate information. The reality is each individual brings a unique contribution to his / her job. The ability of performance system to recognize how work is accomplished as well as what is accomplished. Unfortunately in many organizations today performance management process is flawed. To succeed in competitive and demanding global environment, every organization must continuously improve their performance using performance system and accordingly compensation has to be provided.
1. Total compensation management, taming cost and rewarding employees by Aberdeen Group, April 2008.
2. Innovative Trends and Strategies in Compensation and Performance Management by standard Chartered, 18th July 2006.
3. New Approaches to Compensation Management for Information Technology Professionals by Marsha Benenson-Farley & McKenzie Hall, Celeste Giunta.
4. Implementing a performance based compensation plan – the secret is in the development process by jonathan M.Stern.
5. Performance Management: Impacts and Trends by Roger Sumlin.
6. Case study: Creating a high performance culture in Siemens.