Evolution of EPM concept
Rapidly changing trends in the local and global economy, the global movement of human capital, and outsourcing are causing businesses to look for ways to improve their competitive edge. Consequently, employee performance is becoming a key part of business strategy. Companies worldwide understand that employees are the most important component in business, and now growth is being driven by pressure to get more value from existing employees. However, until recently, methods and technologies to measure and quantify employee performance have been inadequate, largely because the measurement of employee performance has not been tied and measured with company goals. To remedy this, the concept of employee performance management (EPM) recently emerged as a new frontier in human capital management (HCM). EPM models place individuals at the heart of the enterprise. The model aligns employee performance with organizational goals through the collaboration of employees and management, and human resources (HR) and line managers.
Problems managing performance in traditional way
Every company wants to improve organizational performance through its employees and has traditionally relied on the HR department to monitor performance. However, the traditional process run by HR is suffering from the following problems:
Traditional employee performance evaluations are conducted once a year, though performance is a continuous issue. Thus this method cannot save mid-way disasters caused by employees or by negligent managers who have not been following business plans or objectives.
The HR department and line managers are not coordinated. There are no collaborative platforms between HR and line managers, and HR often knows little about specific employee roles and management functions. Nonetheless, the evaluation forms are usually prepared by the HR department and are often too general and rigid, containing HR jargons that do not apply to the employee. Subjective values, like personal traits, are often used making it hard to rate employees. Measuring maturity, attitude, personality, initiative, dependability, and competencies may also lead to charges of bias and discrimination.
There are no set goals or rules or if there are, the goals are established by the supervisor. As a result, the evaluations do not correspond nor are they unified with the overall company objective. Because the evaluation is done based on what the supervisor thinks about the employee, employees often perceive feedback as inadequate, misleading, inconsistent, or biased. Accordingly, employees have less trust and enthusiasm when performing their tasks. Furthermore, without a unified system, problems occur when the supervisor or manager leaves the job or is transferred to another department before the evaluation period starts.
Historically, HR has fewer employees compared to other departments and technology has brought departments down to a skeleton level. On average, 1 HR person works for every 150200 employees. With such an unfavorable difference, HR cannot give the necessary degree of attention required for each employee. Line managers and employees know each other better, have a greater level of trust, or are at least better suited to comment on each other's competencies. This is not necessarily the case between HR and employees.
Some managers and supervisors don't like performance management because they are uncomfortable making judgements on their employees' performances. Who to reward for excellent performance or who to train for improvement becomes a big issue, especially when there is no methodology for measuring performance.
Self-assessing and self-criticizing is tough. Constructive criticism can be difficult for some employees. Many take criticism personally and become defensive. Existing evaluation approaches are typically top down, meaning only management conducts evaluations; employees do not evaluate management. Ideally, assessments should work both ways and be interactive. Management and employees should participate in the process.
In addition to these problems, outsourcing, complex employee roles, and growing company size due to merger and acquisitions are also presenting new challenges to traditional HR departments. Currently companies are implementing performance management software, but it is rarely aligned with enterprise performance management. Therefore, line managers and HR need specific tools to measure employee performance in conjunction with business goals. EPM tries to bridge this gap and is becoming one of the fastest growing segments of human capital management (HCM). However, it is still in the early stages of development and though many vendors are entering this market, no one has yet emerged as a strong player with solid enterprise customer-base. This does not mean, however, that these vendors are not ambitious. Czanne Software is one such example.
European-based Czanne Software has developed some solutions to measure and manage employee performance. Over the last eight years, it has designed and implemented a large number of performance management solutions in Europe, integrating them with a number of different methodologies. The vendor's solutions are widely used the retail, pharmaceutical, banking, fashion, and manufacturing industries in Europe by approximately 350 companies and 20,000 employees.
Users need to keep in mind, however, that EPM is a new market, and, there are no standardized functions and features for EPM. EPM vendors are specializing in different aspects of performance-related functionalities, so it is crucial to know what the company's priorities are. For example, CCHKnowledgePoint focuses on performance and competency management; Canadian-based Halogen provides solutions for performance management and surveying; InScope Competency has a broad talent management suite; and Kenexa supports recruitment and performance management. Peoplesoft, (recently acquired by Oracle) has a strong competency management solution called ePerformance; Performix specializes in call center performance management; and Siebel's EPM is a part of employee relationship management.
Since performance management is highly dependent on methodology and as each company has a unique model, process, and workflows that are best suitable for its organization, customization is more desirable than "one-size-fits-all" solution. Likewise, customization and modification is needed so the Czanne model can work effectively for the human capital-intensive client and for users to set goals, objectives, and competencies. Czanne is most appropriate for enterprises looking for broad latent management tool that has good breadth and depth and supports such concept of pay for performance. Overall, Czanne has a relatively shorter implementation time, compared to its competitors and is suitable for mid to large enterprises. It should be noted, however, that Czanne is less competitive solution for large organizations, which, in the past would have likely turned to PeopleSoft solutions, though it is unclear if Oracle will be actively marketing PeopleSoft solutions at this point.