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...

Despite these potential benefits, some companies are failing to use their performance management systems effectively for career planning, talent retention and succession planning purposes. For example, Sachdeva and his associates (2009) emphasize that although there are a number of HR initiatives used by companies to help retain talent, there are few actual retention policies in place.
Compensation Analysis. Information and communications technology solutions can also help improve the compensation analysis process by eliminating some of the traditional constraints that have been involved in developing objective assessments of individual job performance. In this regard, Kepes, Delery and Gupta (2009) emphasize that in traditional approaches, "Political influences tend to creep into the compensation system through deficiencies in the performance appraisal system. Many companies rely on subjective global ratings for their measure of employee performance. These ratings are notoriously subject to individual supervisory biases and political decisions" (p. 498). Because the importance of pay and benefits as a motivational factor have been well documented, and even the perception of foul play in this area can produce diminished employee morale and productivity, performance appraisal processes must be designed comprehensively and systematically (Kepes et al., 2009). Thoughtfully implemented and carefully administered, though, performance management systems can make the compensation analysis more transparent and objective, and the use of performance management systems can therefore help human resource managers conduct compensation analyses more effectively (Kepes et al., 2009). Taken together, the foregoing and emerging HR-related ICT solutions have truly affected the traditional practice of human resource management across the board, and an assessment of the impact of these technologies on human resource management is provided below.

Assessment of the Impact of Technology on Human Resource Management

Although every organization is unique and the specific impact of technology on their HR management practices will vary, there are some common benefits that have been realized through the integration of ICT solutions with the HR function, including employee self-service, learning management systems, the ability to provide customized training programs, and the take advantage of the expertise of global teams, which are discussed further below.

Employee Self-Service. According to Marler, Fisher and Ke (2009), employee self-service (ESS) technology has become the focus of a growing amount of attention from researchers and real-world human resource managers alike because of the cost savings that can be achieved as well as additional efficiency-related benefits. According to Marler and his associates, employee self-service technology "is a class of Web-based technology that allows employees and managers to conduct much of their own data management and transaction processing rather than relying on human resource or administrative staff to perform these duties. ESS technology can allow employees to update personal information, change their own benefit selections, or register for training" (p. 327). Just as ICT-based tools can help managers in other areas of the organization concentrate on their core competencies, so too can ESS applications assist HR managers in devoting more time to critical tasks instead of the routine tasks that can be accomplished using these automated techniques. In this regard, Marler and his colleagues conclude that, "Shifting such duties to the individual employee allows the organization to devote fewer specialized resources to these activities, often with the intent of allowing HR to focus on more strategic functions" (2009, p. 327).

Learning Management Systems. When it comes to learning management systems and their potential for contributing to the HR function, there is some good news and some bad news. On the one hand, performance management systems and learning management systems can provide the integrated solutions that are needed to effectively manage organizational talent, an approach that has been recognized as an HR best practice; on the other hand, though, these systems were largely developed as separate applications with little or on thought be given to how to use them in an integrated (Linking learning and talent management, 2009). Therefore, HR managers and executives must develop ways to use the information provided by their performance management systems with that provided by their learning management systems to better aligning performance, training and organizational goals (Linking learning and talent management, 2009).

One of the major constraints to this integration was the inability to directly measure gains…