Performance Management focuses on setting aligned performance goals, creating individual development plans to drive achievement of those goals, and then monitoring and evaluating progress to create accountability for individual and organizational results. This process focuses on the both organizational as well as individual performance.
Performance Management is one of the six key human capital processes defined by TDRp(1) and includes:
- Skill gap analysis
- Development planning
- Goal alignment and goal setting
- Recognition processes and programs
- Performance evaluation and planning
In some organizations, skill gap analysis may reside under Capability Management. TDRp includes it here in Performance Management to ensure a closed loop process that begins with skill gap analysis and concludes with performance evaluation and planning for the next business cycle. In practice, each organization is free to organize their human capital activities any way they choose. We simply need a framework to organize the measures.
Each key process like Performance Management contributes to the achievement of organization goals (for example, a 10% increase in sales or a 15% reduction in costs) and talent outcomes (for example, a 5 point increase in employee engagement or a 2 point increase in the retention rate). Often, some of the talent outcomes are top-level goals of the organization on par with an increase in sales or a reduction in costs. Other times, the talent outcomes are viewed as intermediate goals in support of achieving the top-level goals. TDRp is designed to work in either case.
Over 30 measures are defined for Performance Management. These measures are grouped by type of measure (efficiency, effectiveness, outcome) and across five subcategories. Each organization should choose the measures most appropriate to achieve their goals and manage their human capital. Performance Management will typically support the broader organizational goals, as well as talent management focused goals. A short summary of Performance Management subcategories, including examples, follows.
- Performance Reviews – measures that quantify performance goals and discussions.
- Efficiency examples: Percent of Employees with Goals, Percent of Employees with Written Evaluations, Number of Performance Discussions, Percent of Employees Eligible for Rating
- Performance Ratings – measures that describe performance and potential rating distributions.
- Efficiency examples: Percentage of employees by Performance Level, Percent of High Performers, Percent of High Potential Employees
- Performance Perception – measures that assess employees’ perceptions of the organization’s Performance Management process.
- Effectiveness examples: Pay for Performance, Goal Alignment, Performance Management Process Fairness, Performance Management Fairness
- Performance Improvement – measures that describe performance interventions and improvement.
- Efficiency examples: Counseling Percent by Department, Counseling Time by Reason, Counseling Rate by Reason, Percent of Employees with Improved Rating, Percent of Employees with Rating Turnaround
- Pay for Performance – measures that quantify pay-for-performance efforts.
- Efficiency examples: Pay for Performance Incentive Differential, Pay for Performance Salary Differential
In addition to being grouped by TDRp category (efficiency, effectiveness, outcome), the measures have also been grouped into Tiers, which are described below. When choosing measures, we recommend starting with Tiers 1 and 2.
- Tier 1: These are typically going to be the Key Performance Indicators (KPIs) of a given Talent Process. They are likely to vary from one organization to the next and some “Tier 2” metrics may indeed be key to one organization and “Tier 1” metrics for them, while not for others. At a minimum, “Tier 1” metrics are a list of starting-point, TDRp suggested metrics for those looking to build measurement in a given Talent Process.
- Performance Management examples: Pay for Performance Incentive Differential, Pay for Performance, Goal Alignment, Performance Management Process Fairness
- Tier 2: These are typically going to be the supporting metrics for a given Talent Process, which one might look to in order to determine why any noticeable changes or trends in KPIs might be occurring.
- Performance Management examples: Percent of Employees with Goals, Percent of Employees with Written Evaluations, Number of Performance Discussions, Percent of Employees Eligible for Rating, Percent of Employees with Improved Rating, Percent of Employees with Rating Turnaround
- Tier 3: These are usually the raw data points that when used in combination with one another create the Tier 1 “KPIs” and Tier 2 “metrics.”
- Performance Management examples: Employees Eligible for Review, Performance Reviews Conducted, Performance Rating Decreases, Performance Rating Increases, Total Static Performance Ratings
Click here for a complete list of measures for Performance Management. CTR members may also access the full electronic version of the TDRp Performance Management Measures Library , which provides definitions, formulas, comparable measures, and complete references to source documents for a detailed discussion of each measure.
In addition to the measures described above, ten sample statements and reports have been created for Performance Management. These are all available in pdf format and as Excel spreadsheets (CTR members only). The various statements and reports are described in the white paper Introduction to TDRp. The ten include the following:
High-level Business Outcome Statement (with qualitative impacts)
Detailed Business Outcome Statement
High-level Effectiveness Statement
Detailed Effectiveness Statement
High-level Efficiency Statement
Detailed Efficiency Statement
Summary Report (with quantitative impacts)
Summary Report (with qualitative impacts)
Program Report (coming in 2013)
These statements and reports are provided as a starting point in your understanding and application of TDRp. We know each organization is unique and will need to select its own measures, but the templates have proven valuable to the early adopters.
The white papers Introduction to TDRp and Extending TDRp to All Key Human Capital Processes are highly recommended. Since the TDRp initiative began with a focus on Learning & Development, more has been written for L&D than for the other key processes. The Tips and Tools for L&D, however, will also be helpful for understanding how to construct the various statements and reports for Performance Management. With time, advice pieces will be written for each key process.
Notes:(1)The other five key human capital processes are Talent Acquisition, Learning & Development, Capability Management, Leadership Development, and Total Rewards. Workforce Planning and Demographics is a key sub process, which supports all six key goals. For more on the TDRp framework see Introduction to TDRp and Extending TDRp to All Key Human Capital Processes.