Performance management plays a crucial role in an organisationorganization’s talent management strategy. It provides the framework for an employee’s growth and development, and gives visibility over how people are performing. Effective performance management has huge benefits, but also requires considerable resources. Often, it can be hard to articulate the return on investment (ROI) of performance management in quantifiable terms.
Aaron Hardy, VP Operations & Strategy – Asia at PageUp helps our customers design talent management solutions. As organisationsorganizations embrace automation to streamline their performance management processes, it can be difficult to prove ROI to the wider business. “Measuring the impact and return on investment needs to be intentional. A business case may help to acquire the budget, but if the measures and senior stakeholder buy-in aren’t baked into the process, then the success of any program is already at risk,” says Hardy.
With the help of our interactive performance management ROI calculator, you can estimate the ROI of your performance management system.
How do we calculate ROI?
Implementing a performance management system can save your organisationorganization time and money, but it can also be hard to communicate its value to the wider business. To prove the success of your efforts, or to track how you’re progressing and identify areas for improvement, it’s important to track the ROI of your performance management.
To help organisationsorganizations articulate the impact of their performance management approaches, we’ve built an interactive ROI calculator. Our calculator can help you measure the ROI of performance management at your organisationorganization in three key areas – reduction in turnover, increased workforce productivity, and time saved. You can take into account variables specific to your industry or business situation in your final calculations.
ROI measure #1: Reduction in turnover
An important metric for businesses to track is staff turnover rates, and how performance management processes reduce this. Our calculator can estimate attrition rates and how much organisationsorganizations can save by eliminating the need to replace people.
As we know, high employee turnover hurts an organisationorganization’s bottom line. It can also impact staff morale and productivity, particularly if there are high volumes of people leaving over a short period. Technology can help facilitate efficient performance management processes – and effectively retain employees. Aligning people with overall organisationalorganizational goals can help them see the road up ahead: and motivate them to stay in their roles (instead of applying for opportunities elsewhere).
Technology can also increase efficiency in HR processes – by effectively deploying people to areas where they’re needed most. One customer we work with which has 2,000 employees was able to demonstrate the ROI of their performance management solution by reducing the number of HR staff required to facilitate the performance and learning processes. “When these types of ROI advantages are achieved what we see in practice is usually the re-allocation of resources to more strategic work, or headcount reduction through natural attrition rather than redundancies,” says Hardy.
“Aligning people with overall organisationalorganizational goals can help them see the road up ahead: and motivate them to stay in their roles.”
ROI measure #2: Increased workforce productivity
OrganisationsOrganizations need to ensure that their workforce is fully engaged so productivity levels remain high and teams are working towards the overarching organisationalorganizational goals. This is another important metric for organisationsorganizations to understand. Use the calculator to help articulate how performance management – in particular goal-setting and alignment – can increase productivity. Gallup research on employee engagement has found organisationsorganizations with highly engaged employees have substantially higher customer engagement, higher productivity, better retention, fewer accidents and 21% higher profitability. It’s important for organisationsorganizations to understand how they’re tracking.
ROI measure #3: Time saved
Time is money – and adding greater efficiencies in performance management using automation can help save both. Use the ROI calculator to demonstrate how eliminating manual processes from performance management can save money and positively impact an organisationorganization’s bottom line. By automating performance management, organisationsorganizations can free up people leaders from time-consuming, administrative tasks like filling out forms and manually inputting data.
Effective performance management drives tangible business benefits. The key to effective performance management is implementing a system that aligns people’s goals with business objectives. By using this principle as the foundation for performance management, people have a better understanding of their deliverables – which can reduce turnover, boost productivity, increase engagement and save time. When all of these elements align, organisationsorganizations see better ROI: and can savour the benefits of increased revenues and maintaining a competitive edge in the market.
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