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Improving Performance Management With a Human Capital Management System

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Typically, HCM systems help streamline HR functions by automating and simplifying administrative tasks like tracking performance reviews, managing payroll, and administering benefits. They often offer a centralized, secure way to access and update data.

Human capital management system is a larger umbrella term for many different processes and procedures, including attracting talent, retaining employees, and developing company culture. To do that, you need a strong HR system in place.

Automated Performance Reviews

If you’re still relying on an annual performance review process, it’s time to update your approach. Fortunately, automation tools make it easy to streamline and optimize performance management. This makes it easier for managers to get employee feedback, giving employees a clearer idea of where they’re headed in the future.

Using an automated solution also helps ensure consistency, which is key to avoiding bias in the evaluation process. These systems typically come complete with best practices and guidelines, ensuring supervisors follow a consistent, structured framework when assessing employee performance. This creates a more fair appraisal process, meaning employees will take ratings and feedback more seriously.

Additionally, some solutions provide automatic reminders for all necessary actions in the feedback cycle (i.e., signing off on self-appraisals or approving training resources). This eliminates the need for HR departments to track and chase down performance review paperwork. And finally, some systems also allow supervisors to easily select sample comments for their performance reviews, reducing the need to write everything from scratch.

The right performance management system will enable you to move away from a top-down model of annual reviews and toward a more continuous and agile employee development process. This will help you achieve your company’s goals and give your employees the support they need to succeed.

Improved Communication

Ultimately, effective performance management depends on clear communication. For example, a human capital management system can deliver employee data that may highlight performance and productivity gaps. These data points can serve as catalysts for a wide range of potential changes to your organizational processes. This can include altering scheduling strategies to align labor costs with business needs or adopting alternative training programs to improve employee competencies.

An HCM system can communicate essential employee information, such as upcoming performance reviews or training opportunities. This is an effective way to ensure everyone involved is well-informed and aligned during these critical periods.

And it’s worth noting that a recent study found that schools with high levels of HR maturity performed better on state achievement tests, despite having lower overall socioeconomic status. This suggests that human capital management can positively impact learning outcomes—if done well. The key is to offer employees meaningful career progression and a sense of belonging to the organization.

Increased Employee Engagement

Employee engagement is one of the top priorities for human resource leaders. It makes sense because disengaged employees are a major turnover driver, which can be very costly to a business. Employees who are engaged and feel a connection to their work will go the extra mile to meet organizational goals. This results in a higher level of productivity and profitability.

Whether you have an industry like healthcare or a manufacturing company, employee engagement is important to your performance management process. The key is fostering trust and communication to increase employee commitment and motivation at work.

The first step is to understand your team’s state of mind. 

Some of the best ways to encourage employee engagement are through a recognition program, offering training opportunities, and increasing flexibility at the office. Providing autonomy and ownership of tasks also encourages employee engagement because it allows them to be proactive and tap into their potential at the company. Aside from those initiatives, managers should be encouraged to spend time building relationships with their teams.

Data-Driven Insights

A solid performance management system allows managers to track employee performance and provide feedback based on specific criteria. This ensures that evaluations are individualized and suited to individual goals, challenges, and competencies. This data-driven approach makes the difference between a performance management process that is reactive and one that is proactive.

Whether a company seeks to improve its operations, drive sales, or boost customer service, becoming a more data-driven organization can help achieve those goals. According to MicroStrategy, businesses that are more proactive about using data can be 20 times more likely to acquire new customers and six times more likely to retain them.

HR departments can start by integrating HCM systems and processes into their broader technology platforms to make their companies more data-driven. This way, managers can make smarter decisions using fact-based data collected through market research and analyzed to reveal insights.

The best managers know their role in the performance management process is to be an employee’s coach and supporter, consistently communicating thoughtful and meaningful feedback and conversations. When this occurs, it shapes a positive employee outlook and experience, which can ripple effect on the entire organization. This is the true essence of human capital management. The right technologies can ensure a successful performance management process that supports an employee’s career growth and development.