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What do e-payslips, flexible benefits and peer-to-peer recognition platforms have in common? They digitise some reward activities with the aim of making them simpler and accessible to more people. Digital performance management platforms also share similar aims. Features like 360-degree feedback (and peer-to-peer recognition) seek to give a more accurate picture of an employee’s performance and contribution by democratising who can give feedback. Scheduled reminders prompt line managers and employees to set goals and have performance reviews.
Reward and performance management tools have been around for years but as technology improves, they’ve become readily available to even more organisations. New capabilities may have come through upgrades of existing HR software already in use, or via the many ‘software as a service’ (SAAS) subscriptions that tend to be affordable and easy to set up.
So how can we wield the latest technology to significantly improve the way reward and performance are managed? At the end of our previous article in this series, we highlighted that one way to identify opportunities is to think about the ‘endgame’ of key technology enablers: abundance, omniscience and simplicity.
In this article, we explore two examples where this has been applied: one on reward and the other on performance management.
Accessing earned pay early to support financial needs
Delivering early pay through an app enables employees to withdraw the pay they have earned to date quickly and discreetly before the usual pay day. This is sometimes known as earned wage access or employer salary advance scheme.
Early pay can help employees avoid taking high-interest loans to pay for unexpected costs like a leaking roof or punctured car tyre. To be truly effective, it needs to be embedded in a wider financial wellbeing strategy that includes a liveable income, opportunity to save and financial education.
For Associate HR Director Michael Ellis at NHS Frimley Health Foundation Trust, it’s also a tool to attract people to work bank shifts and reduce spending on agency staff in its hospitals. Bank shifts are flexible shifts the NHS uses to meet fluctuating demand for patient care in hospitals. Like agency staff, bank staff can choose whether or not to take a shift. The difference is that bank staff are directly employed by the NHS.
In response to staff dissatisfaction about the frequency of pay, particularly from bank staff, the trust explored running payroll more frequently, but found that it would be too costly. Switching to a different payroll system was not an option. In searching for alternative solutions, the trust happened upon early pay and chose an app to subscribe to after evaluating several of them. It was straightforward to set up and only took a month.
Agency staff used to get paid more frequently than bank staff, but with the early pay app, bank staff can withdraw their pay the day after they’ve worked their shifts if they want to.
The early pay app is available to all staff in the trust and rules are embedded into the app to ensure that staff don’t withdraw more money than they’ve earned after deductions and contributions. Staff can withdraw up to 40% of their gross earnings and up to £1,000 a month. Staff are charged £1.75 for each transaction.
Staff feedback on the app has been positive and amounts withdrawn appear to be modest. According to Ellis, staff who do use the app withdraw an average of £80 for each transaction and make between one to three withdrawals a month. While the app tends to be used by bank staff, interestingly, it’s not just lower-paid staff who use the app but also higher-paid staff.
Fairer performance ratings and talent identification
For some roles like in sales and logistics, the key performance indicators are so clear and data so readily available for analysis that performance can be assessed in real-time. It’s less straightforward for other roles where the manager may be the only person who periodically reviews an employee’s performance. This could result in biased ratings. Having an independent check can reduce that risk of bias.
Now what if that independent check could be done by machine? This needn't be about using technology to eliminate healthy debates around assessing talent and performance as one study found. The opportunity here is to use both the machine’s and the manager’s ratings to help managers have better quality conversations. It can also enable the organisation to put employees on the most competitive career paths faster, said Ericsson Head of People Analytics North America David Swanagon.
When large differences are spotted between the machine’s and the manager’s ratings, it may be a sign that:
- the machine’s analytical model is inaccurate and needs updating,
- the manager might need to be less lenient or harsh in their review, and/or
- there are gaps in the employee’s development which might need to be addressed.
A comparison of machine and manager ratings is embedded in how Swanagon’s current and previous organisations use the nine-box matrix to evaluate employees in professional roles. Not everyone likes using the nine-box matrix to categorise employees based on their current performance and potential for career growth – critics say it’s not useful because it uses unclear metrics and invites bias. But the main point is that the machine can be built to provide consistency in evaluating employees.
To make the machine input more objective, Swanagon advises using a range of data sources other than from the manager. The metrics chosen should be easy for managers to understand. Aim to automate data collection and analysis to free up time for taking action in response to conversations, and enable the machine to evaluate more employees.
Swanagon provides a few examples of metrics that were built into their machine’s ratings.
- Actual vs target key performance indicators (KPIs). Swanagon asserts that every business unit and employee should have a piece of the CEO’s objectives cascaded into their KPIs. Even if the employee does not directly or indirectly generate revenue, they should be adding value in other ways, such as creating a business model that’s sustainable, optimising expenses, promoting the organisation’s brand, or mitigating its risks. Otherwise, Swanagon suggests redefining the purpose of the employee’s role.
- Competitor analysis. This looks at the value that the organisation’s competitors place on the role based on who they’re trying to hire. Swanagon said, ‘If [competitors] are taking these people, that says something about that role and what that role means to the market.’
- Promotion velocity. This is the rate an individual gets promoted within the organisation and the rate that employees in similar roles get promoted in other organisations. ‘If an external successor has a stronger promotion velocity and more meaningful career path than our top internal successor, then that is a sign to HR that they may need to increase development activities for that internal person,’ Swanagon said. ‘We found an inverse correlation [between the manager’s and employee’s promotion velocities]… If the boss has runway left for promotability and for growth, then that’s the type of boss that should be leading the very best talent.’
- Raven’s matrices. This is a nonverbal test to measure an employee’s cognitive load. ‘We create bell curves by domain, so an HR person may not have the same bell curve as an engineer for certain things,’ said Swanagon.
Dimensions for succession planning
In addition to performance and potential, the machine’s nine-box matrix also considers the following dimensions for succession planning:
- Readiness. This evaluates how ready an employee is for the next role and could use data from leadership assessment tools and 360-degree feedback. Swanagon recounted an example of how 360-degree feedback helped surface unknown talent for senior leaders: ‘[e]xecutives didn’t know them as well, but they were loved by their team.’ In that senior role, managing junior relationships was a critical skill.
- Role criticality. An employee’s potential is weighted by role criticality. ‘It is important to weight which jobs matter most to the organisation. We found that by weighting potential, we were able to push STEM graduates into certain career paths. If someone has a really robust cognitive load in oil and gas, we’d want them to be in the upstream side of the business… That’s how they generate most of their revenue,’ Swanagon explained with an example from his previous organisation.
- Inclusion and diversity. An organisation’s diversity targets for gender, ethnicity, disability representation and so on should also apply to individual departments or business units. This is to avoid putting all your high potentials from underrepresented backgrounds in the same departments, said Swanagon. ‘If someone wants to do HR, that’s wonderful. But if they’re being put in HR to advance their career because they’re not being given a chance to be in sales or engineering, [then] that’s a company policy that can be fixed.’
Explore our partner Personio’s articles to find out more on reward and performance:
- Boosting employee loyalty through employee recognition programs
- The four key stages of a great performance management cycle
- What approach to employee performance appraisals work best
- What is the 9-box grid?
Our digital transformation series concludes next month with a recap and overall reflections on the series. We will include excerpts of our interview with Professor Gerald Kane whose research on digital transformation underpinned this series.
Hayfa Mohdzaini, Senior Research Adviser
Hayfa joined in 2020 as the CIPD's Senior Research Adviser in Data, Technology and AI. She started her career in the private sector working in IT and then HR, and has been writing for the HR community since 2012. Previously she worked for another membership organisation (UCEA) where she expanded the range of pay and workforce benchmarking data available to the higher education HR community. Hayfa has degrees in computer science and human resources from University of York and University of Warwick respectively.
She is interested in how the people profession can contribute to good work through technology.