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HR planning – Performance management

Posted by  Tijana Balotic Truong

Organisations prepare plans in order to ensure specified objectives are met, but formulating the plan is only the first step towards making that happen. Once the direction is known, performance management is the tool that brings the organisation to a desired destination (or close to it). Today we look at how performance management can support the delivery of HR plans.

The performance management process

Overall, the performance management process consists of several stages, most of which are framed during the planning cycle:

  • Identification of the key areas in the human resources (HR) plan
  • Identification of the main drivers for each key area
  • Identification of the critical factors that can impact the main drivers
  • Monitoring the development
  • Adjusting HR plan
  • Repeating the process

The key areas of an HR plan

The focus of human resources is the people that an organisation needs to achieve its goals. As such, key areas for HR to manage are:

  • The existing and future members of the organisation. (This is often referred to as employees or headcount).
  • The requirements for them to join, stay and perform well in the organisation.

The main drivers for each of the key areas of an HR plan

The structure and profile of the people on board will depend on the field and industry that an organisation operates in, its objectives, values and its culture. The reality is that if management do not support a specific change in the organization, current patterns such as ways of working or behaviors, will stay as they are.

During the planning process HR should validate how realistic the headcount assumptions are. For example, if the company wants to increase its sales through geographical expansion, sales managers will need to estimate the number of additional sales representatives required and their estimated start dates. HR should assess whether their expectations are feasible and then when the plan is approved, prepare the recruitment schedule accordingly.

If certain positions require particular skills and knowledge, HR should investigate possible ways of securing the right candidates. In some cases, people may not be available locally, which usually increases the length of the hiring process and the associated cost. Notice period also impacts actual candidate availability.

The critical factors that impact the main drivers

Both internal and external factors impact employee recruitment and retention. Internally, factors such as the company’s performance, management style, future potential for growth, tools, systems and processes can impact recruitment and retention. These are all under direct control of the organization. On the other hand, the company usually has no or rather limited influence on external factors such as the economy, demographics, social trends and legislation.

Understanding the circumstances in which the company operates is essential for having a feasible action plan. HR need to ensure that the right people are brought into the team and are motivated to take part in achieving the objectives of the organisation. In order to do this sufficiently, HR needs to take an active role in recruitment and adapt its hiring strategies and offers for new members while not forgetting the existing employees. All of these components should be budgeted for (time, cost, tools) and executed with quality.

Monitoring the development

Monitoring the development of the HR plan is possible if the department has timely access to all relevant information. The most critical data points are:

  • The number of people. For example, how many people are working in the organisation and the availability of new candidates.
  • The costs associated with those people. In other words, how much does the organisation pay or plan to pay for them to work in the company.

Tracking the number of employees could be combined with the mechanisms used for payroll calculations. For that to work, tools should be:

  • Adapted to capture the lowest level of the organisation (e.g. cost centers).
  • Updated on a monthly basis to capture any:
    • Organisational changes including new roles and transfers within the company.
    • Compensation changes, for example if a role transfer is followed by a salary increase.

In order to add value to the organisation, early visibility of the information is important. Reporting should include the number of people the company has versus how many it planned to have in the same period, along with the associated costs and expected costs. Depending on the nature of the data required, some of it will be available before the period is over (e.g. number of hires in current month), or shortly after (e.g. the total costs for the period).

Likewise, status updates on open positions should be shared with respective team leads on a regular basis. Sometimes internal administrative procedures slow down recruitment, which can have a domino effect.

If a position is filled a month late, the costs associated with this position will be lower in the first year. Alternatively, if a position is expected to generate revenue (e.g. new sales manager) the gross margin for the period is at risk. In the example of the new sales manager, if the rest of the sales team cannot secure additional sales to compensate for it, the bottom line suffers.

Adjusting the plan on an on-going basis

Any material changes known as a result of latest real-time developments should be reflected in the plan for the upcoming period. The frequency of adjustments to the plan adjustments will be driven by the organisation’s planning cycles and the respective senior management.

Even if there is no official requirement for senior management to update HR in a specific period, it is helpful for HR team leads and their business partners to share knowledge of the latest status for all recruitment.

That information will then become a base for preparing future official updates when they are requested. More importantly, it indicates if other operational changes are required. When a new hire is delayed, the department needs to re-arrange its activities accordingly. If a selected candidate is seen as the best fit for the company, but requires a higher than planned salary, the organisation will need to look for ways to fund the cost variance.

Performance management is a continuous process. Reality triggers the need for assumptions to be updated and alternatives to be developed. For HR to succeed in delivering its promise, communication and cooperation with various departments in the organisation is crucial. In today’s world, information is one of the key strategic resources. The competitive edge of any organization is defined by their ability to know what is happening and anticipate what will happen represents. Therefore organisations desperately want a proactive HR department who recognises the changing dynamics, adapts accordingly and offers solutions to any risks or challenges.

Tijana Balotic Truong

Tijana Balotic Truong is a performance management and commercial finance specialist, with 15+ years of international experience in large FMCG companies.

She is strong in risk management and developing business partnering within markets, regions and HQ, and is now helping start-ups and SMEs in the domains of strategy and finance.

Tijana is also active in NGO sector, most recently focusing on enhancing fund raising strategies and programs that improve children well-being.

She is a Chartered Global Management Accountant and a Master of Management.