The notion of paying workers based on their own individual performance seems intuitive. In essence, it means paying individuals for what they actually do and not paying them for what they don’t do, relative to organizational needs. Theoretically, this leads to the optimal use of resources, both human and financial. Consequently, most organizations and HR professionals see pay-for-performance as the cornerstone of strategic talent management. For instance, in its 2004-2005 Workplace Forecast, the Society for Human Resource Management (SHRM) lists “linking pay and performance” as one of its key employment trends.

However, attempts at using technology to link compensation to performance have thus far seldom generated the anticipated improvement in worker behavior. In fact, The Wall Street Journal recently reported that 83 percent of companies with pay-for-performance plans describe them as “only somewhat successful or not working at all.”

Poor Communication and Failure to Address Change Management

The Wall Street Journal article cites poor communication of corporate goals and failure to engage managers and employees in the performance management process as prime reasons for pay-for-performance failure.

Consistent with this, our experience reveals that companies frequently fail to address change management when implementing new technology, overlooking the impact that such fundamental changes have on their organizations. They therefore neglect to engage, educate, and communicate effectively with each of the parties involved. This leads to unintentional misuse of new management tools and systems, and occasionally to full-fledged resistance by the intended users.

By neglecting to effectively address critical change management issues, companies fail to reap the full benefit of their often-substantial investments in new technology. Conversely, those attentive to such issues enjoy much higher rates of success.

Use of Non-Integrated Technology Solutions

The HR technology marketplace has provided a broad spectrum of solutions that address such narrowly defined areas as compensation, performance management, and employee communications. However, the inability of these programs to interface effectively with one another and with other enterprise solutions has limited their usefulness in building and implementing cohesive talent strategies.

If savvy developers can design sophisticated solutions to efficiently manage and administer various individual HR functions, why have users been left to struggle with a mix of disparate technology solutions? The answer is that, until recently, niche developers concentrated on advancing their products within their respective technology niches. Few took on the challenge of building comprehensive, integrated, HR solutions.

Further, the larger ERP developers have been primarily focused on designing systems that automate non-strategic processes such as payroll, manufacturing, and supply chain management. Their more strategic solutions are often not robust and, beyond the backend database, fail to adequately integrate with one another. What companies need, therefore, is a suite of HR solutions that integrate fully with one another, as well as with the organization’s other core systems.