The inherent problems of using disparate HR technology are finally being recognized and addressed by developers. Some, such as Authoria, now offer solutions that provide seamless integration and data sharing across multiple, feature-packed applications. This is a major step forward that promises to significantly improve the ability of HR professionals and organizations to strategically manage talent for maximum performance and competitive advantage.

With this in mind, companies contemplating the acquisition of pay-for-performance technology need to have a reasonable awareness of today's market offerings and be aware of the advantages and drawbacks that each provides.

Today's Marketplace Options

Solutions marketed as pay-for-performance management tools can generally be classified as follows:

• ENTERPRISE RESOURCE PLANNING (ERP): Options in this category are typically addon modules that address compensation and performance management and are designed to enhance the basic functionality of the core ERP. Care must be taken to ensure the base system and add-on module are compatible versions. If not, the systems will not work together. In fact, we have witnessed a hesitation among customers to proceed with upgrade cycles as many have found them too expensive, disruptive, and challenging to manage.
• INTEGRATED SUITES: Comprehensive, fully integrated solutions that manage data directly within the HRIS environment, can effectively link performance and compensation management, and can react swiftly to changes in legislative requirements and industry trends.
• NICHE SOLUTIONS: Applications designed to address specific aspects of performance and compensation management. These vary significantly in terms of functionality and generally do not offer integration capability.
• CUSTOM APPLICATIONS: These applications are typically created in-house and are now widely considered to have the highest risk and cost of ownership.

An Incremental Option.Software on Demand

Companies today require flexible methods for consuming software. In response, many companies are offering customers the option to buy a software subscription, where customers can rent the software for a set period, rather than buying a perpetual license. This "software on demand" model allows customers to take advantage of a per employee/per month pricing structure that delivers a lower entry cost as an operational expense. Customers can access and use software via encrypted, highly secure, Internet technologies and pay periodic service fees. The software-on-demand model offers several distinct advantages over the traditional purchase and install approach.

Most importantly, it reduces customers' infrastructure requirements and the concerns associated with periodic software maintenance and upgrading. Instead, software experts.the software firms themselves.handle maintenance and upgrading. The second major advantage of software-on-demand is that it disperses software costs over time on an as-used basis, rather than requiring a capital outlay that must be amortized.

Some software providers are going a step further to give their customers complete flexibility by offering a variety of application management services, including:

• Application configuration, testing and staging
• Content authoring, plan implementation and updates
• Implementation of upgrades and application of patches
• Complete hardware production support
• Presentation changes
• Integration of customer employee data
• Security authentication for single sign-on access

Vendors like Authoria allow customers to manage plan and system changes, view reports, and access project management data through a dedicated customer portal. Customers reap the benefits of a fully managed application deployment environment, while being able to manage customizations required by their organizations.

Additional advantages include removing the challenges of program management, including upgrades and application maintenance, while having minimal impact on an organization's HR and IT resources. And, these application management services often deliver the management and maintenance of the applications at a lower total cost of ownership than if the applications were managed by the customer. Authoria and other firms have in-house professionals who are highly experienced and adept at helping companies manage HR processes through their technology.

These new options in the HR technology marketplace can provide increased organizational flexibility, giving organizations complete control of their business applications and therefore deserve careful consideration in any decision process concerning the acquisition of HR technology.

What Effective Pay-for-Performance Requires

If pay-for-performance is to be truly effective and ultimately drive strategic talent management, several organizational capabilities must be addressed simultaneously in a way that is seamlessly integrated and therefore able to function smoothly. Core capabilities the technology must address include:

• Base and incentive compensation planning and management
• Succession planning
• Organizational goal setting and performance monitoring
• Employee goal setting and performance monitoring
• Organizational and employee alignment
• Organizational and employee competency tracking
• Career development planning and monitoring
• Analysis and reporting
• Change management
• ust-in-time knowledge and coaching for managers and employees

As discussed previously, the market offers numerous solutions that help companies address any, or several, of these areas. However, one of the critical keys to success is technology integration. We often ask the question: How can you have an effective pay-for-performance program if performance is not linked to pay? We strongly believe that, for optimal results, the performance management system must be closely integrated with the compensation management system.

The Importance of Integration

Unlinked or semi-linked systems, for example, one to address compensation and another for performance management is a common obstacle to success. Some currently available solutions are, or can be, integrated with various degrees of success.

Others that claim to be integrated really don't provide seamless information access and flow among individual components. Systems like these often offer a common portal as a starting place, but beyond that provide varying user experiences that make the overall process much more challenging, increase the need for training, and reduce the overall effectiveness of the system.

In addition, non-integrated or poorly linked applications give rise to problems that prevent organizations from deriving maximum value and hinder effective implementation of pay-for-performance. Among common problems are:

• Inconsistency of employee and group objectives with corporate strategic goals
• Development of human capital inconsistent with organizational strategy and needs
• Employee dissatisfaction and disenfranchisement
• Migration of human capital to competitors
• Reluctance by managers to learn and use the technology as intended
• Reduced return on technology investment
• Suboptimal corporate performance

These and other difficulties are often overlooked because they generally are invisible and difficult to quantify. Their impact, nonetheless, can be substantial.

The Importance of Change Management

Regardless, of the technology solution, for any pay-for-performance program to be effective, organizations need to address change management. Without change management in place, it won't matter how sophisticated the underlying technology is. To achieve satisfactory adoption, managers must be able to understand not only how the technology works, but also how it will make their work lives better. Failure to adequately comprehend both will lead them to use the application sparingly, if at all.

A critical component of program success is managerial acceptance. Managers must be engaged and understand the role they play in the process. This means that, in addition to be relatively easy to learn and use, the technology must include educational support for managers. In our experience, solutions that offer support in the form of just-in-time knowledge and coaching are the most successful because they provide information when managers need it most.when they are in the middle of a process, or when they need to answer employee questions.

The Critical Role of Communications

Pay-for-performance involves a complex array of data and processes that affect each employee differently, both in direct and indirect ways. The success of pay-for-performance, therefore, depends heavily on the degree to which employees understand their unique performance objectives, how their own contributions relate to group goals, and ultimately, to the organization's mission, strategy, and marketplace success. If payfor- performance is to be a genuinely motivating force, communications about performance and objectives need to flow unhindered between employees, managers, and executives. And importantly, these communications channels must flow freely in both directions. Clear communication has always been crucial to good leadership: the complexity of pay-for-performance only heightens its importance.

There is a serious misconception among many employers that introducing technology to their pay-for-performance plans will lead to manager and employee confusion. Our experience nearly always has found this untrue. Instead, investigation shows the root cause is typically weak communications that fail to adequately inform, engage, educate and coach managers and employees. To be effective, pay-for-performance requires communications that fulfill four primary functions:

1. INFORM: Managers and workers must understand what is occurring, what is expected of them, the end goal of their efforts, and what successful execution will mean for them.all on a current basis.
2. ENGAGE: Pay-for-performance success directly correlates the degree of engagement by employees and managers, a fact confirmed by the experience of early adopters.
3. EDUCATE: Managing change successfully, especially change that involves introducing a complex process, requires carefully teaching everyone involved everything they need to know about the process.
4. COACH: In pay-for-performance systems, coaching is vital and the dialogs between managers and subordinates can be an important part of legal compliance.

Implementing pay-for-performance raises the significance of effective communications to an even higher level. And introducing technology to support the process raises it even further. As with all major HR initiatives, change management and the communications its success depends on must be a prime management consideration.