Questions You Should Be Asking

Before you invest your limited resources in any performance management system, there are a number of things you should do first. Ask questions and do your homework. Here is a list of things we strongly recommend you do.

1. Referrals/References - Every vendor's out there can put on a good show. Having solid referrals from industry peers is one of the best ways to limit your risk exposure. A thorough reference check is needed before you enter into any agreement. Do not just ask for references. Ask for a client list so that you have the freedom to contact anyone on the list, not just the vendor's pre-selected choices.



2. Do a thorough analysis of the software features and the functionality of the review process. A list of features and functionality to consider may include the following:
   • Online Journaling
   • Goal Setting
   • Flexibility of Administrator's Modules
   • 360 Review options
   • Self Appraisal
   • Process workflow
   • Security
   • Automatic Interfacing
   • Support and Training Materials
   • Consulting Services
   • Application Hosting options
   • Maintenance Agreement and Support levels
   • Licensing Options
   • Compensation Analysis
   • Probationary (Introductory) review options
   • Compatibility with current systems
     
     
Assessing a product's ease of use (functionality and process workflow) is vitally important. A complex system will be more difficult for your employees to use, potentially eroding their confidence in the process, and ultimately undermining the success of the new product implementation. It is important for you to prioritize what is essential for your organization, what 'would be nice' and what bells and whistles you can do without.

It is important to make a distinction between the performance management process and the performance management software. The process for your organization includes its compensation and organizational philosophy (pay for performance, number of rating levels, what your bell curve should look like), in addition to process workflow. It is important to listen to your employees' opinions on what they consider to be a fair and equitable process. Why bother automating a process that is perceived as unfair by your workforce? Buy-in to a new process is extremely important and you will want to involve key stakeholders in the vendor selection.


3. Vendor Software Content - Delving into the software content details (are performance standards and competencies thorough and "real world"?) is essential. In some cases vendors only sell products that provide a structure for performance appraisal process, leaving it up to the organization to provide all of the content. Operational stakeholders need to review specific software content and be satisfied that the vendor is familiar with your industry. Likewise, it is important to understand which performance appraisal philosophy (e.g. Management by Objectives) your vendor is following to ensure that their product is consistent with your organizational philosophies.



4. Industry Specific Knowledge - Every market sector has unique business needs, regulatory requirements and employee appraisal priorities. For example, in healthcare, the regulatory requirements of the Joint Commission on Accreditation for Healthcare Organizations (JCAHO) are very specific regarding job descriptions, performance appraisals and competency evaluations. If you were selecting a healthcare performance management system you would generally want to have a vendor who is familiar with that market.



5. Cost Comparison - The cost of a new system has several components and total costs are often not apparent at your initial sales meeting. With any software purchase, it is very important to understand both the internal and external short and long term costs. Generally, the costs can be divided into three areas: design and implementation, application ownership, and maintenance/support.
   
   ( a ) Design and implementation - With design, it is preferable to select a 'plain vanilla' product. If you customize your solution, it is important to understand the extra costs involved. Not only will you incur extra programming costs the first year, but every time there is an upgraded enhancement on the base product you will incur costs to make your custom program compatible with those changes.
   
   The organization's internal implementation costs must be considered. How much time will they not have to do other organizational initiatives while they are spending time on planning, mapping, content development, communication and training?
   
   ( b ) Application Ownership - Generally, there are two major options for application ownership. Some vendors charge annual licensing fees while other vendors offer application service provider (ASP) agreements. Generally, licensed software runs on your internal hardware, ASPs are hosted by the vendor. Licensing arrangements are typically more expensive than ASP agreements. Licensing and ASP fees are usually paid annually. Annual licensing costs are typically the same as first year implementation costs, while ASP costs are a fraction of first year costs.
   
   If you prefer an ASP agreement, you will need to review the average down time of the vendor's network, the vendor's back up and security protocols, and the terms and conditions of service termination. You should also consider, for licensing and ASP situations, the hardware and software requirements. You also want to make sure that you own all content before you purchase the product.
   
   Your organization may have a formal policy for ROI (Return on Investment) for any software purchase. This more formal approach, although tedious, does help one uncover the hidden costs of buying a system.This more formal approach can help uncover any hidden costs of buying a system.
   
   ( c ) Support (Consulting/Training, Help Desk and Maintenance) - Maintenance agreements, which protect your organization from bugs and errors are currently averaging about 18% of the purchase price. There is a lot of industry pressure for software vendors to absorb more of these costs and you will probably see this percentage decrease over the next few years. Help Desk support is essential if you do not want to overburden your own IT department. Be sure to get references specifically on how responsive the help desk is to employee needs. Typically there are several levels of help desk (live 24/7, email only, 24 hour response, etc.) with associated costs. Consulting and Training on the new process and/or software may be important to your organization, especially if your Human Resources department is understaffed. This is a good investment to ensure that the product is professionally rolled out and 'buy in' is secured with all stakeholders.