Annual employee appraisals are just around the corner. Is this just
another time-consuming formality at your enterprise where you need to
justify the distribution of tight compensation budgets, long-awaited promotions,
Many organizations are now actively trying to divest themselves of traditional
appraisal systems characterized by rigid approaches that cannot meet current
business challenges. Instead, they need adaptable performance management
systems that can handle sudden, strong shifts in corporate direction as
well as leave room for performance planning and ongoing communication.
How, for example, would you address issues related to takeovers or mergers
with your current appraisal system? For some companies, the answer is,
We cant. And in the same breath, theyre telling
us they need a system where employee evaluations can adapt to their ever-changing
corporate structure and strategies.
Were now seeing a persistent stream
of interest among customers in closing the gap between corporate imperatives
and employee behavior. At the executive level, successful organizations
enact nimble enterprise strategies to quickly react to changing business
conditions. As those strategies get pushed down the organizational hierarchy,
employees are facing constantly changing tasks, shifts in responsibility,
and the challenge of an increasingly complex working environment. Performance
management solutions must be able to support these conditions.
Appraisal systems that can set only backward-looking, rigid, long-term
objectives clearly saddle organizations with a competitive disadvantage.
It is for this reason that organizations
are now clamoring for flexible, strategic, and future-oriented performance
management systems that allow enterprises to quickly and effectively convert
organizational goals into concrete and measurable employee objectives.
And this is precisely what the Objective Setting and Appraisals
function of mySAP HR is designed to do:
- It supports the organization in setting up a performance management
process that integrates an enterprises strategic planning with
measurable employee objectives, employee appraisals, and compensation
planning and administration.
- It provides a standardized process for planning reviews and performance
assessment, and in so doing, saves time and money by streamlining HR
In this article, I will highlight from
a business perspective how the Objective Setting and Appraisals function
can help enterprises achieve alignment between strategy and employee behavior.
Along the way I will apprise the IT team of how this function is implemented.
When implementing the Objective Setting and Appraisals function,
IT teams will find that:
- Predefined content is ready for plug-and-play setup.
- The solution was built to be easily tailored to the specific
needs of different organizations.
- Tight security on a variety of levels protects sensitive data.
- The solution supports different user interfaces.
- The solution offers the flexibility required in todays
variable working environment.
Meshing Employee Goals with Corporate Strategy
Effective performance management ensures that employee behavior and goals
are aligned with the corporate strategy. Ultimately, this means that each
employee actively contributes to the fulfillment of the enterprises
business performance, so the essential prerequisite is that employees
are familiar with the enterprises strategy. Moreover, it is common
business practice to reward employees according to team and enterprise
This is supported in mySAP HR through its
integration with SAP Strategic Enterprise
Management (SAP SEM). Within the SAP SEM Corporate
Performance Monitor (SEM-CPM), you can create
and manage balanced scorecards a
strategy management approach that aligns goals
with action1 (see
Balanced Scorecard Approach
A balanced scorecard is a strategic management system that enables
you to manage a network of strategic objectives to achieve enterprise
goals. A balanced scorecard not only contains tangible financial
goals, but also intangible factors such as the availability of strategically
important skills. It depicts a tried-and-tested strategy management
- Derive concrete goals from enterprise strategies
- Develop strategic initiatives for the aspired-to goals, determine
responsibilities, and relate goals to the budget
- Link key performance indicators to each of the objectives to
measure goal achievement
The enterprise scorecard can be cascaded through the levels of
the organization, resulting in area or departmental scorecards;
for instance, you can set up an HR scorecard (see Figure 1).
This helps clarify the enterprise strategy for all parties involved,
and can then serve as the basis for individual objective-setting
||The HR Balanced Scorecard (Perspective Overview
and Strategy Map)
The organizational structure,
typically the foundation of strategy management, can be transferred
from mySAP HR to SAP SEM using an ALE distribution scenario.2
Integration between SAP SEM and Objective
Setting and Appraisals provides the following options:
- Objective-setting agreements are the access point for an employees
objectives, targets, weighting of goals, and part and final appraisals.
From here, employees can link to a balanced scorecard, so that with
a single mouse click, they can jump from their individual objective-setting
agreement to their departments balanced scorecard. If no scorecard
is assigned to the employees organizational unit, the system displays
the next appropriate scorecard from a higher organizational level to
familiarize employees with the strategy.
- Employee-relevant strategic objectives from the balanced scorecard
can be inserted into the objective-setting agreement. These objectives
form the framework for the employees own objectives, and help
employees to relate their own objectives to departmental, area, or enterprise
- In SAP SEM, performance overviews for employees or teams can be created,
containing any elements from any scorecard in the system. The result
of the overview is a score, which can be used to appraise an employees
objective automatically. This function helps to set and manage team
objectives, and prevents resentment and strong competition among team
members because they are all measured by their teams success.
The Objective Setting and Appraisals function
can be used for:
- Objective-setting agreements and appraisals
- Standard appraisals
- 360° feedback
Objective-Setting Agreement and Appraisal
Objective-setting agreements like the one in Figure 2 are specifically
designed for modern, future-oriented performance management requirements.
They allow managers to:
- Formulate and weight objectives individually
- Use predefined common objectives
- Include requirements from the employees job, position, and tasks
- Add qualifications from the qualification catalog
||Objective-Setting Agreement (This view is from the planning status
mode where, in this example, objectives can still be changed, but
appraisal columns are set.)
At any time during the performance feedback
cycle, managers can add, change, or delete objectives, set due dates or
execution periods, and include targets such as the number of billable
days. Various scales are available to rate objectives, including a point
scale from 1 to 5 for evaluating competencies, and a percentage scale
for evaluating achievement of measurable objectives.
Standard links within the objective-setting
agreement take users of the objective-setting agreement to the employees
qualification profile3 and the organizational units balanced
scorecard. Objective-setting agreements permit several independent appraisals
(called part appraisals) per person within the same objective-setting
agreement, including a self-appraisal and appraisals from colleagues,
managers, and subordinates. Role-specific access and display rights coupled
with status management support an efficient process of setting objectives,
reviewing current performance, and preparing a final evaluation. Privacy
features ensure that appraisers can make their personal assessment without
being influenced by others opinions.
- Business Add-In (BAdI) technology provides
enhancement possibilities by extending standard
functions, for example:
- A bonus-relevant objective
for the consulting team is to reach at least
180 billable days per employee per year.
By implementing the appropriate BAdI (in
this case a Value
Determination), you can read the actual
value automatically from the workforce
resource planning system and compare it
with a set target.
- One of your managers objectives
is to increase the qualified headcount
by 15% during the next three months.
You want to provide the manager with
access to a corresponding customer report
that enables him to analyze the situation
regularly. Implementing the right BAdI
enables a link that can be used to call
the report from within the objective-setting
There are 41 BAdIs4 with
62 standard implementations that provide
the openness and flexibility required
to tailor the application to suit the
individual needs of customers without
the need for additional modifications.
To name just a few examples, BAdIs
allow you to add:
- Links to other applications in
the SAP system
- Calculation and determination
rules for target or actual values
- Layouts for print and web display
Traditionally, standard appraisals support a straightforward process
of objective setting and evaluation. They allow only one weighted appraisal
for each objective, and are used for classic performance appraisals that
are not preceded by an objective-setting process. This type of appraisal
is still supported in mySAP HR, although, because it is based on past
performance, it doesnt support a future-oriented strategic approach.
The 360° feedback option can contain the same elements as standard
appraisals or objective-setting agreements. However, appraisers each receive
an appraisal document that they can complete anonymously. Often used for
manager evaluation, 360° feedback can provide feedback that is far
more honest than a personal evaluation, especially if it is completed
This solution can be configured to trigger follow-up
processes after an appraisal has been completed:
- Objective Setting and Appraisals supports compensa-
tion policies that are based on performance results. Appraisal
results can be used to generate proposals for compensation
- Objective Setting and Appraisals automatically transfers
new or updated qualifications from the employees objective-
setting agreement to the employees qualification profile
after the final appraisal.
Predefined Content Ensures Easy Implementation
The objective setting catalog is the backbone of the performance management
system. It allows implementation teams to define and administer an unlimited
number of templates that users need for performance management purposes.
For instance, your users probably need a different template for managers
than they need for the staff working in Research and Development. In the
objective-setting catalog shown in Figure 3, templates are displayed
on the left window in a hierarchical view; customizing settings can be
entered in the right-hand window, as shown for the Performance Feedback
The catalog plays a central role in implementing
your performance management system. Instead of maintaining individual
tables, you simply activate predefined templates for objective setting,
standard appraisals, or 360° feedback, and tailor them to suit specific
customer requirements. You can do this without changing screens and without
additional programming all you need is a mouse. If necessary, an
integrated status-management function allows you to run planned objectives
through an approval process.
For specific requirements, the objective-setting
catalog provides access to technical Customizing settings that enable
you to enhance the performance management system using relevant tables
What About Security?
Objective Setting and Appraisals comprises a four-level security concept
that allows you to control access to confidential data:
- Standard HR authorizations determine which data a user can access
for specified employees.
- Structural authorizations restrict the users access to the objective
settings of employees who work in a specific area of the organization
the objective-setting agreements of all employees in the Human
Resources department, for example.
- Authorization object Appraisal Systems: Appraisal Document (P_HAP_DOC)
restricts a users access to specific templates. In addition, you
can use this authorization object to differentiate a users access
rights based on structural authorizations. You can define where, in
the accessible organizational structure, a user has read
or write authorization. In this way, for example, you can
specify that the recruitment manager can change the objective-setting
agreements of his own subordinates, but have read-only access to those
of his colleagues subordinates.
- Role-based access rights on the template level ensure that users can
only read or change information that they are permitted to access in
the objective-setting agreement. For instance, when colleagues and managers
evaluate other employees, you can define that those colleagues cannot
display the managers evaluations.
There are three options for implementing Objective Setting and
Appraisals, depending on your system capabilities:
- You can take full advantage of Objective Setting and Appraisals
by implementing the following mySAP HR capabilities:
SAP SEM to benefit from integration
with the Balanced Scorecard
SAP BW to use the comprehensive reporting
- You can use Objective Setting and Appraisals as a standalone
application if you set up at least one mini master record for
each participant, consisting of the Actions (0000), Organizational
Assignment (0001), and Personal Data (0002) infotypes.
However, this is a limited configuration: employees cannot view
their own objective-setting agreements because they do not have
access to the system, and SAP Business Workflow is not fully supported.
- You can also use Objective Setting and Appraisals if the participants
in the performance feedback or appraisal processes that
is, your employees have their user IDs registered in the
system. In this configuration, employees can view their own objective-setting
agreements. SAP Business Workflow is fully supported.
For technical issues that may arise during implementation, see
SAP Note 497777.
Support for Different User Interfaces
In addition to web interfaces, Objective Setting and Appraisals also
supports the SAP GUI interface. As part of R/3 Enterprise, Objective Setting
and Appraisals is based on Web Application Server 6.20 technology. This
made it possible to realize web interfaces as Business Server Pages (as
shown back in Figure 2) that can be included in mySAP Enterprise Portals
using generic iViews. The result? Enterprises that base their IT strategy
on Enterprise Portals can implement Performance Management equally as
efficiently as those that use traditional SAP interfaces.
Availability and Plans for Enhancements
Objective Setting and Appraisals is available with HR Extension 1.10
for R/3 Enterprise as of Q1/2003. In the long run, this will replace the
mySAP HR Appraisal System.
Planned enhancements to the performance
management system will be delivered with HR Extension 2.00 for R/3 Enterprise.
These will include full workflow support (workflow templates) and comprehensive
reporting capabilities based on SAP Business Information Warehouse (SAP
An iView for the basic Objective Setting
and Appraisals functions is delivered with the Managers Self Service
50.2 business package as of the end of 2002. Future planning includes
integration with Incentives and Commissions Management, thereby delivering
standard scenarios for an even easier implementation of a value-based
performance management system.
Annual employee appraisals do not have to be just another time-consuming
and burdensome formality. Instead, they can become an important milestone
in a flexible, future-oriented performance management system that:
- Effectively supports workforce alignment with the enterprise strategy
- Increases employee motivation and willingness to perform by outlining
clear objectives and responsibilities
- Reduces expenses by streamlining HR processes
With the new Objective Setting and Appraisals
function, mySAP HR supports customers who want to turn away from traditional,
backward-looking appraisal systems and toward flexible, forward-looking
performance management systems.
For more information, including collateral
materials, demos, and presentations on Strategic Alignment and Performance
Management with mySAP HR, SAP customers can log on to http://service.sap.com/hr.
1 Readers unfamiliar with
SAP SEM-CPM and its balanced scorecard
functions can refer to http://service.sap.com/sem or www.sap.com/sem.
For more on the HR Balanced Scorecard,
see the article Personnel Management
with the Balanced Scorecard by Sandra
Bauer at www.sap.info.
2 The prerequisite for
integration is the existence of an RFC
connection between the two systems. The
HR organizational structure can then be
transferred to the SEM system using ALE.
(For a description of the ALE scenario,
see SAP Note 336547, Integration of HR
3 Profiles are used in mySAP
HR's Personnel Development functions to maintain
special attributes and information on an
object. For example you can set up qualification
profiles for employees, containing all their
skills and competencies, and requirments
profiles for jobs or positions.
4 BAdIs have the following
naming convention: HRHAP00_...
5 Technically speaking,
generating proposals for compensation adjustment
automatically requires one of the following
in a matrix dimension of the relevant compensation
- An overall appraisal
(using template ID) or
- A group of objectives
(using template ID and criteria group
- Any of the objectives
(using template ID, criteria group ID,
and criterion ID).
Martina Schuh joined SAP in 1999. She has been
dedicated to the subject of HCM Analytics from
the outset. Since 2001 she has been product
manager for HCM Analytics, including Performance
Management and Workforce Cost Planning and
Simulation. Martina can be reached at email@example.com.