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By Mark Smith
CEO & EVP of Research
Ventana Research, Inc.
In today’s fast-paced business climate, the
agility with which a company manages performance can determine
its market position and profitability. Businesses are driven
by competitive pressures to reach higher standards of competence
in day-today operations and to capitalize on the interaction
of their people and processes; optimizing these to generate
better outcomes is what performance management is about.
Performance management uses best practices,
methodologies and information technology to manage the performance
of an organization. It requires the business to use all its
assets – people, processes and technology – effectively to
achieve its strategic goals. Correctly implemented, performance
management should enable all individuals working at strategic
and operational levels to align their actions to deliver optimal
performance at all levels.
Toward the Performance-Driven
One of the most crucial organizational challenges
in adopting performance management is to engage the corporate
culture to value and support it. Organizational politics can
hinder a company’s ability to become more collaborative and
performance- driven. Enlightened organizations deal with such
resistance through executive mandates, policies and processes
that address the broad set of performance-related initiatives.
A centerpiece of performance management is
to adopt processes that can push the company and its people
to improve their results. After years of research, our firm
has simplified this effort into a methodology called PerformanceCycle.
It employs a three-step process, called “Align, Optimize,
Understand,” that links business requirements and people across
the entire organization. This process contains mechanisms
to assess and utilize technology that can provide people with
information and, through collaboration, shorten the cycles
required for making decisions and taking action.
Performance management is designed for all
parts of the organization, regardless of the specific business
processes they use, including functional areas such as finance,
operations, the supply chain, marketing, sales and human resources.
While each area may have its own activities and desire particular
results, all should follow the outline of PerformanceCycle.
Companies will need to apply a process such
as PerformanceCycle at all levels to reap its benefits, and
insist that individuals collaborate to establish an organizational
strategy, initiatives and goals, only later taking actions
or making decisions. Ultimately, performance management focuses
on operations, where accountability actually resides. Companies
should act to address performance management in a deliberate
manner that will drive change and through it, produce positive
results.
Performing Better
Achieving real improvement requires motivation
and leadership from the top down. Management must pay special
attention to how rewards and training initiatives can be used
to improve the competence of the workforce. The new processes
and techniques must be applied to established employees and
new recruits alike. Successful performance management will
help your organization mature and reach its goals more efficiently.
Many organizations now acknowledge that they
need to perform better as a whole. Human Resources sees this
from a people-centric perspective; finance sees it from the
viewpoints of cost and revenue on a quarterly basis; and more
recently operations has recognized it from a process perspective.
The challenge is to harmonize these efforts to a set of commonly
defined and mutually understood goals. Performance management
is the basis for doing so.
Gaining alignment of people and processes
is perhaps the most difficult task in implementing performance
management. Another critical component is information and
the technology that supports it. Most organizations also face
challenges in generating and managing information that can
supply a competitive edge in their business efforts. Meeting
these challenges is another aspect of performance management.
The core processes of performance management
apply across industries and are independent of the size of
a company, but the business specifics that each process needs
to analyze, predict and forecast may require unique capabilities.
As a result, no single technology provider can solve all your
needs for performance management.
And although technology has matured to respond
to those needs, here as in other realms, management must lead.
Improvement does not come without costs, and many performance
management efforts have failed when executives looked at the
program as an opportunity for avoiding or reducing costs.
Organizations that attempt to address performance management
without investing in people, processes, information and technology
will find themselves thwarted. But such an investment in talent,
operating budget and technology should prove to be a small
fraction of the performance improvements that result.
Performance management provides a foundation
on which organizations can build better business functions,
empower individuals and maximize their results. Using information
and collaboration to align, optimize and understand performance
will improve the operational quality and results of the organization.
By capturing knowledge from across the organization, companies
can build a road map for performance management that will
guide them to long-term gains for individual stakeholders,
the organization and its shareholders. Now, as never before,
the pressure is on businesses to manage their performance
to achieve goals. And now, as never before, businesses have
the ability to transform themselves by implementing performance
management.
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