An organization’s ability to reach new markets, recognize opportunities for product innovation, achieve sustained growth, and face the pulls and pressures of the market are dependent on its ability to execute strategy. Performance management is the process by which organizations measure and manage execution of this strategy.
Businesses that lack a performance management system are often caught by surprise. Take for example ‘The Case of the Non-Performing Project Manager’. The inability to take stock of the performance of your project manager can result in projects that are stuck, angry stakeholders, and discontented team members. In the worst case scenario, this could involve a breakdown of your organization’s delivery mechanism, a damaged reputation, and spiraling losses.
A scenario like this can be avoided with a performance management system that measures operational performance of the project management team. A well-designed set of metrics will enable stakeholders to spot problems quickly and take corrective action.
But this is easier said than done. Many organizations try and fail to create a performance management system that lives up to these lofty expectations. There are many reasons why these systems fail; this article will examine four of the most common.
- Non-alignment with a Business’s Day-to-Day Processes
The cardinal sin of performance management is its non-alignment with the business processes driving an organization. A performance management system must be baked into everyday processes like operations, budgeting, marketing and recruitment. The metrics you define should reflect your business’ strategic direction, but be measured at a tactical level. This means measuring the activities of individuals, and rolling the results up to departments, business units, and finally the organization as a whole.
Performance management systems should be designed from the ground up for the specific challenges and strategic goals of a business. Your organization’s strategy is unique, so the way you measure performance should also be unique. Organizations that use a generic (or slightly altered) set of performance measurement metrics will not only fail to identify high-performing and non-performing assets and processes, but will be unable to execute corporate strategy.
The ideal way to design a performance management system is to use a consultative process that involves the stakeholders of the business. The measurements defined in this process should address the current and future strategic growth of the business. The system should undergo rigorous testing and continuous improvement to ensure it continues to deliver on its objectives.
- Poorly Chosen KPIs (Key Performance Indicators)
Another key challenge that businesses face is zeroing in on the key performance indicators that tell whether they are on the right track to achieve their business objectives. KPIs are the foundation of any performance management system, so the selection of these metrics is critical to measuring and improving the performance of your business.
When designing your KPIs, remember to keep the SMART (Specific, Measurable, Attainable, Relevant and Time-based) strategy in mind. Specific ensures all metrics are attributed to an individual, team or department who can be held responsible for them. Measurable means that each KPI must be concrete, rather than subjective. Attainable means that targets should be realistic and agreed to by the person or group responsible for them. Relevant means that the KPI should be in line with business strategy; an improvement in the metric should result in better execution of corporate goals. Time-based means that your KPIs (or targets) should have an appropriate time frame for improvement.
- Fixing Poor Performance the Wrong Way
A performance management system is only effective when it is fully executed. When a team or individual isn’t performing well, there is a tendency to blame the system rather than make the necessary changes to address problems. As a result, some metrics end up ignored or forgotten, compounding the problem as data is aggregated to higher levels. Over time, the system becomes irrelevant and unusable, turning the entire process into a huge waste of time and effort.
In the case of poor performance, managers should identify the cause of the issue. If the KPIs are at fault or have become out of date, changes must be made to keep the metrics in line with the business. If the fault is with the individual or group responsible for the metrics, changes should be made to the business process involved. These changes should be made immediately so problems do not linger. Managers and executives need to understand that the framework may have ‘bugs’ that must be fixed, and avoid always blaming the employees when things go wrong.
Being aware of these four challenges will help ensure that your performance management system is successful. When all stakeholders trust the system, it can become a deeply embedded part of business operations, and a source of positive change and strategic alignment for the organization.
About the Author
Deepak Singh is the Founder and President of AccuProcess Inc., which offers easy-to-use business process modeling solution worldwide. Deepak is responsible for business strategy and product development at AccuProcess.