Dos and Don'ts of Organisational Performance Management

• Get the performance measures right. In order to make well-informed strategic decisions, organizations need to be able to accurately measure the effectiveness of their most important operations. At the outset, it is essential to gain an in-depth understanding of the drivers which have the greatest impact upon overall performance, and develop associated performance measures. At corporate level, performance measures must link to the organization’s strategic aims and the drivers of performance for the particular organization or industry sector. If a process does not drive performance, there is little point in measuring it! At operational level, performance measures must demonstrate how well key operational processes or outputs are performing, and pinpoint areas for improvement.
• Cascade goals. Once the key drivers and corporate performance measures are established, it is essential that these are cascaded down throughout the organization. Each operational area’s goals and associated performance measures must be closely linked to corporate level goals so that managers understand how they can drive strategic progress. It can be helpful to devise a phased roll-out with key dates for each management tier, e.g. week 1 = set executive level goals and measures, week 2 = set department level goals and measures etc.
• Commit sufficient resources. Developing and implementing a performance management strategy can be a complex process which takes time to get right. It is therefore important to dedicate adequate financial, IT and other (e.g. staffing) resources to ensure that the new system is developed and implemented successfully.
• Treat it as a change management process. With any program of organizational change, it is important that both the senior team and operational managers actively support and champion the program. Introducing a new system of organizational performance management should not be viewed as a ‘quick fix’ solution. Managers will need time and appropriate support in order to reduce possible sources of resistance and adapt to new ways of working.
• Seek expert advice. Developing and rolling out a new organizational performance management system can be a time-consuming task, which can become costly if things go wrong. Measuring organizational performance is complex, and often requires specialist input. If this expertise is not available in-house it is advisable to seek external assistance, particularly if new technology is being introduced.
• Ensure accountability. For a performance management system to work effectively, all managers need to be held accountable for the performance of their departments. To do this, each area should be set appropriate targets, which are measurable by specific deadlines and deliverable outputs. Performance can then be assessed against relevant targets. A culture of accountability can also be encouraged by linking operational goals to individual performance agreements.
• Act on the results. Effective organizational performance management measures will identify areas where performance is falling short of expectations. It is essential that there is a clear strategy for how to address underperformance, as a lack of action will quickly reduce managers’ faith in the overall credibility of the system and undermine their efforts in collecting data.

Don’t

• Collect too much data. Including too many performance measures can dilute understanding of the most important areas and can lead to a loss of focus. Furthermore, tracking too many performance measures can cause managers to lose sight of which ones contribute directly to strategic objectives. Don’t overload managers with an onerous system of data collection – streamline processes so that they focus on the performance measures which will achieve better results.
• Focus solely on financial measures. Although financial measures such as return on investment (ROI), sales turnover and profit are undoubtedly important, they only give part of the picture of organizational performance. Non-financial measures such as customer satisfaction, employee engagement and commitment to corporate social responsibility are increasingly important issues which cannot be measured solely by figures.
• Rely on technology alone. Introducing scorecard or dashboard technology is only one aspect of the performance measurement process. Although these systems can help organizations collect and disseminate performance information, true performance management goes beyond the limits of technology. Although technology may highlight areas where processes need to improve, performance improvements will only result from changes in actions and behaviors. Specific management skills are needed to encourage the behaviors which will result in improved performance.
• Judge people simply on performance measures. Although the ability to meet performance measures can give an insight into the performance of managers and employees, they should not become the sole basis for individual performance evaluations (and associated rewards). Where there is an overemphasis on reaching targets, these can cause stress, as well as removing the incentive for people to work together to achieve goals.