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STRATEGIC PERFORMANCE MANAGEMENT: Aligning Performance Management To The Business

November 10, 2012 - In Managing Performance - No comments yet

For a business to perform most effectively, the link between its strategic direction and the management of individual performance should be a direct and transparent one. This delivers results to both the organisation and its employees: people are more motivated to perform when they are usefully communicated with and feel part of the overall plan and organisational team; and businesses perform better when their people are motivated to make a full contribution.

So how can successful performance management be embedded in an organisation?  Firstly, some self-evident strategic decisions need to be agreed as the starting points for the alignment of performance management to the business:

Core purpose and strategic direction need to be clarified so that all managers and employees understand ‘what business we are in’ and ‘where we are going’.

The main strategic goals – ‘what needs to be achieved’ – and a balanced set of strategic performance measures, covering areas such as customer service, people performance, operational performance, revenue generation and profitability, need to be communicated and established as the principal means of delegating accountability and providing the means for everyone to focus on  priorities.

The strategic goals and performance measures indicate what must be achieved.  However, for the strategic foundations of effective performance management to be sustainable, the values and core competencies that will focus how results will be achieved need to be communicated effectively.

Managers are accountable for the results their people achieve, but they must be adept at guiding their people to continually improve how results are obtained.  To enable their people to improve, managers need to clearly understand and communicate the desired knowledge, skills, behaviours and attitudes employees need to apply to the tasks at hand.

Management processes need to be established to enable the management of individual performance.  Many organisations already have these in place but may not be maximising their value due to a lack of effective integration.  Four of the main processes that need to be fully integrated are:

The business planning process needs to provide a consistent set of activities that will define the objectives and action-plans to be achieved, along with the appropriate resources/budget allocation.

Top management can have their accountabilities profiled and shaped by the organisation’s strategic goals and performance measures.  It is important that these accountabilities are defined:

The performance management process needs to be aligned to both the business planning process and the accountability profiles.  The process is a series of activities that managers need to undertake with their people on an annual basis.  These main activities can involve:

Normally, an individual’s objectives will be driven by a combination of what needs to be accomplished with respect to their accountabilities and what needs to be achieved in relation to the current business plan.

In ensuring the alignment of these management processes, it is critical to make sure that the reward management process rewards people for achieving results indicated by their accountabilities and the current business plan.  This may seem to be obvious, but how many organisations can demonstrate a clear line of sight from the current business plan through personal accountabilities and objectives to reward?

What are the challenges of making this work?  Although many of the principles of performance management are commonly accepted, and the benefits of having it linked to the business planning process are becoming more widely       accepted, many businesses fail to maximise the value of these management processes.  This is for the same reason that other management processes falter: because it is far more difficult to embed the management practice needed to make the process effective than it is to agree to its use in principle.

In order to engage people in productive activity, it is important for the leadership of the organisation to strive to create a performance oriented culture that embraces direct and transparent linkages between the business strategy and the management of performance.  This is characterised by, among other things, managers participating fully in the performance management process and in honing their capabilities in the practice of performance management.  This includes effective leadership, good two-way communication, and also providing a sense of empowerment.  Employees will then feel that they are an integral and valued part of the business whose contribution is appreciated.

By Richard Nelson and Kate Harrad



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