Growing Performance Management Tree with a Couple of Main Branches

The issue of Performance Management measurement isn't about accuracy, but of validity and reliability.

Corporate Performance Management is management control across functional domains and disciplines. It’s not an isolated management practice, but a multidisciplinary approach with a well set of scientific principles, methodologies, and practices. 

Strategic/Operations/Risk Management are the main branches of the performance management tree. The issue of Performance Management measurement isn't about accuracy, but of validity and reliability. The organization that didn't have a systematic approach to measure performance at both the strategic and operational level has a giant blind spot that is impairing their management effectiveness and maturity.

Under enterprise strategy management, you focus on an iterative strategy and performance management continuum: The purpose of managing performance is about setting performance metrics to evaluate the status of strategy management. Here is a logical scenario: Translate the company vision and mission into a strategy with objectives; then translate the strategy into operational plans to achieve the strategic objectives; then execute these plans and monitor actual performance. Businesses are looking for identifying systemic issues and addressing the causes and corrective actions. Right metrics can reveal anything meaningful for the identified business issues so you can fix them to accelerate strategy implementation effectively.

In practice, sometimes business managers focus on improving business processes, implementation of performance management, or evaluation, but fail to look into the system holistically or think long term. The other pitfall is that sometimes, performance management becomes its own industry, forgetting its very goal to make business improvement or delight customers. A robust performance management system needs to be designed with end-users in mind, future-oriented, output-driven, not process-driven, etc. It facilitates the business information flow, helps to coordinate your strategy, tactics, and risks, makes objective assessments, and understands performance measurement results holistically.

Under enterprise operational management, you look at how to make measurable improvement: Performance Management needs to strengthen the link between strategy management and operational management. When the strategic goals further cascade down to operational objectives, it becomes more traceable and measurable. The performance measurement should cover all areas that contribute to performance value creation including service quality, employee engagement, customer satisfaction, and financial outcomes, etc. In fact, businesses need to expand their capacity by improving operation efficiency and effectiveness with the KPIs to resolve crucial business problems.

Performance management should make objective assessments of those tactical goals, either at the functional or individual level. Inaccurate measurement data will distract the management from making a true improvement. The right metrics can be helpful to track progress in business improvement initiatives, help to get some objective perspectives on what you are trying to manage, concentrate on measuring things really matter, and measure them in the right way, in order to achieve operational excellence seamlessly.

Under Enterprise Risk Management (ERM), look at the things that you essentially do not want it to happen: A company benefits most when it executes Enterprise Performance Management (EPM) and Enterprise Risk Management (ERM) in a complementary fashion, as both are critical for achieving the vision and mission of the company. Embed risk identification and assessment in operational processes and multiple management disciplines. Be cautious of the things that would prevent the execution of the strategy or operational plans from achieving the stated aims or that would even make the strategy and operational plans completely obsolete.

Organizations with the right risk attitude and aptitude can use both quantitative and qualitative methods to assess risks under a valid risk evaluation model, lift risk management from risk control to risk intelligence. The goal for risk management measurement is to build a solid understanding of decision support, manage risks effectively, to ensure high-performance results.

Businesses have become very adept at measuring performance results. It’s important to look at Trust in Humans, Trust in Processes, Trust in Technology. But also be skeptical and ask insightful questions. Performance management is the means to end, focus on where targets are not being met that support planned revenue and profit levels, and what actions might be taken to improve at the individual, functional, and corporate levels; focus on achieving long-term strategic value and developing business competency.

Posted in: Execution,GRC,KPIs,Performance Master,Strategy