The Performance Management System

The Performance Management System

Many companies have strategic plans but they often do not work well because they are not implemented. As Fortune magazine discovered:

 Less than 10% of strategies effectively formulated are effectively executed.

The workforces of many companies go about their daily business totally unaware of the fact that their companies have strategic plans. As a result, there is no relationship between company plans and the workers’ activities.

The key to success lies in translating the vision and the strategic business plans into the everyday activities of the people who are actually doing the work, adding the value, providing the service, so that everybody knows exactly what they have to do on Monday morning in order to achieve results.

The building industry, for example, has mechanisms in place designed to move a project from an architect’s vision of a four-bedroom house to the creation of that house exactly as planned. Everyone involved in the project knows how their contribution fits into the big picture.

Unfortunately, many businesses are lacking a mechanism or system to translate their abstract visions plans and strategies into measurable outputs so that every person in the organization knows exactly what outputs they are expected to produce, and how those outputs are to be measured. You need to disseminate your goals amongst your workers, translating your strategic plan into their everyday activities. In other words, you need a process to implement the strategy. The objective is to implement a performance system that is hierarchically and mathematically connected to the organization’s vision and that will focus all levels of the organization on achieving its vision.

You also need to measure the degree to which this occurs. That measurement is vital, for it tells you whether or not you have successfully transplanted your ideas from paper to the hearts and minds of the workers. Most performance management systems fail because they do not make the crucial link between strategy and daily actions and operations. They focus attention on tactical feedback and control of short-term operations.

A good performance management system provides a comprehensive framework that translates an organization’s vision and strategy into a coherent set of outputs, performance measures and targets. By developing a set of outputs, measures, targets and feedback systems for the leadership team, and then cascading these down the organization in such a way that they are localized, meaningful, understood, owned and aligned, the link between the organization’s strategic goals and the daily actions of the people doing the work can be made.

Resource allocations, annual budgets, and strategic decisions can be driven by the strategy. Performance reviews can be used to monitor individual performance which in turn monitors organizational performance. Reward systems can be designed to reward organizational performance achievement. The vital link between what people are doing on a daily basis and strategic goals can be made.

A good performance management system must mobilize the people in the organization in such a way that their daily activities bring them closer and closer to strategic goal achievement. The performance management system must be a systematic process to implement the strategy.

Detailed references and additional information can be provided on request, and questions are welcome. This email address is being protected from spambots. You need JavaScript enabled to view it.

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