FACTS ABOUT PERFORMANCE MANAGEMENT
The most challenging aspect related to improving performance is building the right culture and implementing the improvement initiatives.
80% of professionals claim to have noticed a positive effect in their organizations after implementing KPIs.
29% of professionals interviewed claim that their organization has at least one data analyst responsible with processing performance data.
34% of professionals state that data modelling and predictive analytics are commonly used in their organizations to generate valuable information from data oceans. However, most professionals (62%) rely on traditional root-cause analysis performed by upper management.
63% of organizations have quarterly or monthly meetings to review performance results.
27% of professionals feel like in their organizations decisions rely more on instinct than on data. (The KPI Institute, State of Performance Improvement and KPIs, 2016)
36% of organizations are practicing unilateral decision making, meaning decisions are taken top-down – the leader makes decisions alone, without consultations. (Harvard Business Review, 2017)
Most performance improvements professionals suggested in reference to their current performance management systems, relate to employee performance measurement and evaluations and optimizing the performance management software used. (The KPI Institute, State of Performance Improvement and KPIs, 2016)
Performance management is among the most recent disciplines developed in business management, despite the fact that measurement is a process as old as time for the humanity. Performance management has evolved side by side with strategy and quality management. Critics may even argue the necessity to consider performance management a self-standing discipline, when in fact many of its methods and tools are part of other related disciplines. Given the increased complexity of business environments and the transition from a manufacturing based economy to a knowledge and experience based economy, specialization has become no longer an exception but the norm. Regardless of the domain, it can be noticed that niche subject matter experts arise continually. Similarly, as competition becomes more aggressive, clients more sophisticated, information and technology more accessible, managing a business goes beyond the traditional management capabilities (finance, human resources, procurement, sales etc.). The Performance Management Office stands nowadays, side by side with other key functional areas.
One perspective is to claim that performance management should be without doubt everyone’s job in the organization, but when no clear accountability is assigned, not much progress takes place. Another point of view is to emphasize on the fact that performance management is included in the responsibilities of every top management member and of the CEO’s. Nevertheless, managing performance is part of the C-suite job, but developing a dedicated performance management capability, which doesn’t necessarily have to be represented by an entire department, but one single person, can ensure a more qualitative process management. Moreover, it can impose a certain approach towards what is performance management and the usage of its tools.
In practice, “performance management” is mostly commonly used to define the management of employee performance, whereas “strategy management” is used to include also the organizational performance measurement. From The KPI Institute’s perspective, performance management refers to measuring and improving both strategic and operational results. Managing individual performance is treated as a different practice domain, given the particularities associated to evaluating the employees’ contribution in the organization. Moreover, performance measurement is also addressed as a self-standing practice domain in order to properly address the topic. Therefore, in the following presentation we will be referring specifically to performance improvement through reliable data analysis, more effective performance review meeting and decision making, as well as better project management and organizational learning.
1.Performance improvement through reliable data analysis
Most organizations, nowadays, are struggling with converting data into knowledge. Technology has enables us to capture large data volumes about almost everything in the organization. However, few companies managed to generate the expected value from the technology investment done, as they are facing difficulties in distinguishing between “not important”, “nice to know” and “very important” data. The proper usage of KPIs should enable managers to bring more clarity into this matter and ensure the right data makes its way into their executive reports.
The advantage of capturing large data volumes is that it enables data mining and predictive analytics. Reliable data analysis should provide high quality data (on-time, complete, accurate, consistent) for decision making. Performance management software solution focus predominantly on the reporting feature, not necessarily on the processing of raw data and data mining. Common IT performance solutions may require additional software which can be used by data analyst for statistical measurements. Nevertheless, Microsoft Excel remains among the most commonly tool used to capture, analyze and report performance results.
2.Performance improvement through effective performance review meetings and decision making
Executives spend thousands of hours trapped in meetings – but how much of this time is effectively used? How many of the discussions are directed towards solution finding? How much time is spent on root cause analysis of past events compared to the time dedicated to plan ahead, to discuss future opportunities? How much time we waste on solving operational matters compared to developing strategic initiatives?
A key element to ensure all important aspects are captured in our performance review meetings is to create a clear calendar of meetings and to define the specificity of each meeting. Each meeting should be defined by 3 characteristics: frequency, audience, discussion focus. Once the discussion focus is clarified, the other two components can be easily established. For example, short-term strategic matters can be approached during a quarterly meeting of top management. On an annual basis, medium and long terms perspectives can be discussed among top management and the Board (if the case of an upper hierarchical level). Moreover, monthly performance review meeting to address operational issues should take place at departmental level.
Agile organizations must create reliable and fast decision making in order to respond to market challenges and take advantage of opportunities as they arise. The decision-making process can be significantly optimized by the effectiveness of performance reporting. If data is accurate, complete and available in due time, it is more likely to be able to decide fast upon the next right moves. A simple considerate, such as the format of the performance report, can facilitate the usage and understanding of data. When data can be accessed in real time, proactive decisions can prevent the occurrence of severe situations.
Furthermore, decision-making is a social process. In most organization decision making at strategic level is team effort. However, it is very commonly approached as a voting process, instead of a collective brainstorming and analysis of potential solutions. The challenges of thinking together is to make people put aside their egos, to bring everyone on the same page and make them ask the tough questions.
Effective decision making should harmoniously combine fact-based decisions with the urgency to act, while using the collective knowledge and experience of the top management team.
3.Performance improvement through better project management and organizational learning
Project management is one of the disciplines that cuts-through performance management, as it reflects the organization’s ability of getting things done. Companies can be very skilled at planning and measuring, but if they are unable to transform ideas into reality and generate the expected outputs, it is all for nothing. Large or small, cross-functional or independent, all initiatives deployed in an organization are experiences of planning and implementing decisions. “Better” project management, in this context, has two meanings. On one hand, project management should be effective in delivering what is expected and on the other hand, project management should be relevant for the organization. A sound initiative management framework should standardize as much as possible the implementation process, by using standardized templates for Initiative Documentation Forms, Business Cases, Project Plans and Project Report Status.
Isolated from the organizational context all projects can be very important and valuable, but when analyzed in correlation with the rest of organizational initiatives, the perspective may be different. Relevant project management should ensure that initiatives are handle similarly to an investment portfolio, looking for the maximization of the overall return, not on each investment or project itself. Developing the Portfolio of Initiatives for the organization can provide an executive summary on the status of each important project. Moreover, this tool can also be used to prioritize each project considering the impact it has over the current strategic objectives. According to a Harvard Business Review research (2015), 51% of executives questioned admitted that they invest too much in non-strategic projects. The lack of visibility over what projects are on roll at a certain moment in time in the organization and their overall impact on strategy, leads to resources waste on initiatives which would not be a priority.
Organizational learning takes place as a natural process in businesses. However, when properly guided it can maximize the non-tangible assets of the organization – the intellectual capital. Every performance reporting cycle is a learning experience, it is an opportunity to assess the resources used, the actions taken and the actual results obtained. The usage of KPIs provides continuous feedback on the quality of the processes and interactions with the organization, as well as interactions with external stakeholders. Capturing the lessons learned, building Communities of Practice, stimulating innovation and employee engagement can become competitive advantages which position the organization as a market leader. Better organization learning implies conscious actions to nurture learning and improvement in the company and embeding it into the organizational culture.
Performance management is partly art, mostly the art of building the right context in which performance measurement and improvement can flourish and partly science, where methods, tools and techniques are rigorously and systematically applied.