Strategic and Operational Dimension to Driving Performance Management System

leadership
Book Review: The Leadership Engine
September 16, 2016
4
How the Mighty Fall
September 16, 2016
performance

Managing the performance of an Organization and its Human Capital is becoming a real challenge to all CEOs and leaders. The new global economy has forced upon a totally new challenge on most organizations: How can we continue to stay profitable and competitive? How can we constantly adapt to the changing market landscape and to strive for continual growth in the “future” business. What used to be good yesterday is just no longer good enough to manage today’s business, let alone effective, to manage business in the future. It is surprising but true, that many business fundamentals of last 10 years are no longer applicable to today’s business environment. As such, driving performance in order to stay ahead of competitions is no longer a question of choice. It is a necessity.

Managing organization performance is perhaps the single most important strategic approach to stay competitive and to ensure continual growth in our business.

It is estimated that most of us achieve less than 1 per cent of our actual potential. It is, therefore, a significant and strategic advantage if management realizes that and starts paying attention on driving organization performance and improving its human capital within its organization, instead of just ‘buying’ external skilled resources to fill the gap.

In fact, in a knowledge-based economy, human resource is now the single, most valuable asset in any organization. Managing human capital has become the number one priority of any organization that wants to be successful in the “New World Order”. A successful organization today, is judged by how well it can manage its human capital to drive its strategic direction. We must, however, recognize the fact that, managing performance is not just an operational issue, neither is it about retaining and/ or motivating employees. It is about the ability to grow the organization and enhance the skills of its employees, in order to meet the expectations of future business. This realization has encouraged many organizations to appreciate the significance of putting their performance management system in place. The question here is, how many of them actually succeed in doing so? There are, in fact, more failures than success.

So, why do many organizations fail in their effort to put their performance management system in

  • Difficultly in implementation. Many of the existing systems are too complicated and tedious to execute. This results in many people in the organization spending too much time planning, and tracking the system. One good example is this: some performance management systems require an individual to read through and complete more than 5 pages of questionnaire.
  • Poorly Designed Forms. Many PMS forms are poorly designed because they have been organized without a proper development process of identifying performance expectations of the individual organizations. Many organizations want quick-fix solutions and are not willing to spend enough time to get things right. It is not surprising that many PMS forms fail to even meet the basic technical specifications.
  • Poor and Vague Performance Definition. Many PMS forms have parameters that are confusing and subjected to different interpretations. Some systems require one to have smart objectives and smart KPIs. Others have a column stating KPI followed by another column stating targets. This is definitely confusing because it lacks clarity. It only reflects the designer’s poor understanding of PMS. All parameters used must be precise and definite from the very beginning.
  • Many Systems Lack Objectivity. The purpose of a performance system is to objectively track and quantify one’s performance so that it can be converted into a performance rating that will, in turn, helps to drive organization performance effectively. The whole idea is to :
    • Tie performance of each human capital to the overall organization’s strategic direction and objectives.
    • Recognize and reward employee performance in all aspects of performance; and not just based on financial parameters.
    • At the same time, to identify employee development needs that will lead to outstanding performance; and to increase its ability to out-perform its current capability.

However, in many cases, the actual performance rating is still based on the interpretation of the supervisor. At the end of the day, it is a guessing game.

  • Poor Usage Of Performance Rating System. In many cases, organizations do not know really know how to use performance rating system as a vehicle to drive excellence performance. They are merely using it as a measuring tool. To make matter worse, some management actually thinks that a maximum rating point means ‘meeting performance’. Example, in a rating system of 5, meeting target is 5. This means that, one just has to meet the target. There is no reason for him to do better than that as there is no more rating point for him to earn, in order to get additional reward.
  • Lack of Knowledge. Unfortunately, many managers cannot tell the difference between an objective, a KPI, a KRA, a work standard and a target. Many of them do not even know how to write a meaningful objective statement in the appraisal form. This lack of knowledge on performance measurement contributes significantly to most failures. Many managers/ supervisors assume that they know a lot when they really know so little. In many instances, supervisors have no knowledge or very little idea of what their subordinates’ performance measures requirements are, or should be. They also do very little to help them, besides pointing out the obvious. It is a case of ‘the blind leading the blind’. The sad fact is that, performance appraisals are carried out year after year as a form-filling exercise, simply because they have to be done. To make matter worse, nobody really cares or takes it seriously because they “already believe” it will not make any difference.

Other factors like the lack of discipline, no check and balance framework and no real data mining capability, need to be addressed as well.

However, by solving the above will only address the operation dimension of managing performance. It is not enough to drive success for our future business.

Many organizations actually realize that having a vision, and understanding the mission of the organization, are not good enough to them to succeed in the future. It is, therefore, most crucial that organizations have the “right” strategies adapting to changing market demands and at the same time, able to link strategies to operational outputs that are measurable. The question is, how does the organization know if its strategies are right? How can they adapt and change, in order to achieve outstanding performance?

Many organizations have tried to incorporate some of the latest performance management tools like the Balance Scorecard (BSC), the KPI and KRA frameworks into their Performance Management System (PMS). Despite using the latest tools, many organizations struggle to implement their Performance Management System successfully; and, too often, they end up with a diluted system that fails to deliver the full benefits of the performance management tools.

It should be clear now to everyone that, using the latest tools to drive performance, does not guarantee success. In fact, most of the time, it does not. Recent research has indicated that 70% of BSC implementations fail to deliver their objectives. The important point is that the right approach and a proper framework are employed for the purpose.

In today’s business environment, managing performance cannot be done in isolation. If an organization is serious about driving performance, it must be clear that taking shortcuts will definitely not work in the long term. It may not even work in the short term! Linking strategic dimension to operation dimension is the key focus. Use it as the governing principle to drive performance.

Learning how to systematically drive organization performance from strategic dimension to operational dimension becomes a critical factor for an organization to compete successfully. Managing performance is no longer just a top management issue; it is about getting the whole organization involved in implementing the strategies, earning to make changes and to adapt to the ever changing market demands. The ability to tie operation outputs to business strategy, the ability to track performance measures at all levels and the ability to cascade performance measures from one level to another, become necessary, to help an organization to successfully execute its business strategy.

Ultimately, the goal of any organization is to perform well and achieve its strategic results.

It is recommended that every organization embarks on a Total Organization Performance Management Solution.

Total Organization Performance Management Solution :
performance
The following diagram shows the even outputs established using the Organization Performance Management Solution Framework.

organization-performance-management

Cascading Methodology

cascading-methodology
Below shows a typical execution plan for the implementation Organization Performance Management Solution.
strategic-implementation-plan

To implementation a total organization performance management solution is not difficult, but requires patience on the part of the organization and its human capital. A malaise of modern-day society is that many of us lack patience and are prone to taking shortcuts.

However, the biggest challenge in the implementation of performance management is still the lack of knowledge. The problem is that the subject looks simple. It is then strongly recommended that an organization should first go back to the basics of re-educating its employees on the subject of performance management, with its emphasis on practical application (something which is currently lacking in most organizations) before trying to put its performance management processes in place. Do not assume that everyone knows the subject matter. As the saying goes, ‘garbage in, garbage out’. Do not develop measures for the sake of doing it. The objective must be clear: organizations must seriously want to achieve quantum-leap performance.

In conclusion, organizations and performance management fraternity should consider the following questions before embarking on driving a Total Organization Performance Solution:

  • Is the PMS form designed properly?
  • Does your human capital actually have the knowledge capacity in the area of performance management? Do a reality check.
  • Has the organization’s strategic direction been translated into operational terms?
  • Is everyone in your organization aware of how the performance management structure impacts the overall organizational strategy, as well as on their own pay-packet? Has this awareness motivated them?
  • Is there an air of excitement regarding performance? Do the employees get excited and enthusiastic about performance review and setting targets for the following year?
  • Are the majority of your personnel conversant with performance management principles and techniques? [The acid test is in the way they formulate new measures and targets in response to a change in strategy]