What is Performance Management?

A strategic business plan provides the organization a sense of direction and a sense of purpose It answers the questions “Who are we?”, “What value are we creating for the stakeholders?” and “What does success look like?” Performance management is the process that ensures the implementation of the Strategic Business Plan by focusing on performance of the Company, the Division or Region, the Department or work group, and the individual employee.

The performance management process occurs on an ongoing basis, beginning with an assessment of the effectiveness of the Company and its employees, and ending with an evaluation of the results achieved. It includes activities to link the Strategic Business Plan, its mission, vision and core values to the goals of each Region, each Division, each Department, each leader and each and every employee.

The performance management process provides a formal means of communicating the mission, values, goals, and objectives to all employees. It serves as the driving force behind all decisions, work efforts, and resource allocations.. In short, it ensures results. Performance management consists of the following components: • Annual operating plans that ensure the overall strategic business plan is being achieved. An operating plan defines the specific results that must be achieved to support and achieve the strategic business plan. • Individual employee annual performance plans and appraisals that are used as a framework for coaching, counseling and developing employees. • A set of metrics (sometimes referred to as a scorecard) tied to key performance indicators. • Regular reviews of progress toward meeting the company goals and objectives on the strategic business plan – at all levels throughout the organization, all the way down to the individual employee contributor.

One key to making performance management successful throughout an organization is communication. Too often communication takes place at only the top levels of the organization. Employees are not privy to information about how the company is doing in accomplishing it’s most important goals and objectives. They are often not even made aware of what those are. When was the last time you saw your company’s strategic business plan?

In companies who are doing a good job of managing the performance of their organization, employees are kept in the loop during the entire process – of assessing the company’s performance at the beginning of the year, to the goals and objectives developed for the upcoming year, to having his or her own individual goals directly tied to the strategic plan during the employee performance planning process, and finally to seeing the results of the overall company performance against the strategic goals and objectives.
A good performance program process: • Ensures that all Region, Division, and Department operating plans are aligned with the overall Strategic Business Plan. • Ensures that employees know what is expected of them regarding their job performance and their contribution to their Region/Division/Department operating plan. • Provides employees with regular feedback regarding their performance and where they fit into the big picture. • Encourages regular two-way communication between supervisors and their employees through regular feedback regarding their performance. • Ensures supervisors consistently develop and communicate employee performance expectations, give appropriate feedback on performance, and fairly evaluate performance results. • Provides an equitable basis for appraising employees’ job performance and making personnel decisions. • Provides opportunities for employee development.

For more information on this subject, see Results-Based Leadership: How leaders build the business and Improve the Bottom Line by Dave Ulrich, Jack Zenger and Norm Smallwood, or Reengineering Performance Management: Breakthroughs in Achieving Strategy Through People by Tracey B. Weiss, Ph.D. and Franklin Hartle.