As the environment becomes increasingly competitive, companies are facing the challenge of having to make performance management a success within their organisation to ensure sustainable growth.
Definition of Performance Management
Broadly, there are 2 main areas in performance management.
Business Performance Management
To improve the performance of personnel and management.
The use of metrics is just a means to an end, with that end being higher profitability.
Business performance management is the act of
- setting corporate goals,
- monitoring the methods used to achieve those goals, and then
- creating ways for managers to more effectively achieve those goals.
By collecting and analyzing data, a company can determine what effects managerial changes have on performance. Then, proceed to alter those changes to help create a more effective process.
The idea of business performance management is a broad concept. But it is best used to analyze specific goals and to help a company save on operating costs, while generating more revenue at the same time.
HR Performance Management
Bring together a number of different, integrated activities to form an ongoing ‘performance management cycle that is in line with the overall performance goals of the organisation’.
Human resource performance management is an ongoing process of communication between an employer/supervisor and an employee, in support of accomplishing the strategic objectives of the organization.
The communication process includes
- clarifying expectations,
- setting objectives,
- identifying goals,
- providing feedback, and
- reviewing results.
This is a subset of the overall business performance management but for the most part, the overriding principles remain.
Performance management is the continuous process of improving performance by setting goals which are aligned to the strategic goals of the organisation, planning performance to achieve the goals, reviewing and assessing progress, developing the knowledge, skills and abilities of people.
Regardless of whether the goal is to improve overall business performance management or its subsets in human resource or productivity performance management, a key point here is that it is a continuous process.
Components of a Successful Business Performance Management Cycle
Business performance management focuses on 4 main activities:
- Identification of goals and key performance areas
- Implementation of strategies
- Tracking of progress
- Reviewing of reports
This is an extremely dynamic system where each activity affects the other and they are all working together to help develop better business performance outcomes.
1. Identification of Goals and Key Performance Areas
- Identify the areas that make up the value chain in the business
- Set corporate goals based on your organization’s mission
- Determine processes necessary to achieve these goals
At this stage, it is useful to establish a baseline and also set a desired benchmark for the business units or personnel to achieve.
Thereafter, these goals should be documented and performance should be gathered and reported regularly.
2. Implementation of Strategies
Once the goals have been aligned, the management team can
- take necessary steps to increase efficiency and profitability
- carry out activities to achieve goals
These actions involve both financial and non-financial goals. Decisions cannot be taken independently but rather with a holistic view.
3. Tracking of Progress
Thereafter, it is important to track the strategies implemented and gather constant feedback.
This step of data collection and consolidation in business performance management is critical.
- Gather data
- Analyze pertinent data
The list of metrics used to create the data varies by company and by project, but the data becomes a critical part of the performance management process.
Most companies stumble in the implementation of the performance management system due to the heavy reliance on human resource implementation.
Leveraging technology that help to implement, collate and present this information can greatly reduce the human factor involved. This also increases the chances of a successful business performance management system implementation.
4. Reviewing of Reports
Once action is taken and business performance reports are presented, the next steps are to
- continuously monitor the outcomes
- report outcomes in the next business performance management cycle to observe the impact of the actions implemented
- identify learnings for next cycle of implementation
- develop a better way to do business
Tools that Help in Business Performance Management
All companies endeavour to manage their businesses well. Usually, if business owners know the elements needed to manage the business successfully, most will want to strive towards the ideal state.
Knowing the elements of the performance management cycle is very important, but that will not necessarily be enough to lead to effective performance management as there are many other issues that can get in the way.
To increase the chances of implementing a successful business performance management system, these are some elements we should consider:
- Ensure there is leadership support and buy-in.
- Ensure that the team understand the importance of the performance management system.
- Implement a business performance management system that simplifies the business management process rather than having to set up a separate team to enforce it.
- Design reports that make it easy for business units and the team to understand the performance outcome and what steps need to be taken to improve performance.
Whether you are looking to enhance your company’s business performance management system or to simplify it for your human resource department, consider leveraging the technology that is offered on Tree AMS.
Our tools are designed for the easy on-boarding of business units and its team to specifically help business owners and operations managers to easily build business performance benchmarks and improve the overall ease.