Why Performance Management Is Crucial To The Success Of Your Business

Performance management must be a priority

Getting the best out your people can sometimes be a stressful business. One of the biggest barriers to effective performance management is that people have different perceptions of what it is about. This is because even terminology around performance management can be misconstrued.  When performance management in your company is not working for you, then professional HR expertise can help an organisation to get clear about what is needed.

For a business to succeed you need to make sure when planning, developing and communicating whatever system you choose that you get it right.  If you don’t then you will get inconsequential data and your employees will lack confidence in the results.  Your Human Resources practitioner can help to sort out the best performance management equation for you and your business.

Performance framework

Your performance framework sits underneath your overall organisational purpose and mission.  It is not the end result. A performance framework examines and monitors the factors which will make you successful, whether that is profit or depth of service.   Businesses who get their performance framework right have a huge advantage. Some organisations don’t actually have a performance framework in place, and frankly, they are missing a trick. If you think performance management is too hard then you are unlikely to be able to track how your business is doing, especially when things get tough.

Because performance can contain a myriad of factors; the first hurdle is to decide on the unique framework for your business. Measuring and managing performance are two different processes. They are frequently confused. Depending on the style and culture of an organisation, these two simple elements can be approached in different ways.

A good organisation will have no doubt about all of the elements of their performance measurement and performance management regimes.

Performance Measurement

There are six basic performance measurement equations: These are:

• Productivity – You can measure productivity individually or by the team. Basically, this measurement is about the quantity being produced in a given time. You can measure productivity across most outcome-based processes, which could be a product, a service or an administrative task.
• Performance – This measurement is a little more sophisticated. It is the measurement of productivity for all of your team. It will include the team members who are perhaps not involved in the productive process. For example, managers or specialist advisors. The purpose is to see how effective the structure of the organisation is against outcomes.
• Effectiveness – This is about throughput. Or in other words the length of time it takes to reach an outcome. Effectiveness links to productivity and encourages businesses to examine the process to see if better results/profits can be achieved, or if customer expectations are met.
• Efficiency – This is about the cost of the outcome. You can have great productivity and effectiveness, but if profit margins are too low, then you have to understand this.
• Standards – The standards that you set. These can include for example standards about quality, quantity, impact or timing.
• Service – The impact made on your customer. You may have service level agreements or targeted customer satisfaction levels. The way you measure the impact on your customer must be relevant and result in your business improving and increasing positive impacts.

Balanced scorecard

The six components all work best when they work in a balanced scorecard framework comparing each equation against each other. So for example, you might be the most efficient team, but if your customers aren’t happy then that could affect profits. Likewise, if your productivity is top end, but your costs are high then you haven’t got the right balance.

Performance measurements can be introduced at organisational or team level. They can include outcomes, targets and results, both quantitative and qualitative. Once you have decided on the most impactful performance measurements, then your next task is to have a sound framework of managing performance. This is the golden thread that runs throughout your business and links your outcomes, standards and processes to your people and how well they perform.

Performance management vs measurement

Performance Management is all about how your individual employees work. What makes managing performance different from performance measurement is that it is about individual contribution. Performance Measurement is about the collective organisational and team results of individual contribution. It is a subtle distinction.

Obviously, the elements of performance management you decide to include in your framework should link into the measurements on your balanced scorecard;  These elements are about the specific elements of that person’s job, and ability to do that job. So for example, the performance requirements of an office junior will be very different from an MD. For that reason, it is essential that your business has the right job roles to get the right results!

Elements of individual performance

The elements of individual performance can vary greatly. A way to keep this simple is to break down the components of what an individual needs to bring to the party to help your business be successful. The four most common components are:

• Capability – This includes, knowledge, skills, competence any specialist knowledge as well as physical ability to do the work.
• Impact – This is about individual objectives productivity, efficiency, effectiveness in relation to their specific job, their team and the organisational results.
• Behaviour – This can be about attitude, buy-in or engagement, contribution to the desired culture and values of your business.
• Talent – this can be about how the contribution and potential of the employee impacts or can benefit the organisation. It can be about suitability for progression either across or up the organisational career path.

Two roles

A good business will have aligned the overall desired measurements or results, with the elements of a managed performance. There are literally hundreds of performance frameworks, and if you are intending to or in the throes of developing a performance framework, you need to remember there are only two rules:

1. Keep it simple. If your 13-year-old can’t understand it, then it won’t work
2. Make it relevant. If the golden thread, connection or link isn’t made, then it won’t work.

Further reading

Here are some great articles from the magazine on Performance Management

1. 5 Reasons to Hold Regular Performance Reviews With Each of Your Team
2. Is Your Performance Appraisal Regime Credible?
3. Underperformance – The Does and Don’t of Managing it
4. People with Passion Drive Performance!
5. Leading Teams to Peak Performance
6. 6 Steps to Letting Go Of Your Poor Performer
7. The Four Critical Needs of High Performing Teams