Performance management - Plus est en vous

What is it?

Performance management is a strategic and integrated approach to delivering sustained organisational performance. “It ensures that the organisation takes the right actions to execute its strategy and create value,” says Professor Regine Slagmulder. A well-structured and disciplined process is the backbone of performance management, but that is not where the pitfalls and challenges lie. Together with professors Koen Dewettinck and Kurt Verweire, she argues that these are to be found in an enabling organisational context.

Ask different people what performance management is and you will get different answers. Dewettinck recalls how a few years ago they invited HR managers and financial controllers to a round table on performance management. “The discussion quickly turned into a full-blown argument, with each party holding to their views.” Today, opinions have converged to some extent but when it comes to the crunch, most companies still struggle to implement leading practices.

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Do you have a strategy?

Verweire: “To be effective, performance management should be driven by a clear and concrete strategy. Group strategies and business strategies are often so vague as to be meaningless. Companies say they want to grow and be customer-focused, but what company doesn’t? There are many ways to achieve growth and unless your sales team and your operations department agree on how to grow, organisations will struggle implementing strategy.”

Dewettinck: “Strategic objectives are one thing but the challenge is to actually translate strategy into something meaningful for every employee at every level. And to keep ensuring that all efforts are contributing to the same goal. While it may seem straightforward, in practice this cascading of strategic goals is one of the biggest issues in performance management.”

No one likes to be judged

One of the barriers to overcome is people’s reluctance about performance measurement. Many perceive measurement of performance, especially their own, to be judgemental. It is therefore important to establish a climate in which people see it as enabling. Slagmulder: “Metrics are only a means to an end. What matters is the quality of the dialogue they generate as well as the actions they trigger. People should be keen to learn from these metrics to always do better. The ultimate purpose of performance management is to create accountability and initiate a self-motivating cycle so that people take ownership of problems and creatively look for solutions.”

Are the right people involved?

Yet all too often, employees regard performance management as a bureaucratic burden imposed by HR or Finance. Dewettinck: “People should feel the process helps them move in the right direction. That’s why it’s important to have a strong sense of shared meaning within your organisation. Involving people in the development of processes and systems most certainly helps, but doesn’t happen enough. More often than not, HR develops evaluation systems, for example, without input from the line managers who are supposed to use them.”

Verweire agrees: “You’d be surprised at how many managers still use the old-fashioned top-down command and control style of leadership. Good performance management highlights the limitations of this management style.” Referring to the model he developed with Vlerick researchers, he adds: “We generally distinguish between four levels of maturity, from entrepreneurial to connected, depending on how a company is managed. I’d say barely 15% of managers have reached maturity levels three or four.”

The enemy within

Slagmulder: “Companies still tend to look at performance from a silo perspective, determining KPIs for specific functions and departments in isolation. As a result, the sum of the parts is less than the whole.” Dewettinck puts it this way: “Performance management is a process across functions and at different levels in an organisation, which is its strength but also its weakness. Unless the various efforts are aligned, they won’t have a reinforcing effect; quite the contrary.”

Verweire points out another issue: “Bonus systems can be detrimental to the collaborative culture you’d need to achieve a common strategic objective. If the system is such that it removes every incentive to share information between departments, you’ll end up in a situation where the enemy is within.”

Gibberish or useful information?

So far, IT has remained conspicuously absent from the discussion. Does this mean that performance management does not present challenges for IT? Not quite. Slagmulder: “Information systems can largely automate performance measurement and monitoring. The challenge is not to get bogged down in a myriad of data and isolated facts, but to be able to translate all that data into useful information you can learn from. It should support informed decisions that drive your business forward.”

Why bother?

Effective performance management is not without benefits. In fact, past studies have shown that companies with mature performance management solutions systematically outperform their peers. A recent study also found that intelligent use of performance management tools, such as balanced scorecards, leads to better strategic alignment, which in turn has a positive impact on performance.

Verweire: “It’s a bit of a paradox: good performance management improves your financial results by making you focus less on your financials and more on the enabling factors.”

The Performance Management Process: the backbone

Regine Slagmulder: “Intuitive performance management doesn’t work. You can’t just go about measuring anything and everything in an ad hoc way without a focused set of strategic objectives. You need a bit of discipline to monitor and act on the relevant performance information. And that calls for a systematic process.

“But this process should be running in the background and any supporting systems should be kept as simple as possible to balance costs and benefits. What’s more, to be flexible and responsive in today’s dynamic environment, you should avoid a mechanistic approach.”

Learn how to make it work

Setting targets, measuring and monitoring... the performance management process (see sidebar) sounds simple, and it actually is. But a streamlined process is not enough! How do you avoid creating merely a reporting bureaucracy? This forthcoming book identifies four key enablers for a high-performing organisation: strategic focus, an engaging climate, a collaborative organisation structure and a satisfactory information infrastructure. It combines academic insights with practical application. Real-life case studies, illustrating a combination of challenges, explain where it can go wrong, but also how to make it work. You will learn how to leverage all four enablers and overcome any obstacles so that performance management helps you achieve your goals – and more.

  • Title: Managing for Performance Excellence – Vlerick on High-Performing Organisations
  • Authors: Regine Slagmulder, Kurt Verweire, Koen Dewettinck et al.
  • Published by: Lannoo Campus
  • ISBN: 9789020979268
  • Available: May 2012

Keen to get your hands on a copy of "Managing for Performance Excellence"? Send an e-mail to [email protected] and she will let you know when it hits the bookstores.

Performance management - Plus est en vous

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Equis Association of MBAs AACSB Financial Times