The Truth about Performance Improvement: Moving Beyond the Metrics

What are the obstacles to successful performance management? What can you do to overcome those obstacles? And how can you move beyond managing performance to improving it?

Find out from your peers. As the first in a five-part series of articles, we'll reveal here and in upcoming issues of sascom what we've learned from more than 1,100 business professionals about their performance management efforts.

The insights come from an international, cross-industry survey designed to assess the current state of performance management initiatives. Drawing responses from multiple departments, the findings reveal the challenges faced, the benefits derived and some of the secrets to improving performance management deployments.

In this article, we'll introduce the main themes of the research – and begin to touch on the topics of subsequent articles, including:

• Technology's effect on performance management success.
• Cultural barriers to performance management and best practices in collaboration. 
• Performance management maturity levels, including where your peers are today.

We'll end the series with a performance management IQ test. Stay tuned to find out how well you'll score.

Think big, start smaller
In the past, performance management in a typical organization meant one of two things: finance managers scrutinizing company expenditures to track revenue against goals, or the human resources department prodding managers to evaluate their employees' job performance. Not anymore.

Now performance management has found its way across the organization. In the vast majority of companies surveyed, most areas of the organization are involved in performance management activities to some degree. In fact, only 16 percent of respondents indicate that performance management efforts are contained within one department.

Despite the broader use of performance management, enterprisewide initiatives are not the norm. Most efforts involve many departments, but only a third of these are aligned strategically across departments, the results show.

Even when performance management programs are implemented at the enterprise level, they do not necessarily lead to better results. Consider the finding that many enterprisewide performance management initiatives – primarily those in large companies – are actually less effective than aligned efforts that are smaller in scope. The problem? Large-scale deployments are often bogged down by their own weight. In fact, company size can amplify difficulties in areas such as collaboration, communication and simple agreement. To counteract these difficulties, large companies embarking on performance management programs might consider starting by syndicating a few key departments and expanding as the effort gains traction. 

Not surprisingly, the research reveals alignment is an important element of performance management success. What is surprising is the finding that alignment is the primary benefit companies hope to receive from their performance management efforts. However, many companies admitted to struggling with alignment issues, such as collaboration, resource optimization and tying planning to strategy, and it appears that they are looking to performance management systems to help. After all, the equation is simple: Align first, and the rewards - including revenue growth, financial transparency, competitive advantage and agility – will follow.

Mind your data
Just as it is important to get various departments within the organization to collaborate, it is also vital that various systems have the capability to "talk" to one another. Investments in systems from multiple vendors, while designed to create efficiencies and improve productivity, can wreak havoc on performance management efforts. The inability to integrate across these systems, cited as a key obstacle for many companies, can bring performance management efforts to a screeching halt. Without a full view of company information, efforts to manage performance are meaningless. 

As the number of data sources mount, data quality also becomes a big concern. More than one in four companies surveyed cited data inaccuracy as one of the main obstacles to performance improvement. Yet among those concerned about data quality, only 47 percent perform the fundamental task of data cleansing and rationalization. Lack of confidence in the data will make any output suspect.

In addition, some firms expressed concern about the sufficiency of their data. Clearly, it's not the amount of data that's the problem. Rarely do companies complain about having too little data.  Instead, the key is accessing the right data. Those responsible for performance management must be equipped with the right business intelligence tools to get at the information.

To ensure data access, quality and sufficiency, companies should look to developing a plan for data stewardship.

Nurture the corporate culture
On the human factors side, a successful initiative must be supported by the employees, yet many companies in the survey reported resistance to performance measurement efforts. Among the issues cited:

• Lack of information sharing or collaboration between departments.
• Little accountability for the success of the performance management effort.
• Failure to communicate the corporate strategy effectively. 

To overcome these challenges, companies must nurture a culture of commitment and collaboration. Managers must effectively articulate the company strategy.  Employees need to understand the benefits of performance measurement, and they need to know their role in the effort and how it maps to the success of the company. 

Next steps for success
The companies surveyed are performing a number of performance management activities, with varying degrees of success. The three most common activities are:

• Measuring performance against goals (83 percent).
• Summarizing financial and performance information at the department level (80 percent).
• Tracking key performance indicators (78 percent).

Employed in isolation, these activities do little to help companies achieve their goals. Instead, we found that companies with successful programs approach performance management activities as a sequential, three-step process:

1. Building a solid foundation of reporting information.
2. Managing the information by tracking performance against metrics.
3. Applying the information to improve the business.

Overall, the research shows that successful performance management efforts combine the measurement process with appropriate infrastructure, skills and culture. Hence, companies that have successful initiatives exhibit specific behaviors.  The successful performance management effort involves:

• A sequential approach to information use.
• A mature use of technology.
• Top-level sponsorship.
• Employee buy-in.

Future articles in this series will discuss each of these areas in more detail. In particular, we'll lay out the measurement process for performance management, explain the benefits of analytic techniques, and discuss the effects of CEO sponsorship and employee buy-in.