Performance Management Dos and Don'ts

Seven best practices in performance improvement (third in a five-part series)

In the fourth quarter 2006 issue of sas com magazine, we introduced this five-part series with a summary of what we learned from more than 1,100 professionals who were surveyed about their performance management efforts. The second article in the series discussed the ways in which technology can affect performance management success.

Here, we’ll describe seven important performance management principles: following a sequential approach, aligning goals, leveraging analytics, addressing cultural issues, securing C-level sponsorship, involving all areas of the company and measuring after establishing a solid foundation.

Watch for the fourth article in the series in the third quarter 2007 issue of sas com magazine, where we’ll interview Becca Goren, SAS Product Marketing Manager for Performance Management, about the survey results – and what they mean for you. You can read previous articles in the series at www.sas.com/sascom-pmseries. 

How can you move beyond the metrics to improve performance? Start by following our list of performance management dos and don’ts.

Do follow a sequential approach
If we look at the activities associated with performance management as a framework, we can categorize them into three phases:

• Report performance to bring transparency to the organization.
• Manage and control to align the organization.
• Improve performance to drive the organization.

Each of these phases involves a series of activities that, when completed effectively, move an organization to the next level of performance management.

Organizations that take a sequential approach to performance management get better results from their efforts. According to the research, the benefits of performance management significantly improve as the organization performs more activities in each phase.

Do focus on alignment
Most organizations struggle with alignment issues – collaboration, resource optimization, tying planning to strategy – and they look to well-oiled performance management initiatives to help.

Without a doubt, alignment is the most prevalent theme throughout the survey. In fact, the top three benefits that respondents hope to achieve through performance management are tied to alignment:

• Strategic and cross-departmental alignment, collaboration and accountability.
• Budgeting and planning process aligned with strategy.
• Resource alignment and optimization.

But why focus on alignment before financial benefits such as revenue growth and financial transparency? Because alignment is essential to operational efficiency and effectiveness at the enterprise level. Goals and metrics that are established by individual departments but not aligned to an overall strategy can be achieved independently, but they might not advance the organization as a whole.

Do leverage analytics
The study shows that the use of technology plays a key role in successful performance management. In particular, the use of analytics dramatically improves the success of performance initiatives. Respondents who have implemented analytic technologies such as data mining and forecasting have achieved greater success than those who have not, specifically in the areas of innovation, competitive advantage and agility. In fact, success in these areas nearly doubled when predictive analytics were employed.

Use of analytics also correlates with other measurements of success. Respondents who have implemented analytic technologies have achieved higher levels of performance maturity, a broader scope of performance management initiatives and a higher level of involvement from all departments.

Do address cultural issues
Respondents to the survey indicated that cultural resistance within their organizations to performance measurement was the primary obstacle to the success of performance management initiatives. This resistance is likely at the root of the second most-often cited obstacle: Departments don’t share information or collaborate.

Lack of collaboration and sharing is a result of the resistance to measurement, which creates difficulties in obtaining the right information.

To overcome these challenges, senior managers must set the stage for an environment of measurement, sharing and collaboration. Managers also need to articulate the company strategy so employees can understand the benefits of performance measurement and how their roles in the effort map to the success of the organization.

Don’t ignore the importance of C-level sponsorships
The importance of executive sponsorship for a performance management effort cannot be overlooked. Because successful initiatives are linked directly to corporate strategy, it makes sense that top executives should not only buy in to the concept but also own it.

This study indicates that in more than half (57 percent) of the organizations surveyed, the performance management initiative is sponsored by the C level. When performance management becomes enterprisewide, C-level sponsorship reaches 72 percent. C-level sponsorship is important to the success of performance management initiatives, but it must be the right sponsorship. Executives need to actively manage the culture to break down resistance to measurement and encourage employees to collaborate and share.

Don’t leave anyone out
Horizontally and vertically, it’s important to get all levels of employees and every department within the organization involved with your performance management efforts.

The research suggests that involving key constituents – finance, human resources and IT, for example – will have a positive effect on the outcome of the project. This inclusion helps break down some of the silos that create problems in sharing information like workforce data that is relevant to all areas. Sharing responsibility for performance management helps to ensure that the initiative is not too function-centric.

For many organizations, effective performance management will require a cultural shift. Unless performance management efforts have C-level sponsorship and buy-in from the bottom up, instituting this cultural shift will be difficult.

Don’t rush into measurement
Finally, as performance management gains a broader following, the organization begins to engage in a variety of activities to manage its efforts. However, pressure to show value and report progress may be pushing organizations to measure before they address more important issues.

Measurement is a phase two activity, and eight in 10 organizations are engaged in measuring performance against goals before integrating and cleansing data. The high level of measurement activity seems to suggest an environment in which organizations may be placing undue emphasis on the metrics.

Study data and analyst research support the idea that dashboards and scorecards top most organizations’ implementation agendas. Although these tools are handy for viewing key indicators at a glance, leading companies understand that they can’t be used for effective management or performance improvement without intelligence behind them.

The bottom line ties back to our original point: Taking a sequential approach and moving through the activities related to reporting, managing and controlling – and finally improving – will yield the best results.