Let's Talk Alignment

How to align performance management activities – and why it matters (fourth in a five-part series)

By Hope Squires

We introduced the topic of alignment and described its importance to performance management in the first article of this series. Published in the fourth quarter 2006 issue of sascom, that series opener described the major themes found in a recent survey of 1,100 business professionals who were asked to describe the current state of their performance management initiatives.

The second article in the series went on to describe what the survey revealed about the role of technology in performance management success. The third article contained a list of dos and don’ts for performance management. Here, we continue the series and focus again on alignment by discussing the survey results with Becca Goren, Global Product Marketing Manager for Performance Management at SAS.

You'll find the final article in this series – a performance management IQ assessment – in the upcoming fourth quarter 2007 issue of sascom.

According to the survey results, alignment is the primary benefit organizations seek from their performance management initiatives, and yet they struggle to attain it. Why is alignment so critical?
BECCA GOREN: Performance management initiatives are designed to maximize every aspect of an organization – meeting the objectives of internal and external stakeholders. To effectively meet those needs, every employee in the organization needs to understand – and be directed by and accountable to – these objectives. Also resources should be optimized to support these objectives. That's what alignment is ultimately about.

Lack of alignment increases inefficiencies, risk and competitive threats. It slows down the organization and prevents optimal execution of the organizational strategy. Ultimately, the business may be unable to achieve the enterprise goals and make necessary improvements unless all divisions work in concert.

The study refers to three different types of alignment. Could you explain these?
GOREN: First and foremost is strategic alignment, which refers to aligning divisions across the organization while ensuring collaboration and accountability toward organizational goals. Second is financial alignment, synchronizing financial and operational strategy and activities across the organization. The third is resource alignment, helping organizations ensure that their acquisition and use of resources support their strategic intent, reflecting priorities.

While all three are important, you can make headway in one before the others. For instance, a governance initiative such as Sarbanes-Oxley could lead an organization to focus on financial management, data integration and data cleansing. This effort successfully leads to compliance and financial transparency – a single account of the financial truth. This transparency is critical to attaining alignment. However, financial alignment can be hampered by lack of strategic alignment, such as coping with competing interests among departments or between departmental and organizational objectives. For example, how budget dollars are spent often reflects departmental, not necessarily strategic, objectives.

The results indicate that many departments are involved in performance management initiatives within the business. Why is that? How does that affect alignment?
GOREN: One of the most striking findings in this survey is the fact that performance management does not "live" in the finance department – nor is it driven by any one department alone. Respondents indicate involvement from every department represented in the survey (finance, marketing, IT, sales, operations, human resources and customer service). The dispersed nature of performance management in the organization represents both a challenge and an opportunity. Because it does not reside in one department, accountability must rest with multiple parties. Cross-departmental collaboration is essential to success.

Why has it been so hard for organizations to achieve alignment?
GOREN: People often underestimate the cultural shift that must accompany effective performance management. Respondents identify cultural resistance to performance measurement as the single greatest obstacle to success. (See Figure 1.) This resistance is likely at the root of the second-most cited obstacle: Departments don't share information or collaborate. If people feel that measurements threaten them instead of prove their success, they are less likely to embrace the needed change. Also, if the mandate comes from the top without proper buy-in, an internal roll-out plan, training, communication and skill development, workers will resist sharing information – a major contributor to misalignment. Employees need to understand the benefits of performance measurement and management, as well as how their individual roles contribute to the success of the organization.

Also, the right support system may not be in place. Just because an organization has a dashboard doesn't mean it has a clearly articulated and communicated strategy, common definitions, common measurements, workflow and support processes – in addition to business intelligence and performance management technology.

The No. 1 cited technology barrier to implementing performance management is the inability to integrate systems from multiple vendors. This inhibits an organization's ability to understand what's going on, where. Without this organizational transparency, there is no foundation for alignment. Other technology can be effective to support alignment, but most struggle with integration needs above all else.

More than one-third of respondents reported that insufficient information is a major inhibitor to performance management success. Clearly, it's not the amount of data that's the problem. If departments are not sharing information and collaborating, and data cannot be accessed from various systems, those responsible for performance management will not
have the information they need.

What can organizations do to address these technology obstacles?
GOREN: Organizations need to ensure the seamless flow of information from multiple systems and between departments. To begin, organizations need to get an accurate view of their information – by focusing on data integration and cleansing. These are foundational steps that should not be compromised because skipping them leads to an inability to move the organization forward to support its goals.

Next, start small. Taking on too much at once can be a recipe for failure. They also need to ensure that technology purchases support their organizational goals. In other words, begin with the end in mind. Businesses need to evaluate goals to determine where to focus first.

Which technologies are organizations considering most, and what may be driving these considerations?
GOREN: Scorecarding technology tops the list of technologies companies plan to implement. Since respondents cited alignment issues as the three most important benefits to performance management, scorecards make a great deal of sense to help organizations align. People expect dashboards to help them understand what is happening and to monitor key indicators, and they expect scorecards to manage performance. Strategy maps (a visual macro view of an organization's strategy) are also of great benefit to alignment.

Not far behind are plans for organizations to implement predictive and workforce analytics. As part of strategic planning, predictive analytics help organizations focus and refine strategies for more successful execution. Organizations can figure out what is likely to happen, run simulations without repercussions and set the best course of action. Respondents who have implemented analytics reported achieving greater success in innovation, competitive advantage and agility – nearly twice the level of those without analytics. Workforce analytics – essential for aligning human capital strategy with business goals – help finance, lines of business and human resources managers analyze needs, assess skills and vulnerabilities, and develop a proactive workforce strategy. Plus, they help predict who will likely leave the organization and analyze workforce risks.

Technologies that affect performance management success

Bio: Hope Squires is managing editor of sascom magazine.