A View of "Performance
Management"
If any ten managers
are asked to define "performance management", they're likely to come
up with ten to fifteen versions. That's what happens when an otherwise legitimate
management philosophy descends into the realm of popular business buzzwords
- its real meaning buried under a pile of misperceptions or confusing jargon.
It becomes just one more part of the "white noise" of today's business
lexicon.
That doesn't mean, however, that the principles behind this approach aren't
worth understanding. Regardless of all the trimmings that have become attached
over time, the true definition of performance management is really quite simple
and relevant: Make sure you understand clearly what your organization needs
to succeed and that you get what you're paying for.
Performance Management 101
Its true meaning is rooted in precedent philosophies like Management by Objective
(MBO) and the latest incarnation; The Balanced Scorecard. Performance Management
can be seen as an evolutionary extension of both; an all-inclusive approach
that incorporates their best features. These supposedly different theories are
not really as different as many would have us believe. The one central theme
consistent with MBO or Balanced Scorecard or Performance Management is that
the performance objectives assigned to units or individuals [must] derive from
the goals (and therefore the mission) of the enterprise itself.
This may sound far too simple for today's complex business environment, particularly
coming as it does from a professional consultant. After all, we're most likely
the ones that confused it to begin with. I could get drummed out of the consultant's
union for revealing here that the emperor is in fact disrobed, but I'm willing
to pay that price; and save dues in the process.
The confusion surrounding these various theories of management arises less from
their underlying principles and goals than from their relative complexity and
applications; as well as how they are often presented by those trying to sell
the same horse of differing colors. Many who promote the scorecard approach
as a discrete marketable service tout it as a replacement for the "failures"
of Management by Objectives. This is similar to how many have represented the
"Six Sigma" process as a replacement for the "failures"
Total Quality Management (TQM). While neither claim is accurate, they have nevertheless
created the impression that these are distinct approaches and one must be left
behind before the other begins.
Management by Objectives
Management by objectives was advocated by Peter F. Drucker, a noted management
theorist, in his book Management in 1973. This approach requires that
the "objectives of every manager should spell out [his] contribution to
the attainment of company goals in all areas of the business." Under MBO,
these objectives should contain both short and long-term elements as well as
tangible business objectives (profit, market share, ROI, CQI standards, etc.)
and such intangible objectives as worker attitudes, management development,
customer satisfaction and public perceptions.
It was presented when introduced as an approach to be applied principally to
managers in a manufacturing environment. Its supposed failures derived primarily
from the fact that it was seldom fully assimilated by the organization. Given
only superficial attention in most cases, the threads linking employee and group
performance to organizational mission and goals stretched over time, and then
broke. It has been discredited as a philosophy because it was poorly applied;
not because its premise was wrong.
Balanced Scorecard
The balanced scorecard approach, as expressed by Drs Robert Kaplan and David
Norton in their book, The Balanced Scorecard in 1996, is primarily an accounting
tool used to assess the customer-based success factors that enable organizations
to clarify their vision and strategy and translate them into action. Like MBO,
it too relies on the linkage between these measurement factors and the organization's
overall mission and goals. It goes beyond MBO, however, by recognizing non-financial
measures more important to post-industrial organizations in the information
age. It seeks to "balance" the influences of customers, suppliers,
employees, processes, technology and innovation in creating future value. The
short-comings of the scorecard, however, is that it is often too complicated
a process to be readily implemented and absorbed into corporate culture.
So What Works?
"Performance Management" is a term that apparently means many different
things to many people. The view I prefer is that it embraces all the principles
of MBO and Balanced Scorecard and everything in between; once the "add-ons"
have been stripped away. The approach I have found best suited to most organizations
seeks to re-establish the link between organizational values, goals and mission
to the individual employee's measurable performance standards.
Accordingly, the balanced scorecard approach is stream-lined so it can be implemented
and the MBO connection is renewed. Here's how:
- Identify organization-wide
mission elements, and then the parallel department or functional translations
of each.
- Define specific
and measurable goals or projects to support those strategies.
- Select applicable
measurement tools and reward systems for each goal to finally in-grain the
process within the organization's culture.
This process extends
MBO by making it applicable to all types of organizations, in all markets and
at all levels.
The Ultimate Goal
So in the end, performance management still remains a somewhat elusive definition;
but maybe that's for the good. It will survive because it's pliable enough to
adapt to any organization - for profit or nonprofit, manufacturing, service,
logistics, academia, high-tech, healthcare, government; broad enough to be applied
to all employment levels and flexible enough to adapt to constant change. Remember
it's basic purpose - making certain that every employee, system and process
is held accountable for adding value that actually furthers the organization's
mission and goals.
