This is the second in a series of three articles on Performance Management Practices prepared for The Stabroek Business by the Mersu Caribbean Consulting Group, a Trinidad and Tobago-based Strategic Marketing, Image Management and Business Consulting Group
By Averil Williams
In a prior editorial, you were introduced to performance management defined as the approach and process of managing a business. It was shared that it is the control system for the corporation: a system that allows effective management of businesses at all levels in the organization. It was intentional that I underlined quite deliberately “at all levels”.
I am a fan of the principles put forward in an excellent book entitled – “Wikinomics – How Mass Collaboration Changes Everything”, by Don Tapscott and Anthony D. Williams. It is actually the subtitle that says it all; “How the power of the masses can change everything”. This gives way to the question, “How do you leverage the power of the masses to improve business performance at every level in the enterprise? The answer can be found in the following statements, “Structure drives Performance” and “Measurement drives Behaviour”.
In looking at structure, we’re referring to the employee configuration of who reports to whom in the organization and the flow and access of information shared. This arrangement is implemented to ensure the right information is made at the right time, by the right people. Everyone should be accountable for the managing ‘their part’ of the business and for contributing towards common objectives and common goals. This is made possible when access to business information fits with the role of every variable in the equation. In other words, the employee management structure defines not just roles, contact details, immediate reports etc., but also the performance reporting roadmap for the organization. This information is what supports management in their decision making, along with the following:
● Clear objectives
● KPI’s and targets
● Action initiatives to be carried out to achieve his or her objectives:
o Plans i.e. planned activities
o Budget allocation by activity
● Clearly defined processes to monitor for control
● Business information to guide them, which is a combination of reports, guided analysis, alerts and recommendations.
The following diagram provides an illustration of what we’re discussing:
Notice the commonalities that exist at the various levels. Consider the concept of driving. If you turn the steering wheel at the top of the organization, how long does it take for it to turn? However if there are steering wheels at all levels then the decisions made at the lower levels all help to turn the wheel at a strategic level. It’s back to the power of the masses again.
With structure in place, what about the measuring of performance?
It is a truism that “Measurement drives Behaviour”. Accordingly, the selection of performance measures must serve to encourage people to align their efforts with the aspirations of the organization.
The literature abounds with good advice on the construction of performance indicators. Here are some tips to assist:
o Include key non-financial measures, as well as financial;
o Be derived from the organizational mission and strategy and from the objectives that flow from them;
o Be detailed, relevant, reliable, understandable, valid, readily updated;
o Be focused on critical success factors;
o Be within the power of the unit concerned to influence;
o Be results-oriented and able to guide improvements;
o Be few enough to be manageable;
o Be many enough to embrace the diversity of the organizational critical success factors;
o There is a balance between complexity and simplicity.
Performance indicators cannot tell the whole story. Certainly, an indicator will rarely tell you WHY something is occurring. Rather, it will tell you THAT something is occurring. To find out why requires a different process.
Here is a (non-exhaustive) list of aids to interpretation:
v An indicator, however well-constructed, can tell you only so much. Do not mistake the performance indicator for the performance itself. An indicator is just that; a window to a slice of a process. In most cases, performance in the process as a whole is best assessed by reading the whole basket of related indicators.
v Valid comparisons can be made laterally – between divisions or between units – only provided the definition of the underlying data elements is consistent. But be wary of facile comparisons; there will be drivers of performance that qualify simple comparatives and these need to be explored and articulated for meaningful comparison. Comparisons are much more robust if they are longitudinal, rather than lateral.
v The individual involved in performance analysis and interpretation needs to understand the processes used to collect the data elements. There is need for a keen awareness of the subtle changes that alter data, so as to contribute cognizance of the robustness of the data to ensure that comparisons are made with due care and accuracy.
v Remember that PI (Performance Indicators) will not tell the whole story. It is conceivable that good performance measures could mask weakness. This is a danger that must be considered in the discussion of performance.
Add process thinking to the mix
While structure and performance measurement may be considered to be primarily associated with planning and deployment, process thinking addresses the management of the system itself. This method also identifies the design and operation of organizational processes to deploy strategic intent to create and add value for stakeholders. The measurement system should be linked appropriately with system and process monitoring, control and improvement. Remember, performance management is the control system for the organization. Improvements in organizational performance are generated through the improvement of the core (business) systems and structures that act in concert to form an organism working in unison with the same pulse regardless of hierarchical positioning. Core practices are broad cross-functional procedures that constitute the means by which the organization delivers it products and services. If you don’t know what’s affecting it, how can you improve it?
Averil Williams BSc, CSPM,COM is a consultant – averil.williams4@gmail.com
