Performance management success factors: Align PM with organizational strategy

Performance management processes and procedures have evolved at a blistering pace, perhaps faster than any other part of the Human Resources discipline.

PM has transitioned from an industrial-age framework focused on maintaining consistent production schedules and quality to a flexible – and interconnected – tracking, coaching and talent development tool.

Technology capabilities and limitations often drove process design in early PMS implementations.

Organizations now require technology solutions that reflect their specific performance management framework and focus on the competencies that enable their unique strategy.

Aligning performance management with organizational strategy

To design an effective performance management system, organizations need to understand how each job – and the career ladders or development paths for those jobs – feed into the organization’s strategic goals.

That understanding provides the framework for how and how often performance assessment and guidance is conducted.

It provides a way to assess performance not just in terms of “what have you done for me so far?” but also, “Where can we best use your talents and optimize your skills going forward?”

Why is that so important?

Effective and engaged employees share a couple of common characteristics, regardless of industry, job function, or seniority.

They understand how their daily efforts make a difference in whether and how their organization achieves its strategic goals.

Without that understanding, how can they to rate their own efforts and see where they should develop strengths and overcome limitations?

An effective performance management solution provides the tools to answer that deceptively straightforward question for individual contributors, teams and organizations.

And, like individual performance goals, a PM system design should flow from a clearly-defined strategy. Otherwise, those systems can limit, instead of advancing, that strategy.

Asking the right questions

Often, discussions about the need for performance management approach the topic at a tactical level.

Indeed, many vendors’ websites suggest that customers look at tactical drivers when they are researching performance management tools.

They suggest organizations ask themselves,” Why are we looking at investing in a new PMS?”

• Compensation decision making?
• Administrative support?
• Developmental planning and guidance?
• General performance measurement and reporting?

For nearly every organization, the answer is, “Yes, all of that.”

The good news is that there’s a growing ecosystem of performance management technology providers that support those core capabilities. And that’s fine as far as it goes.

But that is also a problem. In the end, those are questions about the tool’s capabilities, not about the competencies required to implement your strategy.

Strategy drives competencies, competencies drive PM

Strategy is the expression of an organization’s mission, goals, objectives and interrelated action plans for achieving each of those targets.

Those are the factors that determine what competencies you need to build, maintain and nurture.

Mapping strategy components onto various functions — product development, production, marketing, sales, management and administration and partnerships — helps define and prioritize the tasks that you ask each of your people to perform.

Answering strategic performance management questions requires the customer, and solution provider, to understand how each job – and any associated development plans and career ladders – feed into the organization’s strategic goals.

An understanding of the competencies needed to support your strategic aims provides a framework for defining jobs, assessing performance and guiding employee development.

Shared understanding of why, what and how

If each of your processes flow directly from strategy, you can trace everyone’s work (actions and behaviors) from task to outcome.

That allows everyone to see how their work combines with everyone else’s to enable the organization’s strategic ambitions.

When everyone shares a strategy-based understanding of job responsibilities and interdependencies, they are empowered to hold themselves, and each other, accountable for outcomes.

They can see where changes and improvements in their jobs might better support strategy. And they can anticipate and participate in realizing those changes.

Feedback and adjustment

So, if everything flows from strategy, is this a one-way, top down process?

No. Like any successful living organism, companies, government agencies, charitable foundations or any other group enterprise operate in an infinite series of feedback loops and adjustment mechanisms.

Designing a performance management structure and selecting the tools that can best support that structure needs to be a similarly interactive process.

PMS design needs to include ways to capture and consider input from all stakeholders ranging from senior executive management through to line managers, employees and unions and, in many cases, indirect input from end customers.

Are you optimizing people or processes?

When companies were measuring how many acceptable widgets came off production Line B, and knew they’d be making those widgets for the foreseeable future, performance was easier to assess and to manage.

Employees weren’t expected to change tasks on the fly, if at all. Training requirements were well-defined and could focus on a few specific skills.

Today, however, you need every employee ready to quickly learn new skills and perform new tasks to support an evolving strategy.

Managers need visibility into how workers’ capabilities fit with their current jobs and insight into any talents and interests that would be valuable elsewhere.

Workers need to see how their skills fit with current tasks and what new skills they can and should develop to climb their chosen career ladder.

That means both managers and workers need a holistic view of current and future competency requirements.

And there is a real payoff: the more of a role your employees play in recommending and selecting skills they want to develop, the more excited they will be to use those skills.

Performance management is everyone’s responsibility

Of course, these highly complex and interdependent performance management tools and processes are only valuable if used consistently across your organization.

Here again, tying the performance management process back to strategy makes it clear to all stakeholders just how critical it is.

Leadership support for and continued attention to employee development sets the tone, but ease of use plays a huge part in how effective PM processes and technology solutions are for the organization.

Employees and managers need to be able to learn and use PM systems without a massive time investment that takes away from productivity.

That means organizations need to make learning and using performance management processes and tools part of every job description.

And organizations should push PMS providers to continually improve both user interfaces and user training so those meet your specific needs.

Measuring performance management ROI

Performance management systems provide powerful tools for developing and nurturing competencies, making them among the most important investments an organization must make.

Ultimately, performance management that maximizes workforce development and flexibility in line with a strategic framework is what differentiates successful and less successful organizations – even in the most highly-automated industries.

The return on your performance management investment can be measured in financial terms reflecting increased efficiency, reduced turnover and other metrics.

But the true measure of a successful PMS implementation is a flexible, teachable workforce that understands and supports your strategy and that has the resources they need to succeed and grow with your business.