Performance Management

by Peter Parkes

Strategic goals

Management is doing things right; leadership is doing the right things.

Peter Drucker

Every organisation should have an explicit strategy containing purpose and goals, and if these are to be achieved, it’s important that all the parts of an organisation are pulling in the same direction. Performance Management, together with the associated tools and techniques, is a process for managers and supervisors to achieve these goals and hence support the organisation’s strategy.

For example, we may have a mission statement saying something like ‘we want to be market leader in our target sector’. A consequent goal for performance management may cascade to managers as ‘to improve sales (specifics) by x per cent by the end of next financial year’.

On the other hand, it may be our strategy to withdraw from this sector, and only pursue work/sales with a high profit margin. Without agreeing an explicit strategy to aid communication and align the workforce, managers may end up continuing to chase sales as they have been doing, and unwittingly work against the corporate strategy.

The Audit Commission refers to the flow through from strategy to measures, from leadership to managers, as ‘the Golden Thread’. This is one of the key areas they investigate when they review government funded organisations to ensure that public money is spent economically, efficiently and effectively.

There are several tools to help us to flow the strategy down into the organisation via targets and measures, including the Balanced Scorecard and EFQM excellence model.

Exercise

Consider this: are you and your team operating in a way that is aligned to your corporate strategy?

What evidence do you have to help prove it?

Balanced scorecard

What can you do if there is no clear strategy?

There is a viewpoint that, in the real world, strategy is an emergent property rather than something which someone decides and then everyone does. In practical terms, this means that organisations are seen as being like an organism that adapts and grows into its environment, depending on the positive and negative stimuli received. The organisations/organisms which survive best are those that are the most adaptable and have the best core capabilities. In the absence of an explicit functional strategy, other frameworks to measure improvement in capability can be substituted to make up part of the shortfall. One of these is a Balanced Scorecard.

Robert Kaplan (Harvard Business School) and David Norton introduced the balanced scorecard in 1992, building on other initiatives such as Total Quality Management, and it became a management fashion in its own right. There has been much evolution since then, but the basic concept remains: take a balanced view of a wide range of performance indicators, not just financial ones, and measure a blend of input and output measures. The scorecard can be used at the corporate level to monitor things such as cash flow and return on investment, or at a local departmental level. The scorecard should be custom built around the standard framework for each application. Here is an example of a Balanced scorecard (in MS Excel format) that could be used at a local management level. The actual measures used will need to be custom built for the situation. (Note that you should select from these examples and not attempt to use all of them.)

There are several software tools that can be used to set up and manage evidence for a balanced scorecard, some of which are open source (in other words, free).

There is an independent balanced scorecard user group.

There is also a little more on this in the Balanced Scorecard topic.

The EFQM excellence model

The European Foundation for Quality Management (EFQM) is a not-for-profit membership foundation, created in 1989. The EFQM Excellence model is a management framework for measuring progress on a path of continuous improvement. It is probably the most widely-used organisational framework in Europe, and is chosen to judge the majority of awards for quality. The tool can be used for a number of purposes:

  • Self-assessment
  • Benchmarking with other organisations
  • As a guide to identify areas for improvement
  • As the basis for a common vocabulary and a way of thinking
  • As a structure for the organisation’s management system.

As with the Balanced Scorecard, the model takes a balanced view of the organisation, including a mix of input measures and output measures. It is based on the premise that

Excellent results with respect to performance, customers, people and society are achieved through leadership driving policy and strategy that is delivered through people, partnerships and resources, and processes.

The EFQM Excellence Model

The EFQM’s website contains a standard self-assessment questionnaire (90 questions – ten questions per measure), which can be completed in a few hours. For further information, visit the EFQM website.

Some very large public sector bids are let and assessed using the EFQM model to help ensure continued improvement in operational performance over the life of the partnership and avoid the cycle of re-tendering. Organisations that do well in these competitions are the ones whose business processes are set up to collect supporting evidence against the EFQM’s performance measures.