Performance management is a term that is used in several different ways. To some, the term means the management of the performance at an organizational, department or team level. But to others, it means measuring the performance of individuals within an organization.
Performance Management is:
… activities that ensure that goals are consistently being met in an effective and efficient manner…
Source: http://en.wikipedia.org/wiki/Performance_management
I don’t see the distinction.
If you are going to measure performance you really should be looking at all of the factors that contribute to performance and those include:
- the organization itself
- organizational goals and strategies
- the processes within the organization and
- finally, the people.
If you only investigate one of these factors, and in my experience, most business owners tend to focus on employee performance, you may be missing significant opportunities to improve the performance of your business. Measuring the performance of your people will not yield significant improvement opportunities if the processes are not right, or as I have witnessed in the past, are counter to the organisational goals.
You also need to be carefully designing your performance measures. If you decide to use performance indicators as a part of your reward system the measures you use mustn’t produce behaviours that work against organisational performance goals.
About Organisational Goals
One of the better-known (but perhaps not well-understood) ways of reporting on the performance of an organisation is financial statements. The Profit and Loss Statement and Balance Sheet will tell you whether or not an organisation is profitable, i.e. they were able to sell their goods or services for a price that was higher than the total cost of producing those goods or services.
A cash flow statement will also tell you whether or not the organisation has enough cash flowing in and out to maintain a decent level of liquidity – meaning ‘Do they have enough cash on hand at any given time to pay their bills?
But unless you have a super accountant who seriously over-delivers, your financial statements can only give you details about one aspect of your performance. They cannot tell you anything about your operational processes, people management, the state of your relationships with suppliers or customers or where you sit within your industry or market.
They cannot tell you if you are making/selling the right time to the right customers and they cannot tell you whether your processes are efficient or the most effective. The financial statements will tell you whether or not you are doing well financially, but they cannot tell you whether or not you could improve your position by changing/improving your operational processes.
If you are a small business owner and you are relying solely on your financial statements for performance management rather than developing a more comprehensive performance measurement/management system that is aligned with your organisation’s planning process, you may be hurting your business.
For Employee Performance Management
How well do your employees perform their duties and how well do you support them in their roles?
If you are not engaging your employees in a performance management process, you are not doing to know. Are all of your employees working at their optimal level or are they over or underworked? Do you have some employees working well below their intellectual/professional capacity or are some of them stressed out due to unrealistic demands being placed on them?
Do you have any issues with unmotivated employees or any that could use some extra training and support?
And what do your employees think about you and the way you are managing the business? Do they have any way of communicating issues or suggesting ways to make things work better? Are you listening to their opinions?
A 360 performance review can help you to better understand your employees, provide a mechanism for identifying training and support needs and offer employees an opportunity to provide you (the boss) with feedback on your performance.
