Read our guide on performance management. Understand its importance, methodologies, & latest trends to effectively manage your team's performance.
This is an important question, and we put this in-depth guide together to cover it. Below, we’ll walk through a thorough performance management definition, the importance of performance management, each step of the performance management process, and a great deal more. Use the table of contents below to navigate to the section you need or start from the top! Either way, we hope this guide will help give your organization a strong approach to strategic planning and execution.
A couple of different things may come to mind when you hear the term “performance management.” In this article, we’ll primarily be referring to corporate performance management (also called enterprise performance management)—but that has a separate definition from project performance management and personnel performance management. Take a look below to better understand how these terms relate, and how they’re different from one another.
Corporate performance management is the art of defining, measuring, and ultimately achieving your strategy. This entails thinking about the performance of your entire organization as a whole, and considering how to link together your goals at the enterprise, division, and department levels. When done correctly, corporate performance management should examine the way in which your entire organization is performing—not just a slice of it.
When going through the steps of corporate performance management, you might use frameworks like the Balanced Scorecard, objective and key results (OKRs), or another method to manage and report on strategic progress and execution across departments.
There are two times when you should begin thinking about and integrating the practices of corporate performance management:
Here are a couple examples of organizations that have used corporate performance management to their benefit.
Project performance management allows you to track how you’re performing on particular projects (or on a portfolio of projects) that are helping to support or drive performance in part of your organization. While corporate performance management deals with all aspects of an organization, project performance management is more about the complex art of managing resources, people, schedules, budgets, and other interactions related to a single project.
Some projects are so large that it may feel more like you’re doing corporate performance management than project performance management. For example, if you’re managing a billion-dollar project that is 10 years in the making, that kind of undertaking will require a tremendous amount of complexity. And billion-dollar construction projects likely have aspects that are intertwined with corporate goals, such as finances, customers, and employees or staff. But ultimately, you're still working on a project—one that has a start and end date, and that can be broken into tasks and executed on. Therefore, project performance management shouldn’t be considered identical to corporate performance management, as they have slightly different goals.
The City of Arvada, Colorado, relies on project performance management software to track and report on their projects, which helps them leverage their need for increased citizen transparency. Take a look at Arvada’s full case study here. Keep in mind that this case is operating within its subset of corporate performance management, as is often the case with project performance management.
Personnel performance management—which could also be called human resource (HR) performance management—entails looking at the performance of all your employees, and how those individual performance levels are linked and aligned to the strategy of your divisions, departments, and enterprise as a whole. Personnel performance management not only includes regular reviews of staff performance, but also encompasses employee competency evaluations, employee goal setting, salary reviews, culture reviews, managerial reviews, and employee feedback cycles.
The process of managing individuals is typically handled by HR, but it should be carried out with organizational objectives in mind. As discussed in the previous sections, ideally your organization has a defined strategy and a plan to execute it; you also have a list of projects that have been developed specifically to achieve your objectives. Your people work toward accomplishing those objectives on a daily basis, using their skills and time to carry out the necessary tasks that will advance your plan. Thus, every individual’s goals should feed into the organization’s overall goals.
Clarifying the link between employee goals and organizational goals is important for two reasons:
Here’s an example of how an individual’s performance might be measured in relationship to organizational goals:
If you’re looking for a way to manage individuals strictly from an HR perspective, there are numerous other software solutions that can help. UKG’s workforce management platform handles everything from surveying to performance and compensation management to payroll; SAP SuccessFactors can help elevate your employee experience; and Workday HCM is a comprehensive HR solution that not only tracks individual performance goals, but also helps manage payroll, recruiting, time tracking, and more.
Linking Partners To Your StrategyBeyond employees, some organizations evaluate the performance of their external partners, such as suppliers. While this type of performance management may or may not be directly linked to strategic objectives, it is a way of acknowledging that third-party partnerships play a large role in the organization’s overall success. Metrics that might apply to these relationships are: “Timeliness and accuracy of proposals” or “Cost and budget of projects.” The score each vendor receives—and the weight of the associated KPI in relation to organizational performance—determines whether or not they receive a bonus payout, and the amount.
Performance management software like ClearPoint is useful for creating, linking, and tracking individual performance KPIs that roll up into a strategic plan. Not only does our solution support accountability by allowing you to assign individuals ownership of specific tasks, but it also lets everyone view their progress in the context of the larger organization. Whether you want a high-level view of corporate performance, a mid-level view of project performance, or a narrow view of individual performance, you can see it all—and their interconnectedness—using ClearPoint dashboards, reports, and other features.
Now that you’ve been primed on the definitions, you may want to know, “Why should I care about corporate performance management in the first place?” Corporate performance management helps you:
You may say you want to grow your business—but doubling your profits in five years and growing by 2% annually are two very different types and levels of growth. Corporate performance management helps you set parameters for how to achieve the growth you’re aiming for instead of falling back on the useless adage, “Let’s work harder and smarter, and we’ll see results!”
People in management roles across all levels of your organization have to make decisions that will, in some way or another, affect the entire organization. All of these decisions—whether they’re from marketing or operations or HR—eventually contribute to stronger performance (if all those decisions work together) or company-wide difficulties (if they aren't working together). Performance management helps to encourage the former and avoid the latter.
If each department head has the same understanding of where the company is headed, department-specific decisions will more than likely send the organization in the right direction. But if department heads aren’t aware, their choices could become problematic. For example, let’s say the leaders of your organization want broader job descriptions to attract individuals who could work in multiple roles, but HR continues tightly-defining newly posted jobs. This small decision could potentially prevent the organization from growing in the right direction.
Performance management helps ensure that all divisions, departments, and groups in the company make choices that keep the organization—and other departments—in mind. In fact, you may see a certain department willing to compromise on a decision or the direction of a project because they recognize that resources could be better allocated in a different area. Giving departments the ability to partner up will help ensure company-wide success.
Corporate performance management should be the guiding structure and process for executing strategy. It can be boiled down into three specific steps:
Below are the details of what you need to do from start to finish in order to move through the performance management process.
1. Decide on goals.
As simple as this sounds, it’s quite critical. If a restaurant decides to hire more staff, expand the restaurant, and eventually open another location, you may be quick to say these are all positive steps. But without setting performance goals, these may not be the right steps. For example, if the restaurant is losing money at a rapid rate, does the data support these steps? Or would it be better for the restaurant to open five new locations immediately, all at once? At any rate, you cannot say whether or not you are making strategic progress without set goals. For an in-depth guide into selecting the right strategic goals for your organization, take a look at this article.
2. Understand your organization’s capabilities, and how far you want to expand those capabilities.
If you manufacture plastic products for the healthcare industry, setting a goal to expand into manufacturing food products might be too much of a stretch. To set achievable goals, you need to consider your competitive advantage (what sets your organization apart) and your scope (what is realistic for your organization based on where you’re at in your current strategic journey). Defining your OAS statement will help you set goals that will guide your organization to success.
3. Link your performance goals together.
Your goals should all link together to tell a bigger-picture story of your organization’s strategy. We recommend dividing them into four perspectives—financial goals, customer goals, process goals, and people goals—and linking your performance goals in those four perspectives together. This helps communicate what is important to your organization, and how those goals relate to one another.
4. Recognize the implicit assumptions about what you should stop doing based on goals.
For example, if a manufacturer of custom machines sets a goal to focus on the agricultural industry, it may decide to turn down orders from the plastic industry in order to focus their attention on an area they’ve decided is most important.
Note: While the examples above feature for-profit organizations, goals are also extremely important to mission-driven organizations. For example, a soup kitchen may have a mission of giving the homeless dignity. But without clear goals, the soup kitchen could find itself in the mental health business, the housing business, or the job training business. It may want to be in these businesses, but that should be decided through the goal-setting process. The same organization could also decide to focus entirely on meals, and a goal of serving more people.
All organizations measure “things”—their financials, receivables, customer satisfaction, the number of widgets they make, waste, employee turnover, and so much more. But to ensure your organization is on track with your goals, you need to set measures that actually reflect your strategy—not just those that are simple or expedient to track. This article describes precisely how to set such measures. As you move through this process, keep the following in mind:
In the past, the organization of performance data was handled in one of two ways: Through Excel or PowerPoint, or through comprehensive ERP software.
Excel and PowerPoint are still the most commonly used tools for performance management data. Data owners send their data to a central office (or single individual) on a regular basis, and that office or individual is tasked with consolidating this data and creating management reports that are distributed monthly or quarterly.
There are many challenges with this approach, however. Namely, it takes a great deal of manual effort to compile the data, there’s a constant risk of human error, and the lack of version control can cause major data issues. And those problems are just the tip of the iceberg! (This article goes deeper into Excel reporting issues.)
Some organizations use ERP software systems—like those provided by SAP, Oracle, IBM, Siemens, etc.—to organize their performance management data. However, there are areas of concern with these systems as well:
Luckily, you don’t have to decide between Excel, Powerpoint, or ERP software. Instead, you can use performance management software customized for the performance management process.
ClearPoint is one example of this type of software. It pulls information from multiple databases and software systems and stores it in a central place, sends email reminders when it’s time to add new data, and generates reports without any hassle. ClearPoint also solves the cost and complexity issues associated with ERP software:
Once you’ve set and defined your goals, aligned your measures, and organized your data, you’ll want to get your performance management program up and running. This is where the “Plan, Do, Check, Act” (PDCA) approach comes into play.
It sounds like common sense, but many organizations do only one or two of these steps. They may plan but not act, or they try to act without a plan. Using the full approach ensures that you move through the performance management process successfully. Here’s a breakdown of the acronym in the context of performance management:
Plan, Do, Check, Act is an important concept, but many organizations don’t implement it because it requires a great deal of leadership commitment. Your leadership team needs to understand that implementing corporate performance management practices will require tracking new measures, reviewing results regularly, and making changes to certain processes as new insights come to light. Leadership will play a large role, so they should be prepared to allocate sufficient time to the process. In essence, performance management should change the way they manage; they need to understand that concept in order for it to succeed.
Similarly, performance management will also fail if you don’t plan how it will be implemented, implement all aspects of it appropriately, and take action where needed. This can’t be viewed as a simple business change—it’s a strategic overhaul. This is also the difference between building a Balanced Scorecard as a standalone project and using a Balanced Scorecard as your organization’s primary management tool going forward.
In summary, don’t let your good intentions fail because you haven’t allocated the time, software, or leadership necessary to support your performance management process. The many aspects of corporate performance management can’t be treated like a simple agenda item or project; it’s a complete shift in the way you manage. If you don’t invest in this kind of company-wide change, your performance management process is far more likely to fail.
By now you realize that performance management is extremely reliant on having solid data in your organization. In fact, it’s not possible to be successful with performance management without data.
You may notice that, in your organization, there’s a struggle over who owns the data: business process owners, IT, and performance management. As you get into the performance management process, you’ll need to solve for this dilemma:
In order to have a successful performance management system, business owners must be comfortable working with IT to ensure all data systems have accurate data. Additionally, business owners need to work with the performance management team to give them ownership of the data, which can then be shared with the leadership team on a regular basis.
To better break down the different levels of data (and the ownership of those levels), we created the chart below. You’ll see that each group has some level of responsibility, with performance management having greater responsibility for presentation and execution and IT focusing more on source data and data quality. This means your performance management team and your IT team need to come to an agreement about how data is actually shared.
Let’s start by describing the levels of data:
In summary, the performance management department and business process owners need to work with IT to talk about data and its forms (source, quality, analytics, presentation, execution) before assigning out responsibility. It’s important for these groups to work together as a team. Keep in mind that any disagreements that arise may simply be misunderstandings about roles and responsibilities when it comes to data; using the structure above will help you better define these working relationships.
Some organizations never reach their goals simply because they don’t use the right tools to manage the process. Performance management is a complex art; software can help at every stage of the game. Not only does it effectively keep your strategy top-of-mind, but it also simplifies the most time-consuming parts of the process.
ClearPoint supports performance management in four main ways:
Link goals, measures, and projects across departments. One of ClearPoint’s strengths is that it gives your organization a dynamic way to see (and share) how your strategy and all its components fit together. You can align your goals across departments to see exactly how each goal relates to the overall strategy, and link measures and initiatives to goals to see how these elements inform one another. You can even visualize how individual performance contributes to department performance, and then to overall organizational goals.
Assign ownership to all elements of your plan. Use ClearPoint to promote accountability by designating team members as “owners” or “collaborators” (or any terminology you prefer!) on action items. You can easily view and update an individual’s personal tasks, and link them either visually or mathematically to the organizational strategy. You can also create personal, one-page scorecards showing an individual’s key tasks and activities and the strategic objectives they are linked to.
Easily view performance data on any scale, in a variety of ways. ClearPoint serves as a hub for all your strategic information, giving you lots of options for understanding and communicating progress. A variety of chart, graph, and report types are available for tracking and evaluating measure data, and dashboards quickly summarize essential project data, including percent complete, budget, and quality indicators. Want to understand how those numbers came to be? Rather than just looking at a wall of data (similar to what you might see in a typical data visualization tool), ClearPoint helps you tell the story behind the data by providing additional fields for qualitative analysis. Explanations and hypotheses around the numbers add context, and give decision-makers a more complete summary of what’s happening and why.
Track targets in near real-time. ClearPoint tracks progress toward your measures and goals and automatically evaluates them against target data. These evaluations are reflected in a red, amber, or green (RAG) status indicator, which changes as new data is inputted. Users can log into ClearPoint anytime and view current progress on any measure. When leaders and employees alike have easy access to this information, they’re more likely to reference it for decision-making.
Create reports for every audience. Different audiences need different data, or need to see the same data positioned in different ways. A one-size-fits-all approach to reports will make them less valuable for users. ClearPoint lets you custom-build an unlimited number of report types from a single set of underlying data, so all audiences get exactly the format and level of detail they want. You can produce summary reports for managers and directors just as easily as detailed reports that spotlight specific data points and analyses.
Automate the data collection process. ClearPoint automates 70% of your reporting process, saving you massive amounts of time and energy. It’s capable of automatically:
Organizations that don’t take advantage of automation tools are more likely to get bogged down by the reporting process—and abandon performance management efforts altogether.
Whether you choose ClearPoint or another performance management solution, software is a necessity for organizations that are serious about strategy execution.
If you’ve invested time and resources into developing a strong strategic plan, implementing it, and tracking your progress, then congratulations—you’re well on your way to achieving your organizational goals! But all that effort is only as good as the people executing it.
Mentoring and grooming talented workers not only helps prepare the next generation of leaders at your organization, but also contributes to employee motivation, improves job performance, and increases retention rates—all of which will impact strategy execution positively. Here are eight performance management "best practices" that will go a long way toward future-proofing your workforce.
Say you need to hire some more entry or mid-level employees. Before you begin the hiring process, define what a successful leader looks like at your organization. What personality traits and skills do they possess? During the hiring process, look to hire candidates who fit your criteria and could become leaders. Many successful consulting and law firms hire associates based on if the firm believes they would make a good partner twelve to fifteen years down the road. Take that long view in your hiring.
A simple step is to invest in top talent. Be sure to pay fair and competitive wages to attract top talent, and even more importantly, keep that talent. Offer to pay for professional development courses, certificates, and even degrees. Set the example that employees are to be valued just like customers. You are hoping to keep these leaders within your organization after all.
Cultivate and develop pride in a job well-done within your organization and future leaders. It will help to build morale, and creates a culture that teaches future managers the organization values hard work. Offer unexpected bonuses, gift cards, and lunches for employees. At these lunches, recognize some of the great employees you see as future leaders, which leads us to...
Once you have identified key talent to develop into leaders, take action to ensure they are known, accepted, and trusted within the organization. Give them projects that cut across departments so they can make key contacts throughout the organization, gain greater institutional knowledge, and get experience managing large projects. Do all of this well before their promotion so you can monitor and help ensure their success.
Good decision-making skills need to be developed and are an important element of leadership. Many of the future leaders you identify will already have the basics of these skills mastered, but give them the opportunity to greatly improve. Guide them through the decision-making process. Help them understand the right questions to ask and the proper factors to consider. As they develop, give them more and more authority and take off the training wheels.
The importance of mentoring goes without saying, but do not get bogged down in the traditional view of mentoring as a wise, senior director mentoring a young professional. That approach clearly works and is beneficial, but it is not the only model. Different generations in the workplace can learn a lot from each other. Younger workers are technologically savvy, highly adaptable, and comfortable with a rapid pace of change.
Younger employees can mentor their long-tenured bosses in these areas while established leaders can help younger professionals in their career. Plus, you get the added benefit of helping your emerging leaders learn how to be a mentor in the process.
In addition to mentoring within the organization, expand the program to give people the option to be mentored by leaders in other organizations and professional groups or associations. The learnings that can come from mentoring with equivalents at other organizations, even if they are not in the same space, can be invaluable as young leaders try to figure out their leadership style.
The simplest tactic—yet sometimes the most overlooked—is to act in such a way that inspires others to follow suit. It isn’t always easy to verbally explain the desired behaviors of a leader; attitudes and work ethic may be hard to describe. Sometimes actions send a clearer message. Be aware that people are watching, and exemplify the behaviors you believe are necessary for a leader to succeed in your organization.
For more information on how to effectively manage with the goal of producing desired results, you might enjoy these performance management books: Performance Management: Changing Behavior that Drives Organizational Effectiveness by Aubrey C. Daniels, and The Coaching Habit by Michael Stanier.
Ted is a Founder and Managing Partner of ClearPoint Strategy and leads the sales and marketing teams.