How To Develop & Manage A Performance Management System

There are business strategies to plot, organizational goals to achieve, and things teams must get done. But how do you make sure all of that happens, in the most efficient way possible? By building and running your very own performance management system. In this article, we’ll tell you exactly how to do that.

What is a performance management system?

A performance management system comprises a set of goals, measures, and projects that align with the mission and vision of an organization over a five-year span. Performance management systems may also be called enterprise or corporate performance management.

There are two important points of distinction to make from the get-go. The first is when we describe performance management systems, we are speaking of an approach or framework—not a specific technology. Also, this term is not to be confused with individual performance management (for example, the yearly reviews conducted by HR teams). With that clear, let’s dive in.

How To Develop A Performance Management System

What are the basic components of performance management systems? When you begin building your system, start at the highest level and work down from there. Here are the essential elements to include:

Mission & Vision

Make sure your mission and vision statements are up to date. Depending on your organization’s stage of growth, these statements may be in flux and you might need to confirm their status with your leadership team. Do they still accurately describe the organization and where it’s headed?

Strategy Check

Have you conducted a SWOT analysis or change agenda recently? Both tools require or demonstrate strategic thinking, which will be the foundation of your performance management system. This step is really about testing your strategic assumptions and questioning whether you need to update your strategy. If you have recently completed strategic thinking and planning exercises, you should be in good shape. If you need more information about how to do a SWOT, check out this article.

Goals

The most adept and clever strategy needs a plan of action, and that starts by defining your goals. In the for-profit world, you begin by outlining your financial and other outcome-based goals, and then funnel down to goals centered on processes and people. The key is to make sure that all goals link to your strategy.

We advise creating goals before measures because it will keep you focused on the big-picture strategies. If you start with measures, you’re more likely to choose things that are easy to track or have always been tracked by a department or industry. This methodology doesn’t help you build a performance management system because you’re not thinking of strategic alignment or new approaches.

Measures & Projects

After establishing your goals, you’ll develop and link the appropriate measures and projects. These measures are the indicators of whether you’re on track to achieve your strategy and will be the foundation for the reports you’ll share with stakeholders regarding progress. Of course, you will need targets for your measures and deadlines for your projects.

(Note: You can replicate this process at any level, such as division or department. It’s not limited to the organizational level.

How To Manage A Performance Management System

Management of this type of system can be broken down into two parts:

Leadership Management & Review

The one thing to remember above all else is performance management happens only if leadership teams focus on it.

All leadership activities should be arranged around the strategic goals, with meetings held monthly or quarterly to review the plan. This does not mean your organization should add more meetings, but rather change the focus of existing meetings to be related to strategic performance management. Get your leadership team invested by having them accountable for goals and the discussion process, versus simply sitting in meetings and listening (or multi-tasking).

Performance management reviews should focus on goals and leverage data on measures and projects to inform those goals.

Data & Reports

The second part of administering a performance management system is to develop a rock-solid reporting process for getting regular updates on KPIs and projects. This includes identifying how measures are calculated, when they should be reported (both frequency and actual calendar days), and who is responsible for reporting the measures.

Keep in mind that your reporting will be a work in progress. When you first begin managing performance, measures will change and data may be imprecise, but you’ll get better over time. Once your measures solidify, data can be automatically sourced from other systems and the whole process becomes a snap for everyone. Ultimately, you can create a regular reporting cadence and develop a management reporting guide that automates virtually every step.

When you have your reports generating smoothly and your leadership team talking about strategy, everything will fall into place in real time!

Key Takeaways

The strategy management office may feel a lot of pressure to get a performance system up and running, but the leadership team must own the system or it will fail. Think of strategy teams as more of air traffic controllers than solo pilots—they will be championed by leadership and get support on deliverables from a variety of other team members.

‍‍The keys to making performance management systems successful are having leadership teams drive the process and truly believing your organization needs to change the way it operates. Building a top-caliber system and managing it efficiently will set you on the right path, and solid reporting processes will keep you there.

To learn more about how to do performance management right, contact us.

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