~ 3 MIN READ
Performance Measurement Vs. Performance Management
Performance measurements are a good way to track your progress, but how do you manage the results? This is where performance management comes in.
Performance measurement and performance management may sound similar, but while they are complementary to one another, they are entirely separate strategic practices.
The Balanced Scorecard creators, Drs. Robert S. Kaplan and David P. Norton, played a large role in championing these terms. In 1996, Kaplan and Norton published The Balanced Scorecard: Translating Strategy into Action. When they did this, they spoke about performance measurement, and leading and lagging indicators. But by 2000, when they published The Strategy Focused Organization, they had further explored the concept of performance management. They expressed how it simply wasn’t good enough to just have a set of measures; organizations needed to have a process of evaluating, responding to, and aligning around those measures in order to get anything out of them.
What is performance measurement?
Performance measurement deals specifically with performance measures. These are the quantitative indicators you put in place to track the progress against your strategy. Typically good performance measures cover a wide variety of criteria, like:
- Financial measures
- Customer measures
- Process measures
- People measures
These measures let you know whether you’re on track to achieve your strategy and accomplish your objectives. And that’s incredibly helpful information—you can build some great reports around this information and share those reports across your organization. But frankly, that doesn’t get you far enough. To better explain what I mean, let’s look at performance management.
What is performance management?
While performance measurement asks, “How do we track the progress of the strategy we’ve put in place?”, performance management asks, “How do we manage the strategy we’ve put in place?” This is a subtle (but important) distinction.
The management process requires that your leadership team—either department or enterprise—meet on a regular basis and discuss the results. The team should then discuss the actions they’re going to take to improve the results and determine where your projects link into those results.
So, while your measures may tell you where you are today, the actions you’re going to take to improve those results for the rest of the year are more important. Leadership teams should be able to say, “We’re behind in this performance measure; who is responsible for this particular measure?” Accountability for initiatives is important, and getting your leadership team aligned around your results will drive your company forward.
How can we get from performance measurement to performance management?
These five key action steps will help you evolve from a company that only looks at performance measures to an organization that reviews measures and takes action.
1. Get the leadership team to buy in. This is a fairly obvious, but incredibly important first step. The leadership team as a whole needs to agree that this is an important step to take—and they have to find the time to get it done.
2. Have someone champion the process. On the same note as our first action step, you need a “champion” on the leadership team who will promote the right methods of performance management and ensure that all measurements are actionable.
3. Get performance management on the meeting calendar. I’m sure you’re thinking, “Wait, we don’t need another meeting!” Let me explain. You shouldn’t be adding an additional meeting to your leadership team’s calendar; rather, you should adjust a current meeting agenda to focus on performance management. Make this topic part of the agenda either once a month or once a quarter, and take that time to talk about your performance measures and what you can do about them.
4. Align your budgeting process with your strategy. In other words, put your money where your mouth is by getting your finance budgeting process linked to your performance measures.
When you budget for a fiscal year, you should be spending in the places that will drive measures you feel are critical. If your organization determines that something is a critical success factor or critical goal, you should be spending money on it. This may mean that you get more full-time employees, or it could mean that you invest more in a project that you’ve been working on. Either way, if you’re trying to grow your competency in a certain area, but there are no projects in progress to help it and you’re not funding it, then your performance measure will never improve.
5. Communicate, communicate, communicate. You need to communicate to the organization what your key measures are and ask team members how they can contribute to achieve this goal. It’s also a good idea to make sure that the HR department looks for new hires whose individual goals align to the organization’s performance measures. This starts performance management on the right path from the get-go.
Why is this important?
If you walk away understanding one concept, let it be this: Performance measurements are great; but they aren’t enough. They offer a very good way to track your progress, but they don’t provide you with a process for doing anything about your results. Performance management, on the other hand, offers a way for you to actually do something about your measures as you proceed throughout the year—which is a great (and attainable) goal.