Conceiving a business plan is often a Zen experience. We gather talented and motivated people to discuss where we are headed and how we are going to get there. At some point, whether it takes two minutes, two hours, or two weeks, everything comes together in some exciting way; everybody is energized and high spirited to get the plan going; we leave the meeting and the moment is gone like a pebble dropped into a mossy pond. The messengers from that meeting sally forth to spread the word but the business plan loses momentum as friction and inertia sets in. Enlightenment appeared before you but when you looked, it lost its form and dissolved into nothingness.
In many companies there’s no mechanism to cascade and instill the strategy down through the organization and to ensure that it is actually implemented and the workforce is aligned to it. The answer: Strategic Performance Management. Companies are comprised of unique individuals who share natural abilities, personality traits and motivations in different combinations and quantities. These differences can make executing strategic objectives a challenge. However, capitalizing on your team’s common attributes and motivations can deliver significant bottom-line results.
Strategic Performance Management is not about scheduling annual performance reviews with employees that often do not happen, have no defined outcome and/or follow no specific process. It is also not about inventing control mechanisms for employees that prevent them from using creativity and innovation to achieve outstanding results for the company.
Strategic Performance Management is an on-going process of the alignment of individual objectives to organizational objectives to ensure the optimum performance of the company in regards to its chosen strategy. These objectives are not day-to-day tasks that an employee has to perform. It’s the big picture of how the employee’s role fits in the organization and it gives the employee the chance to get a better understanding of the company.
A key purpose of Strategic Performance Management is to align the entire organization behind the objective of turning the strategic plan into effective action. Most companies have processes in place for planning, budgeting, and other critical management activities, but all too often these processes are not linked together or integrated throughout the organization. To a great extent, developing more effective performance management means identifying the gaps and disconnects and then creating links to bring the processes – and the organization-together.
Sounds complicated? Well, not really. Let’s have a look at the ingredients to implement a meaningful Strategic Performance Management processes at any company.
- Strategic Plan
First thing that is needed is a strategic plan. Every company needs to have a business plan where clear strategies are defined, communicated and documented, in order to succeed. Some companies use outside help to facilitate the creation of such a plan. The plan should be sound and clearly articulate what the company wants to achieve for example in six months from now, a year from now, three years from now and five years from now. These objectives that the company sets in the strategic plan can for example be of financial nature, describe the market position the company wants to achieve, the product spectrum it wants to offer, etc. It also describes on a high level how these objectives can be achieved, e.g. Development of product line X. It’s about defining both what results to achieve and how to achieve results of the Strategic Plan.The development of a strategic plan is a recurring process. A strategic plan is not simply a plan that is developed today and valid for the next five years. Today’s ever changing business environment demands regular adaptation of the strategic plan. This does not mean the objectives change constantly, but it is important to recognize that they could, and more importantly, how to achieve the objective can certainly change based on market and economic conditions. This demands a clear understanding and active contribution of everybody in the company. Not only of the executive management or, even worse, a strategy development group detached from the business.
- Aligning the individual objectives to the organizational objectives
After creating the strategic plan with the overall definition of what objectives and how they can be achieved, these objectives have to be broken down to the individual level. Objectives on the individual level can mean that they are assigned to a single person or a team. However, only one person should be solely responsible for achieving the objective. When defining these objectives it has to be ensured to define what will be measured with this objective and how it will be measured.The basic questions to be asked are:
What do we have to do?
How do we achieve these objectives?
What is the measurement for the objective?
How can this objective be measured?These objectives are defined from the top and go down in the organization level by level until the desired granularity is reached. The result of this should be a detailed strategic plan that clearly shows the dependencies and the alignment of the different objectives that add up to the overall corporate objectives.
Be aware, the result of this plan is not a detailed tactical plan like a project plan. It is an aligned collection of objectives that have clear measurements defined and clearly state an owner. These objectives support the overall corporate strategic objectives and thus are strategic in nature. This means they do not reflect the plan of how to develop or implement a new enterprise-wide information system. However, there might be an objective assigned to an individual person stating that it has to be implemented!
A very critical, and the most challenging part, is to measure the correct things. If the wrong things are measured the wrong results will be achieved. It is not a single measurement that will enable a good performance management system. It is the netting and combination of different measurements. The measurements that are agreed on in the end also have to be communicated clearly to the employees to get their understanding and buy-in for them.
- Aligning the rewards
One of the major elements of a successful introduction and execution of Strategic Performance Management is the alignment of the existing rewards system to the organizational and individual objectives, as defined in the strategic plan and measurements. If the performance of employees is measured against the results they achieved on executing their objectives then they have to be rewarded accordingly. Often a Strategic Performance Management process fails because this part is not implemented. The rewards, which are defined in the compensation plan, recognition and career advancement offered, have to be based on the performance against the individual objectives. These individual objectives, as mentioned before, can and should include team objectives. A certain part of the overall rewards system should also be a reflection of how the company in itself performed compared to the organizational objectives defined in the strategy plan. - Executing and re-aligning the plan
Executing the plan and by that establishing a performance oriented culture is the single area most companies fail when introducing a Strategic Performance Management environment. The hard part is to stick to the plan outline and measure the progress against it in a predictable manner with clearly outlined processes. Most of these processes result in team and organization wide review sessions that are executed on a regular basis. In addition one-on-one review sessions between the manager and the employee or the team are held. The content of each of these review sessions should be to concentrate on the objectives and tasks that are not on track and try to find ways to get these objectives and tasks back on track and again to define tasks that will ensure this happens. With review processes like these it can be ensured that all the individual and organizational objectives and their supporting tactical tasks do not deviate from the overall strategic plan and reduce the risk to fail in fulfilling the agreed upon objectives in the strategic plan. These activities have to be done with speed and precision to avoid any deviation from the plan outline or to keep the deviation at a minimum.As mentioned before, the strategic plan is always adapting to the changes in the business environment and adapt to the market needs of the company. These changes are relatively frequently but certainly should not happen on a daily basis. However, the team and individual tasks that are defined to support and fulfill the team and individual objectives will change at a much higher frequency. A flexible and just performance management system will allow for these changes to happen. The processes to be set up will have to allow the employees closest to the market to define these tasks themselves. By giving them the transparency of and visibility into the strategy plan, they are capable of doing exactly that while increasing motivation and innovation, speed and precision at the company.
Benefits of successful introduction of Strategic Performance Management include:
- Vehicle to communicate inside the company letting everybody gain a clear understanding of the strategy and the objectives of the company.
- Facilitate the alignment of the individual and team objectives to the company goals.
- Process improvements by giving this visibility to every employee in the company, whether it’s executive management or production staff such as:
- Quality of decisions
- Market alignment
- Alignment to customer needs
- Speed of execution
- Speed of adaptation to changing market needs
- Employee motivation
- Innovation
- Knowledge sharing
May F. Chiu is President of e-Technologies Solutions, LLC, a leading web-based solutions provider for project collaboration and performance management systems. She has channeled her 15 years of experience implementing ERP and management systems to develop ResultsXP_Enterprise™, a suite of solutions that provides for easily managing projects, to-do list, performance plans, and strategic plans. Contact her at info@resultsxp.com and visit http://www.resultsxp.com/solutions.htm to learn more about improving business performance.
