Performance Management: A Tool for Strategy Execution
Performance management is considered to be a key factor for organisations. This is simply because an organisation that it is considered to be “unwell” is regarded to have no strategic focus, and that with low productivity (Crawford, 2005). Performance management is widely defined as a continuous process of identifying, measuring and developing the performance of the organisation’s members and aligning performance with the strategic goals of the organisation” Biron, Farndale, & Paauwe (2011: 1295).
The evaluative or measurement process of performance management is referred to as a performance appraisal process. Therefore whereas performance management as a whole is a strategic function, which in most cases is spearheaded by the Human resources department, on the other hand, performance appraisals would be considered as a reactive process of evaluating employees’ outputs or behaviours in relation to strategic objectives of the organisation. Performance measurements may take the form of supervisor-subordinate meetings, three sixty degree ratings, peer ratings, and individual ratings. For some organisations that lack a strategic focus, performance management is taken for granted as a “must do” necessary evil with less regard for its alignment purposes. For these companies, line managers may regard this process as another process that unnecessarily takes a lot of paper work, a lot of time, or a form of a bureaucratic organisational tendency.
If this kind of negative mindset about performance management is neglected, an organisation can reap the benefits of performance management. From a literature review survey, Rouse (2003), takes note of some of the benefits of a performance management system (PMS). To mention a few, the author asserts that a PMS system in place smoothens the process of the implementation of a corporate strategy “by indicating what to measure, determining appropriate means of measuring, setting targets and linking the measure with organizational performance” In addition performance management improves organizational performance, process within the organization, team performance, employee performance, customer satisfaction, quality of supervision facilitates the implementation of organizational change with regard to organizational culture and finally gives a company a competitive advantage (Rouse, 2003).
In addition, a PMS will smoothen the organizational communication, through the feedback process of individual/group/organizational performance, strengthen team collaboration aimed at the collective achievement of goals, and facilitate a clear understanding and buy-in of the strategic business objectives.
The next section will discuss how performance management could be a tool for strategy execution.
PERFORMANCE MANAGEMENT: A TOOL FOR STRATEGY EXECUTION
Performance management could be viewed at three levels, that is; the strategic level, the operational level and at an individual level:
Individual performance is rooted back in the evolution of organisations. This traditional performance management trend was meant to ensure that performance of individuals in the organisation is progressively streamlined in the organisational hierarchy (Brudan, 2009). The scientific revolution relied on this type of performance management, where individual employees were alienated from their work, where each individual performance was closely watched by the supervisor to ensure that the production line moved smoothly, and where an employee could easily be replaced by the other another. In today’s organisations, depending on the structure of the organisation, spans of control may range from narrow to broader for highly hierarchical or bureaucratic organisations to flatter or flexible organisations respectively.
Operational performance management finds its roots in the field of accounting, where organisational efficiency and effectiveness were measured using financial indicators. With the emergence of a multi-dimensional system of performance measurement, a balanced score card was introduced, where a combination of both financial and non-financial measurements were used. The Balanced Score card transformed from systematizing measures to a strategy control and implementation, combining strategic, operational and individual performance management systems (Brudan, 2009). In addition, as for one of the characteristic of flexible organisations, self-managed cross-functions which allow for individuals across functions within the organisation to embark on creative or innovative projects that will allow for the collective achievement of organisational goals would be an overlap between strategic and operational performance management levels.
Lastly, strategic level performance management will measure performance for organisational objectives.
The view of performance management is shifting from a command and control/mechanistic thinking to a thinking based on the aspects of the Balanced Scorecard, the systems thinking and a knowledge management. This is because organisations are moving towards a service or knowledge based economy. For this changing environment, the systems thinking theory stresses the move towards a learning organisation or knowledge sharing, and the Balanced scorecard also stresses the need for communication and learning with strategy execution being the core competency in addition to other control or measurement tools.