Performance Management or Performance Measurement?

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Savvy managers should implement performance management rather than performance measures

October 01, 2002
Manage

The Road to Management Excellence

Understanding Management Infrastructure Options

Building a Leaner, Faster Organization

 

Savvy managers should implement performance management rather than performance measures. Performance management uses appropriate measures to manage processes and capability development to achieve superior results. A performance management program translates the business intentions and approaches daily. It is necessary to guide us to achieving management excellence (see figure).

 

In designing a good performance management program, managers must consider the needs of the various stakeholders, as defined by the business strategy and detailed in the organization's strategic plan. Selection of appropriate measures is a key to business insight and effectiveness. Management teams often let themselves get inundated with too much data and too many things measured and reported so much so that managers actually work with only a few sets of information. But the rest is still collected, consolidated, reported, stored or displayed and is guiding performance.

By selecting the vital few performance measures to report, roll up and monitor, senior managers can use measures to know when to inquire, when to intervene and when to sponsor improvement. Properly aligned measures should be used on executive dashboards to guide the organization and foster better communication among divisions.

The metrics used should provide answers and insight. For example, in production they should answer business efficiency and effectiveness questions. In strategic areas they should indicate progress toward business objectives or the fact that they might have been formulated incorrectly early in planning. They also should reveal how stakeholders view the company's ability to keep promises.

Customer Relationship Cultivation and Care

Customers are the most important stakeholders in every business. A company's best prospects for new business are existing customers or their customers. Customer focus and relationship cultivation are not just sales and marketing functions they're an enterprisewide endeavor.

To be successful, a company must implement a customer care program, not just a customer service program. Customer care is achieved via efficient, dependable processes. It is expanded by creating dialogue opportunities at all levels of the organization and cultivating a corporate culture that promotes employees committed to meeting and exceeding customer needs and expectations in the interface work, the systems they design, the data they process and the protection they offer.

Years ago, I learned about selling life insurance from a successful gentlemen who had a sign on his desk that said, "Take care of your existing clients; they will bring you fortune." He taught me that my best prospects for new business were my existing clients.

Standardizing Our Approach Through Documentation

A medium-sized manufacturing company recently experienced the typical growing pains that most entrepreneurial enterprises suffer as they become successful. Quality was slipping to a dangerous level. The company began with simple work and customer interaction processes. As the company grew, new employees were "trained" on the job by older employees to operate the equipment and interact with others, including the customers. Early success was merely emulated without processes, procedures or work instructions. Managers mistakenly thought that common sense would work.

As problems arose, it became clear that there was no guidance on how to define, address, document or apply policy to whatever solution the employees thought they could attempt. There was soon no way to guarantee consistency of performance and production. However, after taking 20 minutes to clarify and document the process needed, the questions were raised and settled on how to resolve or collect information on issues.

Not long after the first design of the process maps, the company managers noticed they had improved efficiency by 25%. Then they wanted to capture how critical things were done. This led managers to seek to improve even more difficult issues and track their effectiveness.

Some managers have come to refer to "documentation" as "ISO 9000 quality management systems." That is somewhat correct and refers to what people can easily see the visible part of a management system. However, there is a less visible but vital component to standardization and documentation strategies.

  1. First, recognize that ISO standards are derived from sets of best practices and are designed by industry. As a result, there are several ISO quality management standards (QMS).
  2. Realize that all the ISO standards promote more than just documenting how things are done. They also are catalysts for making decisions and alignments, as well as for starting continuous- improvement activities.
  3. Carefully select and implement the right ISO standard(s) or parts. This is the (invisible) cornerstone of a smart standardization infrastructure and the foundation of the road to management excellence. So many other components of performance depend on the ISO QMS standard chosen.
  4. Do what you say you do, document it and prove it. An ISO system does not tell you how to run your business, allowing for the unique parts of a company's strategies and customers. It simply asks managers to document what the corporate strategy and business environment dictate they should do. It expects and the third-party registrar will expect to see evidence that you actually do it that way. Such evidence needs to be tangible enough to demonstrate to any party customers, regulators, registrars, new employees and stockholders.
  5. The documentation and the evidence need to be controlled, and management needs to review the system regularly for compliance, relevance to current business strategy and environment, and insights into changing factors.

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