4 Hot Tips to Build a Winning Performance Management System

How does your firm ensure it is performing as required within the strategic supply chains it operates? A winning Performance Management System enables a firm to achieve its Corporate Strategy in the most efficient and effective way possible. 

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Building an effective Performance Management System has been an ongoing challenge across industry with up to 70% of systems failing.

Best-in-class firms:

  • Incorporate strategic supply chain objectives within their Corporate Strategy
  • Implement firm-wide performance management systems via cross-functional firm-wide processes
  • Master inter-firm and intra-firm relationship management
  • Use innovative technology to manage performance.

So what exactly is a Performance Management System?

A Performance Management System is your approach to ensuring the firm achieves its Corporate Strategy through the management of performance. The key ingredients of the System includes: your Corporate Strategy and specific approaches for Cascading Strategy, Performance Measurement, Stakeholder Relationship Management, Performance Management Technology and System Implementation.

Here are 4 Hot Tips to Build a Winning Performance Management System utilised by best-in-class firms.


Strategic Alignment

Hot Tip 1: Incorporate strategic supply chain objectives within Corporate Strategy

Problem: Many strategic performance management systems apply a strict internal focus and neglect to consider the strategic requirements of strategic customers and strategic suppliers. Failure to consider strategic supply chain requirements will reduce the firm’s chances of performing as required within the strategic supply chains it operates and taking advantage of competitive opportunities.

Solution: Strategic supply chains are a firm’s greatest driver of competitiveness. Ensure the Corporate Strategy incorporates strategic supply chain opportunities and strategic supply chain performance objectives. Corporate level strategic objectives that include strategic supply chain objectives are then able to be incorporated within the Performance Management System and cascaded top-down across the firm via cross-functional firm-wide processes. The firm then has the best chance of performing as required by strategic supply chains and seizing competitive opportunities.

Recap:

  • Ensure your firm-wide Performance Management System includes: your Corporate Strategy and specific approaches for Cascading Strategy, Performance Measurement, Stakeholder Relationship Management, Performance Management Technology and System Implementation.
  • Ensure your Corporate Strategy does not neglect to consider the strategic requirements of strategic customers and strategic suppliers.
  • Incorporate strategic supply chain opportunities and strategic supply chain performance objectives within your Corporate Strategy so that these requirements may be cascaded and measured firm-wide.

Performance Alignment

Hot Tip 2: Learn How to Cascade Corporate Strategy & Align Metrics Firm-Wide

Problem: Cascading Corporate Strategy and aligning metrics via the organisational structure is the most common method but this approach is fraught with many issues including duplication of effort and measurement, and detrimental outcomes (eg. cost reductions beyond strategic requirements impacting service quality). Various performance management systems have been used by firms and high failure rates are due to instrument issues and behavioural factors, which has led to complete abandonment of systems.

Solution: Corporate Strategy identifies what needs to be done, how and what results are expected. Metrics identify what is going to be measured to identify whether the expected results are being achieved. Cascading Corporate Strategy and aligning metrics via cross-functional processes shifts the focus on the major processes responsible for achieving Corporate Strategy and how each function needs to contribute to achieve the results. The results indicate what needs to be measured.

Recap:

  • Use your Performance Management System to cascade Corporate Strategy firm-wide and align metrics firm-wide in alignment with Corporate Strategy.
  • Allow the required results (including Strategic Objectives) to indicate what needs to be measured.
  • Do not cascade Corporate Strategy and align metrics via the organisational structure method to avoid duplication of effort and measurement, and detrimental outcomes.
  • Cascade Corporate Strategy and align metrics via cross-functional processes to shift the focus on the major processes responsible for achieving Corporate Strategy and how each function needs to contribute to achieve the results.

Stakeholder Relationship Management

Hot Tip 3: Master Intra-firm & Inter-firm Stakeholder Relationship Management

Problem: [Intra-firm] Internal stakeholders are critical to corporate success and are abandoning the use of Performance Management Systems. Key issues include lack of management commitment, leadership, guidance and support; lack of clear goals; insufficient resources to implement; difficulty in defining goals for lower levels. [Inter-firm] An imbalance of power between firms, and lack of alignment of goals, has prevented the formation of successful cross-firm teams.

Solution: [Intra-firm] Address behavioural factors and system instrument issues as a high priority during the development, implementation and maintenance of the Performance Management System. Lead staff through the creation process to enhance ownership of future goals and empower staff to manage the system and become power users. Apply adequate emphasis on the change transition and ensure there is a clear link to rewards. [Inter-firm] Collaborate to identify the key drivers for the relationship and establish clear written goals. Identify and establish cross-firm processes that are integrated with cross-functional processes.

Recap:

  • Develop a Performance Management System that everyone will want to use, to avoid complete abandonment of the System.
  • Ensure management are committed to the Performance Management System and actively lead, guide and support personnel in the development, implementation and maintenance of the System.
  • Master intra-firm cross-functional relationship management and empower personnel to manage the Performance Management System to enhance ownership of future goals and achieve firm performance objectives.
  • Adequately address all instrument issues encountered when developing, implementing and maintaining your Performance Management System.
  • Adequately address all behavioural factors encountered when developing, implementing and maintaining your Performance Management System.
  • Collaborate with strategic supply chain members to identify the key drivers for the relationship and establish clear written goals.
  • Master inter-firm relationship management and use cross-firm integrated processes to achieve strategic supply chain performance objectives.

Innovative Technology

Hot Tip 4: Utilise Innovative Performance Management Technology

Problem: Firms are still using spreadsheets to develop their performance scorecards outside their Enterprise Resource Planning System (ERP) and measuring performance outside the ERP has become standard practice. Numerous performance management technologies are available however the take up is still low.

Solution: Undertake a strategic evaluation regarding how the firm manages performance and its information requirements during the development, implementation and maintenance of the Performance Management System. Establish the entire Performance Management System using integrated technology to enhance the efficiency and effectiveness of the system, monitoring, reporting, and to expedite results achievement.

Recap:

  • Establish the entire Performance Management System using integrated technology to enhance the efficiency and effectiveness of the System, monitoring, reporting, and to expedite results achievement.
  • Use sophisticated, innovative, effective and efficient technology to aid the development, implementation and maintenance of your firm-wide Performance Management System.
  • Do not manage your Performance Management System in isolation of your Enterprise Resource Planning System (ERP).
  • Evaluate performance management technology requirements by undertaking a strategic evaluation of how the firm manages performance and identify its information requirements during the development, implementation and maintenance of the Performance Management System.

 


By: Sharyn Grant - See all Posts by this Author

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