Performance Management – what is it?

Organisations have spent billions automating manual systems on the basis of cost reduction or optimisation of processes. But most current attempts to analyse effectiveness of operational systems fail to put results in the context of a company’s goals and objectives. If you now stir investment in reporting capability into the mix, the result is a deluge of operational information that clouds the ability to distinguish between the ‘interesting’ and the ‘important’. There is a desperate need to ask the ‘So What?’ question. With the massive push for performance accountability and real results across businesses and organisations alike, it should come as no surprise that more and more organisations are emphasising effectiveness over mere efficiency.

The transition from efficiency to effectiveness.
The transition from efficiency to effectiveness.

Performance Management is the term used to describe this movement towards effectiveness. It allows organisations to become more strategic, deliberate and accountable in their actions, and to improve operational effectiveness by helping communicate mission and goals, set operational objectives and continually manage performance towards achieving those objectives.

What is Performance Management?

According to Ventana Research, performance management is the business strategy and methodical process to manage execution of an organisation to a common set of goals and stakeholder objectives. Simply speaking, performance management uses both methodology and technology to help manage your organisation by aligning execution with strategy.

Aligning execution with strategy.
Aligning execution with strategy.

A performance management solution can help organisations align operational units, operational processes and individuals with predefined goals and objectives, born of a common strategy. With the continual loop of insight provided by performance management solutions, organisations can easily manage their ongoing effectiveness to improve overall performance towards their goals and objectives. Fundamental to this is the communication of what that strategy and the objectives actually are, so that the target is clearly and unambiguously visible. Equally performance only improves as a result of the initiatives that are put in place to focus on the underlying issues, so there is a need for visibility of this targeted activity.

How does Business Intelligence fit in?

Performance management and business intelligence are often confused because they are closely related – indeed performance management uses business intelligence technologies. Think of performance management as the next generation of business intelligence. Business intelligence helps organisations measure and monitor their performance to understand organisational units, business processes and individuals, whereas performance management helps organisations manage the business by comparing the measurements derived from business intelligence against pre-defined goals and objectives.

Business intelligence = measure and monitor performance
Performance management = motivate, measure, monitor and manage performance against pre-defined goals and objectives.

Sound scary? Too advanced for you?

Stop worrying! You are further down the track than you realise!

The good news is that you probably already have many of the key ingredients for success. If you have goals you are working towards and projects you are working on, you are already on your way. And your justifications for your budgets and plans are the raw material of strategy.

So what’s missing? Alignment. Without alignment, organisations too often cultivate miscalculations, waste and conflicts based on a lack of clear understanding and consequently fall short of goals. Unlike approaches that only emphasise doing the work right, alignment helps ensure proper focus on doing the right work, the right things at the right places at the right times for the right reasons to drive achievement of organisational strategy.

SAP Strategy Management helps you put the pieces in place so that you not only communicate your objectives and the initiatives you are putting in place to achieve them but tell you how well you are performing towards the objectives you have set yourself as an organisation or division or department.

Next: Developing your strategic framework

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