Do you know what your organization's mission is? If so, then you probably also know that your organization's ultimate goal is to achieve it. To do this, management and employees need to make decisions and execute activities in support of the mission. Most organizations that I have encountered struggle with the ability to do two things: accurately assess the performance of their activities and determine whether these activities are actually supporting their goals and helping to achieve their missions.
The activities and programs that are managed below the executive level often have inadequate means of assessing performance. As a result, decisions are made based upon insufficient information or delayed until the information becomes available. In either situation, the ability to make timely and informed decisions is lost.
You may be asking, "How can this be?" You have business intelligence (BI) in your organization. You are swimming in reports! In fact, you might even have too much information to effectively use it. I believe that this is where most organizations struggle to understand and appreciate that having a BI solution does not mean that people are using it in a meaningful manner or understand how to incorporate it into their daily routine. You can have all the detailed information that you need at your disposal - you still won't be productive if you don't know how to organize and access it in an efficient manner.
One approach to presenting information in a meaningful way is through dashboards that visually represent summarized data or key performance indicators (KPIs). KPIs are significant predefined measures that describe target performance and provide individuals with the information they need to assess previous actions. For example, if the goal is to improve shareholder value, several KPIs can be developed to monitor that goal, such as increased profitability, revenue growth and earnings. If the focus is on earnings, several KPIs could be created that assess operational efficiencies, such as improving the sales process, allocating resources and managing operating costs. You could further drill down on managing operating costs by investigating expense items such as facilities, infrastructure labor costs and interest expense. This drill-down process could continue and evolve from KPIs to other measures until you are at the transaction level. In this way you can develop summary KPIs and supporting KPIs and measures that enable detailed investigation. As you navigate from summary to detailed KPIs, additional information is presented, which allows you to develop greater insight and understanding.
KPIs are a wonderful means of assessing performance. However, they need to be organized and focused in a manner that is meaningful to the individuals using them. For example, the CEO needs access to the KPIs that relate to improving shareholder value because he or she is probably evaluated on that metric. As you descend the natural hierarchy of the organization by business function, so should the KPIs that are made available at each level and group. Having too much information can be overwhelming, distracting and counterproductive. Greater focus is achieved when KPIs are provided for the appropriate level and business function of each role.
For example, the accounts payable manager needs access to a series of KPIs and metrics that provide insight into cash management, utilizing vendor terms such as payment discounts, load balancing of vendor and invoicing responsibilities of the staff in the department as well as staff performance and budgetary responsibilities. These measures allow the accounts payable manager to make informed decisions that steer the activities of the department, ensuring that they support the goals of the organization. If the accounts payable department exploits its vendor payment terms to the advantage of improving cash flow, thereby reducing interest charges from borrowing, then they are effectively reducing interest expense. By reducing interest expense, earnings for the organization improve. This, in turn, supports the corporate goal of improving shareholder value.
Role-based performance management provides the direct linkage between the activities and the strategic goals and objectives of the organization. As a result, individuals are able to understand what activities they need to focus on and how those activities impact the organization. The process of implementing role-based performance management requires detailed analysis of the levels and groups within an organization, the KPIs and metrics that are required, the linkage between the measures and levels, and the information that is available for the solution. While this is not an easy undertaking, aligning individuals with the organization's goals and mission, measuring and monitoring activities, and assessing decisions leads to greater operational effectiveness and success.
The goal of any organization is to achieve its stated mission through the decisions of its leadership team and execution of activities by employees. Performance management is the process of assessing the performance of activities and making adjustments to them to keep the organization moving toward achieving its goals and mission. Role-based performance management is the next level of granularity that keeps you focused on achieving your organization's goals. Now that you've thought about your organization's mission, it's time to ensure everyone in your organization is heading in the same direction when it comes to getting the mission accomplished.
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