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The Five Myths of Performance Management

Published
  • February 26 2004, 1:00am EST
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Editor’s note: DMReview.com welcomes The Performance Guys, Guy Weismantel and Patrick Morrissey, as the newest online columnists. They will write on performance management issues each month. Watch for their column on the fourth Friday.

You can’t drop a quarter without hitting some sort of performance management project these days. Everyone in every industry is struggling for better performance. If that’s the case, why is it that so many of us are still confused about what performance management is? Is it due to endless process reengineering by your in-house consultants or because you can’t get at the data? Is the sales team demanding a new dashboard?

Frankly, we’re confused by all the confusion and hope to use this monthly forum to help you wade through the fog and FUD that is performance management and give you some practical advice on how to proceed within your organization. Let’s start out this first column by trying to explode some of the most common myths we’ve heard about performance management.

Myth #1: Performance management is too new and won’t stick in the marketplace. This is a great place to start. The truth is that term performance management or enterprise performance management (EPM), corporate performance management (CPM), business performance management (BPM) or whatever vendors are calling it today is in fact relatively new – just over two years, in fact, since our friends at Gartner came out with their first magic quadrant on the CPM market. However the executive information system (EIS) is actually an old idea. What’s not new, however, is what performance management is trying to do for your organization – align people with goals and objectives so that you’re all dancing to the same beat. Ever have an initiative to improve customer retention? How about employee development? Surprise – you’ve been doing performance management. It’s not new it all – it’s what you’re already doing today.

Myth #2: It’s a technology problem. Wow, does this one get a lot of play from people who are dragging their feet on getting started on performance management initiatives. Usually (by the way) from people who stand to lose something or get exposed if such an initiative moves forward. Do you have a data warehouse in production – or several? Does your company have access to its own customer relationship management (CRM), supply chain management (SCM), HR, financial or enterprise resource planning (ERP) database? Are you producing reports for your business users on topics such as customer profitability today? Ta dah, all of these things come about as a result of technology. The systems are there, so relax. Focus instead on how you get the information out of the system and connect to users and goals. That’s not a technology problem; it’s a project management challenge.

Myth #3: A balance scorecard (BSC) is the answer. Now don’t get us wrong, we’re big fans of Kaplan and Norton, and everything they’ve done to advance the discussion. Plus, they throw a mean conference party if you ever get the chance to go. However, because companies don’t understand what performance management actually is, many have latched onto the concept that if they just adopt the balanced scorecard system, all their problems will be solved. Actually nothing could be further from the truth. Too many companies are using balanced scorecard as a crutch, when they should be using it as a cornerstone from which they really attack the key factors in making their business more productive and successful. Truth be told, it’s hard for many companies to fit all of their key objectives into the four main pillars that Kaplan and Norton espouse. Does it mean BSC won’t work for you? Absolutely not. But BSC is just one methodology for a performance management initiative.

Myth #4: You know what a key performance indicator (KPI) is. A lot of the breezy talk about performance management assumes that the IT teams are fully versed on KPIs. The fact is that just showing a vice president of sales the total number of customers gained this month is not a KPI. It’s nice to know, but not a KPI. Why isn’t it? Because there’s no context to the number, that’s why. Who cares how many customers were gained this month? A better question – how many net new customers do we have this month vs. plan? See the difference? KPIs require some background information, and they need to be measured against a goal. Just regurgitating the numbers does little for the business user – but giving them context gives them the knowledge they need to make the tough decisions.

Myth #5: A new planning system solves the problem. This one may hit close to home, but it’s a crutch. If you’re using some mainframe legacy system that you had to band-aid together to make it Y2K compliant, we feel your pain, and you may need new financial planning applications. But one of the hugest myths in performance management is that everything starts with a plan or budget. And that’s just not the truth. Planning and budgeting are certainly involved and are a big part of performance management. But as so many companies are discovering today, it’s about more than just that, and thinking you’ve got performance management beaten once you sign the purchase order for a new planning system misses the mark. If you don’t have good processes, methodologies and a way to link your high-level objectives with your tactical goals and metrics, no one can save you, not even the best planning system on the planet. Besides, when was the last time that conditions changed and you got more money for your project or department. This is about effective operations management.

Well, that puts a wrap on the first column. We hope we’ve helped get the discussion started on performance management, and we’re looking forward to continuing with this next month.

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