Performance management systems (PMSs) can enhance the ability of any organization to meet and exceed its goals and objectives. However, the entire organization must embrace the concept and culture of performance management. Additionally, executive management must be on the alert for technical issues that could impede the PMS and inhibit organizational acceptance of the system.
First, the organization must develop a performance management culture. The focus of the entire organization from the entry-level position to the CEO must be on the performance of the organization in meeting and exceeding its goals.
In some circles, this is known as management by measures. In other words, the business sets a number of quantifiable goals usually defined by key performance indicators (KPIs) for each major department. Management must rally every relevant position within the organization to meet these KPIs.
There are cultural factors that are present in organizations that have become or are in the process of becoming successful performance management cultures. They are:
Collaborative goal setting. Management cannot arbitrarily set goals and KPIs. The KPIs must be realistic within the best practice ranges of the particular industry and the goal-setting process must be a collaborative effort that involves those people in the organization responsible for meeting those goals.
Accountability. Everyone who is realistically responsible from top to bottom in the organization must be held accountable for meeting the KPIs. Every department and function must pull its own weight, or the KPIs will usually not be met.
Incentives. To encourage individuals and departments to stay the course in meeting the organizational KPIs and goals, top-notch performance management organizations reward those who achieve. The rewards can range from departmental to individual and from monetary to peer recognition but a combination of each is best.
Communications-rich, collaborative environment. For performance management to work at any level, communications systems must be open and collaboration must be the norm rather than the exception. Competition between business units or departments creates hoarding of resources and knowledge, stovepiping of knowledge and dissension within the company. The result is that the PMS is thwarted before it can even take root.
There are also technical issues that may inhibit the performance and acceptance of a performance management system. Perhaps the biggest obstacle and the one that must be overcome first is the legacy data environment. Some legacy data environment problems that should be addressed early include:
Lack of one source of the truth. Many organizations have a technical environment that can best be described by what I call "data mart anarchy." They have developed multiple, independent data marts that are function-specific and provide different answers to the same question, depending on which data mart the answer is pulled from.
To fix this problem, it's essential that all organizational data be collected, loaded, cleansed and distributed from a single location. This does not mean that you have to spend millions on an enterprise data warehouse; a centralized operational data store will do nicely. It is critical that all departments have access to a single version of the organizational data so that the answers marketing receives are the same as those that finance and sales receive.
Lack of audits, controls and corporate governances for data flow and/or data quality. Data quality problems can kill any PMS. If users don't trust the system, they won't use it. To address data quality, I suggest developing a master data management (MDM) strategy. MDM facilitates data analysis across the systems of an enterprise.
MDM enables management to establish audit and control procedures for data flow and quality across all relevant enterprise systems such as sales, services, manufacturing and regional enterprise resource planning (ERP). Also, implicit in any MDM strategy is the idea that there will be an overall corporate governance strategy for data flow and quality within the organization.
Increasing competition for scarce resources makes building a PMS a good business decision. Management by KPIs just makes sense. However, failure to address cultural and technical inhibitors up front can undo all the performance enhancements gained with a PMS. Therefore, while you are building your nifty new system, take the time to sort out these critical cultural and technical issues. This will make your PMS project proceed more smoothly and go a long way toward ensuring its success.
All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. The views and opinions are those of the author and do not necessarily represent the views and opinions of BearingPoint, Inc.
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