Each organisation strives towards building an effective performance management process for business success. A process that encourages employees to take ownership in driving organizational goals usually focuses on 3 major deliverables:
- Translating strategic Business Objectives & Initiatives into Individual Performance Objectives and Action Plans.
- Facilitating individual & thereby business performance through continuous event-based feedback, periodic reviews and proactive performance coaching.
- Driving a culture of High Performance by linking performance data to employee rewards & recognition.
Here are 5 Performance Management Tools that organisations could adopt to achieve these deliverables:
1. Balanced Scorecard:
The Balanced Scorecard finds its origins in a multi-company study called “Measuring Performance in the Organization of the Future”, conducted by Nolan Norton Institute. Kaplan & Norton, the developers of Balanced Scorecard, found in their research that fewer than 10% of all strategies are implemented well, and this can be traced to fundamental problems in the process of strategic implementation:
- The vision barrier – Only 5% of the workforce understands the strategy;
- The resource barrier – 60% of organizations do not link budgets to strategy;
- The management barrier – 85% of executive teams spend less than one hour per month discussing strategy;
- The people barrier – Only 25% of managers have incentives linked to strategy.
The Balanced Scorecard system is designed to overcome these barriers through the translation of strategy into measurable objectives, organization-wide understanding of the strategy, resource allocation to support the strategy, and learning about strategy.
Unlike a purely financial focus which leaves a gap between the organization’s strategic direction and its implementation BSC covers four Perspectives balancing between short and long term objectives, lead and lag indicators (outcome measures are lag indicators (Profits, costs), performance driver measures are lead indicators (leads generated, a capability built).
Well defined balanced scorecards at the organisation, departmental, team and individual levels depict a clear cause and effect linkage between how each individual goal impacts the overall organisation goal. Whenever we have implemented the detailed Balanced Scorecard process in an organisation, employees have come back to us saying that they now understand a lot better how their role is adding value to the overall strategy.
2. Action Planning & budgeting:
While this is an integral part of creating a well-balanced scorecard but it is often missed. Most balanced scorecards have well-defined objectives or goals in Financial, Customer, Internal Process, Learning & Growth perspectives. Each goal has a unit of measurement, targets and weight. As the next step to effective goal setting is to define action plans for each goal. These are initiatives that need to be taken to achieve that goal. It is then important to define budgets needed for these initiatives, budgeting, therefore, gets linked directly to driving organisation strategy as compared to incremental amounts over previous years.
This step helps simplify the complex goals into small easily understandable and achievable actions that employees understand well and are confident to drive, thereby removing the Vision barrier.
3. SMARTER reviews using Technology:
Once balanced scorecard design and action planning are complete, business reviews should be planned around them, focusing on actions that needed completion in that month and results to be achieved from those action completions. Ideally, action completions & business results should be tracked using technology, linking data from ERP to Departmental/Business scorecards. This ensures leaders spend time in discussing what went well & what needs improvement as compared to seeking, collating and verifying data. Leaders can hence completely focus on performance coaching while reviewing financial results and also tweak action plans on the go.
It is recommended that Joint reviews be held at Business, Departmental and Team levels to take a stock of progress made and discuss inter-dependencies. Organisations who have online performance management systems could capture these reviews online. Many smart modern HRIS suites have a built-in continuous performance review mechanism to support this. Organisations who do not have this technology could do this through simple dashboards or shared sheets at department & business levels, to depict department wise progress and its impact on overall business scorecard.
Balanced scorecard based reviews also aide in removing the bell curve process as employee scores are objective, and budget allocations for variable pay and increases can be linked directly to the business, departmental & individual scores without the need for rationalization.
4. Robust Incentive plan to reward performance:
After the review mechanism is established, its time to design incentives to reward excellent performance. Incentives need to be directly linked to an individual, departmental & business scorecards and should be simple to calculate & understand.
We once created an app that displayed monthly scores on Individual, Departmental and Business scorecards. Employees were able to calculate and project their incentives themselves. The app also became a great mechanism to share positive results and foster collaboration. Employees started appreciating inter-dependencies between departments and helped each other to increase departmental and thereby business scores.
5. Minutely planned Recognition Program:
Effective performance cannot be driven without a regular appreciation of positive steps and results. We need to appreciate what we want to see more of. Many times employee recognition efforts are sporadically seen only as good to have. On the contrary, a well-planned recognition program can do wonders to business performance. Monthly awards for the highest score on a performance parameter, sharing the success stories of top-performing employees and teams each month, energise the entire organisation and leave a lasting impression on the minds of employees.
I remember interviewing over 100+ medical representatives (as a Summer Intern at a pharma company) for planning their incentive program. An appreciative inquiry with them revealed that the monetary incentives are soon forgotten or seen as a part of regular earnings. What high performers remembered is the award they received from a senior leader, a family dinner or holiday, the experience of having been called for a leadership meeting, the opportunity to share their success story across the organisation. This has been my experience in every organisation across industries and performance cycles year on year.
Smart recognition programs therefore not only act as effective tools for boosting the self-esteem of high performers but also put the organisation on an exponential learning curve through continuous knowledge sharing, enabling achievement conversations.
Therefore Balanced Scorecard, minute Action Planning & budgeting, smart Reviews, regular Incentives and a well-planned Recognition program are my recommendations for driving performance effectively; I am looking forward to learning and hearing from you which tools are working for you!