One of the dreams or visions for most of the business head of the small, merging organization is to make the organization a system driven and to implement performance-driven management.
As we discussed the need for an organization-wide performance management system, now let us learn the step by step implementation step to make the performance management throughout the organization.
Step1:
Implementing Business performance management, keeping the second level reportees as stakeholders.
Business Level Performance Management :
When the organization is small, or the first time, the organization is getting into the performance management system, the logical step would be determining the important business key performance metrics along with some of the functional key performance metrics and start measuring. Key performance metrics can be measured and tracked by the business heads and his/ her second level reportees, mainly functional heads.
For example, some of the business KPI's like sales turnover, inventory cost as a % of sales, Plant effectiveness, attrition rate, % of NPD contribution over sales can be measured and tracked. This set of performance metrics can be reviewed along with functional heads, and they can be encouraged to work on the action plan to improve the business performance.
This process implementation duration can be one year.
Benefits of business-level performance management :
1. Senior leadership team becomes familiar with the process of performance management even though they are not feeling fully accountable for the result and but they feel they are part of the process.
2. Enhances the engagement among functional heads or second level reportees o when the business head reviews along with them every month or weekly
Step 2:
Implementing Business performance management as done in the first year and arriving suitable functional level performance management, keeping the second level reportees and their team as stakeholders.
Business +Functional Level Performance Management
Since the organization already familiarizes itself with a business-level performance management system in the first year, now the organization can have Business performance metrics that can be set by the business head and tracked along with the functional head.
In the second level, detailed functional level performance metrics can be set and assigned to the second level or operational head level. The functional performance parameters can have more functional oriented and some of the business metrics as derived from business KPI's from the business head.
For example, the supply chain function can have more functional metrics like no of vendors developed, inventory level at different levels, freight cost as % of sales, and so on. Similarly, for all functions, we can have more functional level metrics which can be assigned to respective functional heads and their team.
The functional heads and teams can be encouraged to present the performance metrics trend and a detailed action plan for the business head every month.
This process implementation duration can be one year.
Benefits of business + functional performance management :
1. The focus will be given in-depth to the functional effectiveness, by the way, measurements are extended to all functional key activities
2. Since we involve functional heads and their team, their involvement and focus is improved on functional effectiveness
3. Most of the organization covers under different functional metrics and performance measurement system, eventually, there will be an improvement in the communication process, visibility of issues and the solutions approach, understanding the pains of cross functions enhances significantly.
4. Eventually, engagement enhances across functions
Step 3 :
Implementing Individual-level performance metrics which is derived from business and functional performance metrics
Business Performance Management + Functional Performance Management + Individual performance management :
Since the organization already familiarize itself with the business performance management system in the first year and the functional team engaged in the functional performance system in the second year, now the organization widens the performance management net to all the people in the organization. Ideally, it can be extended to executives, first-line supervisors level.
In this process, each individual is given a set of performance metrics that will have linkage with the functional parameters, which is derived from business metrics.
Each individual is accountable for improving their metrics and report the progress. The review period can be once every quarter or monthly basis, depending on the bandwidth of the organization. It is the responsibility of the functional head to review the progress of their team members.
For example, the individual depending upon the level in the organization can be given performance metrics that are related to his/ her functions. Also, some of the development plans can be added.
By the way, almost the entire organization is governed by performance metrics related to business and functions.
Benefits of organization-wide performance measurement system:
1. Since the direction is set for the organization at business, functional, and individual levels; it improves the focus and engagement.
2. Eventually, the organization gets clarity of performer and non-performer, and this will help to focus on people developmental efforts
3. When the rewards and recognitions are based on the performance, it brings visibility, differentiates the performers and non-performers, improves the culture towards self and organizational performance improvement
Overall, performance management brings engagement among people, eases the communication, improves the focus on results or solutions, and thereby culture would become more of winning than blaming or complaining.
Implementing the organization-wide performance management system is a long process and needs to be implemented in a phased manner for sustaining the results and involving all the stakeholders to create performance-based culture!
As we discussed the need for an organization-wide performance management system, now let us learn the step by step implementation step to make the performance management throughout the organization.
Implementing Business performance management, keeping the second level reportees as stakeholders.
Business Level Performance Management :
When the organization is small, or the first time, the organization is getting into the performance management system, the logical step would be determining the important business key performance metrics along with some of the functional key performance metrics and start measuring. Key performance metrics can be measured and tracked by the business heads and his/ her second level reportees, mainly functional heads.
For example, some of the business KPI's like sales turnover, inventory cost as a % of sales, Plant effectiveness, attrition rate, % of NPD contribution over sales can be measured and tracked. This set of performance metrics can be reviewed along with functional heads, and they can be encouraged to work on the action plan to improve the business performance.
This process implementation duration can be one year.
Benefits of business-level performance management :
1. Senior leadership team becomes familiar with the process of performance management even though they are not feeling fully accountable for the result and but they feel they are part of the process.
2. Enhances the engagement among functional heads or second level reportees o when the business head reviews along with them every month or weekly
Step 2:
Implementing Business performance management as done in the first year and arriving suitable functional level performance management, keeping the second level reportees and their team as stakeholders.
Business +Functional Level Performance Management
Since the organization already familiarizes itself with a business-level performance management system in the first year, now the organization can have Business performance metrics that can be set by the business head and tracked along with the functional head.
In the second level, detailed functional level performance metrics can be set and assigned to the second level or operational head level. The functional performance parameters can have more functional oriented and some of the business metrics as derived from business KPI's from the business head.
For example, the supply chain function can have more functional metrics like no of vendors developed, inventory level at different levels, freight cost as % of sales, and so on. Similarly, for all functions, we can have more functional level metrics which can be assigned to respective functional heads and their team.
The functional heads and teams can be encouraged to present the performance metrics trend and a detailed action plan for the business head every month.
This process implementation duration can be one year.
Benefits of business + functional performance management :
1. The focus will be given in-depth to the functional effectiveness, by the way, measurements are extended to all functional key activities
2. Since we involve functional heads and their team, their involvement and focus is improved on functional effectiveness
3. Most of the organization covers under different functional metrics and performance measurement system, eventually, there will be an improvement in the communication process, visibility of issues and the solutions approach, understanding the pains of cross functions enhances significantly.
4. Eventually, engagement enhances across functions
Step 3 :
Implementing Individual-level performance metrics which is derived from business and functional performance metrics
Business Performance Management + Functional Performance Management + Individual performance management :
Since the organization already familiarize itself with the business performance management system in the first year and the functional team engaged in the functional performance system in the second year, now the organization widens the performance management net to all the people in the organization. Ideally, it can be extended to executives, first-line supervisors level.
In this process, each individual is given a set of performance metrics that will have linkage with the functional parameters, which is derived from business metrics.
Each individual is accountable for improving their metrics and report the progress. The review period can be once every quarter or monthly basis, depending on the bandwidth of the organization. It is the responsibility of the functional head to review the progress of their team members.
For example, the individual depending upon the level in the organization can be given performance metrics that are related to his/ her functions. Also, some of the development plans can be added.
By the way, almost the entire organization is governed by performance metrics related to business and functions.
Benefits of organization-wide performance measurement system:
1. Since the direction is set for the organization at business, functional, and individual levels; it improves the focus and engagement.
2. Eventually, the organization gets clarity of performer and non-performer, and this will help to focus on people developmental efforts
3. When the rewards and recognitions are based on the performance, it brings visibility, differentiates the performers and non-performers, improves the culture towards self and organizational performance improvement
Overall, performance management brings engagement among people, eases the communication, improves the focus on results or solutions, and thereby culture would become more of winning than blaming or complaining.
Implementing the organization-wide performance management system is a long process and needs to be implemented in a phased manner for sustaining the results and involving all the stakeholders to create performance-based culture!
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