What is performance management? A super simple explanation for everyone
When properly designed and implemented, performance management techniques and processes enable an organisation to monitor, manage and improve strategy execution and the delivery of results. Performance management is therefore one of the most critical factors in an organisation’s success, and the ability to successfully manage performance is the single most important skill for leaders and managers. But what exactly do we mean by “performance management” and how does it work? In this article, I give a brief overview of the topic and what it typically means in practice.
What exactly is performance management?
Performance management involves measuring, reporting and managing progress – from the individuals who work for a company, right up to the organisation as a whole – with the aim of improving performance. Examples of performance management processes or tools include performance appraisals, key performance indicators (KPIs) and management dashboards. Essentially, performance management is what organisations do to become more successful and stay ahead of their competitors.
Because it covers such a wide area, performance management is usually divided into two sub-disciplines: corporate performance management and people performance management. Let’s take a look at each one in turn:
Also known as enterprise performance management (EPM) or strategic performance management (SPM), CPM focuses on the performance of the entire organisation. It can be defined as a set of management processes that help the organisation define and execute its strategy, and to measure and monitor performance in order to inform strategic decision making and learning.
The focus of CPM is on strategic performance improvement and, as such, CPM encompasses all sorts of processes for defining strategic objectives, measuring performance, analysing performance, reporting and reviewing performance, and aligning the organisation’s people and its culture.
CPM tools and techniques include management dashboards, Balanced Scorecards, KPIs, analytics, strategic planning, budgeting and forecasting, benchmarking, business excellence models, Six Sigma, enterprise risk management, project or programme management, and performance reporting.
As you may have guessed, PPM focuses on the management of the people within an organisation, with the aim of ensuring that their performance contributes to the strategic goals of the organisation as a whole.
