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Importance of Performance Management Systems

Performance Management is a critical business system that generally gets the last place in the priority list of organizations because it is commonly believed that once the targets are set and people are communicated on deliverables the work will be done.

Interestingly, I found after talking to many entrepreneurs that there is a tendency in the organizations to consider performance management from the limited purview of performance appraisals and hence this critical process is always thought of as HR’s responsibility. This can be a dangerous myth to believe. Performance Management in real sense is an integrated business management system. This system helps you monitor to what extent and how efficiently your organization and your people are executing the strategic goals that you have defined to take you towards your vision.

According to a common consensus of the top management consulting firms, for effective performance management, managers and employees should work together to plan, monitor and review mutually agreed on work goals and overall contribution of the team to such goals from day one. These goals also should be flexible enough so that employees can easily adjust to the changes in organization priorities or feel comfortable and empowered to deal with challenges during the performance period.

Performance Management is critical because a well-defined performance management system aligns your team towards a definite direction and provides a focus for performance. This also brings clarity in roles, deliverables, results in expectations and avoids errors/omissions during executing business plans.   It is also strongly recommended to involve employees in the various steps from goal setting, finalizing Key result areas (KRAs) and Key Performance Indicators (KPIs), working out internal and external dependencies, etc.  This not only enlightens the employees but also builds their sense of accountability towards their tasks. This also helps to identify hurdles to effective performance well in advance and to remove those.

According to the business plan consultant, an Effective Performance Management System should:

  1. Cover a broad range of roles in the organization and create clear job descriptions for each of the organizational roles.
  2. Start with SMART goals  (Specific, Measurable, Achievable, Relevant, Time-bound) and KRA (Key Result Areas) and KPIs (Key Performance Indicators) well aligned with the business plan document.
  3. Set-up clear communication between various internal/external stakeholders, managers, and employees for better execution of the mutually critical goals/projects
  4. Establish a periodic review process focusing on progress mapping, support, and encouragement. This process will provide inputs for the performance appraisal process at the end of the year.
  5. Identify good performance and provide for immediate recognition, pat on the back and rewards to nurturer better behaviors and foster focus on the result.
  6. Counsel employees to effectively deal with the stress emerging out of start-up level teething troubles and empower them with appropriate on-the-job training and other professional learning opportunities.

Lastly, it would be inappropriate to equate performance management system with the annual performance appraisal process (which in most cases are completed with the increment completion mindset). Performance management is an ongoing-continual aspect and therefore, needs to be evaluated periodically with a focus on improving organizational performance and fostering the professional growth of employees.

Are you an entrepreneur committed to building a value-driven and performance oriented organization? CerveauSys strategic is a global management consulting firm, having an enriching experience of designing and implementing Performance Management Systems, which will be your most reliable partner in driving business results. We will facilitate you in setting clear directions, establishing robust performance management and review mechanism; foster your team’s commitment and competence for performance excellence.

Please feel free to get in touch with us to discuss your challenges and opportunities in performance management. Together we can take your organization on a profitable and steady growth path.

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