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The Way Business Is Moving

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Issue Date: June 2008

Five myths of performance management

1 June 2008

Everywhere you look, across every industry, improved performance is a major business challenge. Yet you would be sorely pressed to find someone who can define exactly what performance management is.
Performance management certainly is not new, but the means of comparing software vendors who provide performance management software is. Here are some of the key misconceptions about performance management.
Myth 1. The concept of performance management is too new and will not take hold in the market.
Performance management, or EPM, CPM, or BPM, or whatever it is being called today, has been around for several years so, yes, it is fairly new. What is not new, however, is that performance management is trying to align people with goals and objectives so that everyone in the organisation is singing the same tune. Thus, if you have ever rolled out a customer retention programme or an employee development initiative, you are already an old hand at performance management.
Myth 2. Performance management is a technology problem.
Technology is the enabler; it is not the aspirin for enterprise performance management. In fact, when performance management systems are implemented, the first questions asked are always about what the output is going to be and if the data is available. These are issues which technology cannot address, yet they are fundamental to the success of any performance management system. The challenge then is to get the information out of your systems; the systems themselves are already there.
Incidentally, those opposed to performance management initiatives are often the ones who have the most to lose when they are rolled out.
Myth 3. A balanced scorecard is the answer.
Because companies do not understand what performance management actually is, many have latched onto the concept that if they just adopt the balanced scorecard system, all their problems will be solved. A balanced scorecard is certainly one aspect of performance management implemented correctly, it can be a useful business tool. However, the objective is not to implement the system, but to implement a system that provides the business with the right information to further the business. The balanced scorecard is a means to an end, it should not be the objective.
Myth 4. Everyone knows what a KPI is.
With so much talk about performance management, people tend to assume that IT is up to speed on key performance indicators, or KPIs. It is not news that the business world today is so riddled with acronyms that we might all do well to actually pay attention to whether or not the terms and metrics we bandy about are understood and of relevance and value to the business. KPIs are the metrics identified as the most important variables reflecting operational or organisational performance as measured against strategic or operational critical success factors.
Distinguished from other metrics, KPIs are most critical to gauging progress toward objectives agreed to beforehand. This is key. Numbers on their own are meaningless; it is the context that counts. Who cares how many sales were made last month? The real question is how many sales were made versus how many were planned.
Myth 5. A new planning system will solve the problem.
Much like Myth 3, this one is about crutches. The perception is that all performance management requires is an installation disk. The reality is that performance management means asking hard questions about the business, the processes and the availability of data.
Planning systems are a means to align corporate strategy with operational tactics. This means the corporate strategy needs to be able to be translated into measurable targets which are then incorporated into the planning system. At an operational level planning can be done in detail to demonstrate capability to meet these targets. Bridging the gap between the two is the planning process. To think that you can have a planning system without good processes, methodologies, and a way to link your high level objectives with your tactical goals and metrics is so wide of the mark that you would simply be throwing your money away.
Adrian van der Merwe, MD of 8th Man Consulting
Adrian van der Merwe, MD of 8th Man Consulting
For more information contact Adrian van der Merwe, 8th Man Consulting, +27 (0)11 462 9805, adrian.vdm@8thman.biz


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