Performance management is on top of every IT and HR managers wish list these days. HR managers consider it as a powerful tool to evaluate, record and reward performance. IT managers consider it as an important HR strategy enablement tool. Performance management tools allow managers to evaluate employees on various metrics and dimensions. It allows managers and reviewers to collaborate and also create development plan for improvement. Employees can provide feedback and be part of the process for a complete 360 degree review. Companies are learning and moving up the ladder but one thing that they are not doing a great job is tying PeopleSoft e-Performance goals and Enterprise Performance Management (EPM) balance scorecard.
Balance scorecard, originated by Drs. Robert Kaplan and David Norton is a performance measurement framework that added strategic non-financial performance measures along with the traditional financial measures to provide managers with a more balanced view of the organization. These metrics are leading in nature and performance eventually lead to financial metrics performance.
So how do companies go about tying the two together? Top down approach would be for leaders in the organizations to develop companies’ vision and then tie it up to specific strategic focus thrusts (SFT). These thrusts are broken down into critical success factors (CSF) that are constantly monitored using various Key performance indicators (KPI). All this is done in the EPM system through strategy trees. Companies constantly feed information to these KPIs through various IT systems. But generally these KPIs are lagging indicator and things are already worst when they start to look bad. Companies invest a lot in predictive analytics but forget that it can never be as good as real time information. So what can companies do? Companies can start by breaking CSF into long and short term goals. These goals are further broken down and then assigned to the employees based on capability and responsibilities. This not only makes sure that all employees are working towards the greater good of the organization but it also helps in understanding capability gaps. Hence most important thing that this approach requires is a relationship between goals and CSF.
Bottom up approach is more radical but probably what all best in class organization aspire for and finally IT may help them achieve it. It starts with a vision. Top management develops a vision and communicates the mission and guidelines to employees and managers. Here the vision is not a one line statement like the top down approach but is a more elaborate plan. Once the vision is communicated, employees and managers work diligently to create and consolidate goals within their business units or shared service to realize the vision. These are consolidated at VP level into critical success factors and then at CXX level into strategic thrusts. Beauty of this method is that it involve entire organization is strategy creation and bring in fresh ideas from various sources. On the flip side, it can take really long time.
In both these methods progress of the goals in measured on a continuous basis and then get translated into performance indications for various KPIs on the balance scorecard. Hence, tying up micro and macro performance indicators can help in strategy determination, real time performance measurement and setup feedback loops from top to bottom.