Performance Management: 8 Steps to Hitting the Same Target

Imagine your next Zoom meeting with multiple employees discussing how to improve business performance. The scene will go something like this:

• The controller is convinced the company needs to improve its Enterprise Performance Management (EPM) process.
• The Vice President of Human Resources disagrees and suggests the Corporate Performance Management (CPM) system is what needs improvement.
• The Vice President of Finance believes the CPM is fine. It just needs to be integrated, hence and Integrated Performance Management (IPM) system.
• However, that isn’t enough for the IT Manager who thinks they’re all wrong. He vies for something better—an Extended Performance Management (XPM) system.

The funny thing about this scenario is that each person is likely requesting something completely different—especially the IT Manager. He recently participated in a software demonstration where the consultant performing the demo made up a new type of performance management on the spot called XPM, which the IT Manager repeats because it sounds trendy.

Though the term performance management is used often, its full meaning is not typically understood. The meaning is only exacerbated by consultants who seem to frequently create a new type of performance management (e.g. corporate, enterprise, integrated, extended).

It’s logical to think that each reference made about performance management efforts is related to the same project, right? Not necessarily. Here’s how the uses of the term “performance management” in the Zoom meeting translate:

Which translation of performance management is correct? None are exactly right or wrong. Each translation is partially correct, because each department or source uses the term based on what’s specific to their function. Each translation is only a portion of what performance management really stands for.

What exactly is performance management then?

Stated simply, performance management is the action of measuring actual results against specific targets or goals.

The Performance Management Process

The performance management process for a company consists of the following key steps:

1. Visioning: Defines the direction for the company
2. Goal setting: Establishes performance targets to track and measure progress
3. Strategic planning: Creates long-term plans tied to the company’s vision
4. Business planning: Consists of the tactical planning required at a business unit level
5. Analysis: Identifies progress toward goals and changes business drivers
6. Forecasting: Provides an ongoing outlook of expectations versus goals
7. Measuring success: Measures toward strategic objectives and peers
8. Rewarding people: Recognizes and rewards employee performance based on performance incentives

Overall, performance management can be an integrated, continuous process as depicted by this lifecycle.

Looking back at the various ways different functions of a company use the term performance management, it’s clear each translation is only part of the story. Too often, performance management is used to describe goal setting or rewarding people. These are only two components of the entire cycle.

It might also help to describe what performance management is and isn't.

What Performance Management Is

• A cross-functional, continuous, integrated process for managing the business
• A useful and critical process for achieving strategic objectives
• A method for management to proactively identify opportunities and risks
• A pursuit that requires involvement from multiple functions, integrated processes, and supporting technology

What Performance Management Is Not

• The need for an EPM system
• The need to improve a CRM system
• The need for an IPM system
• A company-wide implementation of an XPM system

Performance Management Process Example

To better understand how the performance management process is used, let’s assess a non-business-related application, like winning a race. For someone with sights on winning a 5K, the performance management process would look something like this:

1. Vision: Winning the annual Turkey Trot 5K
2. Goal Setting Targets: Run 5 miles in week one, 7 miles in week two, 10 miles in week three, and finish the 5K in 21 minutes or less.
3. Strategic Planning: Monthly mileage plan, monthly time/mile average plan
4. Tactical Planning: Daily calendar marking long runs, track work, and rest days
5. Analysis: Comparison of training times to targets, comparison of total training mileage logged to targets
6. Forecasting: Modifying monthly/daily plans based on analysis
7. Measuring Success: Comparison of training targets to actual results, comparison of race results to targets and peers
8. Rewards: Pumpkin pie with whipped cream for achieving training targets, nonstop bragging rights to annoy family members

The person training for this 5K effectively used the performance management process to drive actions toward a desired result. Driving actions toward a desired result should be the objective of every company.

Performance management is a crucial process for effectively managing and guiding a business. However, it is important to think of the process in its entirety. Maybe the IT Manager was right from the beginning: performance management should be an “Extended Performance Management” system. Trademark filed.