Performance management is about controlling the performance of the organization. Most of the time this starts by the financial figures that are set as a guide for the company. We target a certain return on investment, an efficiency ratio or a profit per share ratio. These ratios provide a guide for management because they represent real targets.

The challenge is to link these financial figures to personal objectives, or personal performance criteria. Compare this with a project planning. The (overall) company ratios could be seen as the deadline of the project that you set at a certain point in time, but you still have no idea whether your human resources are able to finish this project, nor what would be a reasonable (resource) benchmark for this project to finish.

But the law of the market defines that we first set our target and then we assess whether we will make it. Pressure is a good friend in business but incredible deadlines will de-motivate.

The productivity matrix will help you in this area, because productivity is measurable at any level and takes into account the direct and indirect contribution to the output. But also in this case you should only implement such a heavy (performance) measurement system if you are going to finish it. The comparison with project management is again very useful; you should (only) implement project management when the risk of missing such a mechanism is bigger than the overhead (costs) that you add to your business.

A step towards a formal performance management system is to address those issues that are key for your business. And these are normally also the issues that are not easily to set performance indicators for. Image that your football team is losing. The performance target is not met. But then, what could have been improved; the defense, the attack or somewhere in the middle, connecting both ...? If you know this, you know how to improve your performance.

© 2006 Hans Bool

Hans Bool is the founder of Astor White a traditional management consulting company that offers online management advice. Astor Online solves issues in hours what normally would take days. You can apply for a free demo account

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