Not Just For HR: 3 Reasons You Should Be Thinking About Strategic Performance

Performance management is recognised a key activity for business success across the globe – and this thinking is not just found in HR departments.

As a process which addresses how the effective management of people - the lifeblood of an organisation – can achieve strong organisational performance, it holds particular relevance in the field of operational excellence, particularly during tough economic times.

"Wherever we look we see the best organisations enhancing performance management processes to develop the talent that will be needed for growth and competition, because only people can create great performance," chief executive officer of Lumesse Matthew Parker explained.

However, performance in the area of performance management varies between regions and individual organisations, research from the company found. The UK is falling behind in offering financial metrics for performance management and Germany, France, Italy, Benelux and Scandinavia are all struggling to make a connection between pay and performance.

How Companies Are Using Performance Management

Some companies are inevitably better at utilising performance management than others. Research from the Chartered Institute of Personnel and Development (CIPD) found there is a gulf between what people understand as best practice performance management and what is being carried out in reality.

For example, over 90 percent of respondents believe regular review meetings are primary activities, but only 63 percent actually carry these out.

Angela Baron, engagement manager at the CIPD, explained :"Performance management is about helping people to understand how they contribute to the strategic goals of organisations and ensuring that the right skills and effort are focused on the things that really matter, making an impact on organisational performance."

Among the companies using performance management to really drive employees towards their strategic goals is the UK's National Grid, an electricity and gas company, which in 2009 announced it was to become one of the first companies in the world to align its carbon emissions with performance management.

CO2 cuts now hold the same weight as customer services, reliability and safety for employees, helping it toward its strategic goal of reducing emissions by 45 percent by 2020.

Why You Need Performance Management

With the world still recovering from the economic downturn, markets remain unpredictable, while the number of companies re-entering growth mode means competition is increasing.

Reason #1: Potential to reduce waste

Reducing waste - e.g. unnecessary steps, time or cost - is a key aim of many operation excellence initiatives. When enacted well, performance management links individual actions to the overall direction of the business.

With everyone heading towards the same goals, resources are not wasted by employees carrying out unnecessary tasks.

Reason #2: Increases Employee Morale

Performance management brings with it an uptick in employee morale, which is widely recognised as upping productivity. Employees who feel they play an important role in the company and understand how what they're doing contributes to the success of the organisation as a whole.

Reason #3: Improves the bottom line

Companies can save significant sums through a well-implemented performance management scheme, however, performance management is not always linked with direct financial returns.

Ladbrokes, for example, looked to better align its performance management with business strategy by measuring shop staff against customers, competitiveness, contribution and compliance, HR Magazine reported.

Jeremy Trevor, retail HR director at Ladbrokes, explained at the time: "In the retail sector, bonuses are usually paid based on shop profitability but our performance metrics are far more about behaviour.

"We're striving to create good presentation standards in our shops and good relationships among the teams so we can provide a great service and attract and retain more customers."