Performance management from the perspective of organisational sustainability is an ongoing strategic process that should align the performance of individuals and teams with the organisation’s long-term goals. It is centered on achieving immediate business results while fostering a culture of continuous improvement. This includes fostering innovation and maintaining ethical practices, all with the goal of ensuring sustainability of the business. There’s a saying that “what gets measured gets done.” This emphasises the importance of having a comprehensive, end-to-end process that touches every aspect of the organisation. By clearly defining what needs to be accomplished and how success will be measured, the organisation significantly increases its chances of achieving sustainability.
Key components of an effective performance management system
One thing that gets overlooked in the design process is the underlying philosophy. This philosophy is crucial because it forms the foundational principles that guide your approach to managing performance. It dictates how performance will be managed, how you will evaluate the business and employees, and how you will reward people. Ultimately, it shapes the entire design and implementation of the performance management process.
In a performance management system, it is crucial to clearly define what needs to be done. This means setting clear objectives aligned with your organisation’s strategy, identifying how you will measure the success of the strategy, and determining who will be responsible for each task, when it will be completed, and what outcomes or impacts you expect. Everything must be clearly outlined, including the specific metrics you will use to gauge success. Given the fast-paced nature of today’s world, where change happens rapidly, it is important to recognise that your current strategy may not necessarily thrive in the next six months.
Instead of focusing on a single, rigid goal, we should consider setting range goals. The advantage of range goals is that they provide flexibility, allowing you to define both minimum and maximum outcomes. If you fall within this range, you’re not at a loss. Relying solely on black-and-white goals can lead to frequent recalibrations. While the SMART (specific, measurable, achievable, relevant, and time-bound) framework is a useful approach, the key is ensuring that all parties agree on the goals. Additionally, continuous feedback from the onset is crucial, with ongoing conversations to keep the process consistent and clear, ensuring that everyone understands the required actions. This involves regular communication between individuals and their superiors.
Continuous feedback is important in performance management for development opportunities which involves considering how individuals can grow and enhance their skills and capabilities. If someone has limitations in certain areas and is not given the proper training, it will be unfair to hold them accountable for not meeting expectations. Therefore, providing development opportunities is crucial. Additionally, having a robust appraisal system is key—it must be objective, balanced, and transparent so that individuals clearly understand the criteria by which they are being evaluated.
Range goals and how important they are in ensuring sustainability in a business and the workplace
Range goals emphasises flexibility and adaptability in goal setting. Instead of setting a single, rigid target like achieving one hundred million naira, consider defining a range, such as eighty to one hundred and twenty million naira. This approach allows for variation within a specified range, thus the one hundred million naira you are looking for sits within the range. It provides the organisation with the flexibility for adjustments, as needed. Consider how budgets are handled today compared to the disruptions caused by COVID-19 and the subsequent development of new strategies. If you base your budget on your current strategy, significant market shifts within six months might require you to revisit and revise it.
Could you establish a range for the percentage of the workforce needed, rather than setting fixed numbers? Thinking in percentages can shape the conversation and provide more flexibility than rigid targets. This approach allows for adjustments as circumstances change. Some might argue that this encourages complacency, but it is about acknowledging the evolving nature of the world. Fixed goals can lead to constant revisits and revisions. Range goals, on the other hand, allow for adjustments before reaching a critical point, enabling a quicker pivot rather than a more challenging recovery from failure.
How performance management aligns with organisational goals and objectives
One area where issues often arise is in ensuring that individuals align with the organisation’s strategy. If not handled correctly, this misalignment can lead to people operating at cross-purposes. The organisation typically has a strategic plan, for example a five-year plan with room for adjustments to accommodate changing conditions. This strategy forms the basis for everyone’s performance contributions.
The company’s goals for the year are communicated to all employees. Different models exist for this process: some use a bottom-up approach, while others, more commonly, use a top-down approach. In the top-down model, the strategy is defined at the top levels and then cascaded down through the organisation. This ensures that every department understands and aligns its contributions with the broader strategic goals of the organisation. For example, in finance, does the company have the necessary funds to execute the strategy? In sales, are you meeting your targets? This approach highlights the importance of aligning individual performance goals with the organisation’s overall strategy. It ensures that individual and team objectives are directly connected to the strategic goals of the organisation. By doing so, you align efforts with the organisation’s overarching goals, promoting coherence and collaborative success. Without linking everyone’s KPIs to these ultimate goals, you risk creating a disconnect within the organisation.
Now, think of your role as a seat on a bus, whether it is in finance, HR, sales, or marketing, you cannot be on the bus heading to Ikeja and be working towards a destination like Lekki. If your goals are misaligned, it is crucial to adjust and ensure your efforts contribute to the broader organisational strategy.
Why performance management is considered a strategic lever for sustainability
As mentioned earlier, “what gets measured gets done.” Without measuring your performance or assessing how well you are doing as an organisation, you risk failure. Performance measurement is crucial for every aspect of an organisation.
If you do not monitor financial performance, you could face bankruptcy. Without managing risk performance, you might encounter issues like fraud or legal troubles. Poor management of employee performance could lead to chaotic organisation. Therefore, it is essential to have a system in place that measures performance across all areas.
Measuring performance is key to driving progress toward long-term goals. Embedding performance measurement into every aspect of your operations helps ensure that you are meeting your organisational objectives. It also fosters a culture of accountability, continuous improvement, and resilience in the face of market changes and external pressures. Without a performance management system, you cannot accurately gauge how you are performing compared to your peers. Performance management is an active process that requires careful attention in any organisation.
How organisations can ensure that performance management is integrated into their overall strategy
First and foremost, ensure that there is strategic alignment. Your performance management system, its philosophy, principles, and goals must align with the organisation’s overall goals and strategic objectives. Additionally, securing executive sponsorship is crucial. Leaders need to be committed to championing the performance management initiatives.
Performance management can be a lengthy process, and success often depends on leaders actively participating and owning the process. If executives regularly review team and organisational performance and treat it as an integral part of their role rather than a checkbox activity, it will greatly benefit the organisation. Furthermore, performance management should be integrated into all aspects of the organisation’s processes, including planning, budgeting, decision-making, and hiring. It needs to be embedded in everyday operations to be effective.
The role of leadership in the successful implementation of performance management as a strategic tool
Leadership plays the role of ownership and accountability for the performance management process. They need to champion the initiative, advocate for it, and actively engage in activities related to performance management. This involves more than just appraisals; it requires managing the entire performance system.
Leaders are responsible for setting clear goals, communicating their importance, and providing the necessary resources. They should ensure that employees understand and have access to the tools required for effective performance management. For example, if using a balanced scorecard to evaluate performance, leaders should train employees on its use, offer support, and provide the feedback needed for improvement. They should also role model the performance standards they expect from their teams. By delivering on these standards themselves, they set an example and reinforce the importance of meeting performance expectations.
Performance management can be quite subjective, but a well-designed system aims to reduce this subjectivity by implementing various controls. It is important to recognise that performance management is not about seeking fault or discrediting individuals or the organisation; rather, it is a process that organisations should embrace with pride, as it is intended to foster growth and drive organisational success.
How organisations can adapt their performance management strategies to respond to evolving business environments
The fashion industry exemplifies the art of reinvention. Each season, whether winter, spring, summer or autumn brings new designs, with preparations for the next season already underway before the current one ends. This ongoing cycle of innovation demonstrates the flexibility and agility that range goals also emphasises.
We should adopt similar practices in our processes, ensuring they are adaptable and can be easily modified as needed. The system should not be rigid but should effectively measure the performance we aim to track. Embracing “range goals” is crucial, especially in a world where change occurs rapidly. It is important to recognise that these goals are not set in stone but should be continuously reviewed and adjusted in line with current practices.
Conclusion
In conclusion, it is crucial to foster a culture of reinvention, promoting adaptability and responsiveness across different age groups within the workforce. Continuous improvement is not a one-size-fits-all approach; it requires targeted enhancements where necessary. Additionally, investing in leadership and employee development is essential to help individuals effectively navigate performance management within the organisation.
“This thought leadership piece is culled from the CIPM radio programme, ‘The Office.’ The opinions expressed in this article are solely those of the Guests and do not represent the views of CIPM.”
