In an increasingly competitive environment, performance management in companies corresponds to its ability to achieve strategic objectives, using the available means optimally.
However, the performance of a company is not a simple addition of individual performance within the company.
Rather, it should be seen as a harmony between the results of each of the cells of the organization. Managing the performance of a company is therefore federating individual efforts and guiding them in achieving an overall objective.
Whether it’s shining a light on super-performance or detecting underperformance, propelling business results is the result of a meticulous and constant process. Here is, in stages, how to ensure the management of performance in business.
What approach for performance management in companies?
Managing performance includes the definition of general performance objectives, the choice of a management strategy and then the deployment of the chosen strategy at the operational level. To deploy a steering strategy, two approaches are possible.
Vertical steering
This is a hierarchical approach. This so-called top-down process consists for top management to:
- Define the mission and vision of the company;
- Choose the strategy to achieve this vision;
- Deploy the strategy by breaking it down into specific objectives, assigned to each cell of the organization;
- Fix the budget envelopes allocated to each level of hierarchy;
- Select strategic indicators and processes to measure collective performance;
- Adjust strategies according to the results obtained.
Transversal steering
It is an approach that puts processes at the center of the steering strategy. In other words, it is a question of defining processes and “best practices”. Then, it is necessary to decide on the competent actors who will be considered as process pilots.
The process pilot, chosen for their proven skills and not because of their hierarchical position, is responsible for:
- Define and standardize the processes as well as the steps and tools used to achieve the organization’s objectives;
- Ensure compliance with these processes in the departments under their responsibility;
- And ensure transversal cooperation between the company’s departments to achieve overall performance objectives.
These two approaches, far from contradicting each other, must complement each other in a process of managing performance in companies. However, whether we focus on one or the other, performance management tools remain broadly the same.
What tools for performance management in companies?
Managing a company’s performance requires knowing the state of play at each stage of the management process, collecting and analyzing data and implementing adjustment actions in order to continuously improve.
For this, it is essential to know the performance indicators and management tools.
Performance indicators in companies
Performance indicators can be classified into two broad groups: monitoring or action indicators and result indicators.
The former offer the real-time information needed to make adjustment decisions. Based on this information, managers can redirect actions, redeploy resources or see in time the ineffectiveness of an approach in order to put an end to it.
These indicators can be the number of customers or the percentage of market share of the company. Employee reviews are also good indicators of a company’s performance in that they make it possible to evaluate the company’s employee commitment.
Result indicators measure the final result and make it possible to gauge the achievement of specific and global objectives. These are mainly KPIs expressed in number or ratios, such as the opening rate for an emailing campaign for example.
Performance management tools in companies
The main tool for managing performance in companies is the dashboard. It allows a global reading of the company’s situation in order to make the necessary decisions. The scoreboard shall contain quantitative and qualitative indicators according to its purpose.
The dashboard can be automated and fed by an information system (HRIS) to be used specifically for human resources management, customer relationship management (CRM) or accounting and financial management of the company.
Other tools used to manage performance are either tools that feed the dashboard or tools that provide directly actionable information.
These are first of all accounting tools such as the forecast balance sheet, the management balance and the cash flow plan. There are also management control tools such as profitability ratios, cost ratios or qualitative indicators such as satisfaction barometers.
All these tools, used together, make it possible to offer via the dashboard, a general assessment of the financial and social health of the organization, and to measure the effectiveness of top management decisions.
However, care must be taken to select indicators and tools that are consistent with the sector of activity in which the company operates. Indeed, the more data collected, the more time it takes to process it and the more material it takes to store it.
Moreover, drowning decision-makers in an avalanche of information does not promote the accuracy and precision of strategic decisions.
What processes to facilitate performance management in companies?
The image of harmony in an orchestra illustrates the indispensability of joint actions to achieve organizational objectives. This is obviously not possible without excellent team cohesion.
Processes that facilitate cohesion between departments and strengthen group dynamics therefore have a definite impact on organizational performance. This may include:
Weekly performance monitoring meetings
These meetings can be sectoral, or encompass several departments of the company.
They make it possible to monitor and control operations, to react quickly to possible hiccups and to establish flexible management, with communication at the heart of interactions.
Objectives Key Results (OKR)
These are objectives with key results, i.e. results to be achieved in the short term. This almost daily monitoring approach makes it possible not to lose sight of the objectives and to highlight the micro-performances.
Recognizing and encouraging individual and collective performance will not only create employee ambassadors, but also establish a culture of excellence in the organization.
In short, ensuring the management of a company’s performance means choosing a direction and directing the actions of all the company’s cells in this direction.
This implies not only clearly defined objectives at each level of hierarchy, but also a particular attention to cohesion within the organization in order to weld work teams.
The challenge is therefore to balance the economic and social finality in the management of performance in companies.
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FAQs
What are the two approaches to performance management in companies?
The two approaches for performance management in companies are vertical management and transversal management. Vertical management is an approach following the hierarchical line, where top management defines the mission, the vision, and deploys the strategy by setting specific objectives at each level of the organization. Cross-functional management puts processes at the centre of the strategy and appoints competent process pilots who are responsible for standardising processes, ensuring compliance and fostering cooperation between departments.
What are the tools for managing performance in companies?
Performance management tools in companies include performance indicators and management tools. Performance indicators are divided into two groups: monitoring or action indicators that provide real-time information to adjust actions, and result indicators that measure the achievement of specific and global objectives. The main management tools include the dashboard that offers a global reading of the situation, accounting tools for financial management, management control tools for performance ratios, and the Human Resources Information System (HRIS) to automate HR management.
