Performance Management and Measurement
Performance management and performance measurement are two key processes that cannot be separated from one another, as they both proceed and follow each other.
Performance management is a ubiquitous term in today’s business environment, being embedded in the body of knowledge of various disciplines and being used at all organisational levels (Brudan, 2010). It reflects the approach one entity has towards performance and it includes sub processes such as: strategy definition (planning / goal setting), strategy implementation, initiatives design and performance measurement.
Performance management is a strategic and integrated process that delivers sustained success to organizations by improving the performance of the people who work in them and by developing the capabilities of individual contributors and teams (Armstrong, 1994).
While performance measurement is a sub process dealing with tracking and evaluation, performance management creates the larger context to plan, organize, coordinate, communicate and control performance. It applies at three different levels: strategic, operational and individual performance management.
Performance measurement is a sub process of performance management that focuses on the identification, tracking and communication of performance results by the use of performance indicators. It deals with the evaluation of results, while performance management deals with taking action based on the results of the evaluation and ensuring the target results are achieved.
Increasingly authors and commentators are discussing the multiples roles of measurmenet; it is recognized that measures allow managers to do far more than simply check progress and the behavioral consequences of measures are frequently discussed (Neely, 2002).
Performance measures quantitatively tell us something important about our products, services and the processes that produce them. They are a tool to help us understand, manage and improve the performance of the organisation. So, performance measurement is a must and it is imperiously required to support the performance management system.
Benefits of measurement
Substantial benefits can be realized by organizations implementing performance measurement systems. The performance measurement system is a process supporting continuous learning in which feedback is used for identifying achievements and making adjustments to agreed-upon strategies or initiatives to ensure continued excellence of activities and services, and to progress for the attainment of organizations mission, vision and objectives. It also can provide a balanced and systematic attempt to assess the effectiveness of organizations operations from different points of view: financial, clients, internal processes and employees.
Performance measurement provides the essential feedback to improve decision making in organizations at all levels: strategic, operational or individual level. As a process, performance measurement is not simply concerned with collecting data associated with a predefined performance goal or standard. Performance measurement is better thought of as an overall management system involving prevention and detection aimed at achieving conformance of the work product or service to the customer requirements. Additionally, it is also concerned with process optimization through increased efficiency and effectiveness of the process or product. These actions occur in a continuous cycle, allowing options for expansion and improvement of the work process or product as better techniques are discovered and implemented.
Why do we need to measure?
If you cannot measure an activity you cannot control. If you cannot control it, you cannot manage it; “when performance is measured, performance improves. When performance is measured and reported back, the rate of improvement accelerates”. Measurement therefore can be used for:
- Continuous improvement: identify defect sources, process trends and defect prevention and determine process efficiency and effectiveness as well as opportunities for improvement
- Management assessment: the basic concept of performance measurement involves planning and meeting established goals, detecting deviations from planned levels of performance and restoring performance to the planned levels or achieving new levels of performance
- Control: offers a broad perspective on the results and it helps to reduce variations
- Self-assessment: measurement can be used to assess how well a process is doing, including improvements that have been made.
- Armstrong, M. (1994), Performance Management: Key Strategies and Practical Guidelines, London, UK.
- Brudan, A. (2010), Rediscovering performance management: systems, learning and integration, Measuring Business Excellence, Vol. 14, No. 1, pp. 109-123.
- Neely, A. (2002), Business Performance Measurement: Theory and Practice, Cambridge University Press, UK.