Strategy Management & Performance Management

Without clear direction any organisation will fail to achieve its potential. Indeed, most commercial businesses will fail altogether, as competitors jostle each other in the struggle to be one step ahead of the field.  And public sector organisations risk losing the confidence and  financial support of their consumers.  Successful organisations know that their best chance of long term survival lies in properly aligning the use of all their resources, including their people, towards a common set of goals. With the best will in the world, people cannot contribute effectively towards a common goal if they do not know what that goal is!

Strategy management is therefore essential if any commercial or public sector organisation is to prosper in the long term.  It involves translating the strategic vision (“Where are we going?”) into action (“What do we need to focus on?  What initiatives are needed?”)

Performance management is just as important, to ensure that everyone involved with the organisation is actually doing what the strategy sets out.  If they are not moving in the right direction, what corrective actions need to be taken?

The Balanced Scorecard is the best-known framework for combining strategy & performance management.  Its huge success world-wide has been for four main reasons:

• Managers like working for organisations with good performance management systems in place.  They hate measures that are inappropriate or subjective, targets that appear to be arbitrary, and communications that are only ‘top-down’.

• Organisations with good performance management systems have stronger internal strategic alignment.  Internal behaviours - such as improvement initiatives - are synergistic rather than in conflict with each other.

• When measures indicating strong performance are distributed across a balanced set of perspectives, managers make better decisions than when the same data are presented without a supporting framework.  They can perceive the cause-and-effect relationships between the overall corporate objectives and the measures under their own control.

• Organisations that make extensive use of a broad and balanced set of financial and non-financial measures – such as those developed under a Balanced Scorecard framework – outperform those that don’t.

A Balanced Scorecard approach is highly desirable, but not essential.  In our experience, many public sector organisations have installed performance management systems that are driven primarily by National Indicators imposed by central government.  In response to short-term imperatives for action, but with only a limited budget to hand, they have opted to monitor progress towards these externally-determined goals rather than to address the broader challenge of setting and managing their own strategy.  Although this is a reasonable and pragmatic response when budgets are stretched, it should not be thought of as a long-term solution.

We have helped improve performance management systems at both ends of the spectrum: from organisations with simple performance ‘dashboards’ and spreadsheets to monitor progress across a set of locally-determined Key Performance Indicators (KPIs), to comprehensive Balanced Scorecards at enterprise, business unit and team levels.  Much of our work in this area incorporates the techniques of facilitation and change management.   Overall, a performance management system can only be judged as successful if it changes behaviours.  Most people within an organisation really want to know their organisation’s purpose, and to be a trusted and empowered part of the delivery process.  We typically make extensive use of facilitated workshops to help to develop trust at and between the different levels of the organisation.