Performance measurement and performance management are entirely different strategic practices, but they are also complementary to one another.
An organization’s performance is measured by way of a set of Key Performance Indicators (KPIs), which indicate progress toward desirable goals. These KPIs help in monitoring the implementation and effectiveness of an organization’s performance strategies. They help in finding the gap between an organization’s targeted and actual performance.
Following are some of the ways in which good KPIs help in measuring performance:
- Provide an objective way to determine if an organization’s growth strategy is working
- Offer a measure to compare the degree of performance change over a period of time
- Measures the accomplishment of goals and not just the work performed
- Focuses the attention of the managers and the employees on the key factors that affect organizational success
- KPIs are verifiable and ensure accuracy in data collection
KPIs are invaluable tools in measuring and managing work towards an organization’s desired goals. As one oft-repeated maxim succinctly says, what gets measured gets done. Unless you are able to measure the results, you cannot differentiate between operational successes and the failures.
Concerning performance measurement, it is not enough to have just a set of performance measures. The organizations need to have system of evaluating and responding to them by realigning the operations in order to improve the performance.
The performance measures are quantitative indicators that are used to track the performance. They cover performance in a wide variety of activities such as finance, customer service, employee management and business processes. These measures enable an organization whether it is on the right track in achieving the organizational goals and objectives. Such information is very helpful and works as a motivational tool, when circulated across the organization.
On the other hand, there is subtle distinction between performance measurement and the process of managing the performance. In the case of performance management, the organizational managers and leaders meet on a regular basis to discuss the results of performance measures and determine the suitable actions to be taken for the improvement of the performance. Thus, the leadership team getting aligned around the performance results will keep the organization firmly on the growth path.
Following are some of the key steps that the leadership need to take to drive the organization from mere performance measurement to constructive performance management:
- Involvement of the Leadership Team: The leadership team needs to take firm actions to rectify the shortcomings revealed by performance measurements in order to achieve the organizational goals and objectives.
- Ensuring Action: A key person from the leadership team needs to ensure that all performance measurements are acted upon.
- Focusing on Performance Management: Get the leadership team to meet regularly to discuss the performance measures and the corrective actions that need to be taken.
- Linking the Budgeting Process to Performance Measures: Plan your organizational spending to improve the critical shortfall in performance measures.
- Proper Communication: It is of paramount importance to communicate organization-wide the key performance measures. This way the performance management can get going on the right path in the light of the key measures.
Performance measurements are great in knowing where an organization stands and where it is heading. They offer a measurable way to track an organization’s progress. But performance measurements alone are not enough to ensure the organization’s progress. Performance management, on the other hand, dwells on the ways of actually doing something throughout the year on the basis of the performance measures so identified in order to keep the organization firmly on the growth track.