The Top 5 Performance Management Tools: Good News And Cautionary Tales

Organizations, whether commercial or not-for-profit, have long been obsessed with managing and measuring performance and there is little sign of this easing up. It is therefore unsurprising that a recent global survey of over 3000 organizations found Key Performance Indicators (KPIs) to be the most widely used tool for managing performance, with a usage rate of about 75%. (The figure below shows the top ten tools). With some respondents preferring to name dashboards, benchmarking or Balanced Scorecards (which require a substantial metrics components) we can safely assume that the actual number of KPI users is even higher (and almost universal).

Although KPIs can be a powerful performance management tool, organizations should heed a cautionary note. An old US Army saying goes, “if it moves measure it, if it doesn’t paint it.” Amusing perhaps, but in many organizations I look at this adage can be readily applied and the KPIs end up adding little value whilst consuming vast amounts of time and effort.

The primary value of KPIs is not in measurement per se, but in enabling rich data-driven performance conversations and better decision-making. Measuring everything that moves provides little more than an illusion that performance is being managed. Ask these simple questions: “what goal will the KPI help my organization achieve or what problem will it resolve;” and “what decisions will the KPI help drive.”

With 60% of usage amongst survey respondents, performance appraisals were the second most commonly used performance management tool. A potentially very valuable tool for aligning the goals of the individual with the strategic aims of the enterprise, again cautionary words are aplenty. The Father of Total Quality Management, and master statistician, Dr W. Edwards Deming refused to even countenance individual evaluation. The reason, he claimed, was that there was no way to make such “appraisals,” statistical valid. Unless employees believe that the appraisal process is fair, equitable and with much of the subjectivity removed, it is typically a poor tool for motivating performance – but can be an extremely powerful de-motivator. The behaviours the organization wishes to drive through appraisals and the behaviours they might drive must be fully considered in the appraisal design process. Something that also holds true when designing KPIs.

In third place, also used by slightly more than half of respondents are mission and vision statements. The overriding purpose of such statements is to ensure that all efforts to improve performance (at strategic, operational and individual levels) are pointing in the same direction: so usage should be encouraged. Once more, there are potential pitfalls for the unguarded. Too often missions and visions are poorly described, and there is much confusion about the role of each. A mission describes the reasons why an organization exists - and might remain stable over many decades. For instance, Google’s mission is to, “Organize the world’s information and make it universally accessible and useful.” The mechanisms by which it does this are not relevant to the mission. Products and technological delivery mechanisms will change.

Vision statements should be inspirational, aspirational and explain where the organization will play and should be time-bound. For instance, too many visions are something akin to, “we will be a leading company in our markets.” Compare with John F. Kennedy’s famous vision of 1962: “We will put a man on the moon and bring him back safely by the end of the decade.”

The fourth most popular performance management tool is management dashboards, which bring together performance information (often in graphs, charts and traffic lights) in a concise display so that performance levels are easier to communicate and understand. Dashboards are popping up everywhere in organizations right now, and with data management and analytical capabilities continuing to develop apace, we can expect usage to grow. But note, dashboards should monitor operational performance and not strategic performance -which is the world of Strategy Maps and Balanced Scorecards, see below). Again, avoid the mistake of “measuring everything that moves.”

In fifth place we find lean management approaches. Compared to previous studies usage of lean approaches has increased, which might reflect the current state of the world economy and the need to improve efficiencies and cut costs. Lean management provides a simple set of tools for easily identifying and removing waste from organizations. The main advice here is to focus on what needs to be improved (and will deliver tangible, and measurable, benefits) and not what is easy to improve (which might deliver little, if any benefit, and might be better off not being done at all).

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Here are some other related posts I have written:

• What The Heck Is a... KPI?
• Caution: When KPIs Turn To Poison
• What The Heck is Wrong with... Mission and Vision Statements?
• Big Data: The 5 Vs Everyone Most Know
• The 75 KPIs Every Manager Needs to Know
• What The Heck is a Balanced Scorecard?
• The One Thing Successful People Never Do!

About : Bernard Marr is a globally recognized expert in strategy, performance management, analytics, KPIs and big data. He helps companies manage, measure and improve performance.

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