Organizational Performance Management Overview

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    (Although the term “performance” is conventionally used in literature about management, some people might have an adverse reaction to that term. For them, they might use the term “effectiveness” instead.)

    The generic performance management cycle is the cycle of activities that recur in any social system that is serious about improving itself and how it works with its external environment, whether the system is an employee, team,
    recurring process in the organization, or the organization itself. The cycle clarifies the purpose of the system, its goals in working toward the purpose, and how those goals will be achieved. As it works to achieve them, it continually evaluates its progress and makes any necessary changes to improve its progress.

    In an overall organization, the organizational performance management cycle includes three highly integrated phases including:

    1. Performance planning
    2. Performance appraisal
    3. Performance improvement

    Significant organizational activities occur within each of the three phases, including:

    1. Strategic planning clarifies the purpose, goals, and strategies to achieve the goals (performance planning).
    2. Adopting the necessary organizational structures as a strategy to achieve the goals (performance planning).
    3. Guiding the necessary organizational behaviors, including the necessary nature of its leadership and management, as a strategy to achieve the goals (performance planning).
    4. Organizational evaluations/diagnoses to monitor progress toward the goals (performance appraisal).
    5. Organizational changes to achieve goals even better (performance improvement).

    Each of these significant activities is also a cycle of highly integrated activities. The way that a social system does an organizational cycle depends on its culture, its current life cycle, and the expertise of the leaders and managers in the system. The same is true for an individual, depending on his or her personality, maturity, and expertise in leading and managing oneself.

    However, the nature of the general performance management cycle is changing as the world around us is changing. This affects performance management in organizations, teams, and employees. See Performance Management: Traditional and Progressive Approaches.

    The purpose of the information on this topic is to convey the core concepts in organizational performance management. Your proficiency – skills, and abilities – in the concepts would come from applying them over time, especially under the guidance of a person who is highly experienced in applying them, as well.

    What is Organizational Performance Management (OPM)?

    We are used to thinking of ongoing performance management for employees, for example, setting goals, monitoring an employee’s achievement of those goals, sharing feedback with the employee, evaluating the employee’s performance, and then rewarding the employee’s performance. For those who did not effectively achieve their goals, the supervisor would work with the employee to increase performance or ultimately fire the employee. That foundational performance management sequence applies to teams, internal recurring activities, and organizations, as well.

    So OPM involves recurring activities to establish organizational goals, monitor progress toward the goals, and make adjustments to achieve those goals more effectively and efficiently. From a systems perspective, the overall goal of performance management is to ensure that the organization and all of its subsystems (recurring processes, teams, departments, and employees) are integrated and aligned together in an optimum fashion to achieve the overall results desired by the organization. Here are two more definitions:

    • “The term ‘Performance Management and Measurement’ refers to any integrated, systematic approach to improving organizational performance to achieve strategic aims and promote an organization’s mission and values.” Hanine Salem
    • “Organizational performance management is the process of making sure that your company resources are being properly used in pursuit of company goals.” George N. Root III

    Those recurring activities are much of what leaders and managers inherently do in their organizations — some of them do it far better than others. The process is closely aligned with strategic management — the process of effectively implementing a well-designed strategic plan.

    General Guidelines for Implementing and Evaluating the Process

    There are certain guidelines that can ensure the success of any generic performance management process. Be sure to read and follow these guidelines closely, especially if this is your first implementation of a comprehensive performance management process. The guidelines also can be useful if you are trying to improve a process that you have already implemented.
    Performance Management for any Application: Guidelines for Implementation and Evaluation

    Organizational Performance Planning Phase

    NOTE: Because of the predominance of the traditional approach to performance management, the following activities are organized according to that approach. However, early in the implementation, you should decide whether you will be using the traditional approach or the progressive approach, or a combination of both.

    1. Review the organization’s preferred goals for the next year and, for each goal, specify preferred organizational results in terms of units of performance, that is, quantity, quality, cost, or timeliness. These units provide ongoing measurements for the OPM to monitor as indications of the organization’s performance. For ideas about measurements, see Guidelines for Selecting Measurements and One Sample Framework for Selecting Measurements.

    • Organizational goals are usually determined during the Strategic Planning process.
    • The strategic planning process also decides the best organizational strategies, including the best organizational structures and organizational behaviors needed to achieve the goals.
    • The units of performance for the organization might be specified in Action Plans associated with each strategic goal. Action plans specify who is going to do what and by when.

    2. Ensure the organization’s action plans directly contribute to the organization’s goals. See Strategic Action Plans & Alignment.

    3. Rank your preferred results. See Prioritizing Strategic Initiatives.

    4. Identify key performance indicators that will suggest whether you have successfully achieved the goals. See How to Identify Performance Indicators of Success for guidelines and examples.

    5. For each key performance indicator, identify standards for evaluating how well the desired results were achieved, for example, “behind schedule”, “on schedule” or “ahead of schedule”.

    6. Integrate, align, and reality-check your action plans. See How to Finalize Your Action Plans – Integrate and Reality Check.

    7. Integrate the action plans throughout the organization. See How to Integrate Plans Throughout the Organization.

    8. Document a Performance Plan — including the desired results, key performance indicators, and standards. Some organizations might refer to this as a short-term (1-year) strategic plan or a capacity-building plan. See Sample Capacity Building Plan.)

    (For an example of each of the above activities, including how the progressive approach might be used for each, see Performance Management for any Application: Performance Planning Phase. Where that description refers to a “domain”, substitute the term “organization”.)

    Organizational Performance Appraisal Phase

    The activities in this phase are much of what leaders and managers do during the year in an organization.

    9. Conduct ongoing monitoring of the progress of the key performance indicators and action plans. See Organizational Evaluation/Diagnosis and Basics of Monitoring, Evaluating, and Deviating from the Strategic Plan.

    10. Exchange ongoing feedback about performance. See Giving Feedback and Advice.

    11. Conduct a performance appraisal (sometimes called a performance review). See Performance Appraisal.

    12. If performance meets the desired performance standard, then reward for performance, for example, a letter of recognition, increased compensation, and/or a promotion. See How to Reward Employee Performance.

    (For an example of each of the above activities, including how the progressive approach might be used for each, see Performance Management for any Application: Performance Appraisal Phase. Where that description refers to a “domain”, substitute the term “organization”.)

    Organizational Development (Improvement) Planning Phase

    13. If performance does not meet the desired performance standards, then develop or update a Performance Development Plan to address the performance gap (see note 1 below.) See Development Planning.

    • If leaders decide that the organization needs to undergo a significant change in order to improve performance, then this is where Organizational Change is so useful.

    14. Repeat phases 9 to 13 until performance is acceptable or the standards are changed.

    Note 1: Inadequate performance does not always indicate a problem on the part of the organization. Performance standards may be unrealistic or the organization may have insufficient resources. Similarly, the overall strategies of the organization, or its means of achieving its top-level goals, may be unrealistic or without sufficient resources.

    (For an example of each of the above activities, including how the progressive approach might be used for each, see Performance Management for any Application: Performance Development Phase. Where that description refers to a “domain”, substitute the term “organization”.)

    Suggested Additional Readings

    Learn More in the Library’s Blogs Related to Organizational Performance

    In addition to the articles on this current page, also see the following blogs that have posts related to organizations. Scan down the blog’s page to see various posts. Also, see the section “Recent Blog Posts” in the sidebar of the blog or click on “Next” near the bottom of a post in the blog. The blog also links to numerous free related resources.

    For the Category of Organizational Development:

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