Performance Management and Key Performance Indicators, KPIs
Performance Management is the process of creating a business environment or activities to ensure people are enabled to perform to the best of their capabilities. Performance management include goals that are consistently achieved in an effective and efficient way. Just to take a few pointers about what performance management would cover
- Financial performance;
- Marketing performance; and
- People Performance
Financial performance
To know how your company is performing, you would need to find out how your financials are performing. Thus you would first of all, establish the financial goals, namely, profit and loss, cash flow and your balance sheet. Thereafter you would check your actual financial results against your financial targets. This generally will be taken care of by the Finance Department or Accounting Department. For small and medium enterprise, you may outsource or engage a part-time professional to perform this task.
Nevertheless, you still need to set your financial goals.
Marketing performance
You would also want to strategize your marketing activities to achieve your company annual revenue and its contribution to the gross margin. The management team would want you to establish the marketing performance measurement or marketing metrics. Again the marketing performance indicators are based on your specific industry. You are therefore benchmarking your company marketing performance against the industry performance metrics.
Marketing performance is one of the key success factors or critical success factors.
People performance
Whenever we mention about peoples’ performance, the performance appraisal comes to our mind. You are definitely right to say you need performance appraisal to assess your people performance. Therefore performance appraisal is a tool and technique whereby you measure the performance of your people to reach the goals that you had set for your people.
What is people performance? People performance management and measurement would be how you manage, motivate and engage your people to achieve business results that are desirable. In other words, are the business results through people? Business agility is the learning agility of its organisation and its people. Business results are interdependent of the business agility to the market changing environment.
Why do we need to have performance management?
Without performance management, how would you know whether your lead team achieved the business goals?
With performance management, you are in a better position to allocate your financial resources, your human resources and commitment of capacity for the level of operations for your products and services.
Human resources or human capital is an intangible resource, and the return of human investment is a huge potential. That’s why you have talent management, career management, flexible wages or compensation management as well as corporate culture development.
You want an inclusive and thinking work team; your activities would include engaging and participative employees.
You want a productive and innovative team; your activities would include productivity events and doing things differently.
Performance management and KPIs
You would appreciate the need for strategic planning and various management tools and techniques; be it finance marketing, quality or people.
Think strategically and act operationally ………….. that’s the general saying.
Finance management has its measurement.
Marketing management has its metrics.
People management has its indicators.
Do we still need KPIs? The answer is a big “YES”.
As highlighted earlier, you need to have key success factors (KSFs) or critical success factors (CSFs). You would have a few KPIs for each of the KSFs.
For the measurement of financial performance, what are its KPIs?
For the metrics of marketing performance, what are its KPIs?
For the indicators of people management, what are its KPIs?
Are KPIs link to compensation and / or rewards or incentives?
The objectives of having KPIs are:
- Stay focus to achieve both personal and organisation goals
- motivate its people with incentives and recognition
- gain trust in company’s products and services (also part of branding process)
- gain confidence from stakeholders for future investment
- future growth and expansion
In conclusion, KPIs are linked to flexible monetary/incentives using various bonuses, performance bonus, one-off special bonus as well as non-monetary/recognition rewards.
By Charles Wong, Associate Trainer, HRmatters21
