What is the Definition of Performance Management?

What is troublesome is that performance management is sometimes mistakenly perceived to be part of a human resources and personnel system. If you perform a Google search on the term, the topic that predominantly appears relates performance management to the personnel function. But performance management as we will describe it is much more encompassing. It addresses how entire organizations, not individuals, are performing.

Think of performance management as an umbrella concept that integrates multiple business improvement methodologies often pursued by organizations. Examples are the balanced scorecard, Six Sigma, ERP, CRM and activity-based costing. The problem is these initiatives and methodologies are typically implemented in isolation from each other. It is as if the project managers live in parallel universes. But we all know there are linkages and interdependencies. So the good news is performance management is not a new methodology that everyone has to learn; it is the assemblage and integration of existing methodologies that most managers are already familiar with.  

Another misunderstanding is the tendency to describe performance management too narrowly. It is much more than just better strategy, planning, finance and control. I view performance management as overarching from the C-level executives cascading down through the organization and its processes. Performance management extends all the way from the top desk to the desktop. In my mind, performance management is a closed-loop, integrated system that spans the complete management planning and control cycle including the processes, metrics, methodologies, systems and software tools that collectively manage the implementation of an organization's strategy. It traverses the entire value chain from customer-facing CRM systems to supply chain management systems and the operations processes in between.

In short, the margin for error gets slimmer each passing year, and performance management will grow in importance.