As organizations embrace the full vision of performance management - not just the narrow financial definition of better budgeting, planning and control - they frequently ask, "Where should we start?" Some may be eager to begin with a balanced scorecard, others by measuring channel and customer profitability. Still others want to take it to the limit by redesigning their core business processes.

In fact, there is no one-size-fits-all answer. It depends on which of the performance management methodologies provides the fastest significant return and gets the employee buy-in ball rolling.

Performance management is not new. Organizations have been doing it for years, arguably even before computers arrived on the scene. But the traditional version of performance management involved an implicit management strategy that was followed up by measurements of customer service, sales and order-fulfillment functions. It did not seek to integrate the varied components of performance management or to develop proactive core processes. Today, organizations realize they must integrate methodologies and their supporting systems, visually display measurements and apply predictive analytics to all their processes. This is the new version of performance management.

As organizations realize that performance management is really much more about improving performance rather than just controlling and managing it, they begin asking, "Where do we begin to take what we already do to a much higher level?"

Performance Management is About Integration and Speed

An organization attains the full vision of performance management when executive leaders have communicated their strategy to their managers and employees in a speedy manner and are committed to providing continuous updates to their plans. This allows everyone to act in sync and without wasted effort. Speed matters in communications. Performance suffers when managers and employees must react repeatedly to unexpected changes. To realize maximum benefits, all of the methodologies (such as strategy mapping, customer relationship management, Six Sigma, lean management and anticipatory capacity resource planning) must be robust, seamlessly integrated and in sync. Because some organizations already have several of these methodologies in place but not necessarily connected, the "where to get started" question depends on key factors related to the organization's current situation.

For example, if a reasonably sound, activity-based accounting system already provides information on which specific combinations of products, services, channels and customers earn or lose profit, executives may want to focus next on successful execution of their strategy by applying a strategy map and its associated balanced scorecard. Failure to execute a well-formulated strategy is a major frustration that frequently prompts executives to pursue performance management. On the other hand, if the executive team is receiving cost information that is inaccurate because of distorting indirect cost allocations or is incomplete - for example, the team is receiving only product- or service-line profit reporting but not full-channel and customer-segment reporting - executives may want to upgrade their management accounting system by applying activity-based principles.

Again, determining where to start on integrating a performance management framework depends on the organization's weaker links.

Any approach to performance management begins with the attitudes of senior leaders. If they launch into performance management with a Darth Vader attitude - seeking underperformers to expose and cut off their air supply - the progress will slow. Employees will experience fear. Performance management is not about punishment but remedy; however, it does involve a great deal of accountability from individuals for achieving desired results. Wise leaders see their role as setting direction and continuous redirection, clearly communicating their ideas, and empowering their managers and employee teams to determine the best methods for moving the organization forward in the direction communicated by its leaders.

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