There is no consensus as to what performance management is. Different IT research firms define it differently. Different consulting firms and software vendors describe it to fit their unique competencies rather than what their customers may require. Because my impression is that most of these organizations view performance management far too narrowly, such as only better budgeting and control, I think it is better to discuss what performance management does rather than have arcane debates about defining what it is.

I argue that organizations have been doing performance management for decades - well before it received its recent popular references in the media. Organizations have been doing performance management arguably even before there were computers! So why is it emerging as a popular buzz phrase now?

The Debut of Performance Management at the Enterprise Level

If you had done a Google search a few years ago on the term "performance management," the results would have predominantly referred to the human resources and personnel departments' attention to monitoring and improving individual employees. Do that Google search today, however, and the shift is toward the performance of the organization or enterprise in its entirety.

Some would argue that this shift where performance management regularly appears in the media was due to the IT research firms observing that business intelligence software vendors - the type with functionality more toward data mining and analyzing data rather than producing the raw transactional data - were integrating the analytical information across multiple departments. For example, a computer manufacturer's purchasing system detects a temporary vendor part shortage that, in turn, is directly signaled to its customer order entry agents to influence their customers to select alternative product variations, perhaps with a discount or deal as inducement, until the part shortage is resolved. The risk of a missed sales opportunity is eliminated. This "demand shaping" is more powerful than "demand management." This type of communication from the purchasing function deep in the bowels of the production function to a call center agent deep in the sales function would have rarely existed a few years ago.

Others might argue the increasing appearance of performance management at the organizational level arose from the same IT research firms observing those same business intelligence (BI) software vendors providing strong combination suites of at-a-glance visual dashboards and scoreboards. Further, these reporting tools are now linked to strategic planning, managerial accounting and forecasting tools - and they are extremely scalable to handle millions of records for products and customers.

These are certainly factors, but I believe the emergence of performance management in the media and marketplace has deeper root causes.