accounting analytics balance black and white

Performance management beyond basic KPIs

For many businesses, the market in which they operate is becoming increasingly dynamic and faces increasing challenges. Demanding customers, shorter lead times, and a large increase in technological developments, among other things, have ensured that the attention for Performance Management has expanded enormously in recent years. However, performance management is a broad subject. You often see that businesses think too lightly about it. Please provide a list of KPIs, communicate this to management, make their bonus dependent on it, and people will manage. 

Nothing could be further from the truth, and you often see disappointing results. Setting up good performance management is, therefore, not easy.

Performance management can only succeed if the correct preconditions have been met.

  • There must be a clear link between formulated KPIs and the organizational objectives. Often this link is missing, with the risk that people are not steering in the right direction.
  • A good decomposition of processes is important in order to be able to do a good translation from strategic goals to operational objectives.
  • Make sure you don’t have too many KPIs that make businesses micro-manage. This indicates a lack of focus.
  • The introduction of Performance management requires a different way of leadership. Managers must be willing and able to steer based on the insights obtained. It requires a change in managers’ behavior in which addressing people about their responsibilities is of great importance.
  • Ensure that the preconditions (rewards, responsibilities, etc.) are properly fulfilled for managers so that they can fulfill their role properly.
  • Good and sufficient communication about the implementation of Performance management is necessary. The organization’s employees must be sufficiently informed because otherwise, resistance may be perceived as threatening as a possible consequence.
  • The setup Performance management system must be sufficiently flexible. Inevitable organizational changes and adjustments in organizational goals must be easy to process if people want to continue to manage in the long term.

Performance management is, therefore, more than just managing based on a few numbers. Performance management is acting on business questions that play a role within the organization. Good Performance management must ensure that an organization:

• Can respond quickly to questions from the market

• Ensures the required transparency

• Manages the realization of the strategy

Performance management is, therefore more than drawing up a few KPIs. If businesses actually want to implement performance management and control performance, the preconditions are also very important!