What is Performance Management?
Article by Bernard Marr
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Introducing Performance Management
Performance Management can be defined as a set of management processes, often supported by information technology, that help to improve the management, strategy execution and decision making in organisations. Performance management processes help companies define strategic objectives, measure performance, analyse and report performance as well as align people and culture.



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Performance Management

Performance Management is what organisations do to become more successful and stay ahead of their competitors. In fact, managing performance is THE most critical task of any executive or manager. If organisations get it right, their performance management processes allow them to define and communicate their strategies, measure, report and monitor progress in order to manage and improve business performance.

Towards better decision making

Performance Management can basically be defined as a set of management processes, often supported by information technology, that help to improve the strategic decisions people make every day. In the end it is the quality of those decisions that will separate successful companies from the rest. Performance Management is therefore a modern umbrella term for a set of management approaches that enable organisations to define and execute their strategy, and to measure and monitor performance in order to inform strategic decision making and learning.

The basic performance management model integrates processes for defining strategic objectives, measuring performance, analysing performance and reporting and reviewing performance and aligning people and culture. All of these are focused on performance improvement which is the central premise of performance management (see Figure below).

Beyond People Management and Performance Monitoring

The following processes and terms are often associated with performance management: strategic planning, performance measurement and monitoring, business intelligence, analytics, people management, reporting, financial planning & budgeting, forecasting, data warehousing, risk management, project & programme management, business process optimisation, knowledge management, dashboards, scorecards, metrics and key performance indicators.

Modern performance management approaches bring together these key aspects of management to form an integrated approach. In the past, performance management was sometimes narrowly associated with either people management (e.g. performance appraisals and dealing with underperforming individuals) or performance monitoring (e.g. collecting and reporting of performance indicators). To avoid this confusion, new terms such as EPM, CPM or SPM have been created.

Integrated Performance Management

Organisations that are serious about managing performance will move beyond the basic model shown in the figure above and integrate it with other key business processes (see Figure below). In order to gain maximum benefits from performance management initiatives organisations need to ensure they align and integrate processes including financial planning and budgeting, project and programme management, people management and rewards, performance reporting, risk management as well as business intelligence and analytics.

Enterprise Performance Management – the Basics

Using the basic strategic performance management model, organisations start with defining their strategy, then move on to measuring performance, then use these indicators to analyse performance in order to extract insights and make better informed decisions which lead to actions and performance improvements (see again the first Figure). Let’s briefly look at each of these steps:

Integrated Enterprise Performance Management

More advanced performance management approaches integrate with other key management processes. Here we briefly look at some of those processes in turn and explore the need for alignment.

Performance Management Technology

The full level of integration between performance management and other key management processes can only be achieved with the support of technology. Corporate Performance Management (CPM) or Enterprise Performance Management (EPM) software suites create a systematic and integrated approach that links corporate strategy to core processes and activities. State-of-the-art software systems support strategic performance management activities by (see Figure above):

For an up-to-date list of the major software vendors and applications please see the listing and links in our knowledge hub
Practical Performance Management Examples

Browse the Knowledge Hub for many examples, best practice case studies, research and white papers of how organisations have put enterprise performance management into practice. Explore the white papers, case studies and articles for more in-depth information on this fascinating subject.