Performance Management @ Startup
What is performance in a business environment?
That's a tricky question, and there are many different definitions. Let us just say in very broad terms that 'performance' is reaching the objective you aim for. In your company, therefore, performance could be very different things. There are many different performances in any organization, and it depends not only on the type of company and sector, but also on the type of stakeholder for whom you want to define performance.?
In many for-profit companies, an important performance is perhaps profit or customer satisfaction. In startup companies, perhaps it is growth and cashflow generation. In any organization, it may be employee satisfaction or the quality of products or services, but it can also be social or environmental performance. Whatever your definition of performance is, or whether you define it in relative or absolute terms, performance management in an organization is considered as the activities, tools, processes, and programs you create or apply to ensure that employees, teams, departments, or the entire organization consistently achieve their goals and objectives in an efficient and effective manner. You just saw the word 'efficiency'. What does efficiency actually mean? Doing the things right? Doing the right things??
When you want something to happen efficiently, it means that you're doing the things right so that you achieve results with as little resources as possible. Effectiveness, in turn, means that you're doing the right things, or that the results you obtain are actually the objectives you set yourself to begin with.?
If you're running a marathon, you may be efficient because you run very fast, but you may not be effective because you're running in the wrong direction.?
Using an example from the business world, you may be very fast in responding to your customer complaints and have very short calls with them in your call center, but you're actually not really solving their problems, and are ineffective.?
Or you could be very good at designing and producing the products customers want, but you need a lot of time and use a lot of resources, so you're inefficient. As an example from performance management, it may not cost you a lot to measure and report your performance, but you may not be reporting the relevant performance and therefore your employees make the wrong decisions.?
Performance management is actually very broad and involves, for example, giving employees the decision rights and resources to achieve their objectives. It involves defining what performance looks like and planning how to achieve it, as well as developing the right tools and procedures to measure performance. If these things are in place, people often speak of the fact that performance management is helpful in order to achieve goal congruence in organizations. That means that all employees and units in an organization follow the same goal and try to achieve the same objective.?
Giving employees the decision rights and resources > to Achieve their objectives.
Defining what performance looks like > planing how to achive it.
Developing the right tools and procedures > to measure performance.
Let's say quality is one of your objectives, then you would perhaps invest a lot in the training of your staff in superior production techniques or good customer service.?
You would perhaps do a benchmark to find out what a good level of performance is, set this as a target, and then define an action plan to achieve this level. You may choose indicators to measure quality or the satisfaction of your customers with quality and include this in your weekly or perhaps monthly reporting.?
let me make a comment on this idea of performance management. Chances are that if you're founding your company and if it is growing, you will hire employees, and of course, delegate several tasks to these people. Of course, you want your company to show high performance, so that is fine.
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The term 'management', however, even though it is used a lot, suggests that you're going to manage someone else's performance as if you were pulling the strings of your employees as if they were marionettes or pushing the buttons as if they were robots. I doubt however that such people exist, and even if they did, you would probably not want to hire marionettes or robots.
Much rather, I encourage you to think as you follow along this and the next modules. You want to enable the performance of your employees and of your organization, as a leader. So what are the conditions you can create for growth and performance? This is more about creating environments of trust and transparency, of positive challenges and support so that people perform because they want to, not because they are told to. This is all the more important if you have created a company and if you want to retain its entrepreneurial spirit and do not want it to behave like a big corporate.?
Performance Management - Enable performance by creaqting the conditions needed for growth and performance.
What are the conditions for growth and performance ?
People perform becouse they want to!
performance management is all the practices that you have to set up in your organization to help you implement its strategy well. Research has shown that many small and large firms fail, not because they have the wrong strategies, but because they failed at their implementation or execution. You can think of Performance Management as strategy implementation. That is, assuming your strategy is given, how should you design your Performance Management System so that you and your colleagues or employees implement or execute the strategy in the best possible way??
Management Accounting is defined as decision-making. That means the practices that provide financial and non-financial information that help you or your colleagues to make better decisions to attain your organization's goals or objectives
Management Control, in turn, is defined as decision-influencing, and comprises all the activities that you do in order to align the interests of employees with those of the owners, by directing employees' efforts and attention.?
Here, you may recognize the idea of goal congruence again. Examples could be: setting a growth target for a sales team, or a quality target for your service employees. But also the way you design the performance reports in your organization, and the choice of the KPIs, will influence decisions. Clearly, whether you give your sales force a weekly report of either the number of new customers or the profitability of customers, will have a different impact on their actions, and how they think of what performance is.?
how you can start thinking about the design of a Performance Management System?
In order to show you these systems, I will use a framework on Management Control that works very well to illustrate the key points. Before we move to the next video, however, let me make a comment about how I want you to think of the word "control" that you have just seen. When most of you hear the word "control", you may think of checking, monitoring, surveilling, supervising something only, rather negative connotations. However, what control actually intends is much broader, it is also about planning, directing, and steering an organization forward. When we use the word in future, I want you to think of it with both these meanings in mind.?
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