Definition performance management

1. Definition performance management
Dr. Filip Roodhooft - Full Professor at K.U.Leuven and Vlerick Leuven Gent
Management School - teamed with Trifinance to survey 120 CEOs in Belgium. The
objective: discover how CEOs experience their company's Finance function, including
their challenges and interactions with other stakeholders.
Performance management or strategy execution came out as the No. 1 priority for the
next few years.
This interesting finding inspired me to share some thoughts with one of Belgium's
performance management pioneers: Professor Filip Roodhooft. The objective: discuss the
research conclusions and elaborate on the importance of PM today and tomorrow.
How would you define Performance Management, knowing it is a well-known concept,
but it also has a variety of definitions?
It's true; there are indeed many different definitions of PM. Strategy Execution is one of
them. The interpretation of Performance Management is strongly related to the
individual's background. Finance professionals most often define PM as the budgeting
process, the definition of Key Performance Indicators (KPIs) and the monitoring of those
indicators, while their HR counterparts often link PM with individual objective setting,
performance feedback & evaluation, and variable pay.
I believe Performance Management should combine both. For me, Performance
Management is the entire process of defining a strategy, implementing the strategy, and
translating the strategy towards the individuals in the organisation.
How do you relate Strategy Execution / PM to the CFO's role?
Each function should contribute to the company's overall value creation. And that applies
to the Finance department as well. Our research shows that the CFO and his team are
expected to reduce time spent on transactional activities (through automation or
outsourcing) and to spend the extra time, energy and resources on high value-added
activities - risk management and performance management being the most important
ones.
What are the success factors for professionalising Performance Management in an
organisation?
First of all - and this is also one of the central findings of our research: accurate data and
efficient data collection are crucial. You can't build a professional Performance
Management process on poor-quality data. Although data collection is merely a
transactional activity - with limited value as a stand-alone - it is a must for many value-
creation activities, including Performance Management.

2. Secondly, a well-established PM / Strategy Execution cycle calls for the combination and
integration of a number of different competencies. All stakeholders should understand
what Performance Management is all about and broaden their scope. For example, a
finance professional should have a basic understanding of the HR aspects of Performance
Management, and vice versa. This requires a development effort to align the PM /
strategy execution concepts and terminology used by everyone involved.
A third action you can take is to clarify the roles and responsibilities of all stakeholders
involved. Performance Management activities are scattered across an organisation. Senior
management formulates strategy, the Finance department is responsible for the budgeting
process, and everyone looks to HR when it comes to individual objectives. In large
organisations, you can sometimes even add an internal consulting department. Are you
then surprised to find that PM / Strategy Execution, the process and the responsibilities of
the parties involved, are not clear? Take the time to clarify the roles of all the parties and
manage the interferences carefully.
And, last but not least, you need to make sure you have a clear strategy. I'm still often
surprised by the vagueness of the strategy in many companies. And the lack of (strategic)
communication. How can you expect business units, teams or individuals to take the right
actions when the strategy is unclear? So, be sure you don't make the same mistake.
Building a strategy map can help.
Does the crisis have an impact on the way companies should deal with Performance
Management?
My answer would be 'yes and no'. The crisis demands short-term thinking and puts many
companies into survival mode. Monitoring activities that help to avoid value destruction
become more important in times of crisis. Furthermore, access to cash and funding are
topics that should be on every CFO's agenda today. On the other hand, it's crucial to keep
the Strategy Implementation dynamics going. You don't want your company to stop
implementing strategy and focus only on the short term. Remember that, sooner or later,
the crisis will also end. You don't want to destroy all value for the future by overreacting
to the short-term issues out there.
To summarise: keep doing your current value-added PM/ Strategy Execution activities,
but don't try to raise your maturity level while handling other short-term crisis activities.
I hope your enjoyed the interview. Let me add one more comment. Strategy execution
was not very important for a long time - but over the last 10 years, many companies have
begun to realise. that it takes more than a great strategy to be No. 1 in their industry. You
need to turn your fantastic strategy into fantastic performance.
http://performanceappraisalebooks.info/ : Over 200 ebooks, templates, forms for
performance appraisal.