The Benefits of Building a Modern Strategic Performance System
Modern Strategic Performance Systems are applicable to organisations regardless of size or type of business. They:
- Facilitate the development and ongoing review of an organisation's strategy.
- Provide a method of aligning the organisation's business activities with that strategy, and
- Allow the organisation to monitor its performance against its strategic objectives.
Most organisations already use various forms of performance systems, usually based around KPIs and scorecards, and frequently combined with 'dashboard' reporting. Most of the large software companies promote 'off the shelf' performance management systems.
The Weaknesses in Many Organisation's KPI & Scorecard Applications
- The oversimplification of complex factors.
- The problems of assigning weights and balance.
- The assumptions about cause and effect.
- Unintended consequences and behaviours stemming from pooly designed measures (what you measure is not always what you get).
- Poor target setting. Short term targets that generate adverse long term outcomes.
- Separation of operational KPIs from the organisation's strategies.
- The difficulty with timing.
- The tendency towards managerial remoteness (the cockpit mentality).
- Underestimating the costs of building information systems.
- Underestimating the amount of managerial time required.
The Characteristics of Successful Performance Management Systems
- Informed and committed leadership.
- Clear focus on the development and implementation of strategy.
- Excellent communications.
- Involvement of staff at all levels.
- Accurate articulation of cause and effect relationships.
- Good performance measures.
- Limited number of measures.
- Meaningful reward systems.
Modern Strategic Performance Systems - Strengths
Modern Strategic Performance Systems:
- Make everyone accountable for the organisation's performance.
- Encourage completely transparent reporting.
- Are completely adaptable. They recognise and build on what already exists.
- Facilitate the clear and ongoing development of an organisation's strategy.
- Provide a clear methodology for implementing that strategy.
- Provide a clear method of aligning all of the organisation's activities with the organisation's strategy.
- Develop meaningful measures and good targets (stretch but achievable)
- Encourage and promote continual improvement by detailed monitoring of the organisation's performance against its strategic goals.
- Improve the organisation's internal and external communications.
© Copyright, Balanced Scorecard Institute Pty Ltd, 2012