However, if you ask someone to represent the "Performance Management System" of an enterprise, you will get a very different set of responses. In contrast to organizational structure, there is no well-defined "lexicography"
The invisibility of the performance management in enterprises leads people to think in terms of components of the system and not in terms of a holistic system. This, in turn, leads to performance problems.
During the past 35 years of working with companies ranging in size from start-ups to global giants, I have rarely seen effective performance management systems.
We have a created a relatively simple way to visualize performance management in organizations. This, in turn, makes it possible to understand how to design effective performance management systems.
All performance management systems require a set of six components1:
· Key Result Areas
· Measurement of performance
· Evaluation and
Each of these components must be designed individually and as part of the overall performance management system. The first three (Key Result Areas, Objectives, and Goals) comprise the "plan component" of a performance management system, and are a "carve out" from the strategic plan2. The remaining three need to be designed so that they are consistent with the first three. However, in practice this rarely happens, especially for the evaluation component.
In most organizations, the "performance evaluation component" is designed in isolation of the plan component. This immediately creates a problem or dysfunctional aspect of the overall performance management system. Specifically, it is well recognized that "what gets measured and evaluated" leads to motivation and emphasis by people in organizations. If there is a lack of consistency between the plan and evaluation components in any so-called performance management system it will lead inevitably to unintended dysfunctional results and sub-optimal behavior.
Making the Performance Management System Visible
Figure 1 shows a graphic model of the components and interrelationships of a performance management system.
Design of Performance Management Systems
The design of a performance management system is beyond the scope of this article. For more information see Management Systems Performance Management http://www.mgtsystems.com/
1 Each of these components has a precise definition. See Eric Flamholtz and Yvonne Randle, Growing Pains, Fourth Edition, Jossey-Bass publishers, Inc. 2007.
2 For more information see Management Systems Strategic Planning http://www.mgtsystems.com/