In an earlier post, we clarified the modern definitions of performance management and performance management systems:
Performance management systems are designed to create value for your organization through the intelligent collection, application, and analysis of data.
They help transform slow, expensive, and disconnected performance planning and management processes into dynamic, efficient, and connected experiences, serving finance, line-of-business, and IT professionals alike.
Performance management helps to create “analytics-driven” organizations.
But you may ask yourself, why does my organization need to be more analytics driven, and why do I need performance management to make it so? There are many reasons why organizations are increasingly driven to take action toward establishing and improving performance management practices, but three problems stand out:
The Need for Faster, More Accurate Decision-Making
Our fast-paced world is getting faster. We need to collect information, analyze possibilities, and respond to actions as quickly as possible. Organizations suffer when they are shackled by slow action and reaction times, but the problems caused by this slowness are compounded if the decisions being made are based on incorrect information. Data management requires increased speed and accuracy, and performance management systems support this.
The Need to Understand Performance Drivers
Unlike strategic performance drivers, which are trend-based KPIs that change slowly over time, operational performance drivers are characterized by their immediacy. These performance metrics, such as product order turn-around times or sales win rates, can contribute to and be indicative of strategic performance metrics like overall customer satisfaction. Performance management systems improve the understanding of these performance drivers and enable you to act upon that understanding. Basically, they help you identify and manage the root causes and effects that occur throughout your organization
The Need for Better Executive Visibility to Enable Decision-Making
Partly because of the first problem we identified — slow and inaccurate decision-making tools and processes — many organizations experience insufficient visibility among executives. Performance-related analysis and informed decisions fall by the wayside if executives can’t quickly, easily, and accurately understand how activities are impacting goals. A well-integrated performance management system eliminates this opacity.
Now that we understand why performance management systems play such a critical role in the success of today’s organizations, our next step is to identify what to look for when selecting the right performance management system for your organization. We’ll cover that in a future post, so stay tuned.Questions? Contact Us!