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By Omar Aguilar
PERFORMANCE MEASUREMENT
To effectively implement the strategic plan, management must know if the plan's goals are being achieved on time and with the allocated resources. Getting the right answers means having the right performance measurement framework. You can't begin to manage performance until you can accurately measure it.
At most companies, the problem isn't a lack of measures-most have too many-but a lack of focused and effective measures. The challenges in selecting the right measures include choosing the right leading and lagging indicators, benchmarking against competitors, balancing financial and nonfinancial measures, and using an appropriate number of measures.
Performance measures at best-practice companies tend
Six Obstacles to Good Planning
to be few and focused and have clearly defined targets. Best- practice companies typically use eight to 12 measures companywide.
Many companies focus almost entirely on financial measures, but that approach results in a one-dimensional view of performance. To gain a more complete picture, best-practice companies use a variety of measures, including people measures (How do we motivate and retain people?), customer measures (How do we build customer satisfaction and loyalty?), and operations measures (In which processes must we excel?).
Once appropriate measures are in place, managers can receive the specific information they need in electronic form in a concise format. If they want more information about a particular measure, they can simply drill down for greater detail. Agreed-upon measures help managers take actions that are directly related to achieving the company's strategies. Such measures also show senior management where the best results are coming from so that success can be recognized and rewarded.
INTEGRATED BUSINESS PLANNING
Integrated business planning comprises three elements: operational planning, budgeting, and forecasting.
Operational planning takes the company's strategies and translates them into specific tactical steps, or actions, starting with broad, general actions and then breaking them down into increasingly specific ones. Much of this happens as the strategic and operational plans are cascaded down through the organization. By bringing all levels of management into the operational planning process and giving individuals a chance to help shape the plan, the company wins management alignment and buy-in. Having bought into the plan, individual managers become accountable for achieving its goals. They are also energized by the realization that their compensation and other rewards will be governed by their success at achieving their goals.
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