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How strategic performance management is helping companies create business value
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By Omar Aguilar

Performance Management

THE ENTIRE ORGANIZATION MUST BE ALIGNED BEHIND THE GOAL OF TURNING THE STRATEGIC PLAN INTO EFFECTIVE ACTION.

At most companies the business strategy is no sooner developed than t begins to lose steam. There's no mechanism to cascade and instill the strategy down through the organization and to ensure that it is actually implemented. This leaves divisions, business units, departments, and individuals to set their own priorities as best they can, whether or not these priorities are in alignment with overall strategic objectives.

To maximize their resources, managers need to know the game plan and their role in it. They also need frequent and accurate feedback telling them how they are doing, where they are falling short, and what they need to do to get back on track. Performance management is supposed to address these challenges, but in most companies it is pursuing its own goals-assessing performance in isolation without asking if that performance is actually helping the company achieve its strategies.

To achieve the results promised by their business strategy, a number of business leaders are demanding that performance management bring the entire company into alignment behind that strategy. More important, they are defining a way to institutionalize business value creation. There are five critical dimensions of performance management that together can help companies maximize value.

1. Strategic Planning: Create a strategic business plan that can be cascaded down through the organization.

2. Performance Measurement: Establish key measures that tell management whether the objectives of the plan are being realized and, if not, where and by what degree they are falling short.

3. Integrated Business Planning: Design and integrate processes- operational planning, budgeting, and forecasting-that create value and align efforts rather than simply police and keep score.

4. Management Reporting: Provide concise, timely information that helps management see what needs to be done and how to do it.

5. Organizational Culture and Reward Systems: Create a culture that energizes employees and inspires them to work together to achieve the company's strategic goals.


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