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Linking Your Performance Management to Business Strategy and Budget

Linking Your Performance Management to Business Strategy and Budget

Used with permission of the author:
Author: Morongwa Makakane
Tlholego Business Consultants
13 March 2007

Back to ... Workinfo.com Human Resources Magazine Volume 1, Issue 5, 2007

What is Performance Management? Why do organisations have to have performance management?

Performance management reminds us that by being busy is not the same as producing tangible results. It also reminds us that training, strong commitment and lots of hard work alone cannot guarantee results. The key role of performance management is its focus on achieving results -- useful products and services for customers inside and outside the organization. Performance management refocuses our efforts away from being busy toward being effective.

Simply defined, performance management is about ensuring that organisational goals are consistently being met in an effective and efficient manner. Performance management can focus on performance of the organization, a department, a process on creating a product or service or performance of employees.

Performance management is a process of harnessing all available resources (human and material) within an organisation and ensuring that these perform to the maximum, in order to achieve the desired results. Performance management involves building processes, systems, culture and relationships that facilitate the achievement of organisational objectives.

The one mistake we often make is to equate performance management to the management of employees. However, it should be focused on more than that.

Performance Management should also focus on:

  1. The organization as a whole and its strategic direction (Business Strategy, Business Plan, Marketing Strategy etc)

  2. Business Units/Departments (IT support, Human Resources, Sales and Marketing etc)

  3. Organisational Processes (Workflow planning, Budgeting, Product development, financial management, invoicing and billing etc.)

  4. Organisational Programs (implementing new policies and procedures to ensure a compliant and safe workplace; or, for a profit oriented organisation, ongoing excellent and efficient delivery of service to clients)

  5. Internal products or services to both internal and/or external customers

  6. Projects (Implementing a new IT system, Reviewing organisational effectiveness etc.)

  7. Teams or groups organized to accomplish a result for internal or external customers

The primary orientation of performance management is developmental but must allow for effective response to consistent inadequate performance and for recognising outstanding performance. Performance management procedures should minimise the administrative burden on supervisors and managers whilst maintaining transparency and administrative justice.

A performance management system focuses on equal participation in performance management by the supervisor / manager and the employee. It is developmentally oriented, encourages coaching, regular feedback through progress reviews and annual appraisals, in order to effectively and efficiently deliver on the institutions strategic goals and national priorities. This system is a means to an end, and its success will be measured by the extent in which it contributes towards creating conditions for effective performance and overall contribution to service delivery.

How does performance management link to the Business Strategy? Why?

A business strategy establishes specific goals to meet the needs of customers, shareholders and stakeholders and fulfill legislative and executive mandates. The Business Strategy defines the expected results to be achieved in a 5-year period and defines measures that enable the organization to manage program performance to achieve those results.

All organisations (from NGOs / CBOs, governmental institutions and to big corporates) conduct some form of strategic planning on an annual basis, which is turned into a Strategic Plan. They do this to review their relevance to their 5 year business strategy, their constituencies, the impact of their work on the customers and stakeholders that are being serviced and the quality of what that service has achieved. Therefore the following issues are important to ensure that the performance system that organisations are utilising are used to the benefit of the employees, the beneficiaries and leads to the long term sustainability of the institution. The following benefits can be derived from using a performance management system that is linked to a business strategy and an annual strategic plan:

  • The Business Strategy can be phased into implementation, by linking identified performance factors with strategic initiatives and projects designed to develop and optimise departmental and individual activities

  • Employees performance will be aligned to the organisation’s strategic and operational goals

  • A systematic framework for performance planning, performance monitoring and review and performance appraisal will be provided

  • A shared sense of responsibility amongst staff for the achievement of strategic goals and objectives will be promoted.

  • A culture of transparency and participation through open dialogue about goals and the achievement thereof, personal development, and performance improvement will be promoted.

  • Managers will be encouraged to effectively create conditions for staff to perform optimally therefore providing excellent, empathetic and motivational leadership.

  • A framework of assessment for identifying good and poor performance and to act appropriately through development and the recognition and rewarding of good performance will be provided.

Why does performance management have to link to the organisational budget?

A Performance Budget is a budget presentation and plan that clearly links performance goals with costs for achieving a target level of performance. In general, a performance budget links strategic goals with related long-term and annual performance goals as well as with the costs of specific activities to influence these outcomes about which budget decisions are made.

Annual plans, which are integrated in the Performance Budget, define the annual incremental progress necessary to achieve the 5-year goals. The management of performance then is the act of planning, developing, monitoring, and evaluating employee performance, program performance, and organizational performance in the context of the Strategic Plan.

It is common knowledge that performance reviews are never satisfactory to everyone and therefore the management of the review / appraisal process in itself is a performance standard. South African institutions in the last ten years have moved closer to managing the performance review process and substantial strides have been made to curb the effects of an unsatisfied personnel post the review process. The issue of building the reward system into the review process has become standard and more institutions realise the need to integrate the reward system in the design of the performance management system. Additional, to that most institutions have a growing number of workers that are members of representative bodies and therefore the design of the performance system has to be negotiated with these institutions at the outset. Finally, it is a management to ensure that the annual budget allocate a substantial portion of its revenue to the performance of its staff.

The benefits of a well designed and inclusive performance management system

  • A business strategy will not have to remain a document (file 13?)– it will be turned into actionable action!

  • It’s the only way to measure if your strategy will be executable.

  • It will motivate employees to work together, with enthusiasm, towards an organisational objective – whatever it is.

  • It will help you to create an enabling environment by linking organisational processes and capabilities necessary to achieve performance through people delivering results.

  • Strategies and plans will be turned into individual actions, necessary to produce a great business performance.

Morongwa Makakane is a MBA graduate and qualified Human Resources Management and Development Specialist. Her areas of expertise include Business Strategy Development, HR, HRM and HRD Strategies and interventions design such as Change Management, design and implementation of Performance Management, as well as Skills Development. Her sought-after experience as a trainer and facilitator has seen her practice her skills at various levels of management; both locally and regionally. She is a registered assessor. Morongwa is also a renowned teambuilding expert and motivational speaker. Morongwa is a Certified Balanced Scorecard Practitioner. She can be contacted at: Tlholego Business Consultants, Tel: +27 (0)12 643 1404 begin_of_the_skype_highlighting +27 (0)12 643 1404 end_of_the_skype_highlighting


Short description
The key role of performance management is its focus on achieving results -- useful products and services for customers inside and outside the organization. Performance management refocuses our efforts away from being busy toward being effective.

Keywords and relevant phrases
Business strategy, organisational goals, organisational processes, organisational programmes, performance management, resources, transparency.

Back to ... Workinfo.com Human Resources Magazine Volume 1 Issue 5, 2007

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