The five steps of performance management

Research from the developers of the Balanced Scorecard method, Kaplan and Norton, shows that more than 90% of organizations fail to implement their strategy successfully. Gartner1 even reports that 56% of the time spent on planning strategy is wasted time. This is related to the fact that in 95% of the cases employees are not aware of the organizational strategy or do not understand it.2. We also often notice that organizations have difficulty with three crucial aspects in the area of setting up and achieving objectives:

  1. Drafting a well-organized (company) plan with associated objectives (represented in the form of Critical Performance Indicators - KPIs) to convert strategy into desired result;
  2. Monitoring progress on the plan, through the most critical actions and KPIs;
  3. Adjusting the actions in the plan to achieve the objectives.

In the previous blog we have described the design of good KPIs in seven steps. After KPIs have been designed, it is essential to control and adjust the processes where necessary. That is why in this edition we focus on the five steps of the Supply Value performance management model that helps to adequately manage the above three aspects.

Process identification and KPI selection
Based on an organization's strategy, the processes that are crucial for success are critical (critical success factors, CSFs). After all, by adequately executing your processes you can achieve your strategy. It is the effectiveness and efficiency of these processes that you measure with KPIs. KPIs are quantitative targets that ensure that the qualitatively set goals become measurable. The KPIs must be MECE; mutually exclusive and collectively exhaustive: the KPIs do not overlap and contribute jointly to the achievement of the qualitative objective. If the standard is met on all KPIs, this should lead to the achievement of the qualitative objective.

KPI design, coherence and documentation
The actual KPIs can be designed on the basis of this set of KPIs. For this you can use the tips from our previous blog. A good KPI has a number of important elements. For a completely formulated KPI definition it is valuable to fill in the KPI toolkit below.

If the KPIs have been designed, measures may also have to be taken to measure the KPIs. Often, processes, activities or the outcomes are not (structurally) measured. Consider, for example, the availability of machines or the satisfaction of employees or customers. These measurements are often expensive due to extra hard- or software or because of the labor-intensive work. In those cases, the measuring process must still be set up.

Data collection and interpretation
Now everything is basically ready to start measuring, collecting data and interpreting that data. This sounds easier than it is. Data often comes from different sources and databases that are not standard connected to each other. Sometimes differences are even in the smallest details such as other time stamps of datasets. Then unfortunately (at the beginning) a lot of manual work is involved to prepare the data for analysis. Sometimes the data is not sufficient, so you can enrich data with additions, such as judgments from experts or reports from employees, to finally complete the picture.
The most important part in this step, however, is interpreting the data. Data without context does not say anything. The availability of a machine may be lower than planned because major maintenance has been carried out. Customer satisfaction can be higher because of the nice weather. That is why it is always important to involve the knowledge and experience from the business in the interpretation of raw data. In this way you make data with all parties involved.

KPI reporting and visualization
To ensure that information does not lose value, it is crucial that data is correctly reported. In this way you guarantee that information becomes control information. There are different ways to report data. Sometimes it can be enough to display data in its simplest form in one object or with one digit. Think of a simple red, orange or green traffic light. This simply indicates the state of affairs. Sometimes more is needed, such as information from trends or a comparison with other periods or products. This always concerns the goal of giving steering information. Most importantly, the report is action-oriented and contains steering information: the report preferably has facts and advice that encourage action!

Performance feedback and action
Then the real work can start: improving data driven. The facts are above the table and there is a good picture of the possibilities. Now the chain can be closed from advice to action and evaluation. The trick here is not to do too much too quickly. Select three to five improvement measures at a time, execute them and evaluate the effect. Here we go deeper into the next blog in this series.

1. Gartner (2018).

2. Kernbach, Eppler & Bresciani, 2014.