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Performance management is not achieved by just buying technology – despite what software vendors may say.

The role of technology is to support management. Too often it is the other way around. This is partly because the processes involved in managing performance – planning, budgeting, forecasting, reporting and analysis are often implemented as discreet systems using different technologies.

To cross the gap between strategy and execution, organisations must address four issues:

1. Plan and measure the factors that drive success
2. Align planning, budgeting, forecasting, management reporting to strategic goals and supporting activities
3. Pay people to do the right things and empower them to do them the right way
4. Use technology to automate and reinforce the above.

Planning and aligning processes

Effective performance management starts with the strategic plan. The budget, forecast and report processes are supporting roles. The right metrics for this approach can be determined through the following steps:

Identify what constitutes both short and long term success. This must be measurable. The metrics may be market share, profit growth and return on capital employed with a related set of goals.

Determine how the organisation will operate to achieve those goals. For example, to increase market share, do you need new products/services to attract new customers or should you maximise the sales to existing markets?

For each of these ‘strategies’ determine what the measure of success will be and set targets.

Recognise and communicate the assumptions being made about the business climate. A change to the growth of the overall market, may mean that a metric is no longer relevant or needs revising.

Involve operational management to determine the tactics required to implement each strategy. Each tactic should be assigned a measure that indicates its successful implementation. 

In addition collect high-level costs and revenue impact data to assess if you should implement each tactic. Assign responsibilities to ensure these tactics are carried out within the boundaries set.

Budget process 

The above is a simple example – in a ‘real’ organisation the levels within the plan would be far more complex.

These examples, however, show the process that needs to be carried out to determine the measures required for the budget and forecast process.

Once the plan is set, the budget process to resource the tactics can begin. This collaborative effort is best conducted through management workshops to establish the ‘cause and effect’ of activities on strategic goals.

Forecasting and management reporting should then be aligned to monitor the implementation of strategy.

If things go awry, remedial action is needed to keep the plan on track. This requires a process driven by events rather than a date on a calendar.

The amount of information to manage can be enormous, but technology can automate much of the tracking, alerting users when a decision needs to take place.

Today’s fast moving business environment makes annual planning and quarterly reporting inadequate. Instead, high-performing organisations treat it as a continuous process.

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