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Volume 32, Issue 2

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Tuesday, 30 April 2019 14:56

How to Fine-Tune Performance Management and Transform Your Organization

Protiviti’s Jim DeLoach discusses one of the more pervasive issues falling within senior management’s and the board’s purview. Performance relates to virtually everything important: execution of the strategy, the customer experience, investor expectations, executive compensation and even senior management and the board itself. Accurately measuring it is critical.

Performance management is so integral to the functioning of executive management and to the oversight of the board of directors that it’s easy to forget that it, too, is a process. Like all processes, it can be effective or ineffective in delivering the desired value. Given the complexity of the global marketplace, the accelerating pace of disruptive change and ever-increasing stakeholder expectations, how should executive management direct and the board oversee the performance management process so that it is effective in driving execution of the strategy and incenting the desired behaviors across the organization?

As the ultimate champion for effective corporate governance, the board engages management with emphasis on four broad themes: strategy, policy, execution and transparency. Effective performance management touches each of these themes by focusing outwardly as well as inwardly and looking to the future as well as to the present and past. The message is that, in today’s environment, the focus on performance must be anticipatory and proactive as well as reactive and interactive in focusing company resources on the pursuit of its performance goals.

Many organizations use some variation of a balanced scorecard that integrates financial and non-financial measures to communicate what’s important, focus and align processes and people with strategic objectives and monitor progress in executing the strategy. With that as a context, we are observing in the marketplace six important areas of emphasis for measuring performance: