Many practitioners talk about the importance of performance management with KPIs and their use in organizations.
But do they all even know what corporate performance management, the KPI concept and other important points in the implementation of this business management methodology are?
It is clear that without mastering the concepts behind the theory, the practice will be undermined and corporate performance management will hardly achieve the desired results.
Therefore, in this post, besides presenting a complete step-by-step of how to do corporate performance management, we will clearly define its main concepts.
So, would you venture to say what corporate performance management actually is before reading our definition?
What is corporate performance management, anyway?
It’s not hard to understand what corporate performance management is, see the concept:
Corporate performance management is a business management methodology based on the definition of performance indicators for the processes carried out in a company and, in some cases, for its employees. Through these performance indicators, also called KPI (Key Performance Indicators), it is possible to evaluate people and processes. Next, you must train people, and improve processes so that your company achieves the best results as well as its organizational goals as it defines in its strategic plan.
Now that you know what corporate performance management is, let’s make it clear what performance indicators are.
What are performance indicators?
Performance indicators are determined parameters that must be measured in each process of an organization so that it can be assessed whether the way they are performed is adequate, efficient and effective, and whether the results achieved are satisfactory.
For example, a performance indicator (or KPI) widely used in call centers is call response time.
Another indicator of performance currently used in marketing is the NPS, or Net Promoter Score.
It is a very simple and agile research to do to measure the satisfaction and loyalty of your customers.
It is done with a single question like this: “On a scale of 0 to 10, how likely are you to recommend our company (brand, service, etc.) to a friend or relative?
As it is widely used by many companies, it becomes a KPI which is easy to compare with the performance of competitors in the industry.
Check out more details about NPS on our blog: Customer Satisfaction Survey Questions: What to consider.
How to do 7-step performance management
Okay, now that you have mastered the concept of business performance management, let’s go step by step to implement it in your business.
1- Analyze the strategic objectives of the company
This is an action you must always take for any initiative or project that you wish to implement in a company.
After all, if someone is doing something which doesn’t contribute to achieving the business goals, it is a waste of resources.
In the case of business performance management, this is even more important.
Why? Because the ultimate goal of performance improvement is to facilitate the achievement of a company’s goals and objectives.
Therefore, all initiatives in this sense must be in line with strategic planning and its objectives.
2- Choose the processes that add more value to the business
Managing a company’s performance is not a simple activity.
In fact, it is a complex process that requires good planning, resources and time.
Therefore, you shouldn’t want to tackle everything at once when starting the implementation of organizational performance management any try to cover all business processes.
This is not only impossible, it’s unproductive and risky.
Ideally you should pick some key processes in the company and start with them.
Once you have perfected performance management and you can make sure your results are being met, choose a few more processes and include them in your organizational performance management program.
Over time, you should evaluate the performance of all important company processes.
But how do you define which processes should be included in performance management?
Criteria for choosing processes for performance management:
- Processes that add a lot of value perception to an end customer (eg, the preparation of food in a gourmet restaurant is fundamental to the taste of the dishes)
- High risk processes (eg, credit analysis at a bank)
- Processes in which there is direct contact with the final customer (eg reception of passengers on an airplane)
- Processes that are among the company’s key competitive advantages (eg maintaining a high connection speed in a video streaming company such as Netflix)
3- Analyze these processes
Now that you have defined some important processes, you need to analyze how they work, to fully understand them.
After all, how can you manage the performance of a process if you don’t fully understand how it performs, what its steps, actors, departments involved, necessary documents etc are.
For this, you should draw a diagram of the process. A graphical representation of the flow of tasks during the course of the process, deviations, decision making and events.
Three sources will help gather the information needed to understand and design the process diagram: interviews with process participants; an observation of the process in progress and the collection of documents used in the process.
Here’s an example of a process diagram:
To draw all of this, you can use specialized modeling software.
They use standard notations, such as the one you saw above (BPMN), so that you can draw process flows easily and intuitively, using a drag-and-drop interface.
Want to see how easy it is to use?
Check out this tutorial explaining how to do process modeling:
Learn more about the BPMN modeling course.
4- Set performance indicators
You’ve already designed the process and mastered its operation perfectly.
Now it will be easy to set performance indicators for this process so you can measure it and know if it is going well or if you need to make adjustments.
To define what to measure in the process, you must take into account some important criteria:
- Relevance: what will be measured must be a variable that considerably affects the process and its results. For example, in a customer service call center, the number of calls the team satisfactorily resolves is an interesting performance indicator. Response time does not indicate service quality. In fact, incentivizing customer service staff to serve customers quickly can make them impatient and anxious. Which in-turn makes them end calls quickly. Obviously, this can decrease the quality of customer service.
- Easy understanding: a performance indicator has to be something that employees understand and see sense in measuring. Otherwise, they will ignore it and in time it will become useless. For example: a fast food franchise uses a KPI regarding the weight of garbage that franchisees discarded at the end of each day. The franchisees did not understand why they needed to do this. Therefore they performed it inappropriately, quickly and without care or precision. After learning that this was a way of assessing whether the amount of disposable materials (cups, cutlery, paper towels, etc.) was deviating, they followed the procedure to the letter.
- Easy to measure: imagine having to count, one by one, all cutlery, cups, towels and other disposable items thrown in the trash at the end of the day. Weighing the trash, (after studying the demand of the day with the garbage produced) is much easier. So this can be a good KPI, just make those involved understand its usefulness, as pointed out above.
- Quantifiable: Ideally, a performance indicator should be evaluated in numbers, so that numerical relationships and comparisons can be made in a more practical way.
Check out this video, it will help you set business performance indicators more easily:
5- Automate the processes
Automating processes does not just mean turning some manual tasks into automatic ones. This is part of automation, but one of its biggest advantages is access to process data and information.
It’s this ability to collect performance indicators that makes process automation one of the greatest organizational performance management allies.
It’s pointless to design new optimized processes if you can’t measure them and evaluate them continuously and in real time.
In another video on our channel, you will see how to automate processes, once you have designed them with HEFLO:
6- Start the operation and evaluate the performance
With the process automated, once the operation starts, the manager will have access to the performance indicators. They will also be able to see other data that automation can provide.
Good process automation software typically has detailed, intuitive, easy-to-understand dashboards and queries for collected data.
Therefore, the leadership team should do a detailed analysis of these indicators and other parameters provided by the dashboard. They can evaluate process performance and detect if there are opportunities for improvement.
7- Determine process improvements
Based on the evaluation in the previous point it is necessary to determine how you can improve the process.
Typically, when moving from one task to another, a process experiences bottlenecks, delays, waste, duplicity, or errors in information exchange.
Now the cycle restarts continuously: the new process, once adjusted, will be re-evaluated. Then, if it performs worse than expected, you can look for better solutions to improve it and meet the KPIs.
See More: Lean Performance Improvement: A Guide
Now that you understand what performance management and its concepts are, be sure to use it in your business.
And if you have any questions about the best way to optimize your processes, download our free ebook: The BPM Cookbook