In many cases when measuring organizational performance, companies tend to focus solely on the financial perspective, setting objectives such as “Achieve profit growth” (measuring it through $ Gross profit margin, $ Net cash flow, or similar indicators) or “Maintain financial discipline” (measuring it through % Budget variance, # Berry ratio, or others).
Organizations should be aware that old methods and strategies may not apply in a fast changing environment, in which an increasing number of companies are more innovative in their businesses.
Performance management, at least at the employee level, has received serious criticism from multinationals such as Microsoft, General Electric, Adobe, Goldman Sachs Group and Google, in the past 5 years. The traditional ranking system and KPI measurement used in the appraisal process provided little added value for the organization, for managers or for the individual. Practice has proved that a measurement system is merely a promise of improvement.
At a time when talent and innovation are highly valued, a large majority of organizations fail to develop new and attractive products and services. So what can CEOs and managers do in order to drive innovation across their organization?