All performance frameworks—whether it is the Balanced Scorecard (BSC), Objectives and Key Results (OKRs), Management by Objectives (MBO) or the Performance Prism—have a shared DNA and purpose: to create synergy in the organization to optimize key results. However, two important questions need to be asked: which performance framework should a company implement and what should one consider when selecting a performance framework?
A well-defined performance framework enables the organization to achieve its desired goals, and having various performance frameworks in hand can make it a bit tricky to choose the right one. Thus, one might be tempted to try implementing what big companies such as Google have implemented and attempt to do the same within their own organization without contextualizing the company culture, size, and business nature.
This article will illustrate the four things to consider when selecting a performance framework for the organization.
Understand your company’s goals and objectives.
It would be silly to start furnishing an empty room without first understanding its intended purpose. Is it going to be for dining or a personal workspace? The same thing can be said when selecting a performance framework. Understanding the company’s goals and objectives is crucial as it will give you a sense of direction. For example, if the company’s goal is to have a disruptive, innovative product or achieve fast growth, then you might consider the OKRs framework as it will enable you to set challenging objectives and provide flexibility to support innovation. On the other hand, if the company’s objectives gravitate toward stability and sustaining the current market share with modest growth, then the BSC is more suitable for this type of environment as it will assist in cascading the objectives from the top down and preserve company status quo while supporting growth at the same time.
Consider the company size and structure.
When we talk about company size, we are not only talking about its capital and asset value, but we are also talking about its workforce size and how they are structured into various functions. If the company has a huge hierarchical structure where each employee is expected to perform a very specific and specialized task that is repetitive and operational, then selecting a framework that exhibits this nature of work will enable the company to create clarity and focus for the employees. A framework to consider for this purpose is MBO, which is defined by The KPI Institute as “clearly setting and defining objectives agreed by both management and their employees.”
Involve internal stakeholders in the selection process.
Highly engaged employees produce substantially better outcomes, are more likely to stay at their organization, and experience less burnout, according to analytics and advisory firm Gallup, Unfortunately, employees can’t reach that level unless they feel that their day-to-day tasks are linked to the company’s purpose and that they have an impact on the results. A good performance framework should be able to convey this to the employees. Asking employees what they value the most and involving them in the decision-making process will result in a highly engaged organization and limit the silo work environment. A performance framework should not be imposed but rather tailored to serve the company’s goals and its human capabilities.
Review and assess the performance framework.
Just like a strategy review, a performance framework needs to be reviewed regularly and not ossified and treated as set in stone within the organization. As the company’s strategy, size, and market grow and change, the performance framework needs to be updated and changed as well.
In conclusion, selecting a performance framework is only the first step. It is a tool for enablement, not a purpose. All performance frameworks can be customized to fit the company’s needs—these are not off-the-shelf products that must be implemented as-is. Nevertheless, other factors play a huge role in executing performance frameworks, such as employee engagement, company structure, and business processes. All these factors influence and impact which framework to select.
This article was written and submitted by Ms. Wedad Alsubaie, who works at the Strategy Management Office of the National Unified Procurement Company in Saudi Arabia.
Culture is an intriguing component of the organizational system, wouldn’t you say?
Although most professionals agree on the importance of building a strong culture, measuring the extent to which this goal has been achieved is quite challenging and tools have been far and few between. One such tool, used to get the pulse of the organizational culture, is provided by the GPA Unit: the performance culture audit.
Another way is to measure specific KPIs, like Sears does. Sears used to monitor % Employees who attended cultural renewal training, while they were in a process of culture change, in ‘96. Other examples of KPIs are % Employees aware of corporate values or # Communications on corporate values, but most of them relate to some quantitative aspect of measurement. Using metrics to monitor performance or inform decision-making is always useful, but can we actually capture our organizational culture in one metric or index?
As culture is a phenomenon that happens naturally in any group, without necessarily being guided, it will always be a reflection of the people’s energy within that group. Culture is more appealing to emotion rather than reason, it is something that can be easily felt when you walk in a company, but it is difficult to explain or justify.
An organizational culture will embed the beliefs and values that define a company and they serve as guidance in daily actions. Culture is a reflection of the company’s spirit and to a large extent, I believe that an organization’s worth is equal to the value of its people.
Performance is a concept usually associated with processes that are more technical than culture, such as financial performance or machinery performance. So why would we want to have a performance-oriented culture? For many people this may sound like a very cold and profit-oriented working environment.
In practice, there are several reasons to embed “performance” within your organizational culture:
Impact on internal stakeholders
Increases accountability regarding the quality of their work;
Raises awareness on the importance of being efficient and result-oriented in their work;
Nurtures constant learning and professional improvement;
Brings clarity on their role and contribution to the organizational strategy;
Increases engagement, by rewarding performance.
Impact on external stakeholders
Positions the organization as a trustful and reliable partner;
Influences the quality of products and services in a positive manner;
Enhances the customer’s experience;
Improves employer brand and market image.
Thus, a change management initiative to shift organizational culture towards a performance-driven perspective, can become quite the leverage for companies wishing to get ahead of their competition.
To have more clarity around how a performance culture looks like, consider the following key attributes:
Shared vision
Strong leadership is essential for any organization. Leaders must have the ability to communicate their vision and inspire employees to follow them. Their vision can be a key liaison that brings and keeps people together, effectively enabling them to work as a team.
Communication
Intense and effective communication increases employees’ awareness and understanding of the company strategy. This impacts the way they work and can help them make better decisions, in full alignment with strategic directions.
Transparency regarding decisions and performance levels establishes greater levels of credibility and confidence in relation to leadership and generates employee interest towards understanding the impact of their actions on bottom line results.
Continuous learning
A culture of performance will act as an enabler for implementing a performance management system within the company. Monitoring performance results facilitates the development of a constant learning process for the entire organization.
A performance-oriented culture not only sets up targets, but also provide employees the necessary training or mentoring to achieve the performance standards set.
Process improvement
A common characteristic of performance-oriented organizations is their concern for constant optimization. By not being satisfied with ”good”, and always striving for ”great”, people adopt a new state of mind, in which they are constantly looking for efficiencies.
Data
In the age of big data, we need to make sure that both young and older generations are accustomed to work and make use of data in their decisions. Modern organizations must have the competencies and the ”habit” of data analysis.
Technology
Progress in today’s business environment is limited, without the support of modern technology. A performance-driven organization will invest in technology to support business processes.
Innovation
Technological growth will be conditioned by the organization’s ability to adapt to market dynamics and innovate in order to stay ahead of the competition. Innovation comes from employees, but what can make a difference between 2 companies that have the same talent pool is the way each manages to nurture innovation among employees.
Rewarding performance
A performance-oriented culture reflects a working environment, where effort and success are acknowledged and rewarded. Rewards don’t have to be exclusively financial.
Engagement
A performance culture should nurture employee engagement, through its employee centered initiatives.
Authenticity
Organizations should be able to identify its uniqueness, acknowledge and promote it among stakeholders. This is what makes a company feel real and meaningful for its employees, customers and business partners. For Zappos, for example, this authenticity is reflected in one of their corporate values – weirdness.
Organizational culture is the unique environment of an organization that is formed through shared beliefs, values, experiences, specific rituals, behavior, interactions, language, and norms. These elements of the culture are developed over time in both visible and invisible ways, such as the organization’s output, interactions, goals, branding, company policies, reward systems, among others.
It is possible that most of the members of an organization are not aware of the origin of their rituals and why they are expected to behave in a specific way. Or they may know exactly what they are doing for what reason and can explain everything with facts. Which of these contradictory approaches characterize your organizational culture more?
Is it a cargo cult organization or “The Credible Hulk”?
Cargo cult thinking in organizations
Cargo cult refers to the belief that a real achievement can be realized by simply imitating visible behavior. This belief exists even without understanding the correlations between the different steps of a process and the consequences of actions.
The origin of this terminology goes back to the first half of the 20th century, when some remote-island-based tribes saw American cargo planes landing on their island. The tribes tried to recreate the different tools and instruments they saw from the cargo planes without knowing how those goods were manufactured. They made radio from stone and wood but without getting the same effect.
This phenomenon can be observed even in advanced 21st century cultures, particularly in the modern corporate world.
Many organizations are adopting the same practices they observe in other companies, such as workplace habits and the design of an office, without fully knowing their impact on the organization. For instance, some companies would place bean bags in the office even if they are hardly used. Some do not observe the business casual dress code on Fridays. And some have ping pong tables.
The paradox is that it is also a rational strategy to follow organizations or people who seem to know what they are doing. When used responsibly, cargo cult thinking can be really useful when making decisions because it saves management a lot of time.
Oversimplification versus overcomplication
Have you seen the meme “The Credible Hulk”? Inspired by the film and the character “The Incredible Hulk,” “The Credible Hulk” is a monster that backs up anything with facts and documents.
The opposite of cargo cult thinking is supporting new initiatives or practices with facts and research. Organizations with this kind of practice are deemed more credible in terms of their innovation practices.
These companies are the ones that look beyond the surface in order to analyze the successful elements of the other innovative organizations, such as Amazon, Apple, and Netflix. They do not just use transparent glass doors because they look good, but also because they want to promote transparency and improve communication in the organization.
However, such an approach is time and resource consuming. Organizations have to justify everything with research, leaving little to no room for instincts and creative innovations that could drive success in the long run.
Cargo cult thinking cannot be completely eliminated. The only way to exclude it from the organizational culture is to learn and know everything, and that is, apparently, impossible. Therefore, organizations could either find the right balance between the two opposite poles or customize their approach based on their goals, the company size, or the nature of their business.
“Good leaders make people feel that they’re at the very heart of things, not at the periphery. Everyone feels that he or she makes a difference to the success of the organization. When that happens people feel centered and that gives their work meaning.” – Warren G. Bennis
