The Role of Strategic Planning in Performance Management, Part 1

How do you successfully tackle performance management, and what role does strategic planning play? This post is the first of two on how to make strategic planning align with performance management. The focus in this post is on the big picture while the next targets accountability.

Linking strategic planning and performance management

Performance Management is most often defined in the context of Human Resources. I have broadened that definition to incorporate more of the organizational outcomes as a whole. The performance of individuals clearly impacts organizational performance and vice versa. Incorporating both perspectives within the framework of strategic planning provides the best opportunity for success. For targeted information on a performance management tool specifically designed to support HR and personnel management, view our post on Dann’s 7 Questions.

So, my broader definition of performance management is making continual progress in positively impacting the key indicators of your business. Your strategic plan provides the basis for what your key indicators are.  What is your vision? Mission? Goals? Key projects? Improving performance on key indicators requires outlining how the strategic work will be held on an executive level, board level and front-line staff level.

Your strategic plan and the planning process are the tools to deliver what is needed for performance management. They define the changes needed to positively impact your key indicators and answers why the changes are important. Without a clear strategy, units of the organization will define their own agenda, there will be uncoordinated, unfocused efforts to improve, and the impact on performance will be dramatically diluted. In short, your strategic plan defines both how and why you will achieve your performance management goals. Here’s how it works.

Strategic planning components drive improved performance

Improved performance consists of innovation, a better growth strategy, and/or improved execution. Your strategic plan should define the best combination of these for sustained improved performance, i.e., the plan targets growth strategies, innovation and/or improved execution. This is done through two assessments, the strategic and the internal.

The strategic assessment defines priority opportunities and threats to innovation/growth of the business. The outcome is the list of priority, executable strategies for growth. The internal assessment defines priority opportunities to improve performance through better quality, better consistency, lower cost, better fulfillment, better systems, better morale, better leadership etc. Put together, you have your strategic or change agenda that spurs improved performance, in short, you have the change agenda for performance management.

An effective assessment process should yield four to six projects that are a mix of both internally and strategically focused work. Much more than this and you will begin to see diminishing returns. This is because 80+% of leadership’s time needs to be devoted to managing what you are doing now. The resources available for defining and managing the change agenda are scarce and very precious.

Using the strategic plan for performance management

Once you have defined the change agenda, you must manage the journey to get there. Two key tools help in that task, metrics and accountability.

First, to the extent possible, each project on your strategic plan should include a metric or measure that tells whether the strategy you have chosen is working (e.g. did the implementation of the new marketing campaign increase sales opportunities?, did the new web-site increase traffic?). It is not enough to simply measure if you are implementing the projects in your strategic plan, you need to measure whether or not the projects are working. Get off what isn’t working and pour the resources into what is. Learn more on building successful strategic planning metrics here.

We will delve into the second key to managing the journey, accountability, in our next newsletter. In the meantime, know that without implementing a process to keep team members accountable for their commitments on the strategic plan, their focus will be on the urgent tasks at hand.

Both accountability and metrics require regularly sitting down as a team and assessing progress. What do the metrics tell you? Where is performance sluggish? Are you on the wrong road or do you just need to make some adjustments to the plan? Putting a strategic plan in place that is regularly discussed and monitored is vital to successful performance management.

The other components of performance management

Your strategic plan is but one tool in performance management, though certainly a vital one. It sets the performance agenda, can manage that agenda and can measure whether strategies are, in fact, improving performance.

The additional tools for performance management include the following:

1. Balanced Scorecard or what we call Instrument Panel to measure overall performance metrics. Uniquely designed for each organization, this monitors your value-proposition, factors that distinguish you from the competition, key success measures and key systems that drive success.
2. Process Improvement which drills down into the specific systems that drive performance and works to de-bug them.
3. A strong organizational structure to assure the organization supports an efficient workflow.
4. Production statistics for organizational units in the structure as well as each employee.
5. Incentives and rewards for improved performance both for the individual and organization-wide.

How to move forward

So what do you do next? Start by evaluating your current planning system and strategic plan that are in place. Do you have a strategic agenda that targets growth and innovation, as well as internal systems and structures? Are you measuring the impact of the work you are doing to know that it is having the desired effect? Do you have any of the other components of performance management listed above in place?

If you want help with the answers to any of these questions, we would be happy to be a resource for you. For assistance with the analysis or on how to get started on building a better strategic plan, give us a call, (907) 276-4414 or e-mail us.