to create a more efficient and profitable business. One of these tools, performance management, historically has been viewed as an ineffective, highly political, and time-consuming chore. Yet there is not a single organization in the world that does not want what a performance management system focused on results and backed by commitment can deliver—clearly articulated goals so employees and managers understand expectations, valid information on how well they are doing, recognition of the contributions they have made, tactful and just-in-time feedback on areas in need of improvement, and fair and equitable pay for performance. Performance-oriented organizations are focusing on positively impacting and motivating employees with their performance management systems to build the necessary commitment for them. How? The American Productivity & Quality Center (APQC) and Linkage, Inc., believe the results of their joint benchmarking effort will pave the way.
The purpose of this multicompany benchmarking study was to discover and
examine best practices in the area of performance management. As is discussed in the methodology section of this executive summary, five organizations were chosen for their “best practices” in performance management, and their processes and practices form the basis of this report. Benchmarking best practices can be a tricky subject. For one, the term “best practice” is often misleading. APQC and Linkage do not claim to have identified the five top organizations in the world in performance management. Instead, these organizations should be considered best-practice organizations because they have done an excellent job with the tools they have. Creating a successful performance management system cannot be simply a “cut-and-paste” job.
Based on the results of this study, it is apparent that the organizations involved in this benchmarking project, both those sponsoring the research and those participating as best-practice organizations, understand and emphasize that fact. What may be considered a best practice for one company may be a not-so-good idea for another. Organizations that will get the most out of this report will not look for the magic bullet to cure all of their performance management ails. Instead, the insights gleaned throughout the project should be used as a starting point to get “out of the box” and truly understand the performance management process. With more than 20 top-notch organizations participating in this research project, there is certainly no dearth of ideas to consider.
The Performance Management consortium benchmarking study began in January
1999 with a planning meeting in which the APQC and Linkage study team, the subject matter expert, and the sponsor organizations agreed upon the study’s scope, which included the following three areas:
- structuring the performance management system for success,
- building commitment to the performance management system to ensure proper
- assessing results.
The APQC/Linkage project team and the subject matter expert collaborated to
create this scope. The scope statement was used to direct the development of questions for the study’s data collection tools. The scope addressed the following issues. First, to get a better grasp of how leading organizations were maximizing the value of their performance management systems, it was important to realize that the purpose of the systems could significantly differ from one organization to the next. How partner organizations structure their performance management systems for success was a key interest of the sponsor organizations. Other related interests were spelled out in the following questions:
- What are the purposes of the performance system (e.g., attract, retain, and motivate)?
- How will it be used?
- How are the organization’s core competencies, strategic goals, and mission related to the performance management system?
- How does the performance management system support the integration of
organizational goals, strategy, and mission?
- How are the appropriate competencies for a position defined?
A second area of interest to the sponsor organizations involved the deployment
and communication techniques that allow organizations to successfully execute their performance management systems. As discussed at the study kickoff meeting, the processes are often similar, but the commitment to and execution of the performance management system are what make it successful. Questions of interest related to this area included the following:
- What is the organization’s culture? Is the culture supportive of the organization’s goals, values, and mission?
- Can performance be measured in a manner that is satisfactory to the organization?
- How is the involvement of the stakeholders ensured?
- Is the process truly manageable?
- Are the organization’s core competencies, strategic goals, and mission communicated clearly to its members?
- How is feedback used successfully?
- How are employees prepared to make the process work?
- How are stakeholders trained to use and value the process?
Finally, the entire study team was interested in finding out how leading organizations are positively affecting the bottom line with their performance management systems. Sponsors sought answers to the following questions about assessing the results of performance management:
- How are the results of the process measured?
- Is the performance management system’s financial impact on the organization’s
bottom line measurable?
- What are the nonfinancial, measurable results of a successful performance management system?
KEY FINDINGS OVERVIEW
The consortium benchmarking study on which this report is based explored what
organizations with a high degree of commitment to their performance management
processes do to maximize the effectiveness of their systems. The 10 key findings and three additional insights identified during the study are listed below. The findings have been grouped into three main focus areas consistent with the study scope for the purposes of this report.
Section 1: Structuring the Performance Management System for Success
Section 2: Building Commitment for the Performance Management System to Ensure
Section 3: Assessing Results
Section 4: Additional Insights
Benchmarking is the process of identifying, understanding, and adapting outstanding practices from organizations anywhere in the world to help an organization improve its performance. Companies participating in benchmarking activities report breakthrough progress due to direct and indirect improvements in cost control, quality, cycle time, and profits. Recognized by the European Center for Total Quality Management in 1995 as first among 10 leading benchmarking organizations’ models, the consortium methodology, developed in 1993, serves as one of the premier methods for successful benchmarking in the world.
A listing of the sponsor organizations in this study, as well as the best-practice (“partner”) organizations that were benchmarked for their innovation and advancement in performance management.
- Executive Summary
A bird’s-eye view of the study, presenting the key findings discovered and the methodology used throughout the course of the study. The findings are explored in detail in following sections.
- Key Findings
An in-depth look at the 10 key findings of this study. The findings are supported by quantitative data and qualitative examples of practices employed by the partner organizations.
- Partner Organization Profiles
Background information on the partner organizations, as well as their innovative performance management practices.