What is performance management?

Performance management is one of the management tools that managers and human resources practitioners must master. Note: The tools that must be mastered do not mean the tools that must be used.

What do you mean?

Don't do performance management at will, or it will waste people and money within the organization. But can we not do performance management? No, because it is easy to eat the same pot. The organization can't identify the value contribution, which is unfair to excellent core employees.

There is a principle that needs attention: enterprises should enhance the value of the output of core employees through organizational design, achieve the best organizational efficiency, thus gaining absolute competitive advantage and promoting organizational goals and sustainable development.

These are two key points in human resources work:

Identify outstanding core employees, give incentives, give platforms, give resources, and be strongly inclined. You know, the company is driven by most of the value generated by a few core employees. It doesn't matter whether the company is product-driven, business-driven, management-driven, solution-driven or marketing-driven. Different organizational stages and different industry attributes have different core driving points. Only by identifying them can we give people in these positions important resources and platforms.

Build a high-performance organizational team and improve organizational ability. From division of labor to decentralization, from decentralization to authorization, to unified standard value evaluation, consistent goals, and the establishment of perfect internal mechanisms and processes to achieve team goals are the focus of organizational capacity building. Design from the employee's will, ability, thinking, platform opportunities of the company and other dimensions to achieve organizational capacity building.

Back to performance management, I have shared too much about doing performance design before. I want to share some thoughts with you again. I hope that partners can pass on these ideas in the actual work process, and don't copy them all at once. Even an empiricist should be an empiricist who has seen through the underlying logic.

Value evaluation system is one of the foundations of organizational performance management. That is, how do we evaluate the value of organizations, departments, teams and individuals? Through the value evaluation system, we can manage the performance of the evaluation system.

First, the value evaluation system.

Value evaluation system: namely performance evaluation system. What indicators or standards do you use to measure the health of this organization's development, or the degree of achieving its goals and competitiveness?

For example, a company of 50 people has created a gross profit of100000. And a company of 300 people has created a gross profit of 20 million. We use an index: human efficiency to evaluate these two different companies, which is one of the value evaluation systems.

Value distribution system: that is, how we divide and divide the value created. What criteria do you use to divide it, how much, and to whom? Basically, you have to solve this problem.

For example, the percentage of commission that the sales team of a company can get is 10% of the gross sales profit they created, that is, we will give 10% to this team. What about the R&D team? What about backstage? Generally speaking, there are two kinds: staffing is actually budget and share. The other is internal pricing.

Therefore, in a complete organizational system, the first thing HR should do is to help the management's value evaluation system and value distribution system. We can imagine that without these two systems, if the members of the organization do more and do less, do more and do less, and do less and do more and do less, it will be difficult for you to identify which team and who are worth cultivating and encouraging.

Of course, if the tissue is small, it can be coarse-grained. But once the scale of the organization is large, the performance dimension of the team and talents will be refined. Of course, all performance design is top-down, starting from the external market and transitioning to the internal.

Come on, let's have a look first. Within the organizational system, there will be a sales and marketing team. The value evaluation and value distribution of this team are well designed because it is easy to quantify. We generally use different indicators such as gross profit or market sales or operating profit to define value.

Therefore, for the front desk, a unit that directly generates value for customers, the evaluation of value is the direct feedback from the market. It can be divided into products or regions, or into stocks and increments, or into old customers and new customers, or into conventional products or strategic products. This is the detail part.

The middle office system within the organization, namely, R&D, production, supply chain, quality, technical support, etc. If these values are not directly oriented to the market customers in the organization, how to measure the evaluation of these values? China and Taiwan Province have two ways, called internal pricing or historical cost measurement.

Internal pricing is: China Taiwan Province is responsible for the production of products. Use certain technology, organize different people, purchase raw materials and produce products through project management. At this time, the cost of the products produced can be quantified. These costs, plus a certain value-added, can constitute the pricing of front-line sales personnel to the market. In this way, the value of front desk and middle desk can be quantified.

Or the historical cost of Taiwan Province. We should study historical materials. In the past company history, how much did we spend on average to serve these customers? When our customers' market share expands, China Taiwan Province replaces crowd tactics with less cost expansion, for example, by improving technology and efficiency, which is the value quantification of China Taiwan Province.

The value evaluation of the background is measured by the overall management cost. The purpose of management is efficiency. The background assists the front desk, middle desk or various business departments through management tools, models and methods. Through division of labor, organizational capacity building and human resource management, improve the efficiency of the team, achieve the goal and improve people's efficiency. This is the background mechanism.

Backstage, with less management costs, brings greater team efficiency, and tests the management level of the backstage. Generally, historical cost or leverage principle is adopted. How much management cost brings how much operating profit, which is the value embodiment of management means.

Second, the tools of performance management

We return to performance management itself: the upper level should undertake strategic objectives, and the lower level should guide employees' output. The performance management tools we often talk about, such as OKR or KPI, are all tools, and we need to look at the performance management system systematically.

Managers of some companies, including human resources, lack top-level design thinking and a historical and organizational perspective to look at performance management. Instead, it is natural to list the assessment items and hand them over to the management for a job. You ask them what variables your company's performance management has promoted business development and what is the logical relationship between them, but they can't answer.

The annual development of an enterprise begins with strategic objectives, and the analysis and dismantling of strategic objectives is the source of performance management. First of all, we must have a panoramic understanding of strategic dismantling. This is the primary procedure for organizational development. Performance management should promote the realization of strategic objectives, otherwise we don't need performance management.

After the strategic panorama is dismantled, it is imported into subordinate units through strategic decoding, that is, each business department or business layer, or each profit center, which is a secondary unit that undertakes organizational goals. After the goals of these units are determined, we should plan the management action, preview the solution of the contradiction between goals and resources, and what path to achieve it. These paths, that is, the rehearsal plan, are the points to be resumed in future management meetings.

Performance guarantee is to achieve the goal of this business line or product line, so our interpretation of the path is also very clear, what are the key elements to be dismantled. In other words, what key indicators or elements or goals do I have to ensure that I can achieve this business goal? The essence of these indicators is that we should pay attention to key performance variables. Or KPI and so on.

Of course, your performance management tool doesn't have to use KPI. There are many performance tools for reference, such as PBC, OKR, balanced scorecard and management by objectives. These are just tools to help key performance variables achieve the goals of the line of business through the path we rehearsed.

Performance should also play its role in guiding employees' output. Note that the purpose of performance is not to assess employees, but to guide employees' output through a series of performance management actions.

The first is the goal and plan. This should be confirmed when doing goal decomposition and key performance goals. That is to say, any employee should know what his goal is at this stage. How do these objectives support the strategic objectives of the organization? This is the unified stage of performance objectives and the key step for the first round of interaction between management and employees.

Followed by process control and authorization. Process control is very important for performance goals. Please note that we don't support result orientation, as I mentioned many times in previous posts. Process control is divided into two parts, one is process rectification, and the other is process empowerment. The goal is to ensure that employees follow the pre-designed path to achieve their goals.

Then there is the performance appraisal and counseling stage. The importance of this stage is actually performance coaching. We are very clear about performance evaluation, and we have set goals and standards. Then we will evaluate according to this logic. However, performance coaching is rarely taken seriously. Performance coaching is the recovery of performance appraisal. There should be sufficient dialogue between superiors and subordinates to restore the deviation between employees' initial path deduction plan and actual operation process, thus increasing the possibility of our next goal.

Performance serves economic goals. Drucker said that a good manager should make an effective commitment to his goals. Since the goal can be achieved by respecting and attaching importance to the goal, the management should have a scientific understanding of performance management. It is an important task for developing enterprises to improve their management ability to respect scientific management, identify with and cultivate the technical concept of management.

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