What is performance management? 5 reasons why companies fail


performance management


Companies usually get a little lost when looking for innovative and complex strategies for performance management. This happens because they fail to practice simple actions that  quite often are within their reach and contribute to their own growth.

By making this choice, they fail to apply performance management, ceasing to grow an average of 30%, according to recent research.

It has been noticed that organizations where performance management is disconnected from the rest of the company, usually do not achieve positive results or meet their goals. This fact is exactly what causes a negative impact on performance.

To revert the situation and promote teamwork, it is necessary to create and develop a cohesive performance management system.This is especially relevant for finance and HR managers, who should chase the same purposes in the way to implement strategic management. 

In order to offer a clearer understanding of what happens inside companies, we have listed the main problems that lead to failure in performance management implementation; and also some possible solutions.

But, before checking out the reasons why most companies fail to apply it, do you really know what corporate performance management is?

After all… What is performance management?

businesswoman using tablet analysis graph company finance strategy statistics success concept planning future office room 3 What is performance management? 5 reasons why companies fail

Performance management is a business administration methodology in which KPIs are defined to follow up processes and employee performance. The goal is to measure  efficiency and to act quickly in case of deviations, making fact-based decisions and assisting in strategic planning.

Based on this concept, is it now clear what performance management is?

Let ‘s move on then!

5 reasons why you may fail at performance management

1. Conflict of purposes

As obvious as it may sound, it is always good to remember that performance management is a generic term that refers to a broad set of analytical and administrative tasks designed to help leaders understand and guide the company towards a more efficient administration.

After recapping the concept of performance management, it is necessary to consider that not every company thinks about it in the same way. Therefore, it is natural that management tasks are often disconnected from each other, and end up promoting a combative behavior amongst different departments.

Solution: first, it is necessary to define future actions and make them widely known by everyone. In most cases, success relies on good internal communication practices —actions and values pursued by the organization must always be emphasized.

2. Misaligned behaviors and attitudes

Every company needs to assess how its growth strategies are working. In order to do so, it must identify where these tasks are being managed. Not just to measure them, but also to make sure that organizational goals are aligned with employees’ behavior.

Underperforming companies often pursue different goals and trust that a “cascade process” will naturally occur. This attitude only contributes to a misaligned and inefficient workforce.

Guarantee that the entire organization is contributing to the same goals. Steve Jobs once said: “That’s been one of my mantras: focus and simplicity”.

From this perspective, we can conclude that being simple can be harder than being complicated. Therefore, you have to work hard to get your thoughts straight, and then make them simpler. In the end, when the company realizes that all the desired results have been achieved, the effort will be worth it.

Solution: simplify the process as much as possible and use performance management to follow up on some important goals. Good management starts with focus. Successful companies improve their performance when they are impressively clear and transparent about the goals they want to achieve.

3. Complexity and disconnection

Organizations stuck on goals that don’t converge to the company’s long-term strategies, fail to track the accomplishment of necessary tasks, and fail to encourage the right behaviors.

Solution: the company must focus on goals and also on workers’ behavior. Best performing companies evaluate how much their current goals are aligned with the future ones. Also, they measure the effect that success has on staff members and reward the ones who properly run after their designated goals. By that, we are talking about the objectives that are clearly part of the business plan created and spread by the organization.

4. A not so humanized management

Performance management processes should reward staff members’ efforts, encouraging them to develop new skills. This ultimately helps to build a positive culture throughout the company.

In this context, studies show that only 23% of HR managers believe that their processes accurately reflect their employees’ contributions.

Solution: align business performance management with HR numbers and results. To achieve high performance, managers must establish a safe space, create incentives for their staff, and reward those who perform to reaffirm the company’s organizational values.

5. Overwhelmed leaders

Low-performing companies are led by managers who are overwhelmed with data, too focused on financial results and on correcting past deviations.

Even though these leaders may see what kind of changes are necessary, they rarely have the ability to make the right decisions and proper adjustments. By focusing exaggeratedly on data, they lack the ability to perceive changes in the environment.

On this subject, it was found that 95% of data in mid-sized companies is not useful.

Thus, we can conclude that the vast majority of data, instead of guiding the company, gets in the way of achieving a positive result.

Solution: create a flexible evaluation system. Successful companies are fully connected to the market and know how to define the right moments to invest. They also choose highly relevant data and inform their employees about everything that happens in the organization, from human capital to markets, operational and financial factors.

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