smartKPIs.com Frequently Asked Questions

Welcome to the Frequently Asked Questions, or FAQs area. Here are listed the most common questions about Performance Management and KPIs, and the answers for them. If you have additional questions that are not present below, you can search through the materials available on this site, post a comment for a specific KPI or visit our blog here.

FAQ Categories

KPIs (5)	Performance Management (7)

FAQs in category Performance Management

No.	Question	Answer
1	What is the Balanced Scorecard?
2	What are the benefits of the Balanced Scorecard approach?
3	At what levels is Performance Management applicable?
4	What is the Strategy Map?
5	How is Performance Management different from Performance Measurement?
6	What are the main steps in implementing Performance Management?
7	Why is Performance Management important?


Q1. What is the Balanced Scorecard? [top]
The Balanced Scorecard is an organizational performance management system used for implementing and managing strategy at all levels of an enterprise. It links objectives, initiatives and measures and translates the organization's strategy into actionable information. Traditionally scorecard developed as part of the system used a structure based on four perspectives: 1. Financial perspective: How do we look to shareholders? 2. Customer perspective: How are we seen in the marketplace? 3. Internal business perspective: What must we excel at? 4. Learning and growth perspective: How can we improve and evolve?

Q2. What are the benefits of the Balanced Scorecard approach? [top]
Some of the benefits of implementing the Balanced Scorecard are: 1. Clarity: integration of various systems and managerial concepts used in organizations. 2. Alignment: Improved alignment between elements of strategy and day to day activity. 3. Achievement of desired results, through a higher emphasis on implementing plans, learning and mobilization of staff.

Q3. At what levels is Performance Management applicable? [top]
There are three levels at which performance management concepts are applied in organizations: 1. Strategic level - entire organization 2. Operational level - team and functional area 3. Individual level - each employee's contribution, as outlined in individual performance plans

Q4. What is the Strategy Map? [top]
The Strategy Map provides a visual representation of a company's critical objectives and the crucial relationships among them that drive organizational performance. They give employees a clear line of sight into how their jobs are linked to the overall objectives of the organization, enabling them to work in a coordinated, collaborative way toward the company desired outcomes. Strategy maps show the cause-and-effect links by which specific improvements create desired outcomes. From a larger perspective, they show how an organization will convert its initiatives and resources, including intangible assets such as corporate and employee knowledge, into tangible outcomes.

Q5. How is Performance Management different from Performance Measurement? [top]
Performance management is the overarching process that deals with performance. It reflects the approach one entity has towards performance and it includes sub processes such as: strategy definition (planning / goal setting), strategy execution, and training and performance measurement. Performance measurement is a very important process that focuses on the identification, tracking and communication of results by the use of performance indicators. It deals with the evaluation of results, while performance management deals with taking action based on the conclusion of the measurement and ensuring that targets are achieved.

Q6. What are the main steps in implementing Performance Management? [top]
You will need to review the effectiveness of your procedures for: • setting performance targets • designing measures of performance relevant to the targets • systematically and accurately measuring outcomes • assessing the performance of external service providers • using results for informed decision-making • improving performance. Research shows that most organizations have the components of performance management in place, but they are not always used to overall advantage. A possible five-step approach that could help organizations in improving the performance management is outlined below, with suggested techniques. Step 1: Identify your level of maturity in performance management • Look at how the organization is performing in all its aspects of performance management - from direction setting through to review and measurable improvement. • Do an assessment that will help to identify your organization’s maturity and the strengths and weaknesses. • Establish where you are now as a series of baselines, looking at performance management at strategic, tactical and operational levels. Techniques: Assessment; baseline Step 2: Identify where performance management is important to your organization • Is it in setting direction or ensuring the delivery of required benefits or improving the alignment, performance and contribution of the internal and external resources used by the organization? • Identify the values for your organization. Techniques: Value chain analysis; benchmarking with other organizations (which may identify things you had not thought of) Step 3: Resolve any mismatch between steps 1 and 2 • Review performance management at each of the four levels - (organization, strategic, program and tactical). Are there weaknesses in areas that are important to your organization? Techniques: to become more outward looking and customer-focused, use the well established balanced scorecard. Step 4: Establish where you want to be and begin to build performance management into business processes and into the culture • The aim is to have target, measurement and review processes for those things that the business considers important such as product, process, service and staff. • You will have lots of measures which need to be prioritized against your particular perspective on effectiveness, efficiency and economy and against your values. Techniques: establish benefits management as a norm Use databases to collect performance information and analyze trends. Include performance management in the business, program and project lifecycle. Step 5: Feed information back into performance improvement Monitor and take action on: • Did we achieve what we set out to do? • Where are the opportunities to improve? • What can we do to improve? You are seeking answers to: • What is achievable? • What is important for our organization? • What was achieved?

Q7. Why is Performance Management important? [top]
Managing performance is about managing for results. Performance-based management at any level in the organization should demonstrate that: • you know what you are aiming for • you know what you have to do to meet your objectives • you know how to measure progress towards your objectives • you can detect performance problems and remedy them. Managing performance is important because it responds to a need of support in achieving results and due to its benefits. Some key benefits of performance management are: 1. Focuses on results, rather than behaviors and activities. A common misconception among supervisors is that behaviors and activities are the same as results. Thus, an employee may appear extremely busy, but not be contributing at all toward the goals of the organization. An example is the employee who manually reviews completion of every form and procedure, rather than supporting automation of the review. The supervisor may conclude the employee is very committed to the organization and works very hard, thus, deserving a very high performance rating. 2. Aligns organizational activities and processes to the goals of the organization Performance management identifies organizational goals, results needed to achieve those goals, measures of effectiveness or efficiency (outcomes) toward the goals, and means (drivers) to achieve the goals. This chain of measurements is examined to ensure alignment with overall results of the organization. 3. Cultivates a system-wide, long-term view of the organization. Effective performance improvement process must follow a systems-based approach while looking at outcomes and drivers. Otherwise, the effort produces a flawed picture. For example, laying off people will likely produce short-term profits. However, the organization may eventually experience reduced productivity, resulting in long-term profit loss. 4. Produces meaningful measurements. These measurements have a wide variety of useful applications. They are useful in benchmarking, or setting standards for comparison with best practices in other organizations. They provide consistent basis for comparison during internal change efforts. They indicate results during improvement efforts, such as employee training, management development, quality programs, etc. They help ensure equitable and fair treatment to employees based on performance.

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The statement:

"Eradicate extreme poverty and hunger."

is an example of


Mission Statement	Vision Statement
Goal	Objective
Target	SMART Objective
Critical Success Factor (CSF) / Value Driver	smartKPI / Key Result Indicator (KRI)
Metric / Performance Measure / Performance Indicator	Key Performance Indicator (KPI)
Initiative	Milestone