Introduction
Today, no organization can deny the importance of performance management. Strategic planning is closely connected to it. Together, they form a framework that leads to good employee performance and effective achievement of business objectives.
However, not all businesses understand the relationship between performance management and strategic planning. This paper will explore the significance of the process of linking performance management to the strategic plan.
Background
Over the last few years, a substantial volume of scholarly information about performance management has emerged from a number of studies undertaken to examine the topic from various perspectives, including its importance as well as the right procedures to implement it in an organization (Rausch & Sheta 2013). One of the most important issues, in this case, is the relationship between performance management and strategic planning (Daniels 2004). While some scholars have shown that the is a direct link between the two aspects of an organization, the information between the two is not well-developed due to the limited number of studies carried out to identify, define and characterize the relationship (Rausch & set-to 2013).
Purpose
Thus, the purpose of this paper is to attempt to identify a link between performance management and strategic planning in my organization. In particular, the paper will also attempt to identify the issues that tend to affect the link between the two in my organization. To develop this understanding, the paper attempts to address the following questions:
- What are the performance management processes that take place in the organization?
- What is the extent to which there is a link between performance management and strategic planning in the organization?
- What should be done to improve the performance management process and improve the link between performance management and strategic planning in the organization?
- What benefits will be achieved when these actions are taken?
Review of literature
Definitions
Performance management is a continuous, systematic approach for improving organizational performance through evidence-based processes of making decisions as well as a continuous focus on performance and accountability (Rausch & Sheta 2013). It is expected that the integration of performance management into all the aspects of an organizational level of management, as well as the processes of policy-making, result in the transformation of the practices of the organization to achieve a result-oriented focus (Rausch & Sheta 2013).
It involves thinking through a number of performance aspects, planning, identifying critical facets and dimensions of performance, and developing and enhancing organizational performance and its competencies (Daniels 2004). Every manager, organizational leaders, and shareholder expect an organization to perform to the best possible level and create value within the set framework (Rao 2010). In this context, results or the outputs of an organization define the most acceptable, measurable, and visible dimensions of performance (Daniels 2004). Thus, dimensional performance describes the results or consequences of the inputs in a summarized, final, or semi-final format (Daniels 2004).
Thus, it is arguable that performance management is a description of the standards of organizational performance in terms of the outputs of the inputs. A number of interventions are used in order to ensure that each individual in the organization delivers the maximum input within the conditions or under the given circumstances (Rausch & Sheta 2013). The ultimate objective is to maximize the outputs using the provided inputs. On the other hand, strategic planning is a business and economic term used to describe a number of actions meant to serve a wide range of purposes (Rausch & Sheta 2013).
For instance, it defines the identity of an organizational preparation for the future, analysis of the environment, provision of focus, creation of value for cooperation, and the generation of new options (Daniels 2004). It acts as a guide for the routine activities for all the members of an organization. In general, strategic planning’s main goal is to allocate the appropriate resources with the aim of providing the organization with an opportunity to develop a competitive advantage (Daniels 2004). The ultimate objective of strategic planning is to ensure that the organization obtains a blueprint that explains how resources are to be allocated in order to achieve the set goals (Rausch & Sheta 2013).
The link between performance management and strategic planning
According to Hofer and Shendel (2008), it is conceptualized that organizations that tend to embrace and apply effective strategic planning often achieve improved performance compared to those that fail to consider strategic planning in their organizational management levels. According to Miller and Cardinal (2010), the process of carrying out a number of steps associated with the strategic planning process tends to facilitate how the effectiveness of the organizational effectiveness is realized.
In a study by Thune and House (2000), formal planners tend to perform better than informal planners on all measures because the strategic planning involved tends to be associated with performance management. In addition, Miller and Cadinal (2010) developed a study with more than 25 previously published studies and realized that strategic planning has a positive influence on the performance of an organization. These studies are supported by additional research by Caeldries and VanDierdonck (2008), which shows that the relationship between strategy and performance is positive.
According to Pealtie (2003), introducing formalized strategic planning in an organization improves the performance of an organization through developing and implementing better and effective organizational strategies. A strategic plan is liked to a map in a car race, which guides the driver and avoids crashing, coalition, or veering off the track (Rao 2010). As such, a strategic plan plays the role of guiding the performance management in order to realize the organizational goals and objectives and fulfill the corporate missions (Bhosle 2012).
Organizational analysis of strategic planning and performance management: Case Study of my organization
What are the performance management processes that take place in the organization?
My organization is a business firm involved in developing and marketing software products for various purposes, including those software categories that support academic, financial, and communication systems. It is a relatively small organization with less than 200 employees centralized within a single office with a general manager, one assistant, and four department managers responsible for managing the four departments within the organization- innovation, production, financial, and marketing sections.
Despite its small size, the organization has developed a comprehensive code of practice in order to support and implement performance management. A number of practices are involved. For instance, the management has set clear performance expectations, which are communicated to every employee at all levels. In fact, every department has set up a comprehensive set of expectations for each employee as well as for the general performance of the department. For instance, the innovation department is expected to provide at least 12 methods of developing new software versions every year to ensure that they are in line with the dynamic needs and demands of the market and clients. In addition, the company has developed a clear method of linking compensation to performance and delivering regular job feedbacks (Cokins 2009).
For example, the company has a strategy of rewarding employees with exceptional performance based on an annual measurement of performance. Moreover, the organization has developed a comprehensive way of identifying organizational careers for all employees (Cokins 2009). To build employee skills and capabilities in technology and management, the organization focuses on young brains in order to nurture them and provide them with skills through practice and education (Rao 2010). Then, they are given an opportunity to work in various sections of the four departments. In addition, this allows employees to obtain appropriate opportunities for learning and development.
What is the extent to which there is a link between performance management and strategic planning in the organization?
An in-depth analysis of the performance management practices in my organization reveals that the management has integrated these practices within the strategic plan outline that has been set and used to ensure that the organization achieves its goals and objectives every fiscal year. The main objective of the organization is to remain as the best performing technological institute in researching, developing, and marketing new, comprehensive and user-friendly software products with a high capacity to meet and satisfy the highly dynamic market needs (Cokins 2009).
The organization’s primary reason for developing a clear performance management set of processes is develop a tight link between the strategy and the actions taken within the organization. The link between the two aspects is defined by an effective method of goal setting, which includes timelines and combined with a method of tracking progress as well as identifying obstacles. It is also defined by the need to define success and the bottom line outcomes of the strategy (Cokins 2009).
Identification of the issues affecting the process of linking performance management to the strategic plan
Despite the establishment of a clear link between performance management and strategic planning in my organization, it is worth noting that a number of issues affect the strength of the link and, thus, the realization of the objectives. Two major issues are the aspects of low levels of employee engagement in some departments and inconsistent criteria for evaluation and rewarding (Cokins 2009). In particular, low levels of employee engagement have been reported in some cases, with some low-ranking employees in the marketing and innovation departments arguing that their opinions and experience in their fields have been ignored during decision-making, yet they are the ones who face the challenges in their fields.
For instance, last year, there were more than two cases of young employees in the innovation department arguing that the information they provided to the department office in regards to the development of new software had been ignored, resulting in the development of unsatisfactory products. Similarly, some employees have argued that there are some inconsistencies in the process of evaluating and rewarding, which leads to mistrust, higher attrition, as well as cases of low productivity.
Therefore, it appears that the processes of developing evaluation and rewarding criteria, as well as involving all employees in decision-making, are faced with some problems, which means that the strategic plan is affected by errors in performance management. As such, there is evidence that additional efforts are required to fill these gaps within the organization management. This phenomenon has affected and reduced the strength of the link between performance management and the strategic plan in the organization.
What should be done to improve the performance management process and improve the link between performance management and strategic planning in the organization?
To improve the link between performance management and strategic planning in my organization, it is necessary to find better practices or improve the existing ones to solve the two issues raised above.
First, it is recommended that the decision-making process, especially in terms of employee involvement, be revised. For example, the organization should provide a routine process of holding forums in each department to bring together all the employees and their leaders to a common table and hold discussions regarding the challenges and opportunities of each department (Cokins 2009).
In addition, the weaknesses and strengths of the processes used to develop products, the existence of new information or knowledge in the field, and any other information pertinent to the processes should be communicated. All the employees should be expected to list some issues and opportunities observed at their workplaces and present them in the forums. In addition, the managers should express their opinions during the forums and create an opportunity for discussion (Cokins 2009). The results of the discussions should be used in decision-making processes, which will contribute to strategic planning.
Secondly, these forums should also focus on the weaknesses of the existing rewarding and evaluation criteria in order to take the employees’ opinions and develop better, effective, and acceptable methods for recognizing and rewarding based on performance (Cokins 2009).
What benefits will be achieved when these actions are taken?
The overall benefit of taking the above suggestions in improving the strategic plan through enhancement of the existing procedures for performance management is to ensure that the link between the strategic planning and managing performance is strong, reliable, and consistent with the existing knowledge (Rao 2010).
First, taking employees’ opinion in decision-making is set to improve employee performance and confidence in their work. In particular, employees will feel that they are an important part of the organization (Cokins 2009). They will achieve the capacity to use the freedom they have to invent new ideas and communicate them to the management through the routine forums. In this way, they will feel that they have contributed to the development of the company’s success as well as contributing to the development of society. In addition, it will encourage them to invent new ideas and expect them to be recognized, which will eventually improve the organization’s competitive position as well as the overall performance.
Secondly, the employees will work extra hard to contribute to the organization as well as personal development because they are aware that their opinions and efforts will be recognized and rewarded at the end of a given period (Cokins 2009). They will work as a team within their departments and improve the performance of each department because they know that the collective performance is rewarded according to the existing criteria, which they will have contributed to its development.
Conclusion
The above case study of my organization reflects the scholarly findings in management research, which suggests that organizations that focus on developing and using performance management as part of their strategic plan tend to have better outputs and overall performance, which gives them a competitive advantage in the market. In fact, this phenomenon is a clear indication that there is a clear and strong link or relationship between performance management and strategic plan (Rao 2010).
References
Bhosle, SK, 2012, “Performance management and strategic planning: where is the link?”, Zenith International Journal of Business economics & Management Research, vol. 2, no. 2, pp. 133-142.
Caeldries, F & Van Dierdonck, R, 2008, “How Belgian Business Firms Make Strategic Planning Work”, Long Range Planning, vol. 21, no. 2, pp. 41-51.
Cokins, G, 2009, Performance Management – Integrating Strategy Execution, Methodologies, Risk, and Analytics, John Wiley & Sons, Inc, New York.
Daniels, A, 2004, Performance Management: Changing Behavior that Drives Organizational Effectiveness, Cengage, New York.
Hofer, CW & Schendel, D, 1978, 2008, Strategy Formulation: Analytical Concepts, West Publishing Company, London.
Miller, CC & Cardinal LB, 2010, “Strategic Planning and Firm Performance: A synthesis of More than Two Decades of Research”, Academy of Management Journal, vol. 37, no. 2, pp. 1649-65.
Pealtie, K, 2003, “Strategic Planning: Its Role in Organizational Politics”, Long Range Planning, vol. 26, no. 3, pp. 10-17
Rao, TV, 2010, Performance Management and appraisal systems, SAGE Publications Inc, New York.
Rausch, P & Sheta, A, (2013), Business Intelligence and Performance Management: Theory, Systems, and Industrial Applications, Springer Verlag, London, U.K.
Thune, SS & House, RJ, 2000, “Where Long-range Planning Pays Off”, Business Horizons, vol. 21, no 3, pp 81-87.