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Organizational performance alignment is the linking of organizational goals and objectives with
performance. This is perhaps the greatest challenge to implementing a world class performance
management solutions. Most companies have problems aligning and relating strategy and plans
with operations, enterprise application architecture and information systems with business
processes, the organization with business operations, customer needs with product and service
@
 , outsourced services with internal operations, human resources with business
needs, tangible assets with intangible assets, management policies and decisions with business
change, information reported with the actual business, and so on. This lens focuses on aligning
performance to your organization's finances, people, processes, and systems.

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½. u Process for uligning Organizational Performance Throughout Your Organization
2. The Performance ulignment Lifecycle
3. uligning Business Units to Organizational Objectives
4. uligning Employee Performance to Organizational Objectives
5. How to ulign Performance Measures to Organizational Goals
6. uligning IT Performance to Organizational Objectives
7. uligning Financial Performance to Organizational Goals
8. Presentation: How to ulign Performance to Organizational Goals and Objectives
9. uvoid These Common Pitfalls When uligning Performance to Organizational Goals
½ .Performance Management Secrets, Tips and Techniques

   



 

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u good performance management plan aims to optimize results and align subsystems in order to
achieve the overall objectives of the organization. Therefore, focusing on performance
management within your organization (whether departmental, procedural, workforce, systems or
financial) should ultimately affect overall organizational success. uligning performance to your
organization's goals and objectives is critical to your organization's success and is the most
important ingredient to Lifecycle Performance Management.

So, how can we align the organization to it's strategy? First, we must define our organizational
strategy as something tangible and manageable with measurable indicators? We must also decide
what areas within our organization are most important to align in order to get the best results.

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The illustration above is a basic flow of how an organization's mission and objectives can be
translated throughout its people, processes and technologies.

Strategic ulignment facilitates the translation of business and functional priorities into strategy.
This plan is designed to help your organization develop its performance strategy in a manner that
feeds strategic alignment and leads to financial and operational metrics analysis within each
value stream. This process will help you identify areas of misalignment and guide you towards
realignment.



   
  

  



˜ üivision/departmental Performance ulignment

˜ Workforce Performance ulignment
˜ Resource Performance ulignment
˜ Financial Performance ulignment

One step to aligning organizational performance to corporate strategy is to align divisions across
the organization while ensuring collaboration and accountability toward organizational goals.
unother step is aligning workforce performance to corporate objectives. unother step is financial
performance alignment, synchronizing financial and operational strategy and activities across the
organization. und another step is resource alignment, ensuring that your organization's
acquisition and use of resources support their strategic intent, reflecting priorities.

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Today, more and more organizations are extending performance management initiatives
enterprise-wide. These initiatives require the collaborated efforts of multiple support groups and
systems communicating in an organized manner and guided by a performance management
team. Integrating the different divisions and components of performance management is a
complex task. It requires collaboration, commitment, and standard processes across the entire
organization. Getting the individual divisions within your organization to share information,
processes, decision-making and responsibility is the challenge, and this is the value add to
Lifecycle Performance Management versus traditional performance management.

Many performance management initiatives are often met with resistance from operating units
and divisions, especially those that view integration as a threat to their decision-making
independence. Through assurance and continued communication, many discover that
performance management is an enabling process that helps improve their decision-making and
guides them toward their goals.

üespite the broader use of performance management, enterprise-wide initiatives are not the
norm. Most efforts involve many departments, but don't strategically align these departments to
organizational goals. us organizations get larger, performance initiatives tend to become less
effective, because difficulties in collaboration, communication and agreement are intensified and
it's more difficult for a performance team to manage push back and gain buy-in on a larger scale.
In order to get around these obstacles, a performance management initiative may be more
successful by performing a pilot on one division, then integrating a few key departments and
expanding as the efforts gain momentum and confidence.

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u primary goal of performance management is getting people within the organization to
understand and execute what they're supposed to do in order to help the organization reach its
objectives. Strong executive sponsorship, open communication, change management, and
training are among some of the initiatives that can assist in this process. But in the end, the key
to success is aligning all aspects of performance management with things people can understand
and personally control. ulignment is a simple concept, but making it work is the most
challenging aspect of Lifecycle Performance Management. When workforce performance is
aligned with corporate objectives individuals in an organization develop a stake in that
organization's performance. Employees understand how their roles contribute to achieving the
overall goals of the business and as a result organizational objectives are met. The Workforce
Performance Lifecycle assists organizations in implementing the important aspects of employee
development and goal alignment.

Functions within workforce performance management are:

 ˜ Recruit and Hire Management
˜ Compensation Management
˜ Incentive Management
˜ Goals Management
˜ Learning Management
˜ Competency Management
˜ Performance Measurement

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 : ubility to centrally manage and improve the process for a new
or replacement employee in an organization.

 
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  ubility to centrally manage compensation and analysis to
optimize workforce and employee satisfaction.

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  ubility to centrally define strategies for incentives and rewards and
measurement of outcomes on expected performance improvement.

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  ubility to centrally manage objectives of employees and compare

performance to objectives in order to reach the desired outcomes on an annual or initiative basis.


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  ubility to centrally define, manage and track the impact of training and
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  ubility to centrally manage competencies in the organization and
be able to leverage them across the organization.


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  ubility to provide flexible reporting and analysis of employees
from a cost and performance perspective to determine their potential and value.

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Many high-level 
     are so abstract they don't mean anything to the
people who actually do the work. These high-level measures need to be broken down into a set
of more focused measures that are meaningful to employees at every level. For example, net cash
flow might be a critical 
     for the CEO and the organization overall - but
what does it mean to an uccounts Receivable clerk, and what can that person do to improve net
cash flow performance?
Lifecycle Performance Management addresses this issue by translating each high-level target
into a cascading series of focused performance measures, each designed to drive specific
behavior at a particular level in the organization. Using our previous example, the CEO might
focus on net cash flow while the CFO looks at debt-to-equity ratio. The controller might focus on
liquidity ratio, while the accounts receivable manager looks at days sales outstanding, and the
accounts receivable clerk worries about percent of collections over 3 /6 /9 days. With
Lifecycle Performance Management employees at every level are measured by something they
understand and control, and clearly link to the goals of their direct supervisor and the
organization as a whole.

Many business processes within an organization may span across business units and functional
support groups. To avoid bottlenecks, finger-pointing, and redundancy of work, shared
performance measures that align people across organizational boundaries need to be identified
and responsibilities accounted for. For instance, a performance measure that includes percent of
collections over 3 /6 /9 days might be applied both to accounts receivables clerks and sales
representatives. Shared and integrated performance measures encourage people to collaborate -
boosting the organization's overall performance.

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IT/IS departments provide technical support for the entire organization. While we know that this
alone is a complex task, today's business model requires IT/IS to not only support users, but to
align technology to meet the business needs of the organization. Understanding business unit
objectives and translating them quickly and accurately into IT priorities is essential today. Just as
critical is the ability to effectively communicate IT planning and performance data in a way that
is useful to business unit management. The growing complexity of IT/IS, the frequent
technology changes which take place, and its continuous critical impact on organizations, have
made managing IT performance a critical function for most organizations. Executives are
constantly looking for ways to use IT/IS more effectively, and identify uses which generate a
higher value add. ut the same time they must guarantee the effective integration and return on
investment in order to achieve organizational goals and gain a competitive edge.

So how does a performance management team measure how well an organization's IT/IS is
aligned to organizational objectives? To answer that, first let's take a look at the different
vehicles for aligning and measuring IT performance. The IT Performance Lifecycle utilizes
service level agreements, performance-based contracts, and products and services catalogs to
generate reports that help an organization understand how well they are measuring up to business
objectives (see above).

Service desk, capacity planning, data integration, security and custom business application
development are a few of the functions IT departments support which are critical to the success
of a business. It is the performance management team's responsibility to ensure that they identify
and report on metrics that capture true business effectiveness.

Questions the performance management team should ask senior management regarding IT
strategic alignment and performance:

˜ Which of your business unit's processes support the organization's mission the most?
˜ üo the metrics we report on drive those processes?
˜ üo our metrics address the company's critical needs?
˜ üo our reports provide the required information to make business decisions?
˜ üo they identify areas of misalignment?
˜ üo IT initiatives appear to be prioritized appropriately?

The IT Strategic Planning Process

The planning process involves asking such questions as who participates in the work group, who
is responsible for the plan, how can user participation be guaranteed, how can coordination of the
different departments involved be assured and how can the quality of the process be reached. The
composition of the group responsible for IT/IS planning is a key factor in the planning process.
Therefore, the team that finally approves the strategic plan for IT/IS is usually comprised of the
top management of the company, the managers of the different functional areas and by the IT/ IS
managers whom, with their teams, prepare the plan. Companies that fail to commit senior and
departmental management to the strategic plan have a difficult, if not impossible task of aligning
IT systems to Business Strategy.

Why is it important to evaluate strategic planning when it comes to Performance Management?

Because measuring the right processes is the difference between an organization that is barely
functional and one that's highly efficient. Measuring the right processes allows an organization to
eliminate investments that are not producing favorable results, and it allows them to focus on the
areas that most affect the success of the organization.

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In an economy where results need to be achieved fast and investor confidence is low, CFOs and
finance organizations are implementing integrated performance management to improve
information quality and visibility. One challenge organizations face implementing performance
management initiatives is identifying financial performance measures that are meaningful to
those responsible for carrying out the work. Using the example from the last section, net cash
flow is a critical performance measure for executives and understanding overall organizational
performance; but it probably means very little to the accounts receivable clerk who has no idea
of how their contribution improves net cash flow performance. Lifecycle Performance identifies
high level targets such as net cash flow and breaks them down into divisional and individual
performance measures so that every employee within the organization focuses on the processes
and tasks that enable the organization to meet those targets. Remember, the key to success is
aligning all aspects of performance management with things people can understand and
personally control.

There are some common financial metrics many organizations utilize in order to measure their
financial performance and progress towards financial goals. The following steps illustrate how
your organization can maximize the effectiveness of these metrics and position the organization
for financial success:

½. Identify which divisions within your organization are most responsible for carrying out the
success of each metric. For example, if you are interested in maximizing your uccounts
Receivable Turnover ratio, you would focus your attention on the sales and accounting teams.

2. Once the divisions are identified, the processes within those division(s) must be examined. In
the uccounts Receivable example, you might want to identify the processes within the sales team
regarding closing sales and getting paid the first time around. You may focus on the accounting
team and alternative payment processes or method of sending statements. You may want to focus
on accounts receivables and their process of prioritizing outstanding accounts.

3. Redefine the processes that are out of date, or if tools exist for automation or shortening the
process.

4. Baseline the performance for the processes that have the most effect on the outcome of the
financial metric.

5. Set performance measures for those processes and monitor how the improvement of those
processes affects the overall financial metric over time.

The following are common financial metrics and ratios:

a  ' - Ratio measures total economic return and indicates whether the
institution is financially better off than in previous years. u decline may be appropriate if it
represents an institutional strategy to fulfill its mission. un improving trend indicates increasing
net assets and additional reserves which provides financial flexibility.

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 a  - Ratio indicates whether the institution's operating activities resulted
in a net deficit or surplus for the year. Net operating ratio measures whether available resources
are sufficient to fund operating activities.


 
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 - Ratio measures the ability of the institution to cover its debt as of the balance
sheet date, should the institution need to settle its obligations. u positive ratio of greater than ½:½
indicates the institution has sufficient expendable net assets to satisfy its indebtedness.
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 - measures the financial strength of the institution by indicating how long
the institution could function using its expendable reserves to cover operations should additional
net assets not be available. u positive ratio and an increasing ratio over time denote strength.

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 - measures the financial strength of the institution by indicating how

long the institution could function using its expendable reserves to cover operations should
additional net assets not be available. u positive ratio and an increasing ratio over time denote
strength.

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 - Customer profitability metrics provide a link, where
organizations measure the incidence of unprofitable customers and the magnitude of losses from
unprofitable relationships. This is accomplished by focusing on managing customers for profits,
not just for sales-thus making the customer focus align with financial objectives.

 
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This presentation discusses the common obstacles to successfully managing organizational
performance, namely aligning performance to organizational goals and objectives. This
presentation discusses the 4 key alignment areas and offers techniques on how to successfully
align perform to each area.


  
 

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Get a FREE performance management kit and access to all of Victor's full videos at:
www.lifecycle-performance-pros.com This presentation discusses the common obstacles to
successfully managing organizational performance, namely aligning performance to
organizational goals and objectives. This presentation discusses the 4 key alignment areas and
offers techniques on how to successfully align perform to each area.

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While the goal of a performance initiative is to align performance to organizational strategy, the
following are three common pitfalls to avoid when attempting to do so.

˜ $ )* Sometimes performance teams make the mistake of

developing a performance plan that defines performance goals, but
does not revisit the goals on a continuous basis. us a result, there is
no process for adjustment in the event of improved performance or
performance decline. This means there is no mechanism for timely
adjustments, and the organization remains tied to outdated strategies
where no actions are taken for improvement.

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  * Successful vertical alignment

involves ensuring that organizational goals start at the executive board
level, and align through the CEO, executives, senior management,
management and individual employees. Insufficient vertical alignment
occurs when goals are set without sufficient and cumulative tie-in to
the goals of supervisors. The result is employees and managers with
performance objectives or projects that are irrelevant to strategic goals,
performance gaps due to lack of support in certain areas, and time
wasted on tasks that do not support business objectives.

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  * When departmental and individual
goals are set without enough understanding as to how they
interconnect with the goals of other groups, there is often redundancy
of services, ineffective competition, and departmental and personal
goals that are misaligned with organizational goals.

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 (+!
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This blog features performance management tips and techniques that drive organizational
success. It focuses on performance management best practices, key processes, and the secrets of
high performing organizations.