Underpinnings of Integrated Performance Management - Part I

Focus: "Only Doing What Matters"

Performance management is all about the successful execution of strategy. We identify four guiding principles to translate strategic directives into an effective performance management cycle. The first is focus: only doing what matters.

Focus is about three main ideas:

1. Shared understanding of value creation across the organization
2. Identified key value drivers linked to strategic directive
3. Planning, execution and measurement of what matters

To come to a shared understanding of value you will first need a high-level model of how value is being created in your company. This model needs to breakdown into value drivers and improvement levers. Each value driver will need to be verified with the strategic direction of your company. For each value driver define improvement actions by asking yourself "how can we change what we do?" and "how can we do what we do better?". Finally, establish a common definition of value: Value of what?, Value to whom?, Value when?, What basis?

To drive value, you will first need to measure and report value. Based on the high-level value model the first step is to identify key value drivers (eg. Marketing Spend).

Then illustrate relationships between identified value drivers (eg. Marketing Spend and Sales Volume). Link value drivers to strategic directives, by mapping strategic goals to value drivers, and challenging where necessary. To highlight improvement levers, try to quantify the sensitivity of ‘Value’ to changes in the value drivers.

The final step in focusing is planning to execute what matters. This starts with identifying the materiality and sustainability of each value driver.

Based on this exercise you can assess how much impact your company can have on each value driver; consider (negative) interdependencies among value drivers as well. Then set focus on those drivers with strategic priority, and ensure balance between short-term and long-term focus (e.g. growth).

In future posts we will elaborate on the other three guiding principles for successful strategy execution: alignment, integration and behaviour.