Underpinnings of Integrated Performance Management - Part II

Alignment: “All pulling in the same direction”

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. In part I we discussed focus. In this post we want to discuss the second principle which is alignment: all pulling in the same direction.

Alignment is about three main ideas:

1. Cascading targets throughout the organization
2. Clear management control and accountability
3. Project portfolio and initiatives linked to value drivers

To communicate targets, processes must be established for aligning and cascading performance measures. This is typically a combination of both a top-down as well as a bottom-up approach.

A consistent breakdown must be defined and communicated of corporate targets, initiatives and performance measures to subunits- and individual targets, initiatives and performance measures. Targets should be aligned across business dimensions (e.g. function, geography, customer) to facilitate joint value creation and co-operation.

To establish clear management control and accountability, the first step is to define organisational accountability.

Responsibility must then be assigned to business units, functions etc. for each target, initiative and performance measure. Based on this a clear management control and reporting framework can be established. Finally, employee performance targets and objectives are defined and aligned with strategic objectives and value drivers.

Linking projects and initiatives to value drivers is an essential step in achieving alignment.

All projects and initiatives are categorised and prioritised by contribution to strategic objectives. This requires establishing a clear linkage to overall value drivers. Based on the contribution to strategic objectives of current projects, new initiatives might need to be developed.

In future posts we will elaborate on the remaining guiding principles for successful strategy execution: integration and behaviour.