What are the different types of systems to monitor organizational goals and objectives?

For any business established or startup, small or large, local or multi-national, the long term growth lies in achieving maximum efficiency and improving operational capabilities. There are two major contributors to that, one is the information technology and the other is the employees. The information technology is essential to improve communication, support various business processes and for automation and digitalization. The growth is the prime objective for any business, companies spend millions to ensure they achieve their goals. When the entire organization is working to achieve a common shared goal, the prime goal of the business can be achieved. It is extremely important to make sure that each and every bit of a business is craving for the same goal. Everyone has their own part to play, but ultimately everyone is heading towards the same goals and objectives. If that could be done, the business can accomplish whatever they want to. For small and medium sized businesses usually the CEO or the top level managers keeps an eye on everything, a performance management system can be a great aid and support for them and it provides them a framework to align individual goals with the primary goals of the business.

It is remarkable to have hundreds and thousands or even tens of thousands of employees working together to achieve a higher goal. Every business tries to achieve that by commissioning various types of performance management systems however, there are only a few who have succeeded in achieving the ultimate performance management. The primary objective of any performance management system is to align the individual goals with the organizational goals. That is the simplest explanation of the performance management. However, it is not as that simple, in fact it is one of the most complex and sophisticated system in any organization. The performance management system relies on multiple digital systems that are already in place, along with additional analytical work, to let the business monitor the organizational goals and objectives in real-time.

The performance management system is a complete framework with multiple sub-systems to attain the real-time 360 degree monitoring of the organizational goals and objectives. In this blog we will discuss different aspects of the performance management system to understand different types of performance management for different organizational goals and objectives. The organizational performance management system or enterprise performance management system is a set of tools to execute different processes and methodologies to build and monitor business strategies. These strategies are defined on the bases of organizational goals and objectives. The performance management system help businesses and enterprises to achieve their organizational goals and objectives.

What are different types of performance management systems to monitor organizational goals and objectives?

A few years back the businesses and enterprises were relying on traditional performance management frameworks. Which involves assessment of the employees after a certain time period to evaluate and measure their performance (input, output, productivity, etc.) and their contribution to the organizational goals and objectives. The process was expensive in terms of time and resources. Most of the HR leaders realize that the process is not as that reliable too. Several studies have been done and surveys have been conducted which concluded that almost 80% of the employees want instant reward and gratification, 95% of the HR managers are not satisfied with the annual reviews and established performance evaluation methodologies, more than 50% of the employees believe that the annual assessment is grossly inaccurate which also results in mental and emotional stress, both the HR and the employees are agreed that long-established performance management tactics and methodologies focus more on the recent events and project negativity, which have very negative effects on the employees, they lose their confidence and morale.

This results in a complete transformation and a quick evolution in the performance management practices and techniques. Now a days the international market leaders and huge enterprises have shifted to three most commonly used performance management systems to monitor their organizational goals and objectives and to effectively implement their strategies:

The BSC or Balanced Score Cards
The MBO or Management by Objectives
The KPIs or Key Performance Indicators
The OKRs or Objectives and Key Results
Budget Driven Business Plans and Objectives
HR Driven Reviews

1. BSC or Balanced Score Cards

The BSC or Balanced Score Cards are one of the most effective and most widely used performance management system. Studies and surveys have shown that almost 85% to 88% of the users are agreed that the balanced score cards (BSC) are the most effective performance management system and is very helpful in achieving their organizational goals and objectives. By definition the balanced score card (BSC) is a performance based metrics which combines four major components, employees, customers, financial, and internal business processes to help businesses achieve their organizational goals and objectives. The balanced score cards (BSC) are used for:

Defining high-level organizational goals and objectives which clearly states what the business wants to accomplish and then strategically broke down the objectives and goals in the four aspects, employees, customers, financial, and internal business processes
Monitoring and tracking to understand if you are achieving your goals and objectives
Adjusting course, taking actions, aligning resources and people to improve progress

The balanced score cards (BSC) help aligning employees, teams, departments and other resources with organizational goals and objectives. The important thing to understand is that the strategy should be well-organized and well-planned and the goals and objectives should be clear and realistic.

2. MBO or Management by Objectives

The management by objectives or MBO is a very different methodology, it requires businesses to define multiple objectives which could be linked or totally independent. Unlike balanced score cards, the management by objectives use these smaller objectives and focus on achieving the milestones. The objectives are then aligned with the relevant individuals and resources. The performance management is subjective to those objectives only. The management by objective method is:

Defining objectives in a set of 2 to 6 objectives which are not necessarily linked and can be achieved individually
The objectives are defined to increase communication and interaction between the management and the employees to boost employees performance which help achieving the objectives
The objectives are conveyed to the employee by the managers and the performance is monitored continuously to make sure the objectives and goals are achieved
Continues feedback is the core of management by objective system and it enables the employees to set their course and make correction to align themselves with the objectives

When goals are set as per management by objective approach there is no clear plan of action is defined, in fact the managers and the participants are allowed to share their recommendations and suggestions as well. This is to boost the participant’s involvement and their morale. When employees knows they also have say in making the plan of action and setting goals to achieve those objectives they feel more involved and their performance also get improved.

3. KPIs or Key Performance Indicators

The KPIs or key performance indicators are a very specific matrices used to measure the performance of a business. The KPIs performance management system produces quantifiable data that tells how well a business is performing in achieving its organizational goals and objectives. For example if the objective is to reduce customer churn rate, the KPI will monitor and measure customer churn rate and at the end of the month or week the management can tell if the customer churn rate got decreased or not. The KPIs are used to align the individual employees, teams, and departments with the organization’s vision and their goals. The KPI performance management system is:

As per the vision of the organization, the KPIs are defined to achieve certain objectives which include from high-level objectives to individual level objectives as well
The KPIs measure monitor individual action and measure its contribution towards the organizational goals and vision
The strategy can be compared with a pyramid, at the top is the vision and high-level goals, then strategy driven objectives, then KPIs and CSFs, the CSFs are critical success areas, which are absolutely necessary to achieve the goals
Some KPIs are simpler such as the profit of the business, some are harder such as customer satisfaction, but all KPIs are related to individual actions hence can be measured accurately against the performance and progress towards the organizational goals and objectives

The KPIs are usually set as per a criteria commonly known as SMART. It stands for Specific, Measureable, Achievable, Relevant, and Time-bound. The business first state their vision, then they build strategy to achieve that vision and then the KPIs are set for the matrices which will indicate your progress towards that vision. This allow the organization to closely monitor the performance of all involved parties, and allow them a chance to make quick corrections and planning to ensure the goals will be achieved.

4. OKRs or Objectives and Key Results

The OKRs or objectives and key results is a performance management system which is designed to communicate, monitor and set organizational goals and high-level objectives. The OKS performance management provide a simple framework that boost communication and motivate employees to achieve the high-level organizational goals. Basically the OKR performance management system is somewhat similar to KPI performance management system but if provides better communication and enables higher engagements to develop passion. The results are quantifiable and time-bound. Which allow the management to closely monitor the performance and let them make correction on regular bases to ensure the high-level goals will be achieved. The OKR performance management system is:

The objectives are defined as per the high-level organizational goals, then the measureable matrices are defined to measure the key results
Instead of pushing goals to the individuals and teams the OKR system allow them to set OKRs by themselves to achieve the high-level organizational goals and objectives
The individual employee’s involvement is increased by providing them a chance to give their inputs and feedbacks to the team’s objectives at every level, which induce passion and motivate them to perform well
Rather than focusing on the outcome, the OKR performance management system focus on the tasks that would be needed to achieve a certain goal, then the key results can be measured

The OKR performance management system’s beauty is that it always provide space for growth and information, it is transparent and the strategy and plan is always subjected to improvements. Because a rigid strategy will chock the innovation, allowing individual employees and teams to participate in the planning process will pave way for innovation and creativity, it also boost efficiency as more information will be available down the line while executing the strategy.

5. Budget Driven Business Plans and Objectives

The budget driven business plans and objectives is a not so popular performance management system. But it works extremely well for some organizations, and we have also witnessed that sometimes in case of a crises or unexpected situations businesses shift towards budget driven business plans and objectives where the only driving factor for goals is the budget of the organization instead of the strategy. The goal is to invest in projects and techniques that deliver results.

The high-level organizational goals and objectives are defined by carefully analyzing the income sources and the cost & expenses. This is how the management identifies the areas where they should invest and which sectors require downsizing
The goals and planning is influenced by the finance team, which provides previous year’s spending of a particular department or team and then the same team is being asked to provide the list of all the activities they can perform without changing the budget
Since the performance is measured only on the bases of finance, this could affect both the new and underdevelopment projects
The individual teams and departments are free to derive their own strategies and plans to project their accomplishments for the next year by keeping the expense same as of the last year

The budget driven business plans and objectives is not so commonly used performance management system. It also relies heavily on the capabilities of team leaders, managers and department heads, which can be seriously affected if any one of them decided to quit their job in the middle of a year or before completion. That is why it only works under certain circumstances and mostly businesses don’t use this performance management system.

6. HR ReviewsDriven Performance Management System

The HR reviews based performance management system is a performance management system but it is not an alternate to KPIs or OKRs based performance management system. In fact it is being used along with the KPIs or OKRs performance management systems.Basically the HR reviews are used by managers who assess and evaluate employee performance, highlight their strengths and weaknesses, their potential and the set their goals for future. Usually HR reviews are done annually or semiannually, some businesses are also using the HR review more frequently and done on quarterly bases and even on monthly bases.

Regular are done by the managers and are based on the work quality, work ethics, behavior, competencies and growth of the employee
The reviews and managers’ feedback data is managed by the HR department and the HR evaluate employees on the bases of these reviews and set their course for future
The reviews should be shared with the employees as well to let them think about their development and performance, the review shouldn’t include direct criticism, comparison, false information, speculations and should be completely neutral

Basically the HR review based performance management system is more interested in personal performance and is not much focused on the organizational objectives and goals. That is why the HR review based evaluation should be done along with the data of the KPIs based performance management system to get a better and more accurate performance matrices.

What are the key features of a Performance Management System?

The performance management system is used to implement a fair framework which evaluate the performance of the business to help businesses achieve their organizational goals and objectives. A good performance management system is intuitive and user-friendly. Here are some key features that an effective performance management system should have:

The performance management system should be continuous
Intuitive and User-Friendly administrative dashboard
Automatic data integration and real-time updates
Customizable alerts/notification features
Customizable review cycle and timing features
Question creation facility and customization function
360 Degree feedback collection features (downward, upward, peer, external, etc.)
Automation facility to simplify work flow and processes

A good performance management system help businesses to increase their profit margin by improving overall performance of the entire business. It help guiding employees with their individual development and personal growth. The primary objective of a performance management system is to align the organizational goals and objectives with the personal goals and objectives of the employees.

Conclusion

Every business wants to grow and want to make sure they gain maximum profit with minimized expenses or cost. This can only be achieved by maximizing the business performance. The business performance relies on two major factor one is the infrastructure and IT and the second is the employees. The infrastructure and IT is easy to handle, however, when it comes to improve employee performance, it is difficult and sophisticated. That is why an effective and efficient performance management framework is required. There are different types of performance management systems and methodologies. The purpose of this blog was to explain these types. RSI Concepts is a leading software development company specialized in customized solutions for enterprise performance management systems, KPI and OKR systems and other integration tools. If you want to learn more about the subject or need help with your business performance management needs, please feel free to contact us through our Contact Us page or leave a comment in the comment box below and we will get in touch with you soon.