Why Is Business Performance Management Important? -
11 min read
January 7, 2021

Why Is Business Performance Management Important?

An effective management strategy is the number one factor that determines the productivity of your teams and the profitability of the business.

In this article, we’ll delve into the world of business performance management, specifically the meaning of business performance management and how to come up with a practical and effective performance management strategy.

So, let’s get started.

What is Business Performance Management (BPM)?

Business performance management (BPM), also known as Enterprise Performance Management (EPM) or Corporate Performance Management (CPM), is defined as the managed process that involves the optimization of your business’s overall performance and the achievement of the set business goals. 

Business performance management allows your organization to boost management structures for business performance, which is done through the use of analytics, reports, as well as KPIs (Key Performance Indicators), among others. 

The result of these processes and the enhanced business performance management is easy measurement and monitoring of the success and efficiency of your business activities.

Why is Performance Management important?

Here are the reasons why management is important.

  • Alignment

The primary reason for corporate performance management, whether it’s done through formal and/or informal processes, is that it allows for the alignment of your company’s employees, systems, and resources, making it possible for you to meet your strategic objectives.

  • A Comprehensive Dashboard

The other reason why management is important is that it allows for easy analytics. Corporate performance management and the processes that allow measuring performance management work like a dashboard displaying the performance of the business via reports, KPIs, and other performance indicators. 

Thanks to this dashboard-like setup, a manager can get timely insights into performance, and you notice the early warning signs of potential programs. You will know to act swiftly to keep the business on track. The management dashboard created will also allow you to have a better understanding of management and company-specific answers to what is business performance management?

  • Enterprise performance management helps you understand what’s wrong with the current management system.
  • It allows for measuring performance management 

Measuring performance management is effective, but you only get the desired results if you research and set benchmarks, come up with clear organizational goals, measure your success, evaluate the performance and results from measuring performance management systems, and act on your results.

Why then is performance management difficult, slow, and even ineffective for some companies? Put differently, why is performance management important? 

Well, although the performance-based management system can drive up profits and ROIs by pulling the business in the same direction, the best results from this management system are only attained where there is a system for measuring performance management. 

Essentially, strong performance management relies on this one simple principle – that whatever gets measured gets done, which means that in the ideal system, the business should come up with cascades of targets and metrics right from the top-level strategic management objectives all the way down to the daily activities of the frontline employees. 

Then, the managers will have to monitor these metrics consistently while engaging with their teams regularly to discuss progress made and come up with better ways of meeting targets. With the measuring performance management strategy, the good performance gets rewarded while underperformance calls for immediate actions to address the problem.

Here are the common pitfalls in corporate performance management:

Poor Metrics – Are the metrics selected for performance evaluation effective in determining or promoting the level of business performance you wish to attain? Have you incorporated your most important metrics to create a balanced scorecard? When it comes to measuring performance management, you need to choose the right metrics and also come up with a balanced scorecard. 

This management system can be regarded as measuring performance management and the numbers you see against different metrics determine employee morale and business success. In other words, your targets should be reasonable, based on what your employees can deliver with their best efforts. If you are struggling to come up with metrics, you could try working with ClockInEasy.

Poor Targets – Along the lines of poor metrics and measuring performance management, you need to come up with realistic targets. Selecting targets is, however, complex. It is an art and a science – if you have easy targets, your teams will crush them but with no improvement in their (and company’s) performance, and if the targets are unattainable, your staff might be too demoralized to even attempt to hit them. 

Therefore, you need to find the perfect middle ground, keeping in mind that the right targets for your company are attainable, but also with a healthy level of flexibility. For the best targets to be attained, your company must overcome cultural barriers and always raise the bar.

Lack of transparency – for successful corporate performance management, you must have transparent systems for measuring performance management. Transparency applies to enterprise performance management best practices too. What we mean by this is that your employees should believe in their targets for them to achieve them, with no obscurity between the company objectives and individual effort. Departments shouldn’t add buffers to their targets to counter the chances of underperformance, and this is why management is important. 

There also are cases where the metrics used in one level fail to have any logical links to the metrics set for the higher levels. To ensure management success and for an understanding of why performance management is important, you need to have the entire organization run from one verified version of the target setting/corporate performance management truth. All employees should be able to understand how they contributed to the organization’s performance.

  • The other issues to work out include lack of relevance (especially around metrics), lack of consequences (for good or poor performance), lack of dialogue (for example, after-action reports, toolbox talks, or talks on daily shift hurdles, etc. all-important in identifying and fixing mistakes early), and lastly, lack of engagement from management. The good news is that you will be able to overcome these challenges with the best practices for performance management.

The Purpose and Goals of Enterprise Performance Management

Enterprise and corporate performance management are essential for all businesses, and the following are the goals of having enterprise performance management systems in place.

Wondering what the purpose of enterprise performance management is or generally why management is important when it’s based on management?

  1. Setting up and defining the necessary goals to ensure the fulfillment of the organization’s objectives.

Goal setting is the most effective way of initiating and encouraging better performance across the organization. This helps employees focus on what’s really important.

It also encourages the alignment of the individual employee objectives with the overall business objectives while optimizing an employee’s individual performance.

And on top of all that, goal setting helps in the identification of the key result areas while also allowing individuals to work on improving these areas. As a result, it is a big part of measuring performance management.

  1. Set the right expectations for employees and managers

You need a robust business performance management system to come up with clear expectations for the employees and managers. At the same time, it allows you to build on the current performance of an employee then come up with a strategy and list of expectations that the employee is more likely to meet. The right expectations will bring results, meaning you shouldn’t expect a poor performer to be a top-performer overnight.

To set attainable, healthy, and reasonable expectations:

  • Define your expectations clearly
  • Give your reasoning behind that expectation.
  • Document the expectations
  • These steps are important because the moment your employees understand their roles, accountabilities, and responsibilities, they will be more productive and consistent.
  1. Improved communication

Good communication is essential for the success of your strategic performance management system. Excellent communication defines what business performance management is because it encourages not only a good communication culture but also ensures better engagement between teams and, most importantly, the alignment of individual and business objectives.

For effective communication, leverage the power of one-on-one interactions with all team members, give continuous coaching and feedback to encourage skill development, incorporate team building activities, and encourage collaboration.

  1. Setting performance standards

Enterprise and corporate performance management’s success relies on the performance standards you have set for the enterprise/business. Your business needs to set up new performance standards if you notice the following: 

It’s also important to set performance standards for you to avoid the following management problems:

  • General lack of effort from the employees
  • Unmet goals (could result from your goals being unrealistic/ unattainable 
  • Inadequate resources 
  • Poor collaboration between teams
  1. Coming up with individual performance and training plans

You need a corporate performance management system for training and the improvement of the skills, knowledge, and experiences of your workforce. It’s also an important part of boosting your employee retention rates. As you know by now, you can improve employee retention by encouraging personal and career development, and you can do this by coming up with a plan to help your employees gain the desired skills and knowledge. For this to happen, identify the skills and training your employees need, create a training budget and plan, and determine how the newly acquired skills will be applied.

Measuring performance management  

With defined organizational goals and benchmarks, measuring performance management is simplified. You could use graphic rating scales, employee performance standards, or use the management by objectives strategy for measuring enterprise performance management.

How is the Business Performance Management Process Implemented?

To build a strong and effective enterprise performance management system, a manager needs to do the following:

  • Performance Metrics Focus on Leading Indicators

Most of the time, businesses measure and manage their leading indicators using the lagging indicators like monthly quality targets or output. Although these seem to work for some companies, you could record higher results by using these metrics and integrating performance management into your performance management system.

  • Maintain Work Standards and regular beat

By regular beat and standard work, we mean that you need to maintain cadence for your meetings, as well as reviews for that intrinsic rhythm that becomes a part of your everyday operations. Setting and maintaining work standards are some of the reasons why management is important.

  • Work on continuous improvement

For the success of your organization’s operations, you need to ensure there is continuous improvement in all employees, including leaders and the C-Suite management level. By having standards in place for the leaders, it may be uncomfortable in the beginning, but it promises great success and continuous improvement across all the levels in the organization. The success of your enterprise performance management system is largely reliant on this strategy. 

The Benefits of Business Performance Management and Best Practices

Why is performance management important?

  • Measures employee success
  • Business performance management creates a shared vision of your company’s goals and objectives.
  • It lowers the employee turnover rate.
  • The enterprise performance management system for corporations motivates teams and individuals.
  • It’s a cycle that allows employees to understand the goals and objectives of the company, as well as the expectations. It also shows them when they meet their expectations.
  • The enterprise performance management system allows employees to improve in weaker areas.
  • It encourages the development of plans to help in overcoming challenges. These are the important answers to the question ‘why is performance management important?’ but you should know that you could get a lot more from a comprehensive enterprise performance strategy. 

What is business performance management? Why is performance management important, and how is it different from Performance Appraisals?

Performance Management vs. Performance Appraisal

Performance management vs. performance appraisal is one of the aspects of HR and business management that can be a bit confusing, especially because both aim to increase the performance of employees and, consequently, the business.

  • Performance management vs. Performance appraisal – what is it?

But we’ll help clear out the performance management vs. performance appraisal confusion. Before we look at performance management vs. performance appraisal, it’s important to note that they are both important and determine the annual performance reviews conducted by corporates.

That said, performance management represents the process used in the identification, management, measurement, and development of the performance of an organization’s human resources department. The performance appraisal, on the other hand, is an ongoing process that ensures the evaluation of employee performance. So, to answer the question ‘why is performance management important?’ it’s worth noting that performance management is all about being able to help employees develop and advance their skills and career, improving their productivity and performance in the process. 

  • Performance management vs. Performance appraisal – Time

To further understand these two performance factors, it’s important to note that performance appraisal is all about the past and how an employee performed in the immediate past during a review period. On the other hand, performance management has to do with the present and the future – how things are done in real-time to achieve goals and what the company can do to improve employees’ capabilities in the future.

  • Performance management vs. Performance appraisal – How it works

Performance management best practices have to do with how management/HR could help an employee in their continual development for the employee to be a better resource to the organization, while performance appraisal is all about evaluating progress made by an employee through the assessment or measurement of their actual performance regularly, over a specific duration.

Also, performance management is a proactive and strategic management process, while performance appraisals are more reactive, operational, and they are linked to compensation.

  • Performance management vs. Performance appraisal – Level of implementation

Performance management cuts across the organization, including the management and employment levels, while performance appraisals are a top-down form of assessment.

Regarding the involved parties, performance management focuses on collective organizational performance by supervisors and managers, while the appraisal is more about an individual employee’s performance, and it’s done by the HR department.

Conclusion – Why is performance management important?

Business performance management bears its origins in organizations seeking fair strategies and tools for determining compensation, which meant measuring the employees’ performance, hence the development of standards for the employees that received bonuses or salary increases; today, performance management is more of the management strategy used to determine the overall performance of an organization, from the employees to the C-Suite level management.  

So, if you are asking, what is business performance management? Think of it as a comprehensive enterprise performance management system that determines and measures the success and efficacy of business processes and structures.


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