To enjoy the remarkable benefits of performance management in your organisation, you must know how to apply it to your business. There is no one-size-fits-all approach to performance management, so what worked for other companies may not work for you. Different scholars and business owners have invented several unique frameworks for performance management.
However, we will offer an overview of the three most important performance management frameworks:
Management by Objectives
In this framework, managers set objectives based on overarching business goals. They communicate these objectives to the employees, who are then monitored to ensure they work to achieve them. Afterwards, the managers evaluate each staff member and reward those who meet the objectives.
It’s a system that removes all the fluff and focuses more on the objectives. However, it doesn’t delve into the steps required to achieve these objectives. The Management by Objectives method can also lead to micromanagement, and employees may feel pressured or watched, Big Brother style.
Objectives & Key Results (OKRs)
OKRs is a refined version of the Management by Objectives framework. The intent was to create a framework that allowed objectives to be defined while also developing a quantifiable and acceptable strategy for accomplishing them. In OKRs, even employees can set their own goals and take responsibility for those goals.
The major benefit of the OKR framework is that it encourages employee participation, collaboration, and feedback. There is also more autonomy since employees know exactly what paths to take to achieve the overall aim.
Balanced Scorecard (BSC)
Created in the 90s, the Balanced Scorecard evaluates a company’s performance by looking at four critical areas: Financial, Customer, Process, and Organisational Capacity (or People).
For instance, Jane is the manager of the department store. Traditionally, her manager would only look at her profit-and-loss numbers to decide whether she was a good or a terrible manager. However, with a BSC system, Jane’s manager would look at Jane’s relations with customers and colleagues. He will also have to evaluate what processes Jane uses to scale roadblocks. Did she miss an obvious opportunity to save the store money? Were they wasteful? These are the factors BSC includes to give a holistic view of an employee’s performance.
The performance management framework you choose for your organisation largely depends on the structure of your business. In general, if your business values synergy and alignment across the entire organisation, you can opt for the OKR or Balance Scorecard method. And if synergy is not a prerequisite or if your organisation comprises semi-independent departments, you can use the straightforward MBO to create departmental objectives.