Magazine article Strategic Finance

How Corporate Culture Affects Performance Management

Magazine article Strategic Finance

How Corporate Culture Affects Performance Management

Article excerpt

Every progressive organization needs a management system that enables it to formulate its strategy, to implement processes that support operations, to provide performance evaluation and operational control, and to learn and change. Such corporate performance management (CPM) systems consist of metrics, methodologies, processes, and systems to manage performance at the corporate level.

These systems can provide organizations with a wide variety of strategic and operational benefits. Examples of strategic benefits include:

* All parts of an organization can focus on the same corporate goals;

* Staff can understand how their choices, when combined with those of other business units, will better achieve organizational goals;

* An organization can increase its ability to respond to changes in the external operating environment;

* Interests of all stakeholders are aligned;

* The workforce is more capable and motivated; and

* An organization can better allocate resources.

Examples of operational benefits include:

* Tedious tasks can be eliminated so employees can devote more time to high-value ones;

* Organizations can have standard, defined, repeatable processes around the management of financial data, which ensures the data's accuracy, believability, relevance, and timeliness;

* Companies can deliver targeted best practices and methodologies into the hands of business users where they can be employed most effectively;

* Employees will have timely information on which to base critical decisions;

* Companies increase employee accountability and visibility;

* Organizations can leverage customer resource management (CRM) information;

* Organizations can leverage enterprise resource planning (ERP) data;

* Employees are more satisfied as they become more involved;

* Companies have better control of operations;

* Organizations increase their ability to listen to the "voice of the customer"; and

* Organizations increase their efficiency and adaptability. The effectiveness of CPM systems varies widely from one organization to the next. Some successful organizations have systems that are good at aligning employees' efforts with organizational goals and providing them with the feedback necessary to enhance their performance; others don't.

What factors contribute to the effectiveness of these systems? Technology supports system effectiveness, but a performance-oriented culture--one that values people, performance, transparency, and accountability--is key to system effectiveness. Technology is important for a successful CPM implementation as an enabler of people--not the other way around.

Companies vary greatly in their ability to support a performance-directed culture. Howard Dresner, chief research officer of Dresner Advisory Services, LLC, and an authority and author in the areas of business intelligence and performance management, wrote about this in his January/February 2010 article, "Building a Performance-Directed Culture," in Balanced Scorecard Report. He noted that "at the highest level, a performance-directed culture is one in which everyone is actively aligned with the organization's mission; transparency and accountability [are] at the norm, new insights are acted on in unison, and conflicts are resolved positively and effectively."

Dresner also says there are six critical measurement criteria that organizations must keep in mind when attempting to foster a performance-directed culture:

1. Alignment with Mission,

2. Transparency and Accountability,

3. Action on Insights,

4. Conflict Resolution,

5. Common Trust in Data, and

6. Availability and Currency of Information.

In this article we'll examine the impact of each of these criteria on the ability of organizations to achieve benefits from their CPM systems. …

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