The performance of your business is something that as a responsible business owner you want to keep track of. You need to have your finger on the pulse of your business in regard to its performance so that you can make well-informed, precise decisions for the betterment of your company. Without a thorough understanding of how your business is performing, you really are in the dark when it comes to making changes and improvements or adjusting your tactics to improve your success.
What is Business Performance?
What exactly is meant by the term business performance? In many instances, it is a direct reflection of commercial effectiveness, the ability of a business to achieve its goals and see expected results from its efforts. Key performance indicators help you to measure the effectiveness of your business, taking into consideration various elements from costs to deadlines, quality to profitability.
Evidently, there is quite a lot involved in understanding the performance of your business, yet it is vital if you want it to succeed. Therefore, this is where software comes in to do the hard work for you.
The Options Out There
There are various software systems out there that will help you to better understand the performance of your business, the two more well-known ones being performance management systems and performance management systems. Both of these two essential concepts help businesses to monitor their performance and make vital developmental decisions and while they sound similar, they are in fact very different.
Many argue that performance management systems are superior to performance measurement systems, and that is the debate we will discuss in this article. We will find out exactly what each system is, the pros and cons of what they offer, in order to help you decide which system would be best for you. Let the battle of performance management vs. performance measurement commence!
What is a Performance Measurement System?
It’s quite a simple and basic explanation, but performance measurement systems measure performance. These tools help business to monitor elements of its programs, systems, and processes by collecting, analysing, and reporting on information that helps to ascertain how well a business is performing in regard to its goals and objectives. There are distinct, quantifiable indicators that you look out for in order to measure your performance in an effective way, including both short term and long term goals. Some of these indicators include:
- Financial. This involves gathering a general picture of the financial health of the business and measuring things like cash flow and turnover.
- In this area, you want to know how satisfied your customers are, or how positive/negative their view is of your business and the experience they receive.
- By examining different processes within your business, you can see how things can be changed and improved in order to get better results.
- While this factor is more intangible and harder to define, it’s important to gather information about the people that work for you. How well are individuals and teams cooperating with each other? How effective are those in positions of seniority?
What is a Performance Management System?
Basically, a performance management system takes the data from a performance measurement system to the next level. This allows you to plan actionable strategies that will help your business to achieve high performance and reach its goals faster. The limitations of performance measurement systems are resolved by a performance management system, helping you to understand the reasons behind certain indicators.
This understanding of why and how is greatly more valuable when it comes to making effective changes to improve things. While a performance measurement system will tell you that an employee is not doing a difficult task very well, a performance management system will help you to understand how they are doing it and how you can help them to progress and improve.
So, what does a performance management system offer that a performance measurement system does not? Here are three main areas:
- A performance management system helps to plan an effective strategy. This assists you not only to track and monitor the performance of your business as a whole but also to help you manage the results and work towards your goals and objectives.
- A performance management system, rather than focusing on outputs, focuses on outcomes. This is a much more effective way of seeing and monitoring improvement.
- A performance management system establishes an individual as an active participant in own development, instead of something that happens to him or her.
While performance measurement is important, it isn’t enough to make a big impact on your business. You will gain ways to track your progress, but those results are useless without the provision of the process to act upon them. Performance management is the answer in this situation, offering actionable suggestions to help you do something about the things you measure as you progress as a business.
Moving From a Performance Measurement System to a Performance Management System
Evidently, both performance measurement and performance management is important, but if you want practical help on how to act on your insights and make changes in your business, you’ll likely conclude that a performance management system is the way to go. If you decide to upgrade your system in this way, what will help you to make the transition? Help other members of leadership teams to understand and appreciate just how important and valuable performance management tools are.
Show them how a performance management system will help them personally, as well as the staff members under their leadership. With the support of superior business leaders, you will more likely be able to make the transition a success. The implementation of a performance management system isn’t the end of the road, but merely a new door to success.
It’s important that regular meetings are held to discusses the performance of the business and each employee as an individual. With the right system in place, your business and the people working within it and grow from strength to strength!
