Today, we'll look at these key roles closer…
Performance management and SPM
Before we go into it, keep in mind that using performance indicators also acts as a communication tool for transmitting core values such as mission statements, credos and vision statements or to drive desired behaviour.
This means that SPM must be directly linked to your company's main objectives and mission.
But how does it do this?
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First of all, SPM can be used to gather data about past performance and also to implement strategic objectives. SPM has to be adjusted depending on the business and this creates the need for the drivers and purposes of every performance indicator and the whole SPMS to be thoroughly explained in the process of design, and communicated during implementation.
SPMS can be used in relationships between headquarters and subsidiaries, and between corporate and business unit levels, explains the same source.
"It is fundamental for organisations to decide which type of SPMS to introduce, in line with their approach to strategic control" and the "if the headquarters of a multinational company wants to exert financial control over its subsidiaries and keep the learning generated within those subsidiaries, the inclusion of predominantly financial indicators would be appropriate," explained the source. When it comes to supporting knowledge flows and the diffusion of good practices across subsidiaries, mere financial control is not enough.
SPM is also a means by which you can establish a dialogue between different functions within an organisation.
This means that more non-financial factors will be included in the SPM design. Using SPM for diagnostic reasons can actually negatively impact the performance. It is thus recommended that a positive contribution should be made by "monitoring performance against goals, providing boundaries for action, restricting risk-taking, and monitoring the efficiency and effectiveness of processes and activities".
As a conclusion, lacking clarity over such matters and being inconsistent with regard to changes implementation can lead to a general SPM failure. So consider these factors closely before implementing this type of performance management
system in your company.