Summary of the article
The article explains the bridge between performance measurement and performance management. Performance management is the use of information derived from the data collection exercise in making management decisions and setting goals (Amaratunga & Baldry 2002, p. 217). Using performance measurement systems to collect data is not enough to cause an improvement in performance. Managers in an organization need to collectively analyze the data collected in a performance management system. They have to assess goals that were achieved and those that they failed to achieve. In the process, they identify reasons for failure and those for success. The facility organization then integrates the reason for success as its routine practice (Amaratunga & Baldry 2002, pg. 220).
Facility organizations can also use external facilities for benchmarking in performance measurement. A performance management system supports effective communication of results and managers need to be committed to performance improvement. Managers allocate resources according to the strategic needs of the organization. The facility organization strategy is to support the main organization’s strategy. The external and internal environments are dynamic. It creates the need to continuously review the measurement framework. There should be selective adjustments to the measurement framework rather than an overhaul to enable a comparison between new data and historical data (Amaratunga & Baldry 2002, pg. 220). There is a need to expose the interrelationship between different individual performance measures and overall performance.
Key learning points
- Performance measurement should stimulate analysis, followed by action.
- A performance measurement system should be able to integrate changes in the environment.
- It should ensure that the identified improvements are maintained.
- Performance measurement results are more useful when they are used for directing management.
- Performance management in facilities ought to target measures that support the overall organization’s strategy.
- When facilities fail to meet goals, it a good situation to evaluate whether there is a need to review goals or to increase resources.
- The facility should identify the best practices that help managers to initiate change and improvement.
- Performance management should encourage collective learning based on performance measurement.
- An effective performance management system allows managers and employees to assess the efficiency and effectiveness of activities in real-time. Managers should be able to respond to variations from goals without waiting for a long period.
Relevant statements that are not key points
- Lack of a performance management system may result in higher dissatisfaction and turnover as it creates a mismatch between expectations and resources.
- Performance management enables firms to evaluate data based on specific outcomes in alignment with objectives.
- When data are not used in management, perceptions will change about their importance.
- The facilities can use performance management to anticipate future needs.
- There is a need to follow a partnership approach between the facility and other branches within the organization. It may allow sharing information and constructive competition.
- Some measurement frameworks may appear to have long-term usefulness to the facility.
- There is a need to establish a reward system that encourages employees to improve target performance measures.
- Organizations adjust their core business based on the environment. It is necessary for facility managers to continuously review the facility’s measures to target measures that have more value to the firm’s strategy.
- It is necessary to understand relationships between measures so that facility managers can select the ones that have the greatest impact on performance.
Analysis of ideas and concepts
The main concept in the article is that the facility managers need to align the facility’s goals with the firm’s strategy (Amaratunga & Baldry 2002, pg. 221). Managers at the top level of the organization have long-term goals that define the firm’s strategy. Martinez (n.d., pg. 1) describes that the facility should map its performance measurement system onto the overall organization’s strategy. When facilities within an organization target the same overall goals, it is easier to support each other. For example, a firm that wants to maintain a lower level of inventory would want the facilities to increase their flexibility, from producing few units to higher numbers within a short period.
Another concept in a facility’s performance management is to communicate results and findings, and create a similar understanding of the facility’s objectives and core values (Amaratunga & Baldry 2002, pg. 218). In their study on Sainsbury’s (retailer in the UK) performance management system, Miah & Hossan (2012, pg. 19) describe an organization that has an effective performance measurement system but has some weaknesses in the performance management system. One of the weaknesses in performance management was visible through the employees’ inability to articulate the firm’s core value. Some employees could recall that there are six core values but could name none among them. Different employees provided different views of what needs to be measured (Miah & Hossan 2012, pg. 19). An effective performance management system has to ensure that employees learn the core values that are practiced as organizational culture. It has to ensure that facility managers communicate the core values frequently and helps employees understand the relationship between different performance measures.
A facility needs to identify performance measures that are very critical to the outcome of other measures. In Sainsbury’s case, the firm’s strategy was to focus on employees (Miah & Hossan 2012, pg. 18). The firm recognized that it operates in a labor-intensive industry. Its success is related to offering superior customer service. In alignment with the firm’s strategy, the retail outlets used a balanced scorecard that integrated employees’ behavior in the performance measurement system. The behavioral measure accounted for an employee’s interaction with customers and other employees (Miah & Hossan 2012, pg. 20). The firm used the ‘Mystery Customer Measure’ (MCM), as an individual performance measure, to measure the quality of customer service. The important point in the performance measurement system is that they have identified the most critical parts that need to be measured and controlled. One of the weaknesses of their system is that it lacks a real-time feedback system.
Some practical implications
The performance management system may be used to increase cooperation between facilities and employees within the firm. Martinez (n.d., pg. 3) discusses that a performance management system can be used to facilitate communication, transparency, and improved vertical and horizontal cooperation in the organization. It can also increase tolerance to failure and encourage friendly competition among functional units in the firm. Martinez (n.d., pg 2) discusses a case involving a firm in the energy sector. It does not have any other option rather than to use a performance management system to improve performance, considering that market prices are set by the government. Its profitability relies on improving internal performance measures to increase efficiency and effectiveness.
One of the important points that I have learned is that performance measurement should be used for decision-making. A firm may collect data to maintain standards, with no intention to improve performance. Concerns are raised only when there is poor performance. A firm may also rely on a performance measurement framework for a very long time, ignoring the changes in the external and internal environment. A superior performance measurement system would be one that enables managers of a facility to carry out an assessment in real-time.
Amaratunga, D & Baldry, D 2002, ‘Moving from performance measurement to performance management’, Facility, vol. 20, no. 5/6, pp. 217-223, Web.
Martinez, V n.d., What is the value of using performance management systems? Web.
Miah, M & Hossan, C 2012, ‘Performance management system in UK retail industry: A case study’, Far East Journal of Psychology and Business, vol. 7, no. 3, pp. 13-25, Web.