SAS, performance management refers to how an organisation leverages its assets (people, money and technology) to achieve short, medium and long-term strategic goals. Through a process and journey intended to improve value creation, it requires focus on four essential objectives:
Control cost without sacrificing future growth objectives
Organisations are expected to do more with less to improve shareholder and stakeholder value. Given the nature of current incentives (meeting quarterly or annual targets), there is a risk that you may meet short-term targets at the expense of strategic growth initiatives.
Understand what drives cost and profit (or value)
Fewer than 50 per cent of executives are happy with their understanding of what drives cost and profit/value ("The Performance Management Exchange," Business Week Research Services and SAS, March 2007). Without this understanding, managers are unlikely to allocate resources appropriately and may not know where to focus attention for improvement. At best, it may mean the organisation is generating suboptimal results. At worst, it could mean it is destroying value without realising it, until it's too late to recover.
Improve agility
Change is happening faster than ever and information is doubling faster than ever. Organisations that can identify opportunities and threats more easily than their competitors, understand the implications, update strategy quickly and then execute that strategy consistently across the organisation will be the winners. However, only 20 per cent of CEOs and CFOs are happy with their organisations' agility. The most significant obstacles to improving performance are accountability, culture towards measurement and transparency ("The Performance Management Exchange," Business Week Research Services and SAS, March 2007).
Identify and respond to environmental, social and economic risks, and opportunities
Sixty per cent of global executives regard global climate change as strategically important for product development, investment planning and brand management ("How Companies Think About Climate Change: A McKinsey Global Survey," The McKinsey Quarterly Survey on Climate Chang, December 2007): McKinsey & Company). Eighty-two per cent expect some form of climate change regulation in their organisation's home country within five years ("How Companies Think About Climate Change: A McKinsey Global Survey." The McKinsey Quarterly Survey on Climate Change (December 2007): McKinsey & Company). A focus on the ‘triple bottom line’ of people, profit and planet drives increased brand value through innovation, improves internal efficiencies and accountability, and engenders the loyalty of consumers, employees and other stakeholders.
Read the first part of this article here.
