The purpose of the second part of this book is to develop a more integrated framework for performance management. The first thing that is needed is to identify the constituent elements of such a framework. The Integrated Performance Management Framework, with its five major components, will serve as our guide. In each chapter of Part II, we will explore one of the constituent elements of this business model in greater detail. We will summarize what the management literature tells us about each of these particular components and investigate how to align your strategy with it.
Obviously, strategy is a central concept when striving for strategic alignment. Unfortunately, ‘strategy’ has become a catchall concept that is used to mean whatever one wants it to mean (Hambrick and Fredrickson, 2001). Therefore, we start the second part of this book with a chapter on strategy. That is, we present an overview of the various performance goals and how they influence an organization’s strategy, and explain how these goals and strategies are set and developed.
Chapter 7 moves to the second component of our framework and
tackles the operational processes. It addresses how companies can obtain better performance through Business Process Orientation. Business Process Orientation is seen as an answer to the challenge for firms to become more quality-oriented (see Chapter 4). Throughout this process, organizations look differently at the role of operations. In Chapter 7, we explain the different roles companies have to go through in their journey to World- Class Manufacturing.
Chapter 8 focuses on a particular support domain: information technology. This chapter investigates how information technology (IT) and information systems (IS) contribute to an effective strategy implementation. It illustrates how to align support processes with your strategy and how to manage this process.
Chapter 9 tackles the evaluation and control component of our framework: we describe how management control systems can be used to manage company and business performance effectively. Attention is paid to the three major elements of a management control system: (1) the management control structure; (2) the management control process; and (3) the management control culture (beliefs systems).
From then on, we explore the various building blocks of the organizational behaviour component. Organizational design is a hot topic in management and managers are struggling with it. Chapter 10 starts with a discussion of the basic elements of organizational design and how they fit together. We present three ‘generation’ designs and discuss the implications of these designs for implementing strategy.
Chapter 11 focuses on the new function attributed to human resources management (HRM). The HRM function is increasingly seen as one of the key functions in the development and implementation of a strategic response to the new competitive environment. To make the shift to a strategic partner, HRM faces some new challenges. Chapter 11 will outline them and present some frameworks that show how HRM can become critical to organizational effectiveness.
Chapter 12 is about leadership. It explores how leadership can contribute to the development of superior strategies and their fast and skilful execution. We present a rather personal view on what leadership is, and describe some of the leading theories on leadership.
Reward systems are the last element of the organizational behaviour component. Although they are often considered a major strategy implementation tool, there is still much confusion about what rewarding really is and how it motivates (and often demotivates) people to achieve organizational goals. Chapter 13 explains what reward is all about, how it can become strategic and also how to manage (i.e., formulate and implement) a reward strategy.
When managers talk about performance management, the aspect of organizational change is a major issue in their discussions. In Chapter 14, we will outline how the performance management concept can be translated into a change management approach and how change, learning
and performance are inextricably intertwined. We will present some new ideas on the context in which changes take place and learn how ‘change- friendly’ organizations can boost themselves to maximum performance, thereby illustrating how two eternal enemies – chaos and order – can be structurally reconciled.
Chapter 15 concludes Part II. In this chapter, we reflect on all the different chapters from Part II and make recommendations to integrate the lessons that can be learned from those chapters. This is not an easy task, and we do not pretend that we have an integrated approach towards performance management yet. However, we will show that our Integrated Performance Management Framework is a useful framework that opens many opportunities to guide further research in this new direction.
6 Performance Goals and the Strategy Formation Process
KURT VERWEIRE AND LUTGART VAN DEN BERGHE
In many organizations, setting clear goals and objectives is the starting point for the strategy formulation and strategy implementation process.
Providing a sense of purpose plays an extremely important role in shaping the behaviours of people within an organization, and it is an important lever that top management can use in the Integrated Performance Management process (Chakravarthy and White, 2002). That is why many definitions of strategy and management pay explicit attention to the role of setting performance goals and objectives, often referred to as ‘planning’.
In this chapter, we tackle two major questions: (1) What are the performance goals for an organization; and (2) How are these goals set and how are strategies developed? The first question is tackled in the first and second sections of this chapter. We start with a discussion of the organizational purposes of the company as defined in its vision and mission. These can be considered as the performance goals at the corporate level. The mission and vision must then be translated into concrete strategies and actions, which serve as guidelines and benchmarks for the business unit and functional levels.
Given our interest in the process side of the performance management trajectory, we investigate the goal-setting and strategy formation process in the second part of this chapter. There, we also discuss the role of strategic planning in the strategy formation process.