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Few subjects are more widely discussed—or misunderstood—than performance management. With the demand for qualified people higher than ever, its importance has never been greater. Ask yourself these questions: Are employees working in the same direction? Do they understand the purpose, mission, and vision of the company? And do they understand how their actions contribute to the success of the enterprise?

Linking organizational and individual performance is not a new idea. While few will argue against it, so much has been presented on the subject that a simple objective has become a complex and expensive proposition. The aim is to develop a simple and effective method to tie the two together. To begin, view organizational performance around four key questions: What do we want to accomplish? Why is it important? How do we want to go about it? What will happen if we're successful?

It is important that the specific targets you choose reflect the strategic intent of the organization. Ideally, these will come directly from your operating plan, and address three interrelated targets: financial, sales and service, and strategic.

Financial targets include profitability, efficiency, and cost control. You may have just three goals here: income, expenses, and gross profit. It is important to keep goals simple, measurable, and easy to understand. Sales and service targets are next. What do you want to sell, and to whom? Be specific.

Strategic targets are a bit different. These are important to accomplish even though they may not yield a tangible outcome. Examples include installation and training on a new software system, launching a public relations program, or staff training and development. Since these are more qualitative than quantitative, whether, and to what extent, they have been accomplished is a matter of judgment. Nevertheless, they should be included to round out the organizational performance management.

Communicating organizational goals begins with a presentation to the staff. Determine the best time and place to do this, keeping in mind that everyone should participate, and receive a written copy of the goals. Schedule regular updates that track progress throughout the year, at least on a quarterly basis.

Drilling Down

Individual performance management also consists of three parts. They include: responsibilities, goals, and work-related behaviors. The "responsibilities for major job functions" approach takes the traditional job description to a new level. Since we begin with a blank form, a dialogue between the supervisor and employee gets agreement on the major areas of responsibility. The next step is to determine goals. Refer to the operating plan as a starting point. If the organization is to be successful, what must that individual accomplish to provide a meaningful contribution? As with the responsibilities, each should be discussed openly, and agreed upon by the employee and supervisor.

The final step centers on work-related behaviors. This is an important, but often overlooked, part of the individual performance management. We're measuring performance by three criteria: responsibilities/job functions, goals/accomplishments, and behaviors. The first is the reason most people are hired. The second is what earns promotions. The third, more often than not, is what leads to termination of the relationship. What are work-related behaviors? Ideally, they are derived from the values of the organization. If you do not have a statement of values, it is suggested that you develop and adopt one. Examples include: integrity/honesty; respect for the individual; courage to take on new assignments and responsibilities; and commitment to personal and professional development. Once complete, it is signed by the employee and the supervisor, and reviewed as often as quarterly, but at least at mid-year, to be sure the employee is on target, the goals are still valid, and the responsibilities have not changed.