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Performance Management and Measurement


As the concept of performance management (PM) implies, modern corporate governance has to focus on the cause-effect relationships underlying a firm’s financial performance production. In order to determine the causes of the financially desired effects, the so-called implicit knowledge of the employees should be realized. For this, information management (PF) offers various analysis techniques to reveal company-specific success factors of financial performance production from the implicit knowledge of corporate experts.
Identified factors must be organized in a network of cause and effect relationships. Within this framework, the Project Manager can apply the mapping tool to individually structure the revealed information, aggregate it and visualize it for the whole company. For a valid representation of causal relationships, the subjective bias that arises during the said process must be minimized. Various mapping methods can be found in the literature that differ in their approach and importance.

What is Performance Management and Measurement?Performance Management and Measurement

Preventive maintenance and performance measurement can often be associated with a strategic management and control to focus on long-term financial success. In order to achieve this goal, implement strategies in a promising manner and adapt to the consistent development of the success potential of the entire organization, strategic factors related to financial success need to be identified. By controlling critical success factors through measurable key performance indicators (KPIs), the company’s financial performance can be beneficially affected. This requires identifying the upside causes of financial success that can be dimensioned financially or non-financially.
With the subsequent consideration of non-financially dimensioned success factors that are deeply rooted in the intuitive knowledge of managers and employees in general, Performance management (PM) offers a routing and control concept that extends the constraints of traditional control procedures based on financial ratios that are fully logically disaggregated. Neely and his team defined performance measurement as the process of quantifying the effectiveness and efficiency of action. Evaluating the efficiency and effectiveness of action always requires reflection of corporate strategic goals. Thus, performance measurement provides a holistic assessment of the company’s performance. It requires additional definition of cause-effect relationships to analyze the entire performance production process.
The specific success factors of a company are integrated into a cause and effect network. Each factor can be directly or indirectly associated with the financial performance of the company. Cause-effect relationship is defined as causative if there is a strong correlation between causes and consequences, and the cause of action temporarily precedes the effect. In addition, the relationship should be reasonably explainable. A comprehensive understanding of performance production is achieved by accurately indicating the causal relationships between factors. Moreover, in decision-making situations, the consequences of the chosen actions on the success of the company can be predicted.
In this context, performance is determined as a multi-criteria and therefore multidimensional construct, which in this causal sense can be measured not only in advance but also in advance. Therefore, performance measurement is classified as an integral part of the protective manager in the context of a higher control. At this point, the project manager explains the process of planning, implementing and executing the corporate strategy with a consistent system of actions. In connection with a strategy, it determines the quantifiable KPI values ​​and the number of studies, respectively.
Due to permanent tracking of operation numbers, if a significant variance is identified, the project manager can initiate appropriate strategic action such as feedback or forward feed. As a result, for a comprehensive analysis and control of performance production, success factors and company-specific causal relationships need to be carefully identified and analyzed. For this reason, performance management treats information management as a complementary discipline.

Performance Management and MeasurementExplicit and Implicit Information Management

Information management means the acquisition, development, transfer, storage and use of information in a company. A condition for generating knowledge is general knowledge, such as scientific theories and models. Information is not systematized for a particular context, simple facts or events etc. based on data defined as. As such, it creates a structured, meaningful summary of open data points to arrive at a conclusion or make an estimate. In particular, it represents the general ability to link and use the latest information with previously collected information in several new application areas. As a result, information carriers develop a new understanding or subjective perception of the real situation, which forms a new knowledge base. Here, it can often differ explicitly and implicitly.
Explicit knowledge is transferable and therefore not available only to the person who owns it and uses it. It can be based on company-specific cause-effect dependencies, as well as on the subject-based, intuitive experience-based knowledge of competent employees and managers. It is difficult or impossible to express this as implicit knowledge implicitly and also to formalize contrary to explicit knowledge, also understood as individual specific knowledge.
According to Ambrosini and Bowman, information can be graded according to the degree of tacitness. And these must be specified between explicit knowledge (A) and deep-rooted tacit knowledge (D) that is not usually explained, infectious knowledge (B and C). A specification includes implicit information (B) that can be appropriately expressed and revealed. However, this becomes less obvious over time because the information carriers were not mentally interested in it and no third party requested it. In addition, there is implied knowledge (C) that can only be expressed incompletely. Although it is possible to achieve this, it cannot be explained by the use of general language. Type B and C implicit knowledge is of particular importance for a company to discover success factors related to performance and to develop their hypothetical causal relationships in a map.
The implied knowledge of experts should be externalized by applying adequate elicitation techniques in the context of knowledge management. For this purpose, three groups are divided in the literature under the term of information acquisition techniques and these are as follows:
Observations and interviews,
Process monitoring,
Conceptual techniques,
Usually one method cannot be defined as more appropriate than another. Choosing a technique for obtaining performance-related information should be considered specifically. However, for the development of causal hypotheses, he has the experience that interview techniques generate more information about company-specific connections than other approaches as the most widely applied methods.
Then, the externalized implicit knowledge of performance-related success factors is causally systematized by formulating a causal map into a more general and easily understandable form. Depending on the mapping method chosen, causal relationships are based entirely on subjective judgments. This subjective knowledge refers to an individual’s relationship with his environment and is therefore not objective. Although subjectivity offers an epistemic value, it can be seen as a source of error in the present subject. The increased comparability and transparency of individual subjective evaluations about causal relationships create some degree of intersubjectivity. Thus, intersubjectivity can be achieved only if more than one individual can clearly understand the formulation and structuring process of causal relationships between success factors.Performance Management and Measurement
However, strategic estimates of future performance improvements are only possible to some extent and cannot even be achieved by applying subjective and intersubjective based maps. However, only a statistical verification of the causal map produces an objective understanding of causal relationships and can therefore be directly empirically verified. As a result, the valid estimate of performance production can be given and initially, subjective mapping methods are discussed more closely in the following section.
Mapping methods are used to describe company-specific explicit and implicit information such as control-related factors and their causal relationships. There are various definitions and names of mapping methods in the literature. These can be distinguished according to their type and construction concept.

References:
clearpointstrategy.com/performance-measurement-vs-performance-management/
integratingperformance.com/pages/integration/introduction/performance-management-and-measurement-2.html

Author: Ozlem Guvenc Agaoglu


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