The Renewed Importance of Setting Strategic Direction, Performance Expectations, and Measuring Both: How Human Resources Can Help
By Dr Nadine Greiner, Ph.D.
The renewed importance of setting strategic direction, performance expectations, and measuring both
Internal and external company performance measures are a main point of focus (and anxiety!) for many senior executives and boards. The “new” economy and the “global” economy increased the rapidity of change, and the recent correction of both has brought this point of focus into starker perspective. Hence, there is renewed internal and external pressure for clear, measurable, and efficient executive management.
Studies indicate that companies using effective performance management techniques realize considerable increases in sales and income per employee, as well as in total shareholder return. Organizations using effective human resource management systems exhibited significantly higher performance: Sales per employee were four times as great, employee turnover was close to half, and the ratio of firm market value to the book value of assets (a key indicator of management quality, as it indicates the extent to which management has increased shareholder’s initial investment) was more than three times as large in high performing companies (Becker, Huselid and Ulrich, The HR Scorecard: Linking People Strategy and Performance, Harvard Business School Press).
In short, performance management is back in full force. Human Resources practitioners are in a unique position to help, and this article proposes how.
Define the five critical success factors for clear, measurable, and efficient executive management.
Start at the top. Facilitate the need to set or reset strategic direction to better meet market demand
Incorporate external experts to provide market research and new perspectives to avoid group think
Emphasize tools, structure, and process predictability as a company competitive differentiator in the marketplace
Emphasize focus on performance measurement alignment, from external marketplace measures, to board expectations, to each line employee
Coach and support individual executives during the performance expectation setting and performance measurement processes
Identify the trigger for the need to set or reset strategic direction to better meet market demand.
Due to the renewed importance of setting strategic direction, performance expectations, and measuring both, the ability for CEOs to align performance expectations is paramount. Effective performance management enables executive and line teams to reach continuous alignment of business decisions to meet the company goals, so that their companies adapt to changing directions and beat increased competition.
These changes, any of which can be a trigger, include:
New accountability to shareholders/market (IPO, acquisition, etc.)
Change of board members or CEO
Changes in executive or department leaders
New market pressure
Change of strategic direction
New competitive threat
Internal organizational inefficiencies
Leaders who may need coaching include:
Founders and board members
CEOs and executives
Executive managers of new teams
Executive managers of existing teams
Cross functional management teams
Post merger integrated management teams
Human Resource professionals
Teams of business units such as IT, Operations, Finance
In my experience, executives and employees who apply effective strategic measurement as common practice are more likely to be early adopters and supporters of performance management systems. Hence, I have found immense support for performance management from board members, finance professionals, and IT professionals. With the recent shift in the Venture Capital space, I have found recent support from angel and firm investors.
1. Start at the top. Facilitate the need to set or reset strategic direction to better meet market demand
Definition of strategic direction
A clear and successful strategic direction engenders agreement in the senior team of executives, as well as across functional disciplines, on commonly defined business opportunities. This strategic direction builds a common language, and analysis, starting with the role of current products capabilities and limits and ending on leveraging them (or developing new ones) to achieve success.
In order to achieve buy-in that can endure the turmoil and setbacks often experienced in execution, discussing, and arriving at, strategic direction is best done with a collective approach commencing with the senior teams in companies. There are many techniques to identify new business opportunities. In short, setting strategic direction in teams is a common forum for executive teams (occasionally including board of directors), and can produce a reworked or new vision statement.
2. Incorporate external experts to provide market research and new perspectives to avoid group think
Needless to say, the company might be rich in experience and expertise with regards to its products and the market. This information will be important to incorporate into the strategic direction, and it is vital to make this clear early on in the process, to honor peoples’ input. Depending on the products or services offered by the company, there are a few well-known, little disputed neutral experts in market analysis. It is important to emphasize the need for an objective approach to new, clean data to inform decisions.
3. Emphasize tried-and-true tools, structure, and process as a company competitive differentiator in the marketplace
Each Human Resources professional has his or her own tools, structures, and processes. The most important facet of this part of the process is to use differentiators the group understands and is comfortable with (this might require some education by you or an outside expert), and agrees upon. The team might have its own tool bag, and adopting or adapting some of them for the purpose of the exercise can build comfort in the often uncomfortable situation of refocusing, or rebuilding, the strategic direction of the company.
The following describes the success factors during this phase of setting strategic direction, performance expectations, and measuring both:
A. Role definition
Decision-making, processes, and analyses should be agreed upon and lead by the executive team to ensure ownership and continued momentum in finding the appropriate performance measurement tools. The Human Resources professional’s role should be clarified upfront as offering only facilitation and support. If the HR practitioner’s role is seen as the primary leader or implementor, the success of the new performance measurement (and therefore strategic direction) diminish.
B. Information management
Defining the problem to be solved, the performance to be measured, the IT requirements, the request for proposals process, cost information, and the decision-making process should be made clear upfront, and the data should be gathered in an organized fashion. Comparing apples to apples is important here, and the executives should cast votes by examining objective, comparable data on performance measurement systems. The process should broaden understanding, to end in an informed group choice rather than a selection based purely on one facet e.g. selection of the best ‘cost option’.
I have recently incorporated, and introduced at this point of the strategic direction, performance expectations, and measurement of both. Succinctly put, good web-based performance measurement and predictive tools have high flexibility, and can track across business, yearly, quarterly, or project goals. Some have way cool technology. For example, some incorporate predictive aspects such as artificial intelligence and analytics, and most incorporate email as an additional way to communicate and store performance measures. I have found that these tools can enable talent leaders to develop a first-class human resources function, and allow department managers to lead their workforce to meet new strategic and tactical goals. From a personnel perspective, it also promotes individual career development, enhancing diversity through performance-based inclusion of employees of all backgrounds and styles.
4. Emphasize focus on performance measurement alignment, from external marketplace measures, to board expectations, to each line employee
Highlighting in an explicit way that each employee’s behavior contributes the to company meeting, beating, or failing to meet its critical goals, can bring goals alignment into a new light for executive teams and boards. The renewed importance of setting strategic direction, performance expectations, and measuring both, affects all employees. In order to succeed, companies must focus all employees on their overarching strategy set by the executive staff.
This renewed important also casts a light on the importance of building and maintaining an active board of directors who contribute in measurable ways to the strategic direction and continued growth of the company. It is not uncommon for contributions of those at the board and CEO level to be measured against specific goals related to the market adoption or internal initiatives.
5. Coach and support individual executives during the performance expectation setting and performance measurement processes
Bridging the gap between strategy and employee performance is a powerful way to implement change, and to ensure that overall business goals are met. Many seasoned leaders are comfortable with developing and communicating goals to their employees, but some are not—or they are not familiar with the newer technologies. Additional time might be well spent going over the basics of SMART goals (specific, measurable, agreed upon, relevant, and time-bound) either in a classroom setting, or as a pop-up item incorporated into the performance measurement system. Additional time should be spent teaching the performance tool, or holding train-the-trainer seminars.
The renewed importance of setting strategic direction, performance expectations, and measuring both is becoming more and more apparent and crucial in the marketplace. In essence, successful companies are at the forefront of using the same tools and analytics human performance management used by supply chain managers for decades. Performance measurement allows businesses to provide clear direction and obtain measured and meaningful results that can make a company sink or soar. Human resource professionals are in a unique position to help companies select their performance measurement processes and tools, and to enable companies achieve their human performance goals.
Nadine Greiner, Ph.D. is a professional Interim Executive in the San Francisco Bay Area. She specializes in leading change, and holds a Ph.D. in Organization Development. Her clients include Apple, Bank of America, Schwab, IBM, Sutter Health, Stanford, Lucille Packard, Dignity, The City of San Francisco, The James Irvine Foundation, The SPCA, and The Sierra Club.