> Newsletter Issue Five

It's all about Performance

Performance – what is it?

In the business context, performance is a history of accomplishment. Performance is usually measured in terms of some level of success relative to our competitors and/or some accepted standard (usually a financial standard). If we perform better than our competitors we are more successful at accomplishing our business purpose year after year than they are at accomplishing theirs. Strong performance is important because it leads to business success.

There are at least three different ways in which we can measure performance:

  1. How well we do at accomplishing the specific goals and objectives that we set for our company
  2. How well we perform versus our competitors
  3. How well we perform against some accepted standard

Doing well with any one of these does not necessarily translate to doing well in all three. For example, it is possible that we could accomplish all of our company’s goals and objectives and still not do well against our competition or accepted performance standards. The reason for this might be that we set the wrong goals and objectives or that our goals were not aggressive enough.

It is also possible that we could do well at accomplishing our company’s goals and perform well in terms of an accepted standard, but still not do well against the competition. A possible explanation for this situation might be that the competition set very aggressive goals and did exceptionally well that year.

And, yes, it is possible to do well against the competition but not in terms of either our own goals or accepted standards. The most likely reason for this result would be that the competition’s performance was very poor, so we beat them but still did not have a wonderful year.

Business purpose is the starting place.

It is true that many of the measures we use to evaluate performance are financial. Certainly, the ones we use to compare our performance against our competitors and the ones that become standards within the industry are mostly financial: gross revenues, profit, market share, etc. These are important and appropriate, and at least facilitate useful comparison.

There is yet another valuable perspective on performance. In addition to the financial aspects of performance there are also the functional aspects of performance. These are the aspects that relate to the functions (or "competencies") that we need to perform in order to be successful in achieving our business purpose. Looking at performance from this perspective there are both effectiveness factors and efficiency factors that are important in determining our level of performance.

The effectiveness factors include:

  • Purpose: The goals and objectives of the company or organization – what we want to achieve
  • Commitment: The level of drive and desire that individuals within the company have about achieving the company’s purpose
  • Competencies: The organizational functions, knowledge, skills, and attributes needed by the company to accomplish its purpose
  • Alignment: The degree to which everyone is working together toward the accomplishment of the same purpose

The efficiency factors are:

  • Speed (faster): The rate at which tasks are completed, functions are performed, and goals are accomplished
  • Quality (better): The level of completeness, thoroughness, attention to detail, and responsiveness to the company’s purpose with which tasks are performed, items are produced and/or services are provided
  • Economy (cheaper): The level of stewardship of resources (e.g., time, materials, labor, impact on the company, etc.) applied in performing tasks, producing items, and providing services

Purpose (the first of the effectiveness factors):

The nature of performance is unique to each company and organization. Different companies will need a different collection of competencies in order to perform – to accomplish its purpose. Without defining the purpose of our company, we are unable to identify the specific competencies we need for accomplishment and success.

Definition: Purpose includes mission, vision, goals, objectives, and strategies. Purpose is that which the company has set out to achieve. When we look at the purpose of our company we should be able to see each of four elements that are the foundation of the company:

  • Values: those things that the company values above all others;
  • Vision: one that captures the excitement of the true potential of the company;
  • Orientation: the basic types of functions required of our company to produce the services and/or products that provide value to our customers and clients (For example: we are a manufacturing company, or we are transportation company, or we are hospital, or a law firm – each has a different orientation.);
  • Responsibility: the value and stewardship that we owe to all those who have a stake in our company (Stakeholders include: customers, clients, investors, shareholders, employees, the communities in which we operate, and many more.)

Why is purpose so important to the performance of our company? Purpose is the ultimate standard by which performance is measured. Without a clear articulation of purpose it is impossible to know how we have performed. Purpose is also the key to determining the functions and organization of the company. A thorough understanding of the purpose of the company is the first step in identifying all of the many functions, business processes, support systems, organizational structures, and procedures that are required to achieve that purpose.

A clear articulation of purpose is also an essential ingredient in building commitment within the work force (and, commitment is another important performance factor). The prerequisites to building commitment are clear goals and a strategic and lofty vision. Both goals and vision are included within an understanding of the purpose of a company. The concept is simple enough. How can we expect any individual or team to be committed unless we share with them exactly what we are expecting them to be committed to? Purpose is that to which we want everyone in the company to commit. Purpose is what we want everyone in the company to strive to achieve.

How do we communicate our company’s purpose? Can we merely set out our company’s purpose – maybe a mission statement and a description of our strategic business goals – and expect people to become committed? Doubtful! That would be like expecting loyalty without manifesting the leadership behaviors that encourage loyalty.

We must present our company’s purpose in a way that is compelling and that makes absolute business sense to those whose efforts we wish to enroll. We must provide a Compelling Business Rationale. Let’s take a closer look at the characteristics of a compelling business rationale:

  • Compelling . . .
    - Convincing
    - Inspires trust
  • Business . . .
    - Related to our business purpose, vision, and strategic goals
    - Based on an accurate assessment of the market situation
  • Rationale . . .
    - Logical plan related to accomplishment
    - Outlines actions required and how we will implement those successfully

Our compelling business rationale must describe our business purpose (that which we want to accomplish), the strategy we will use in accomplishing that purpose, why that will win for us in the marketplace, and why all of this is good for everyone who has a stake in our company.

Bottom Line: Purpose is what we want to accomplish – it is the very reason for performance. It defines the nature of the performance required for achievement – functions, processes, systems, structures, etc. It provides the standards for measuring performance and the direction for improving performance.

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