Performance management is the process or system by which an organization measures and improves performance within its workforce.
Although the term most commonly refers to individual performance, organizations use performance management to monitor performance on an organizational level, a departmental level or team level.
The parts of a performance management system usually include:
- Performance reviews
- Manager one-on-ones
- Performance improvement plans
- Peer feedback
- Performance improvement plans
- Goal-setting and tracking
- Rewards and recognition programs
Performance management training teaches you that a Key Performance Indicator (KPI) is a quantifiable matrix that replicates how well an organization is accomplishing its stated goals and objectives.
In its simplest form, a KPI is a type of performance measurement that helps you understand how your organization or department is performing. A good KPI should act as a compass, helping you and your team understand whether you’re taking the right path toward your strategic goals. To be effective, a KPI must:
- Be crucial to achieving your goal
- Be well-defined and quantifiable
- Be communicated throughout your organization and department
- Be applicable to your Line of Business (LOB) or department.
Of course, there are dozens of Key Performance Indicators. One of the most obvious but still most important is profit. Analysts need to take a hard look at both gross and net profit margin to better understand how successful an organization is at generating a high return.
An important customer KPI is Customer Lifetime Value (CLV) because minimizing cost isn’t the only way to optimize customer acquisition.
CLV helps you look at the value your organization is getting from a long-term customer relationship. This performance indicator can be used to narrow down which channel helps gain the best customers for the best price.
Want to learn more about performance management? Tonex offers several Performance Management courses.
For more information, questions, comments, contact us.
Additionally, Tonex offers 120 different courses in a dozen categories in Leadership training.