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Modern performance management goes beyond past practices in the same way that GPS systems have enhanced the quality of information available to a driver.

A car dashboard tells you about the inner workings of a vehicle. It lets you know how fast you’re going, how much gas is in the tank, and how hard the engine is working. It includes warning lights to mitigate the risk of running out of oil or gas.

Much of the history of performance management was about creating similar dashboards focused on the current state of the company. The typical performance management system provided finance-centric measurements, processes, and systems that told how the business did in the prior quarter and provided guidance about how it is currently running.

A GPS system provides an interactive map of where you want to go and how to get there. It describes the surrounding environment so that you know what roads to take. It provides context for your surroundings and options based on your preferences and needs, such as shortest route or freeways only.

In addition, GPS systems alert us when there are risks in the road ahead, such as an accident blocking a certain highway, traffic congestion, or a bridge closed for construction. Using this information, we can replot our route to make sure we still get to our destination.

Modern performance management does the same thing as a GPS system by helping companies define direction in a precise way, by providing the means to communicate and propagate a detailed understanding of the way forward, by looking ahead to what the likely outcomes are with predictive models, by looking into what is happening in the business network, and by expanding and deepening awareness of the direction of the employees, partners, and key stakeholders.

In terms of the analogy, our destination represents the strategic goals of the business. The roadblocks and weather alerts represent the risks we encounter while pursuing that strategy. Compliance is following the rules of the road, such as traffic signs or speed limits. Heeding these rules helps us get to our destination. If we ignore a red light, we’re more likely to get into an accident; if we disobey the speed limit, we’re more likely to get pulled over by a police officer. Compliance is also a matter of adhering to internal requirements such as keeping tires inflated to the optimal pressure or maintaining proper oil pressure. Needless to say, ignoring compliance has bad consequences: our travel time is slower and the costs are higher.

The task of performance management applications is to provide the traditional dashboard and to supplement that information with a model of where a company is going and how fast it is getting there. Performance management is both a dashboard and a GPS system for the modern enterprise, one that adds the dimensions of time, risk, and compliance while looking at what happened in the past, present, and future.

Excerpted from Driven to Perform: Risk-Aware Performance Management From Strategy Through Execution (Nenshad Bardoliwalla, Stephanie Buscemi, and Denise Broady, New York, NY, Evolved Technologist Press, 2009). Copyright © 2009 by Evolved Media, LLC

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