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Few subjects are more widely discussed—and more misunderstood—than performance management. Today, with the demand for qualified people higher than ever, the importance of performance management has never been greater. In this article, we'll take a close look at a step-by-step approach to performance management developed by NAPL. We'll look at two levels—organizational performance and individual performance—and how they are linked for maximum results.

John Whitney, professor of Business at Columbia University and author of "The Economics of Trust", has an extensive background as a "turnaround" consultant. From his experience, he insists that he can go into just about any organization and eliminate up to 50 percent of the activities being performed by employees with little or no impact on the overall performance of the organization. While you may or may not buy his premise, ask yourself these questions:

• Are all our employees working in the same direction, creating value for the customer?
• Do they understand the purpose, mission, and vision of the company?
• And, most importantly, do they understand and appreciate how their actions, day in and day out, contribute to the success of the enterprise?

Put it this way: If they did, what could your organization accomplish?

Linking organizational and individual performance is not a new idea. While few will argue against it, so much has been written and presented on the subject that a relatively simple objective has, in many ways, become a complex, cumbersome, and expensive proposition. To begin with, we view organizational performance around four key questions:

• What do we want to accomplish? (Goals/Targets)
• Why is it important? (Mission)
• How do we want to go about achieving it? (Values)
• What will happen if we're successful—what will it mean to our key stakeholders (employees, customers, ownership, vendors, and the community)? (Vision)

It is important that the specific targets you choose for measuring organizational performance reflect the strategic intent of the organization. Ideally, these will come directly from your operating plan, and address three distinct, yet interrelated areas, each of which will be weighted equally when determining an overall performance score:

• Financial targets
• Sales and service targets
• Strategic targets

Financial targets are just that. Profitability, efficiency, and cost control are specific goals to set in this category. Sales and service targets are next. What do you want to sell, and to whom? Other potential targets for this section are customer service goals, such as on-time delivery, collection/accounts receivable days, length of time it takes to generate an invoice, customer retention rate, client satisfaction ratings (using instruments such as the NAPL eKG competitiveness system), and lifetime value of customers.