Business Studies

Strategic Management Topic 7 Q4
What is the difference between performance measurement and performance management? How does the combination of both enable an organization to achieve and maintain a well-balanced and effective performance management system?

ANSWER

The Difference between Performance Measurement and Management

Performance measurement and management are two terms that are often used interchangeably within organizations. Performance measurement focuses on measuring the results and outcomes of a company’s activities. In contrast, performance management focuses on managing or controlling processes to ensure that goals for performance are being met. Often, performance measurement is used to determine if goals are being met (Bititci et al., 2018). If there is a large variance between the actual results and the set goals or targets for performance, this may indicate that processes need to be managed to improve outcomes.

Performance management focuses on consistent improvement in all areas of the organization through continual monitoring, measuring, and reporting. Performance management attempts to establish a baseline for performance by identifying key areas that need improvement or evaluation, then measuring the current performance levels against the baseline. This allows the creation of action plans based on what needs to be changed/improved, executing those actions plans, and finally, re-measures performance based on actual results (Hutchinson, 2013).

Achieving and Maintaining a Well-Balanced and Effective Performance Management System

Organizations rely on performance measurement and management to achieve a well-balanced and effective performance management system. Ideally, an effective performance management system focuses on improving overall organizational performance (De Lancer Julnes, 2017). Therefore, combining performance measurement and management allows the system to monitor essential aspects and set goals, and improve performance. This is because performance management allows the system to measure progress toward achieving and design strategies to improve organizational goals. On the other hand, performance measurement allows the performance management system to measure the extent to which the stated goals are achieved. Performance measurement and management are important for the performance management system because they help ensure that the organization is moving toward achieving its goals and improvement. Relatively, they ensure that the organizational goals align with performance and that the management practices are enhanced.

References

Bititci, U. S., Bourne, M., Cross, J. A. F., Nudurupati, S. S., & Sang, K. (2018). Towards a theoretical foundation for performance measurement and management.

De Lancer Julnes, P. (2017). Performance-based management systems: Effective implementation and maintenance. Routledge.

Hutchinson, S. (2013). Performance management: theory and practice. Kogan Page Publishers.