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Are You Still Using a First Generation Performance Framework?

Editor's Note: Take a look at our featured best practice, Objectives and Key Results (OKR) (23-slide PowerPoint presentation). Successful organizations are using Objectives and Key Results (OKR) now. OKRs are efficient way to track company and team goals and measure their progress. It helps every organization's success by cutting out unimportant goals and focusing on what truly is important within the organization. OKR [read more]

Also, if you are interested in becoming an expert on Performance Management, take a look at Flevy's Performance Management Frameworks offering here. This is a curated collection of best practice frameworks based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. By learning and applying these concepts, you can you stay ahead of the curve. Full details here.

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What is a “first” or “second” generation Performance Management and Measurement framework?

Let’s begin by defining these concepts.

First generation Performance Management and Measurement frameworks derive Key Performance Indicators (KPIs) from strategy.  These include well known and established frameworks, such as Balanced Scorecard (BSC) and EFQM Excellence Model.

These first generation frameworks have led organizations to increase the number and range of performance measure, but do not add the value that could be achieved.   These frameworks have significant weaknesses in the way that these KPIs are identified, integrated, communicated and acted upon.

On other hand, a second generation Performance Management and Measurement frameworks derives KPIs from stakeholder and organizational needs.  This concept was developed by Andrew Jack, when he observed the management and employee dissatisfaction with existing Performance Measurement and Management frameworks.  To address these issues, Andrew Jack developed the second generation framework, Value Mapping.

Value Mapping focuses on driving true value for the organization, by deriving measures tied to Value Drivers and Value Outcomes:

  • Value Drivers are things that drive Value Creation.
  • Value Outcomes are the desired outcomes for the stakeholders.

The Value Mapping framework utilizes a pictorial way of integrating the most useful performance measures, which helps employees to reconnect themselves to their performance.  It identifies the most important value required by the stakeholders and then develops a strategy to integrate it.  Value Mapping also focuses on effective communication and assets that can create greater value to drive performance.

valuemapping

From the Value Mapping process visual above, we see the components of this model are:

  • Value Needs Assessment
  • Review of Strategy and Objectives
  • Mapping and Integration of Objectives
  • Predicted Value Outcome Mapping
  • Value Drivers Assessment
  • Value Driver Mapping
  • Measures Development and Refinement
  • Communication, Planning, and Allocation of Energy/Resources
  • Value Outcome Assessment and Reporting Value

All organizations should be value-focused.  This is the basis to Value Mapping.  The Value Mapping model is an approach to value creation that uses the language of value to identify and structure performance measures.

Before we can review and develop our KPIs, we need to understand the Value Outcomes that we are trying to create, which are influenced by the needs of our stakeholders.

Value Mapping, specifically, helps management and employees reconnect with performance measures and performance management.  Value Mapping identifies the most important stakeholder needs and uses these to measure value outcomes, as well as to develop an integrated strategy. Value Mapping approach also places great emphasis on the effective communication of the activities and assets that create value, the value drivers, and the measures of their performance.  It is an approach that can help to structure the reporting of value for all people concerned in the success of the organization.

Are you a management consultant?  You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

Interested in gaining more understanding on how to implement Value Mapping?  You can learn more and download an editable PowerPoint about Value Mapping here on the Flevy documents marketplace.

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241-slide PowerPoint presentation
Benchmarking is the pursuit of superior company performance through best practices. It involves setting operational targets based on industry best practices. Traditional target-setting methods have left some companies vulnerable to global competition. Japanese philosophy of "dantotsu" [read more]

Want to Achieve Excellence in Performance Management?

Gain the knowledge and develop the expertise to become an expert in Performance Management. Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. Click here for full details.

Performance Management (also known as Strategic Performance Management, Performance Measurement, Business Performance Management, Enterprise Performance Management, or Corporate Performance Management) is a strategic management approach for monitoring how a business is performing. It describes the methodologies, metrics, processes, systems, and software that are used for monitoring and managing the business performance of an organization.

As Peter Drucker famously said, "If you can't measure it, you can't improve it."

Having a structured and robust Strategic Performance Management system (e.g. the Balanced Scorecard) is critical to the sustainable success of any organization; and affects all areas of our organization.

Learn about our Performance Management Best Practice Frameworks here.

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About David Tang

David Tang is an entrepreneur and management consultant. His current focus is Flevy, the marketplace for business best practices (e.g. frameworks & methodologies, presentation templates, financial models). Prior to Flevy, David worked as a management consultant for 8 years. His consulting experience spans corporate strategy, marketing, operations, change management, and IT; both domestic and international (EMEA + APAC). Industries served include Media & Entertainment, Telecommunications, Consumer Products/Retail, High-Tech, Life Sciences, and Business Services. You can connect with David here on LinkedIn.

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