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Flevy Management Insights Case Study
Performance Management Improvement Initiative for a Global Retail Firm

There are countless scenarios that require Performance Management. Fortune 500 companies typically bring on global consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture, or boutique consulting firms specializing in Performance Management to thoroughly analyze their unique business challenges and competitive situations. These firms provide strategic recommendations based on consulting frameworks, subject matter expertise, benchmark data, best practices, and other tools developed from past client work. Let us analyze the following scenario.

A global retail firm is struggling with underperformance across its various divisions, despite having a robust performance management system in place. The organization has been grappling with low employee morale, high turnover rate, and declining sales. The organization's existing performance management system appears to be ineffective in driving employee performance and aligning it with the organization's strategic objectives.

Upon initial examination, the root causes of this situation could be manifold. The performance management system might be outdated, not aligned with the company's current strategic objectives, or not effectively communicated to the employees. Alternatively, the organization's management might not be effectively using the system to motivate employees and drive performance.


A 5-phase approach to Performance Management can be employed to address this situation:

  1. Diagnostic Assessment: Identify the current state of the performance management system, its alignment with the strategic objectives, and its effectiveness in driving performance.
  2. Gap Analysis: Identify gaps in the current system and potential areas for improvement.
  3. Design: Develop a new performance management system that is aligned with the organization’s strategic objectives and designed to drive performance.
  4. Implementation: Implement the new system across the organization, ensuring it is effectively communicated and understood by all employees.
  5. Monitoring and Evaluation: Regularly monitor the new system's effectiveness and make necessary adjustments.

Key Considerations

While this methodology is robust, the CEO might be concerned about the potential disruption during the implementation phase, the costs associated with developing and implementing a new system, and the time required to see tangible results.

To mitigate these concerns, it is important to emphasize that the implementation will be done in phases to minimize disruption. Additionally, the costs of not addressing the current issues could far outweigh the costs of developing and implementing a new system. Finally, while the results might not be immediate, the long-term benefits in terms of improved performance and employee morale will be significant.

Expected Outcomes

  • Improved performance across all divisions of the organization.
  • Increased employee morale and reduced turnover rate.
  • Increased alignment of employee performance with the organization's strategic objectives.

Performance Management Best Practices

To improve the effectiveness of implementation, we can leverage best practice documents in Performance Management. These resources below were developed by management consulting firms and Performance Management subject matter experts.

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Potential Implementation Challenges

  • Resistance to change from employees and management.
  • Costs associated with developing and implementing a new system.
  • Time required to see tangible results.

Critical Success Factors and Key Performance Indicators

  • Improved performance across all divisions (measured by Key Performance Indicators such as sales figures, customer satisfaction scores, etc.).
  • Increased employee morale (measured by employee satisfaction surveys).
  • Reduced turnover rate (measured by HR statistics).

Sample Deliverables

  • Performance Management System Diagnostic Report (Word)
  • Performance Management System Design Document (Word)
  • Implementation Plan (Excel)
  • Monitoring and Evaluation Report (PowerPoint)

For effective implementation, take a look at these Performance Management best practices:

Case Studies

Several Fortune 500 companies have successfully overhauled their Performance Management systems to drive performance and align it with their strategic objectives. For instance, General Electric replaced its traditional annual review system with a more flexible, real-time feedback system. Similarly, Adobe replaced its annual performance reviews with regular check-ins, resulting in a 30% decrease in voluntary turnover.

Additional Considerations

The organization's leadership must be fully committed to the new Performance Management system for it to be successful. They must be willing to lead by example, effectively communicate the new system to the employees, and provide necessary support during the implementation phase.

Furthermore, the organization must be ready to invest in training and development to equip its employees with the necessary skills and competencies to meet the new performance standards.

Lastly, it is important to remember that a Performance Management system is not a one-size-fits-all solution. The system must be tailored to the organization's specific needs and strategic objectives, and regularly reviewed and updated to ensure its continued effectiveness.

Best Practices Relevant to Performance Management

Here are additional resources relevant to Performance Management from the Flevy Marketplace.

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