Performance management Excellence

Operational peformance steering model

This page goes into greater detail of our practical 100 criteria Operational Excellence model, on the Performance Management pillar criteria, numbered from 19 to 54 after the criteria belonging to the Process management Excellence pillar (9 to 18). The goal is not to explain the entirety of all the criteria described here but to provide enough details so that one can use these criteria to evaluate his own Operational Excellence level using them.

If our Operational Excellence model represents a business as a human body, the Performance Management pillar is unquestionably that body's brain and nervous system. It connects and aligns all the other pillars together throughout the entire company at all levels:
  • it cascades the strategy into operational objectives and performance indicators down to the processes at all organisational levels,
  • it integrates the improvement & innovation actions into the daily operational activities,
  • it enables the people and management to get the relevant information they need to make the right decisions possible at all times, further developing their own leadership skills along the way
For this reason, and because most of its criteria don't depend too heavily on any one particular industry in their key principles, Performance Management represents more than 1/3rd of our model.



From objectives to data: objectives and indicators

It may be helpful to think of performance objectives as the poles to reach on a long journey. Indicators, as a result, are essentially the compass that guides the organisation and its people - making sure that they are all headed in the right direction at all times.

Because of that, indicators are very structuring - this despite the fact that they need to fulfil many qualities that at first may appear contradictory. Not only do they need to be balanced across several dimensions, but they need to do so in a reduced number. Some are "leading" others are "lagging". They must be standard and customised to a specific business or local area. 

Above all, performance indicators need to be managed and aligned with the strategic objectives. If they aren't, they are little more than a distraction, and they will only end up generating the exact opposite of what they were supposed to achieve: be effective and efficient.

In addition to the criteria defined below, it is helpful to read our article titled Why should we talk about KPO and not KPI and make the K useful?.

19 - Key performance objectives and supporting performance objectives

Generally speaking, each organisation must have a clear set of Key Performance Objectives (otherwise known as KPOs) as requested by the level above. For the top management team, for example, the "level above" would actually be the strategy itself and the KPOs would therefore become the strategic objectives.

Other Performance Objectives (POs) may also be defined to support the KPO, but it should be clear which ones have priority over any other ones: a KPO must always be a priority over a PO.

20 - The 3-7-10 rule for performance objectives

For each organisation unit of the overall business, there is no "correct" number of Performance Objectives (both KPO and PO); the precise number will vary according to the specifics of the organisation unit.

However, we believe that for the best results, KPOs should be limited to three to guarantee proper focus and alignment throughout the organisation. The other Performance Objectives may very well go up to seven in total, to embrace the complexity of the business and to manage more precisely the main performance drivers; but no more, otherwise lack of focus and confusion start. 

21 - SMART

Every objective must fulfil the following SMART criteria:

  • Specific; the objective must be not only specific, but very clearly defined.
  • Measurable; the progress towards said objective must also be measurable. In most cases, this means that it can be quantified. However, that might be sometimes difficult to achieve and it is therefore much simpler, while still being effective, to have at least a clear definition of how to evaluate the level of performance. As a general rule of thumb, at least 80% of the objectives should be quantified.
  • Attainable; the objective must be achievable realistically. This objective attribute is still valid. However, the level of stretch should be adapted as defined for the Strategic Objectives level of stretch (for more information, see the criteria 3 of the Strategy Implementation Pillar).
  • Relevant; the objective needs to be relevant to the organisation by being aligned to both the strategy and the practice or process it measures.
  • Time-related; the time-frame to achieve the objective must be clear.



22 - "Leading" indicators

A lagging indicator is one that is typically measuring an output, or a result. In other words, it measures something that has happened and that can no longer be changed. A leading indicator, on the other hand, typically measures an input - otherwise known as a catalyst. This measures something that, when present at the right level, is favourable to the achievement of the lagging indicator.

In other words, it is a predictor - though imperfect of the result. Leading indicators measure the real business drivers that will need to be managed by the managers in the organisation. Since leading indicators are measuring the performance drivers, they are often just the essence of the management and must be present in any team set of KPI.

23 - Balanced performance objectives

Performance Objectives (KPO or PO) should follow the Balanced Scorecard principles and be balanced in the following areas:

  • Financial
  • People and competences
  • Internal processes
  • Client (both external or internal)

However, this might not apply to all teams at all levels. Most general management teams, be the ones that deal with the company, a business unit or a specific site, should have objectives in these four dimensions. Others that only have a partial responsibility may not have objectives in all dimensions.


24 - Objective <=> Indicator

Any Performance Objective will have a performance indicator along with it. This must be both formally communicated and up-to-date at all times.

Any performance indicator will also have an objective associated with it. A performance indicator without an objective is just "data" - it may help to understand some context, but it is not a performance indicator.

25 - Managed indicators

Any indicator (KPO and PO) of a team must really be managed by the team: they must be fully integrated into the operational management, published, reviewed, analysed, compared ...
Any indicator that is not managed is an unnecessary dead weight for the organisation, creating unnecessary activities to generate it.

This must also be the case for the indicators to report to higher hierarchical levels; they must not only be useful at the higher level but also for this team; it is the only guarantee that there is both a real alignment between the hierarchical levels AND that these performance indicators are reliable.


26 - Objectives <=> responsibility

All Performance Objectives are aligned with the responsibility and accountability needed to influence performance drivers of a person or team accountable for the objectives. However, there are two situations in which objectives are somewhat "shared", for lack of a better term:

  1. Defining shared objectives may be done on purpose to encourage team spirit or collaboration.
  2. It is not always easy to have an obvious indicator with a direct break down and clearly separate the accountabilities. There may not be a simple mathematical formula present.

Regardless, the number of these shared objectives should always be limited as much as possible to keep individuals, or teams, accountable for some specific scopes.

27 - Standards

In larger organisations in particular that have several sub units of the same type (like several regional offices or several production plants), the KPIs for similar units are always standardised. However, there may be some level of local customisation needed to take into account local differences. These would include different processes, varying customer segments and things of that nature.


From objectives to data: Dashboards

Dashboards are and will always be the key to efficient management meetings. To get to that point, however, they must regroup ALL the KPIs in a concise way. They must also be as visual as possible to help focus the meeting only on the most important areas of discussion.

28 - Consolidated and concise dashboard

All the Performance Objectives and Indicators of a team are to be consolidated in one team dashboard, in either paper or electronic format. If there are too many to include within a single view like this, it implies that you're dealing with a larger volume than you can handle. It is likely that not all of them are useful, and you should look for opportunities to integrate some with others. Or, they should be delegated to other teams.

The most important thing here is that the dashboard needs to be concise and structured with all key information on a single page. Other pages are only necessary to dive deeper into more details about the data on the first page - NOT to find completely new data. This is also true for an online dashboard, with the addition that the page must also not be too long. If it is, it is no longer concise.

29 - Dashboard regularly communicated

The team dashboard must be regularly updated and communicated to ALL team members. If this is an online dashboard, any update date must be clear to all involved.

30 - Performance indicators, visual status and trends

All the Performance Indicators in a dashboard must be compared to their objectives in a direct and visual way, usually by color coding. This will allow people to immediately see where to focus their actions, analysis or discussions.

Most performance indicators (and all the key ones) will have a visual way for you to see their history and to identify trends and patterns that may have otherwise gone undiscovered.

31 - Causes and actions for no achievement

Most of the Performance Objectives NOT achieved will have the causes for deviation and the corrective actions formally documented in the dashboard. This information will stay there until a full resolution is possible.

In the dashboard, this information may take the form of a summary - one that includes details in a more thorough document like an action plan, too. It may not be done for all POs, however, if the team is focused on resolving only part of them as a top priority.


From objectives to data: Data & reporting

It's equally important that data collection, storage and distribution is the basis to build the Performance Indicators and enable a deep analysis when necessary. Yes, this can consume a significant amount of your efforts. It can even make it impossible to build the right KPIs. Because of this, it must be executed in a very structured way to minimise duplication, avoid creating useless data and to embrace automation as much as possible.

However, a lack of automation should never preempt having important Performance Indicators. Likewise, automation should be performed only when the KPIs and the data really need it and are clearly defined. If this is ignored, it will represent a massive unnecessary cost that will likely be spent on the wrong information system.

32 - Automatic data collection

Data should be largely collected automatically from various information systems or equipment, rather than manually, to save time.

33 - Clear data collection and communication process

The process to collect, consolidate and even distribute that data should be fully defined with clear roles and responsibilities at all times.

34 - Accessible, accurate and timely data

Data should be easily accessible to all those who need it in a common electronic repository or database. Likewise, data should be timely, accurate, complete and well-structured - with the right level of detail and in the right format for the needs of different users.

35 - Standardisation to minimise reporting work

The reports and inputs/outputs of meetings should all use similar templates, tools and data structures to maximise the reuse of existing data moving forward. This will also have the added bonus of minimising reporting work, too.


Decision meetings

The types of meetings that will be focused on in this section are only planned and periodic management meetings - the kind typically used by the management teams to review the business performance at all hierarchical levels. Ad-hoc meetings or one-to-one meetings to manage the performance of an individual are not part of this section.

We call them "decision meetings" because they are where the decisions are made and the actions are taken - or at least, that's how it's supposed to work; it is therefore imperative to reach Excellence.

In truth, many of the whole Operational Excellence criteria of a company will likely contribute to and can be very well observed in one of these meetings:

  • One should be able to see how the strategy is cascaded into the objectives and performance indicators. This includes how well they are integrated into the key processes, whether they're following SMART principles, if they are focused, leading, managed and more.
  • One will see how the issues are NOT coming as issues, but instead as solutions to be decided. This is true if they are managed at the right levels (for example, operational issues should be managed at lower levels).
  • One can see how the leadership participates and what sense of accountability and values are exercised in these key moments.

It's important to note that these meetings are usually very costly because they require the regrouping of managers, who are the most expensive resources. Because of this, they must also be short and focused with the bare minimum number of necessary people possible.

In addition to the criteria being defined below, feel free to also read ourrecent article on this topic titled "Management meetings are the tip of the iceberg of the performance management system"

36 - Coordinated meetings

The different management meetings, either of the same team or of different teams must be well-defined. They must also be rationalised and coordinated to help minimise overlaps or the duplication of work between them.

37 - Meetings basics

Meeting basics MUST be in place. They should all have a structured agenda that is communicated ahead of time (or is repetitive enough to be known by all). Likewise, they must start and finish on-time, the agenda must be followed and time must be managed. Participants should be attentive WITHOUT side conversations or distractions.

Overall, there should be NO interruptions or phone calls accepted during this period.

38 - Minimal attendees and duration

Meetings should have the correct number of attendees and the perfect duration. The latter should be both the minimum amount of time needed to cover the scope, while also the maximum amount of time needed to have an effective meeting to begin with.

Participants must be present on-time, or their lateness must be known ahead of time. During these meetings, presence delegation to other people will be rare.

39 - Frequent and periodic

For all management teams, there will be a periodic and frequent formal management meeting to review the performance of the team fromm the previous period and the actions they took. The frequency of this will depend largely on the business and the hierarchical level of the team itself.

Usually this will be weekly for most middle management teams, but it could be quarterly for a board meeting or even daily for a workshop production team.

The important thing is that they will be frequent enough to take corrective actions as soon as possible and that the periodicity is fixed. One key point: frequent and short are better than long and not frequent at all.

40 - Supported by a dashboard with a review by exception

Performance management meetings should be supported by a KPI dashboard, action log and other necessary formal data that covers the meeting in terms of scope.

The input data must not only be complete, but also accurate and updated before the meeting itself. The Performance Indicators must be reviewed formally in the performance management meeting with a focus only on the ones not achieving their stated Performance Objectives (if all are achieved, we may review the worst ones ... or revise the objectives upwards).


41 - Meetings prepared with analysis and solutions

Before the meeting, participants should have already analysed their issues and Performance Indicators with deviance. Any Root Causes should already be known by the time the meeting begins.

Likewise, they will have prepared solutions or actions that they present to get approval or collaboration. Any problems and justifications should not be presented unless they are supporting proposed solution understanding.

42 - Minimal discussions on issues and technical topics

All meetings should focus only on the key topics and at the right level. Complex and technical issues should always be taken OUTSIDE the meeting for resolution. Discussions on issues that have not been analysed prior to the meetings should be limited.

43 - Proposed solutions review in management meetings

Management meetings should be focused on discussing and deciding upon solutions proposed - that's it. Any deviance, root causes and solutions proposed should be reviewed and challenged in a constructive and thorough way in the meeting itself. Unsatisfactory proposed solutions or explanations should trigger actions designed to guarantee their eventual resolution.

44 - Forward looking

Finally, there should be a systematic review of anticipated events or changes for the next period. Likewise, proactive actions should always be taken when it is relevant to do so.


Actions and decisions

Within this context, decisions and actions are what people really feel - either while performing those actions (meaning their workload) or when they change the way they work. They are also what is genuinely visible of the leadership.

Because of this, management must make sure the right decisions and actions are taken, implemented right, without too many of them. Obviously, the management must also demonstrate his own ability to take decisions.

45 - Clear definition and accountability of actions

Actions must be formally defined (with clear accountability and due dates), communicated and regularly tracked until completion.

46 - On time in quality actions

Actions should be mostly performed on-time and with the expected quality. This is a clear sign that there aren't too many actions, that the deadlines are realistic and there is the right drive and rigour to achieve said actions. However, too many actions performed on-time may show a lack of (positive) pressure, too.

47 - Coordinated actions

The number of action logs, action plans and action lists should be limited. There must also be a mechanism in place to guarantee that they are coordinated between the different teams.

Achieving that last point may be possible through a wide variety of means, like through the creation of a Unique Action List or via management review and the coordination of actions.

48 - Clear decisions and priorities by the right people

Decisions and priorities must be clearly defined and they should always be taken or approved by the right managers (meaning that those managers "own" the scope of the decision and they are entitled to take or approve the decision). They should also be communicated to all.


49 - Consistency of decisions and communication

Important decisions always need to be properly explained and reinforced by the appropriate communication and supporting documents. This is true to ALL people impacted either directly or indirectly by the decision at hand.

Decisions should rarely be re-discussed or challenged once they are communicated. This is always a good sign that they have been appropriately considered upfront, and that they have been well communicated and taken by the right people.

50 - Priorities changing at the right pace

It is completely normal that priorities change in a moving environment. However, they must change at the appropriate pace - largely due to relevant business changes, not to management inconsistencies.

Visible management

Finally, we arrive at the concept of visible management: something that is effective because it is understood with more clarity, faster and is remembered longer by people than any other form of management.

Use it as much as possible, but as the word "use" implies - visual management must be used to actually manage everything that happens next. That may seem like a trivial distinction, but in our experience we have seen countless visual boards that are just merely placed in work areas to be ignored. They are not updated or supported in any management meeting and, as a result, are not effective.

Note that we include the management routines in visual management, as quality management is also a close proximity between management and subordinates in the daily operations of a business. This is necessary to guarantee mutual understanding, coaching and trust.

51 - Visual boards

Visual boards should contain objectives, performance indicators, current and planned actions that are to be used within teams. That applies to office or more operational jobs, too.

Visual boards may have any format (be they a large screen, a physical board on the wall or an electronic visual board) provided that they are A) visible, and B) up-to-date.

52 - Management with visual boards

The visual management boards will be systematically used to support team management meetings. Most of data will be read from them and new information or actions will be written on them during the meeting (or just after the meeting, when necessary).

53 - Short interval meetings

Short interval control (otherwise known as frequent short meetings) should be frequently used in operational teams to take action, anticipate issues or resolve those issues in a fast way. Their frequency will depend a great deal on context. With a fast production line, it may be an hour. With a production workshop or customer help desk, it may be a day. For project development and sales teams, it could be a few days.

However, they are NOT a replacement of formal performance management meetings.

54 - Management routines

All managers should use regular management routines to interact with the individuals of their teams. Their frequency will depend on the context - they could occur weekly or even daily in a production environment, for example.

In general, they should happen at least quarterly. They should be simple, enabling quality interaction. They are not, however, official performance appraisals. They should always be focused on the future and should empower the individual to improve his or her individual performance and competencies.

Look at the next 17 criteria of the Improvement Excellence pillar of our operational Excellence model
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