Business performance management

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Organizational performance and its types.[1]

Business performance management (BPM), also known as corporate performance management (CPM)[2] enterprise performance management (EPM),[3][4] organizational performance management, or simply performance management are a set of management and analytic processes that ensure activities and outputs meet an organization's goals in an effective and efficient manner. Business performance management is contained within approaches to business process management.[5]

Performance management can focus on the performance of a whole organization, a department, an employee, or the processes in place to manage particular tasks.[6] Performance management standards are generally organized and disseminated by senior leadership at an organization and by task owners, and may include specifying tasks and outcomes of a job, providing timely feedback and coaching, comparing employees' actual performance and behaviors with desired performance and behaviors, instituting rewards, etc.[7] The technique can involve outlining the role of each individual in the organization in terms of functions and responsibilities.[8]

Specialists in many fields are concerned with organizational performance including strategic planners, operations, finance, legal, and organizational development.


Before the Information Age in the late 20th century, businesses sometimes laboriously collected data from non-automated sources. As they lacked computing resources to analyze the data properly, they often made commercial decisions primarily by intuition.

As businesses started automating their processes, the availability of data increased. However, collection often remained a challenge due to a lack of infrastructure for data exchange or incompatibilities between systems. Reports on the gathered data sometimes took months to generate and these delays allowed lack of informed strategic decision-making.

In 1989 Howard Dresner, a research analyst at Gartner, popularized "business intelligence" (BI) as an umbrella term to describe a set of concepts and methods to improve business decision-making by using fact-based support systems. Performance management builds on a foundation of BI but combines it with the planning-and-control cycle of the enterprise with enterprise planning, consolidation, and modeling capabilities.

The advent of increasing standards, automation, and technologies led to vast amounts of data becoming available. Data warehouse technologies allowed the building of repositories to store this data. Improved ETL and enterprise application integration tools have increased the timely collection of data. OLAP reporting technologies allowed faster generation of new reports which analyze the data. As of 2010, business intelligence has become the art of collecting large amounts of data, extracting useful information, and turning that information into actionable knowledge.[citation needed]

By 2017, Gartner retired the concept of "CPM" and reclassified it as "financial planning and analysis (FP&A)," and "financial close" to reflect two concepts: increased focus on planning and the emergence of a new category of solutions supporting the management of the financial close.[9]

Definition and scope[edit]

Business performance management has three main activities:

  • Selection of goals
  • Consolidation of data that is relevant to an organization's progress
  • Interventions made by managers based on the data reviewed to improve future performance

All three activities typically run concurrently, with interventions affecting the selection of goals, the information monitored, and the activities undertaken by the organization.

Several domains in the field are driven by corporate initiatives, academic research, and commercial approaches. These include:

  • Strategy formulation
  • Business planning and forecasting
  • Financial management
  • Supply chain effectiveness

Based on the mission and vision of an organization, different strategic needs may drive how BPM domains are leveraged and promoted within an organization.[10] For example, a professional services firm based in Canada may view the need to have effective and transparent supply chain operations very differently from a clothing manufacturer with operations throughout the world. What is common in the BPM approach is the closed-loop BPM process model advocated by Kaplan and Norton[vague] and their management approaches to strategy formulation, including balanced scorecard and strategy map techniques.

Innovative technologies provide one approach to collapsing this gap and allowing corporate strategic outcomes to be fully realized and risk management programs to be fully described.[11]


Various frameworks for implementing business performance management exist. Companies use a top-down framework to align planning and execution, strategy and tactics, and business-unit and enterprise objectives. Reaction frameworks include the Six Sigma strategy, balanced scorecard, activity-based costing (ABC), objectives and key results (OKRs), total quality management, economic value added, integrated strategic measurement, and theory of constraints.


Performance management principles are used most often in the workplace and can be applied wherever people interact with their environments to produce desired effects—schools, churches, community meetings, sports teams, health settings,[12] governmental agencies, social events, and even political settings.

The way performance management is applied is important in getting the most out of the group. It can have a positive impact on how employees perform on a day-to-day basis. In order to avoid a negative impact, it must be applied in a way that does not encourage internal competition, but rather teamwork, cooperation, and trust.[13] This is done through an implementation process of clarifying the work that has to be done, setting goals and establishing a performance plan, frequently providing coaching, conducting a formal review, and recognizing and rewarding top performance.

Managers use performance management to align company goals with the goals of teams and employees in an effort to increase efficiency, productivity, and profitability.[14] Performance management guidelines stipulate clearly the activities and outcomes by which employees and teams are evaluated during performance appraisal.[15] Many types of organization use performance management systems (PMS) to evaluate their business according to their targets, objectives, and goals to achieve the vision of their organization. For example, research institute may use PMS to evaluate their research success in achieving specific development targets in line with the institute vision.[16] Complex multifaceted performance drivers such as societal contribution of research may be evaluated along with many other complex performance drivers like research commercialization, research collaborations, in focus of many development areas such as commercial agriculture sector.[17][18] In such cases research institute may use data-driven real-time PMS to deal with such complex performance management challenges and to be on track of research practices towards development needs of a country in achieving innovations for development of agriculture sector.[19][20]

To apply performance management principles, a commitment analysis is completed first to create a mission statement for each job. The mission statement is a job definition in terms of purpose, customers, product, and scope. This analysis is used to determine the continuous key objectives and performance standards for each job position.

Following the commitment analysis is the work analysis of a particular job in terms of the reporting structure and job description. If a job description is not available, then a systems analysis is completed to create a job description. This analysis is used to determine the continuous critical objectives and performance standards for each job.

Werner Erhard, Michael C. Jensen, and their colleagues developed a new approach to improving performance in organizations. Their model is used to stress how the constraints imposed by one's own worldview can impede cognitive abilities that would otherwise be available. Their work delves into the source of performance, which is not accessible by mere linear cause-and-effect analysis. They assert that the level of performance people achieve correlates with how work situations occur to them and that language (including what is said and unsaid in conversations) plays a major role in how situations occur to the performer. They assert that substantial gains in performance are more likely to be achieved by management understanding how employees perceive the world and then encouraging and implementing changes that make sense to employees' worldview.[21]

Benefits of performance management[edit]

In the public sector, the effects of performance management systems have differed from positive to negative, suggesting that differences in the characteristics of performance management systems and the contexts into which they are implemented play an important role to the success or failure of performance management.[22][23]

How performance management can fail[edit]

Managers who are not clear in their expectations may end up with employees who believe that have been doing a great job, when they have been doing something other than what has been asked of them.

Employees who question how fair the performance management system is will discredit its effectiveness. An example of this would be a high level of internal competition within the performance management system. This will cause those who do not get rewarded to be disgruntled with the process. Additionally, without proper implementation in the planning of the performance management system, employees may view the process as something they must have compliance with. This will result in a less proactive and more inaccurate representation of the performance of an employee.[24]

Organizational development[edit]

In organizational development (OD), performance can be thought of as Actual Results vs Desired Results. Any discrepancy, where Actual is less than Desired, could constitute the performance improvement zone. Performance management and improvement can be thought of as a cycle:

  1. Performance planning where goals and objectives are established
  2. Performance coaching where a manager intervenes to give feedback and adjust performance
  3. Performance appraisal where individual performance is formally documented and feedback delivered

A performance problem is any gap between Desired Results and Actual Results. Performance improvement is any effort targeted at closing the gap between Actual Results and Desired Results.[25]

Other organizational development definitions are slightly different. The U.S. Office of Personnel Management (OPM) indicates that Performance Management consists of a system or process whereby:

  1. Work is planned and expectations are set
  2. Performance of work is monitored
  3. Staff ability to perform is developed and enhanced
  4. Performance is rated or measured and the ratings summarized
  5. Top performance is rewarded.[26]

Design and implementation[edit]

Performance management is the term used to refer to activities, tools, processes, and programs that companies create or apply to manage the performance of individual employees, teams, departments, and other organizational units within their organizational influence. In contrast, performance appraisal refers to the act of appraising or evaluating performance during a given performance period to determine how well an employee, a vendor or an organizational unit has performed relative to agreed objectives or goals, and this is only one of many important activities within the overall concept of performance management.

At the workplace, performance management is implemented by employees with supervisory roles. Normally, the goal of managing performance is to allow individual employees to find out how well they had performed relative to performance targets or key performance indicators (KPIs) during a specific performance period from their supervisors and managers.

An organization-wide 360-degree feedback process integrated into its culture can be a powerful tool for communicating and instituting change, rapidly touching all members of the organization when new markets, strategies, values and structures are introduced into the system.[27]

Organizations and companies typically manage employee performance over a formal 12-month period (otherwise known as the formal company performance period).

The results of performance management exercises are used in:

  • Employee development planning to select the most appropriate and suitable development intervention to improve employees' knowledge, skills and behavior
  • Factual basis for compensation and rewards (pay raise & bonuses being the most common)
  • Factual basis in consideration with other factors for mobility (Example: transfers and promotions)

Each year companies spend millions on their performance management systems. In order for performance management to be successful, businesses must continue to adapt their system to correct their current deficiencies. Some aspects may resonate more with employees compared to others (e.g., goal setting or performance bonuses).[28] Effective management will set up a performance management system that is distinctive and consistent. The goal is to continue to alter the system to have higher employee engagement and increase their employees’ performance at work. In turn, companies hope this results in less turnover and creates a better workplace environment.

Selection of goals[edit]

  • Goal-alignment queries
Determine the short and medium-term purpose of the program. What strategic goal(s) of the organization will the program address? What organizational mission/vision does it relate to? A hypothesis needs to be crafted that details how this initiative will eventually improve results/performance (i.e., a strategy map).

Goals are updated regularly based on the results metrics. Businesses start a BPM program by setting corporate goals before determining the means to achieve them. Results are closely monitored to modify goals. For example, if a managerial decision increased worker productivity, the business may decide to reinforce the goal. Goals are rulers to businesses for measuring success. A business may not necessarily exclusively set financial goals. They may choose to set goals in other aspects such as managerial or ethical goals.

According to Richard et al. (2009), organizational performance metrics encompass three specific areas of firm outcomes:[29]

The term "organizational effectiveness"[30] is broader.

Specialists in many fields are concerned with organizational performance including strategic planners, operations, finance, legal, and organizational development.

The balanced scorecard methodology tracks multiple dimensions such as:

Information monitoring[edit]

  • Baseline queries
Assess current information-gathering competency. Does the organization have the capability to monitor important sources of information? What data is being collected, and how is it being stored? What are the statistical parameters of this data, e.g., how much random variation does it contain? Is this being measured?
  • Cost and risk queries
Estimate the financial consequences of a new BI initiative. Assess the cost of the existing operations and the increase in costs associated with the BPM initiative. What is the risk that the initiative will fail? This risk assessment should be converted into a financial metric and included in the planning.

Information monitoring, also known as information consolidation, is a business process where data is gathered and filtered. Software aids businesses analyze the data and presents it in a comprehensible manner to allow managers to make decisions accordingly. Individual companies define their own sets of metrics and KPIs used by software to create data reports.

  • Metrics-related queries
Information requirements need operationalization into clearly defined metrics. Decide which metrics to use for each piece of information being gathered. Are these the best metrics, and why? How many metrics need to be tracked? If this is a large number (it usually is), what kind of system can track them? Are the metrics standardized so that they can be benchmarked against performance in other organizations? What are the industry standard metrics available?
  • Measurement methodology-related queries
Establish a methodology or a procedure to determine the best way of measuring the required metrics. How frequently will data be collected? Are there any industry standards for this? Is this the best way to do the measurements? How do we know that?

Managerial adjustments[edit]

After reviewing the data, the business intervenes and reviews its original goals, and then proposes new measures to improve business efficiency and profitability. The adjustments are reflected in future data analyses.

  • Results-related queries
Monitor the BPM program to ensure that it meets objectives. The program itself may require adjusting. The program should be tested for accuracy, reliability, and validity. How can it be demonstrated that the BI initiative, and not something else, contributed to a change in results? How much of the change was probably random?

Considerations of implementation[edit]

Additional questions may arise when implementing a business performance management program which involve stakeholders in the business and the economy, including investors, vendors, partners, and competition.

  • Customer and stakeholder queries
Determine who will benefit from the initiative and who will pay. Who has a stake in the current procedure? What kinds of customers/stakeholders will benefit directly from this initiative? Who will benefit indirectly? What quantitative/qualitative benefits follow? Is the specified initiative the best or only way to increase satisfaction for all kinds of customers? How will customer benefits be monitored? What about employees, shareholders, and distribution channel members?

Metrics and key performance indicators[edit]

Items of generic importance include:

  • Consistent and correct KPI-related data providing insights into operational aspects of a company
  • Timely availability of KPI-related data
  • KPIs designed to reflect the efficiency and effectiveness of a business directly
  • Information presented in a format which aids decision-making for management and decision-makers
  • Ability to discern patterns or trends from organized information

Areas in which management may gain insights using business performance management include real-time dashboard on key operational metrics, customer-related statistics, marketing-channel analysis, and campaign management.

Although the following list describes what a bank might monitor, it can apply to similar service-sector companies.

  • real-time dashboard on key operational metrics
  • customer-related statistics:
    • new customers acquisition
    • customers retention
    • attrition of customers (including breakup by reason for attrition)
    • turnover generated by segments of the customers (possibly using demographic filters)
    • outstanding balances held by segments of customers and terms of payment (possibly using demographic filters)
    • collection of bad debts within customer relationships
    • delinquency analysis of customers behind on payments
    • profitability of customers by demographic segments and segmentation of customers by profitability
  • campaign management, market research, and analysis:
    • demographic analysis of individuals (potential customers) applying to become customers, and the levels of approval, rejections, and pending numbers
  • marketing-channel analysis

Business performance management integrates the company's processes with CRM or[citation needed] ERP. Companies may use it to gauge customer satisfaction, control customer trends, and influence shareholder value.[citation needed]


Because of business performance management, activities in large organizations often involve collecting and reporting large volumes of data. Many software vendors, particularly those offering business intelligence tools, will market products intended to assist in this process. As a result of this marketing effort, business performance management is often incorrectly understood as an activity that relies on software systems to work, and many definitions of business performance management explicitly suggest software as being a definitive component of the approach.[31]

This interest in business performance management from the software community is interpreted by some to be sales-driven.[32]

Since 1992, business performance management has been influenced by the rise of the balanced scorecard framework. Managers can use the balanced scorecard framework to clarify the goals of an organization, identify how to track them, and decide if intervention is necessary. These steps are the same as those that are found in BPM, and as a result, a balanced scorecard can be used as the basis for business performance management activity with organizations.[citation needed]

In the past, owners sought to drive strategies throughout their organizations, to transform these strategies into actionable metrics, and to use analytics to expose the cause-and-effect relationships that could give insights into decision-making.

Business performance management consists of a set of management and analytic processes, supported by technology, which enables businesses to define strategic goals and then measure and manage performance against those goals. Core business performance management processes include financial planning, operational planning, business modeling, consolidation, reporting, analysis, and monitoring of key performance indicators linked to strategy.

Business performance management involves data consolidation from various sources, querying and analysis of the data, and putting the results into practice.

Application software types[edit]

People working in business intelligence have developed tools that ease the work of business performance management, especially when the business-intelligence task involves gathering and analyzing large amounts of unstructured data.

Tool categories commonly used for business performance management include:

See also[edit]



  1. ^ Mahmoudi, Amin; Javed, Saad Ahmed (2022). "Performance Evaluation of Construction Sub‐contractors using Ordinal Priority Approach". Evaluation and Program Planning. 91: 102022. doi:10.1016/j.evalprogplan.2021.102022. ISSN 0149-7189. PMID 34736766. S2CID 239609916.
  2. ^ "Introducing the CPM Suites Magic Quadrant", Lee Geishecker and Frank Buytendijk, 2 October 2002,, M-17-4718
  3. ^ Frolick, Mark N.; Ariyachandra, Thilini R. (Winter 2006). "Business performance management: one truth" (PDF). Information Systems Management. 23: 41–48. doi:10.1201/1078.10580530/45769.23.1.20061201/91771.5. S2CID 11317244. Archived from the original (PDF) on 2011-07-19. Retrieved 2010-02-21. Business Performance Management (BPM) [...] is also known and identified by other names, such as corporate performance management and enterprise performance management.
  4. ^ Mojdeh, Sana (2005-12-20). Technology-enabled Business Performance Management: Concept, Framework, and Technology (PDF). 3rd International Management Conference. pp. 1–9. Archived from the original (PDF) on 2011-07-22. Retrieved 2010-02-21. Confusion also arises because industry experts can not agree what to call BPM, let alone how to define it, META Group and IDC use the term 'Business Performance Management', Gartner Group prefers 'Corporate Performance Management', and others favor 'Enterprise Performance Management'.
  5. ^ vom Brocke, J. & Rosemann, M. (2010), Handbook on Business Process Management: Strategic Alignment, Governance, People, and Culture (International Handbooks on Information Systems). Berlin: Springer
  6. ^ Harris, Hilary; Brewster, Chris; Sparrow, Paul (2003). International Human Resource Management. CIPD Publishing. ISBN 9780852929834.
  7. ^ "Performance Management". U.S. Office of Personnel Management. Retrieved 2019-02-28.
  8. ^ Hameed, Waseem (2020-11-12). "Performance Management".
  9. ^ Van Decker, John E.; Rayner, Nigel; Iervolino, Christopher (October 31, 2017). "Back to Basics: The Refocusing of Corporate Performance Management". Gartner. G00341616. Retrieved 2019-04-16.
  10. ^ "EPM Software".
  11. ^ "Organizational Structures Supporting Rich Survival". Springer. Retrieved 17 March 2023.
  12. ^ Mettler T, Rohner P (2009). Performance management in health care: The past, the present, and the future (PDF). International Conference Business Informatics. Vienna. pp. 699–708. Archived (PDF) from the original on 2022-10-09.
  13. ^ Smith, Marisa; Bititci, Umit Sezer (2017-09-04). "Interplay between performance measurement and management, employee engagement and performance". International Journal of Operations & Production Management. 37 (9): 1207–1228. doi:10.1108/ijopm-06-2015-0313. ISSN 0144-3577.
  14. ^ Zaffron, Logan, Steve, David (Feb 2009). Performance Management: The Three Laws of Performance: Rewriting the Future of Your Organization and Your Life (1st ed.).{{cite book}}: CS1 maint: multiple names: authors list (link)
  15. ^ "Performance". U.S. Office of Personnel Management. Retrieved 2019-02-28.
  16. ^ Abeysiriwardana, Prabath Chaminda; Jayasinghe-Mudalige, Udith K. (2021-06-01). "Role of Peripheral Analysis Methods in Adoption of Successful KPIs for a Research Institute Working Towards Commercial Agriculture". International Journal of Global Business and Competitiveness. 16 (1): 61–71. doi:10.1007/s42943-021-00021-z. ISSN 0976-1888. PMC 8039501.
  17. ^ Abeysiriwardana, Prabath Chaminda; Jayasinghe-Mudalige, Udith K.; Seneviratne, Gamini (2022-12-31). "Probing into the concept of 'research for society' to utilize as a strategy to synergize flexibility of a research institute working on eco-friendly commercial agriculture". All Life. 15 (1): 220–233. doi:10.1080/26895293.2022.2038280. ISSN 2689-5293. S2CID 246761304.
  18. ^ Abeysiriwardana, Prabath Chaminda; Jayasinghe-Mudalige, Udith Krishantha (2021-01-01). "Role of key performance indicators on agile transformation of performance management in research institutes towards innovative commercial agriculture". Journal of Science and Technology Policy Management. 13 (2): 213–243. doi:10.1108/JSTPM-10-2020-0151. ISSN 2053-4620. S2CID 237685948.
  19. ^ Abeysiriwardana, Prabath Chaminda; Jayasinghe-Mudalige, Udith K.; Kodituwakku, Saluka R. (2022-05-23). ""Connected researches" in "smart lab bubble": A lifeline of techno-society space for commercial agriculture development in "new normal"". New Techno Humanities. doi:10.1016/j.techum.2022.05.001. ISSN 2664-3294. S2CID 249035865.
  20. ^ Abeysiriwardana, Prabath Chaminda; Jayasinghe-Mudalige, Udith K.; Kodituwakku, Saluka R.; Madhushani, K. B. (2022-08-22). "Intelligently driven performance management: an enabler of real-time research forecasting for innovative commercial agriculture". SN Social Sciences. 2 (9): 168. doi:10.1007/s43545-022-00484-8. ISSN 2662-9283. PMC 9395937. PMID 36033638.
  21. ^ Madden, Bartley J. (September 2014). Reconstructing Your Worldview. Learning What Works Inc. p. 99. ISBN 978-0988596931.
  22. ^ Nielsen, Poul A. 2014. "Performance Management, Managerial Authority, and Public Service Performance." Journal of Public Administration Research and Theory. 24(2):431–458.
  23. ^ Gerrish, Ed. 2015. "The Impact of Performance Management on Performance in Public Organizations: A Meta-Analysis." Public Administration Review 76(1):48–66.
  24. ^ Peacock, M., Stewart, E. B., & Belcourt, M. (2020). Managing Employee Performance. In Understanding human resources management: A Canadian perspective (pp. 211-239). Toronto: Nelson Education.
  25. ^ Abeysiriwardana, Prabath Chaminda; Jayasinghe-Mudalige, Udith K. (2022-08-10). "Single window performance management: a strategy for evaluation integrated research culture in the commercial agriculture sector". SN Business & Economics. 2 (9): 128. doi:10.1007/s43546-022-00297-0. ISSN 2662-9399. S2CID 251504791.
  26. ^ US Office of Personnel Management, A Handbook for Measuring Employee Performance, published March 2018, accessed 26 October 2022
  27. ^ Bracken, D., & Rose, D., "When does 360-degree feedback create behavior change? And how would we know it when it does?", Journal of Business and Psychology, 26(2), 183-192
  28. ^ Kakkar, Shiva; Dash, Sanket; Vohra, Neharika; Saha, Surajit (2020-04-23). "Engaging employees through effective performance management: an empirical examination". Benchmarking. 27 (5): 1843–1860. doi:10.1108/bij-10-2019-0440. ISSN 1463-5771. S2CID 219006172.
  29. ^ Richard, Pierre J.; Devinney, Timothy M.; Yip, George S.; Johnson, Gerry (2009-02-06). "Measuring Organizational Performance: Towards Methodological Best Practice". Journal of Management. SAGE Publications. 35 (3): 718–804. doi:10.1177/0149206308330560. ISSN 0149-2063. S2CID 143585204.
  30. ^ Upadhaya, Bedanand; Munir, Rahat; Blount, Yvette (2014). "Association between performance measurement systems and organisational effectiveness". International Journal of Operations & Production Management. Emerald. 34 (7): 853–875. doi:10.1108/ijopm-02-2013-0091. ISSN 0144-3577.
  31. ^ BPM Mag, What is BPM? Archived December 12, 2006, at the Wayback Machine
  32. ^ The Next Generation of Business Intelligence: Operational BI White, Colin (May 2005). "The Next Generation of Business Intelligence: Operational BI". Information Management Magazine. Retrieved 2010-02-21. The biggest growth area in operational BI analysis is in the area of business performance management (BPM).

Further reading[edit]

  • Business Intelligence and Performance Management: Theory, Systems, and Industrial Applications, P. Rausch, A. Sheta, A. Ayesh (Eds.), Springer Verlag U.K., 2013, ISBN 978-1-4471-4865-4.
  • Performance Management - Integrating Strategy Execution, Methodologies, Risk, and Analytics. Gary Cokins, John Wiley & Sons, Inc. 2009. ISBN 978-0-470-44998-1
  • Journal of Organizational Behavior Management, Routledge Taylor & Francis Group. Published quarterly. 2009.
  • Handbook of Organizational Performance, Thomas C. Mawhinney, William K. Redmon & Carl Merle Johnson. Routledge. 2001.
  • Improving Performance: How to Manage the White Space in the Organization Chart, Geary A. Rummler & Alan P. Brache. Jossey-Bass; 2nd edition. 1995.
  • Human Competence: Engineering Worthy Performance, Thomas F. Gilbert. Pfeiffer. 1996.
  • The Values-Based Safety Process: Improving Your Safety Culture with Behavior-Based Safety, Terry E. McSween. John Wiley & Sons. 1995.
  • Performance-based Instruction: Linking Training to Business Results, Dale Brethower & Karolyn Smalley. Pfeiffer; Har/Dis edition. 1998.
  • Handbook of Applied Behavior Analysis, John Austin & James E. Carr. Context Press. 2000.
  • Managing for Performance, Alasdair A. K. White. Piatkus Books, 1995

External links[edit]