Strategic Aspects of Performance Management

Strategic management directs and coordinates the activities of the various functional areas of a company in order to achieve specified business objectives. It is an ongoing process that assesses the business and the industries in which the company is involved; assesses its competitors; and sets goals and strategies to meet the objectives as against changing circumstances, new technologies, new competitors, a new economic environment, or new social, financial, or political circumstances.

The key missing dimension for true integrated performance management is how to keep a focus on determining and maintaining a winning strategic direction. If we use the metaphor of a sailing boat, having perfect operational performance management in place is equivalent to keeping the boat best positioned against the wind with its sails perfectly trimmed, being the fastest in the pack. But to win a race, the most important issue is not to be fastest in a particular leg, but to know how to come first at the final destination. This requires, in addition to having a perfect team on board, looking ahead, scanning the horizon, avoiding collisions and shallow waters; predicting the weather, winds and currents; strategic planning and deciding on the best course over each leg and over the whole race, against the elements and against the competition. This is the skipper's task, i.e. the top management's task.

Figure 6.4 External Aspects of Industrial Operations

Of course we cannot get into the detail of strategic management issues because that would require another volume, but we can highlight the main aspects that are complementary to the systematic approach to operational performance management as elaborated here, starting with an examination of the external factors influencing performance on the short to medium term horizon (Fig. 6.4).

Significant changes in any of these areas will influence business performance, to which a strategic management response would be required. This response would be formulated through strategies, policies and objectives that need to be implemented in order to maintain a competitive business position, while satisfying customers, shareholders and other stakeholders.

However, due to the complexity of the modern business environment, these issues are not as straightforward as may be the case with internal factors affecting business performance. They will appear from different angles in a global market place, having an immediate or delayed impact and a direct or indirect influence, but requiring timely responses. If the responses are not timely, performance will deteriorate and the competitive position will be threaten, therefore constant alertness and vigilance with regard to changes in key external influencing factors is essential.

Looking more specifically at the technological area, we will outline a methodological approach for identifying and monitoring the external factors that influence business performance.

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