Performance Management and Strategic Planning

Learning Objectives

3.1 Define strategic planning and its overall goal.

3.2 Describe the various specific purposes of a strategic plan.

3.3 Explain why the usefulness of a performance management system relies to a large
degree on its relationship with the organization’s and unit’s strategic plans.

3.4 Understand how to create an organization’s strategic plan including an

environmental analysis resulting in a mission statement, vision statement, goals,
and strategies.

3.5 Conduct an environmental analysis that includes a consideration of both internal

(strengths and weaknesses) and external (opportunities and threats) trends.

3.6 Understand how a gap analysis resulting from a consideration of internal and
external trends dictates an organization’s mission.

3.13 Understand the relationship among a unit’s vision, mission, goals, and strategies
and individual performance

3.15 Understand how a strategic plan determines various choices regarding

performance management system design.

3.16 Explain why a consideration of strategic issues is a building block for creating
support for a performance management system.

1. Purposes of Strategic Planning

• Definition
o Describes the organization’s destination
o Assesses barriers
o Selects approaches for moving forward
• Goal
o Allocate resources
▪ To provide organization
▪ For competitive advantage
• Purposes
o Helps define the organization’s identity
o Helps organization prepare for the future
o Enhances ability to adapt to environmental change
Part I: Strategic and General Considerations___________________________________________________

o Provides focus and allows for better allocation of resources

o Produces an organizational culture of cooperation
o Allows for the consideration of new options and opportunities
o Provides employees with information to direct daily activities

2. Process of Linking Performance Management to the Strategic Plan

• Strategic Planning for the Organization
• Developing Strategic Plans at the Unit Level
• Job alignment
• Individual and Team Performance

Strategic Planning: Overview

A. Environmental Analysis
B. Mission
C. Vision
D. Goals
E. Strategies

A. Environmental Analysis

Identifies external and internal trends

• To understand broad industry issues

• To make decisions using a “big picture” context

External trends
• Opportunities
o Environmental characteristics that can help the organization succeed
• Threats
o Environmental characteristics that can prevent the organization from being
successful

Internal trends
• Strengths
o Internal characteristics that the organization can use for its advantage
•Weaknesses
o Internal characteristics that can hinder the success of the organization
• Some factors to consider
o Organizational structure
o Organizational culture
o Politics

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 o Processes
o Size

Environmental Analysis includes conducting a gap analysis, which analyzes

o External environment (opportunities and threats)

vis-à-vis

o Internal environment (strengths and weaknesses)

Environmental and gap analyses provide information for organizations to decide:

● Who they are

● What they do

B. Mission

The mission statement contains information on the organization’s:

● Basic product/service to be offered

● Primary market/customer groups
● Unique benefits and advantages of product/services
● Technology to be used
● Concern for survival through growth and profitability

C. Vision

● Statement of future aspirations

● Focuses attention on what is important (eliminates unproductive activities)
● Provides context for evaluating

D. Goals

Purpose of setting goals:

• Formalize expected 5+ years achievements

• Provide a source of motivation
• Provide tangible targets to strive for
• Provide a basis for good decisions
• Provide a basis for performance measurement
Part I: Strategic and General Considerations___________________________________________________

E. Strategies

• Create strategies, game plans, or “how to” procedures

• Address issues surrounding:
● Growth
● Survival
● Turnaround
● Stability
● Innovation
● Leadership

How the HR Function contributes:

• Communicate knowledge of the strategic plan
• Provide knowledge of KSAs needed for strategy implementation
• Propose reward systems

Developing Strategic Plans at the Unit Level

• Organization
o Mission statement
o Vision statement
o Goals
o Strategies

Must clearly align with and be congruent with

• Every unit’s
o Mission statement
o Vision statement
o Goals
o Strategies

Consensus about strategies and goals across organizational units

• Strategic consensus: Agreement among organizational units on a common set
of strategic priorities
• Generally speaking, strategic consensus predicts firm performance
• More specifically, strategic consensus predicts firm performance more
strongly when
o Strategies and then goals are set
o As opposed to setting goals and then strategies
• Therefore, it is better to first have units agree on common strategies before
they agree on what goals will be set to reach those strategic priorities

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 Alignment of Strategic Plan with Performance

Job Descriptions
• Tasks and KSAs are congruent with organization and unit strategic plans
• Activities described support mission and vision of organization and unit

Individual and Team Performance

Organization and unit mission, vision, and goals lead to

• Performance management system, which

o Motivates employees to
• Display behaviors aligned with mission, vision, and goals
• Produce results to support mission, vision, and goals
o Aligns development plans with organization priorities

Strategic Plan Leads to Some Choices in PM System Design

• Criteria (Behavior vs. Results)
• Participation (Low vs. High)
• Temporal Dimension (Short-Term vs. Long-Term)
• Level of Criteria (Individual vs. Team/Group)
• System Orientation (Developmental vs. Administrative)
• Rewards (Pay for Performance vs. Tenure/Position)

3. Building Support

Answering “What’s In It for Me?”

• Top Management
o Help carry out vision
• All levels
o Involvement
o Participation (voice feedback and concerns)
o Understanding of organizational vision and goals