The first question of management is what difference does it make if we invest in people, technology or facilities? The corollary: which investment will give us the greatest return in the shortest time?
SAP SuccessFactors and Workforce Intelligence Institute (WII) believe that there are two fundamentals of management that, over time, will consistently show the greatest returns. They are:
- . Performance management through goal alignment, and
- . Pay for performance.
Logic has it that if people can see how their work links directly to corporate goals, they will be stimulated to work long and hard in service to that vision. Logic also cautions us that if people do commit themselves to the vision they must believe that their efforts are equitably compensated.
To build on our previous research and test our assumptions, we combined forces to study the performance management system sophistication or maturity of 40 corporations of varying sizes. As one would expect, there was a distribution of financial performance and system maturities across the 40. Our quantitative and qualitative analyses reveal where performance management practices do and do not affect financial performance. Financial performance was tracked in three ways:
- Return on equity
- Revenue growth, last 12 months
- Net income, last 12 months
The 40 companies were divided into strongest and weakest financial performers with a number in the middle. We compared each company's financial performance with its industry mean. Since different companies operate under different market conditions, comparing across industries does not make sense.