by Jeff Thill

Imagine the power your organization would have if every individual in the workplace understood the company’s goals, as well as how their jobs impacted those goals.

How much more powerful would it be if employees could also recognize critical tasks that demand immediate attention and manage them accordingly? What if they had clear measurements that advised them of their progress and provided them with better decision-making information?

This is the very real power of performance management, an approach that can unleash your profit potential.

All roads lead to profitability

Implementing performance management results in better productivity and predictability. It therefore creates what most companies desire and demand – improved profitability.

Through enhanced productivity, manufacturers achieve profitability by producing more items with the same amount of conversion costs. Capacity is increased to allow for growth without large capital investments or costly new initiatives. Employees understand the relationship of actions to results and become more accountable.

With a more predictable business, manufacturers become more profitable by taking proactive advantage of critical business information and quickly seizing opportunities. Clear and relevant measurements make it easy to generate changes and create a positive impact on the business. Challenges are recognized in real time and solved before they impact the bottom line.

But is performance management really necessary?

Certainly it’s possible to achieve greater profitability without implementing performance management…at least, for a time.

One reality is that companies may be profitable in spite of themselves, but it’s a condition that won’t last without some kind of active performance management.

Often, many organizations sustain unprofitable products or processes that are fortuitously offset by a handful of highly profitable transactions. Sooner or later, the consequences of their unprofitable business elements will emerge; luck is never an enduring substitute for prudent management.

Profitability can also be achieved purely through cost cutting – but again, this does not build a sustainable competitive advantage, nor does it fully address the needs of customers or employees.

In some form or fashion, performance management is absolutely necessary, whether it is labeled as such or identified as something else. All businesses must relate goals to actions and should want to measure their success. In fact, managing performance equates to managing profitability.

Again, most companies say they pay attention to profitability, yet very few have a system or processes in place to manage it on a day-to-day basis. 

Performance management can give you a systematic way to plan your actions, align your resources, and achieve profitable business performance.

About the Author

Jeff Thill is a Wipfli partner who serves manufacturing, wholesale, and retail clients ranging in size from large widely owned companies to smaller family-owned businesses.  Please contact Jeff at our St. Paul office at (651) 766-2862 or e-mail him at jthill@wipfli.com.