Performance Management is the final phase of our strategic management framework. Performance Management includes the implementation, the monitoring the control, the feedback, the reconfiguration, the adjustment and reformulation and response. During strategy execution, we don't have time to drill into all the aspects of performance management. But let's just cover the big picture in this lesson. The CFO should be well versed in performance management principles of all the strategic management phases. This is the one where the CFO needs to shine.

The first three stages of our strategic management process might seem like a lot of work, and to do them well certainly required a fair amount of senior management time. However, relative to the amount of resources required to execute strategy and keep it on track, it pales by comparison. Jim Collins is famously quoted with great strategies 1% vision and 99% alignment. So let's begin drilling into the 99% a lot It comes in many forms. So you're going to need to consider some of the following organizational structure must be aligned to support the strategy of the organization. Every element of strategy needs to be carefully allocated to an accountable person.

Communication strategy at all levels of the organization is imperative. Remember that dire earlier statistic about the oblivious 95%. Don't let your employees join that statistic, incentive plans and performance evaluation needs to be aligned. People need to be focused on doing the right things, and systems and processes may need to be aligned to the strategy. This includes configuring the reporting system and establishing and measuring performance metrics. If there's a new strategic direction, you'll need to consider change management principles which deal with the human challenges of implementation.

Performance Management is all predicated on establishing a response mechanism to allow management to have Just an adapt on the fly. In your mind, you should be tying this back to what we talked about in our first lesson around the three approaches to developing strategy. Remember insight planning and response. Okay, this is how a response approach should be structured. First, determine what should be measured. Second, establish a standard or target for acceptable performance.

Third, as strategy is being executed, performance gets measured and any deviations get adjudicated. When a deviation falls outside of that tolerable range, our response is triggered. The principles of the balanced scorecard are helpful in this regard whether or not you actually implement the tool to its full extent. As we begin our journey down the road toward our future state. It's helpful to have a mix of leading and lagging indicators that sample from both inside our internal and outside in our external environment. And in doing so we're able to test and challenge the view we formed in our SWOT analysis.

Real Time indicators of how we are presently performing, help us to see the results of our strategic initiatives, monitoring indicators that sample our positioning in the external environment, for instance, what our customers are saying about us, and tracking the development of our core capabilities, for instance, the release of new products or the expansion into new regions. This is going to help us predict what's ahead. So here's another poll that I conducted using the pro formative community around how the community looks at performance measurement and what sort of metrics they are developing. The vast majority of folks are actually using a mix of financial and non financial indicators to measure performance. Notice, however, that only 4% of poll participants are actually using a fully implemented balanced scorecard. So I like the principles of balanced scorecard but it's not necessary that you go the full distance and follow the formal and the rigor of a full balanced scorecard.

Participants who are relying solely on financial indicators or don't have a performance management system are obviously at a greater risk of being unable to identify and respond to shifts in the marketplace. When strategy goes off track or root cause analysis can help us identify how and where it happened. Let's walk through a strategy evaluation process. You can start by asking yourself the question, did this strategy implemented produce the desired results? If the answer is yes, then congratulations keep on trucking. If the answer is no, then we need to begin digging deeper.

Ask yourself what's the strategy poorly executed? Which again is a yes no answer. The answer is yes. Then consider whether you have a communication commitment or performance management issue. Knowing where your issue is, gives you a place to start fixing. If however, these weren't the problem, consider whether your situational analysis was valid.

If it wasn't, you may need to revisit the strategic planning process again from the beginning. By going back to your SWOT analysis, the last place to look is determined whether the functional strategies were well aligned with the corporate and business strategy. And if they weren't, there's your problem. And if they were That only leaves a resourcing deficiency, as the last available excuse for why strategy execution was ineffective, every strategic failure can be captured somewhere inside this decision tree. The tree doesn't solve your problem, but at least identifies where your strategic management process has weaknesses. Which brings us full circle.

In this lesson, we only touched on some of the most important elements of a performance management system. There is much, much more that could be said, but we're going to leave that for another course. In our final lesson, we're going to wrap up this course and I'm going to give you some access to some tools that could help you in managing strategy at your organization a little more effectively.