HRM3706 Performance Management
STUDY UNIT 2 – Business Strategy and Performance
2.1 Introduction
An outline of how to cascade business strategy to performance management. It starts with overall business
goals, targets, scorecards and metrics as the overall high-level foundation of business performance until it
reaches the level of team and individual performance. The heart and soul of any strategy are the actions and
moves in the marketplace that managers undertake to improve the company’s financial performance,
strengthen its long-term competitive position, and gain a competitive edge over its rivals (Thompson,
Strickland & Gamble, 2008: 6). In its broadest sense, strategy is the means by which individuals or
organisations achieve their objectives (Grant, 2008: 16).
An organisation is a performance driven company only if there is an effective business strategy with sound
business goals in place, which enhances the overall effectiveness of the organisation’s programmes and
services. Performance management facilitates the execution of the business strategy by ensuring that the
resources available to the organisation are directed at the delivery of projects and programmes that meet
agreed organisational priorities. Performance management sets up a shared understanding of what is to be
achieved by the organisation. Business strategy does not exist in isolation but entails a systematic
development and implementation of a performance management system throughout the different levels
within the organisation
2.2 Purpose of linking business strategy to performance managment
By linking the business strategy to performance management, organisations can track whether they are doing
the right things, with the right people, in the right way to achieve their business strategy. Make sure you
understand why organisations link their business strategy to performance management. Performance
management as an enabler to the execution of the business strategy does the following:
It clarifies goals and work expectations of the various work levels within the organisation.
It provides a medium for executive management to understand employee needs.
It provides a mechanism for monitoring, implementing and reviewing organisational strategy
2.3 The link between business strategy and performance management
There are different steps that organisations take to link their business strategy.
➢ Firstly, identifying the business objectives of the organisation.
➢ Secondly, the management team should be able to establish the values that unite and energise
employees towards a common goal.
➢ The organisation should identify the value drivers that would guide the direction of the organisation.
The value drivers of the organisation involve identifying what will make it possible for the organisation
to achieve its objectives.
➢ The organisation should provide a conducive environment that would make it possible for employees
to perform their duties. The success of achieving the organisation’s strategic objectives depends on
the implementation of an effective performance management system within the organisation
Page 1 of 13
Summary by L Petzer
, 2.3.1 Business Objectives
For an organisation to achieve long-term success it needs to have a clear, articulated identity that distinguishes
its innate and unique characteristics (DNA). This identity will include a common understanding of the
following:
• the vision and mission of the organisation
• its culture and leadership style
• the defined market in which the organisation competes
• how the organisation will position itself
• what product or service will be offered to the market
• the manner in which this offering is packaged
• the expected quality of the product or services
Setting of objectives should not stop with top management’s establishment of company-wide performance
targets. Company objectives need to be broken down into performance targets for each of the organisation’s
separate business, product lines, functional departments, and individual work units. Therefore, the setting of
objectives needs to be a top-down rather than a bottom-up approach.
An effective leadership style and business strategy will have a material impact on positive employee
behaviour, which could result in employee retention and both improved productivity and customer retention.
To be able to execute the business strategy, management and employees should share common values. The
values represent the emotional pledge and resolve that identify what it means to belong to and be part of the
organisation.
For example, at Nedbank their core values are the following:
• Integrity: Being honest, trustworthy, consistent and transparent in all our actions and decisions
• Respect: Recognising the inherent worth of every individual and treating everyone with dignity
• Accountability: Being prepared to take ownership of and be held accountable for our commitments
and actions
• People-centred: Investing in our people and creating an environment that empowers our people to
perform distinctively and to excel
• Client-driven: Creating value and delightful experiences for our clients that exceed their expectations
(Nedbank Annual Report, 2018)
2.3.2 Value Drivers analysis
Value drivers are those elements of the business which contribute to shareholder value and which individual
employees/teams can influence and impact upon. Value drivers form the foundations for
▪ defining measures of performance at every level
▪ defining competencies required to achieve value
▪ applying incentives to the most critical value drivers
▪ developing a framework of Key Performance Indicators (KPIs) as part of performance management.
Value drivers are organisational competencies and measures which include different kinds of management
approaches in organisations, such as management by objectives (MBO), value-based management (VBM), or
the balanced scorecard.
MBO ~ is referred to as an approach to motivate managers and to integrate their efforts by setting goals for
the organisation as a whole. The predefined strategic objectives are used as set standards according to which
performance within the organisation is managed. These objectives are then cascaded down through each
management level, to ensure that attaining goals at each level will help to reach the objectives of the next-
highest level and finally the company goals.
VBM ~ refers to tools that financial managers can use to plan, monitor, and control a firm’s operations in ways
that enhance shareholder values.
Page 2 of 13
Summary by L Petzer
STUDY UNIT 2 – Business Strategy and Performance
2.1 Introduction
An outline of how to cascade business strategy to performance management. It starts with overall business
goals, targets, scorecards and metrics as the overall high-level foundation of business performance until it
reaches the level of team and individual performance. The heart and soul of any strategy are the actions and
moves in the marketplace that managers undertake to improve the company’s financial performance,
strengthen its long-term competitive position, and gain a competitive edge over its rivals (Thompson,
Strickland & Gamble, 2008: 6). In its broadest sense, strategy is the means by which individuals or
organisations achieve their objectives (Grant, 2008: 16).
An organisation is a performance driven company only if there is an effective business strategy with sound
business goals in place, which enhances the overall effectiveness of the organisation’s programmes and
services. Performance management facilitates the execution of the business strategy by ensuring that the
resources available to the organisation are directed at the delivery of projects and programmes that meet
agreed organisational priorities. Performance management sets up a shared understanding of what is to be
achieved by the organisation. Business strategy does not exist in isolation but entails a systematic
development and implementation of a performance management system throughout the different levels
within the organisation
2.2 Purpose of linking business strategy to performance managment
By linking the business strategy to performance management, organisations can track whether they are doing
the right things, with the right people, in the right way to achieve their business strategy. Make sure you
understand why organisations link their business strategy to performance management. Performance
management as an enabler to the execution of the business strategy does the following:
It clarifies goals and work expectations of the various work levels within the organisation.
It provides a medium for executive management to understand employee needs.
It provides a mechanism for monitoring, implementing and reviewing organisational strategy
2.3 The link between business strategy and performance management
There are different steps that organisations take to link their business strategy.
➢ Firstly, identifying the business objectives of the organisation.
➢ Secondly, the management team should be able to establish the values that unite and energise
employees towards a common goal.
➢ The organisation should identify the value drivers that would guide the direction of the organisation.
The value drivers of the organisation involve identifying what will make it possible for the organisation
to achieve its objectives.
➢ The organisation should provide a conducive environment that would make it possible for employees
to perform their duties. The success of achieving the organisation’s strategic objectives depends on
the implementation of an effective performance management system within the organisation
Page 1 of 13
Summary by L Petzer
, 2.3.1 Business Objectives
For an organisation to achieve long-term success it needs to have a clear, articulated identity that distinguishes
its innate and unique characteristics (DNA). This identity will include a common understanding of the
following:
• the vision and mission of the organisation
• its culture and leadership style
• the defined market in which the organisation competes
• how the organisation will position itself
• what product or service will be offered to the market
• the manner in which this offering is packaged
• the expected quality of the product or services
Setting of objectives should not stop with top management’s establishment of company-wide performance
targets. Company objectives need to be broken down into performance targets for each of the organisation’s
separate business, product lines, functional departments, and individual work units. Therefore, the setting of
objectives needs to be a top-down rather than a bottom-up approach.
An effective leadership style and business strategy will have a material impact on positive employee
behaviour, which could result in employee retention and both improved productivity and customer retention.
To be able to execute the business strategy, management and employees should share common values. The
values represent the emotional pledge and resolve that identify what it means to belong to and be part of the
organisation.
For example, at Nedbank their core values are the following:
• Integrity: Being honest, trustworthy, consistent and transparent in all our actions and decisions
• Respect: Recognising the inherent worth of every individual and treating everyone with dignity
• Accountability: Being prepared to take ownership of and be held accountable for our commitments
and actions
• People-centred: Investing in our people and creating an environment that empowers our people to
perform distinctively and to excel
• Client-driven: Creating value and delightful experiences for our clients that exceed their expectations
(Nedbank Annual Report, 2018)
2.3.2 Value Drivers analysis
Value drivers are those elements of the business which contribute to shareholder value and which individual
employees/teams can influence and impact upon. Value drivers form the foundations for
▪ defining measures of performance at every level
▪ defining competencies required to achieve value
▪ applying incentives to the most critical value drivers
▪ developing a framework of Key Performance Indicators (KPIs) as part of performance management.
Value drivers are organisational competencies and measures which include different kinds of management
approaches in organisations, such as management by objectives (MBO), value-based management (VBM), or
the balanced scorecard.
MBO ~ is referred to as an approach to motivate managers and to integrate their efforts by setting goals for
the organisation as a whole. The predefined strategic objectives are used as set standards according to which
performance within the organisation is managed. These objectives are then cascaded down through each
management level, to ensure that attaining goals at each level will help to reach the objectives of the next-
highest level and finally the company goals.
VBM ~ refers to tools that financial managers can use to plan, monitor, and control a firm’s operations in ways
that enhance shareholder values.
Page 2 of 13
Summary by L Petzer
