What Is Business Performance Management? (With Performance Metric Examples)
Updated June 24, 2022
Companies use business performance management (BPM) to assess employees and the overall execution of their company. Business performance management provides managers, business owners and management teams valuable information on their customers and employees. Business performance management is an opportunity to make the necessary changes and adjustments to business functions. In this article, we explain what is business performance management, detail why business performance management is important and share useful performance metrics.
What is business performance management?
Business performance management is a metric to determine overall business progress towards goals. Management teams assess individual employees and whole departments to make the right decisions about their company. It is important to note that this method is not limited to analyzing the financial aspects of a business, but also considers employee and customer satisfaction.
Business performance management is highly valuable because the company collects data about the business for quantitative information. For example, some data collected might include the number of sales made in a given month or the company's current cash flow. When a company uses business performance management, they collect and interpret data to assess their business operation holistically.
Why is business performance management important?
Business performance management is a beneficial way to evaluate employees and overall company behavior. A company that uses business performance management considers crucial data and goal progress in analyzing how they are doing. There are many benefits to business performance management, including:
Aligning with goals
When a company uses business performance management, they consider how the company aligns with established goals. Goals are advantageous in a business because they act as a motivator and provides a concise objective for all employees to achieve.
When using business performance management, you directly assess your company's goals, how quickly they achieve milestones and what additional work they need to do towards completion. The management team establishes business goals for the whole company and tracks progress throughout the year using business performance management.
When using business performance management, the business considers alternative solutions to achieving its goals. Considering alternatives happens when the initial approach the business executed did not produce satisfying results. This is a benefit of business performance management because it invites new ideas and encourages innovative thinking among employees. Alternatives might even present a better approach because it considers additional data and the management team learns from previous experience.
Keeping everyone accountable
When a management team uses business performance management, they keep their employees accountable. Managers and supervisors assess employee performance and as a result, employees tend to consider company goals more frequently. When businesses hold employees accountable, employees recognize their responsibility.
When a company uses business performance management, its assessment of the company is more transparent. Employees are better aware of the company's evaluation methods and what their managers' expectations of them are.
Three main activities of business performance management
Business performance management uses three main activities that drive well-informed decision-making. Consider the three main activities of business performance management:
Goal selection is when the business decides on short- and long-term goals. Several members of a management team think of these goals. Goals are realistic and take into consideration the trajectory of the business. At times, the company might decide to focus on specific goals and chose to postpone others. This allows for dedicated time, energy and resources spent on a few selected goals instead of a broader focus on many goals.
Information consolidation, also known as information monitoring, is the gathering of data on the business. This activity provides significant information for the management team to assess and guide decision-making. When a business uses information consolidation, they aim to provide accurate and reliable information for the team's reference. Information consolidation is constant, as new data about the company is continually created.
A management intervention, also known as a "managerial adjustment," is the action the management takes to improve business functioning. The business determines this decision by referring to data from information consolidation, considering the business mission and reviewing goals. For example, a supervisor might begin to check in with an employer weekly rather than on a bi-weekly basis. This approach provides an additional opportunity to ask questions.
Examples of performance metrics
Performance metrics are different strategies for identifying how well a business is doing. Consider the following examples of performance metrics:
Cash flow is the current incoming and outgoing of money in a business. Companies use cash flow to pay for company expenses such as supplies and rent. Cash flow is highly valued because it means the business is experiencing consistent payments. However, knowing how much cash flow exists is critical because too much outgoing money—or "negative cash flow"—means the business does not make enough money to pay for necessary expenses.
A great insight into business performance is customer satisfaction. Customer satisfaction is how happy or unhappy a customer is with your goods or services. Assess customer satisfaction through polls, surveys and reviews of your company. With this key metric, you can directly ask your customers why they feel a certain way.
When setting goals, a business also creates a strategy that employees follow. For example, a marketing strategy might include posting on social media daily. Strategy implementation considers how well the business is executing a strategy to obtain its goals. Well-performing businesses act on strategies by consistently integrating them into the business operations.
Sales revenue refers to how much money the business is making from sales. Sales revenue is significant because this is the company's income, and it correlates to how well the company is selling its products or services. To improve sales revenue, consider revisiting your marketing strategy to reach more customers.
Customer loyalty is when a customer buys your product again and again. Their dedication shows they enjoy your product, which demonstrates good business performance. Consider how many customers return to your business and how many repurchase the same products. A loyal customer is also a great way to gain more shoppers because they are likely to share positive reviews about your business.
Website traffic reveals several key pieces of information, including how many people go to your website and how long they stay on one of your pages. Website traffic gives your business a better understanding of who your customers are. For example, if you have an online store, consider how long your customers look over certain products. This information is valuable to future business decisions such as increasing production on this product.
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