Chapter 3

Performance
Management and
Strategic Planning
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 Overview
 Definition and Purposes of Strategic
Planning
 Linking Performance Management to
the Strategic Plan
• Strategic Planning
• Developing Strategic Plans at the Unit Level
• Job Descriptions
• Individual and Team Performance
 Building Support

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Strategic Planning: Definition
 Process
• Describe the organization’s
destination
• Assess barriers that stand in
the way of that destination
• Select approaches for
moving forward
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 Strategic Planning: Goal
 Allocate resources to provide the
organization with a competitive
advantage

 Allocate resources to pursue its

goals

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 Strategic Planning: Purposes
1. Help define the organization’s identity (who
they are and what their purposes)

2. Help the organization prepare for the future

(clarifies the desired destination

3. Allows organizations to analyze their

environment to enhance the ability to adapt to
environmental change

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Strategic Planning: Purposes
4. Provide focus and allow for better
allocation of resources to what
matters most

5. Produce an organizational culture

of cooperation (common set of goals
are created)

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 Strategic Planning: Purposes
(Continued)
6. Allow for the consideration of new
options and opportunities (new market
or new product)

7. Provide employees with information to

direct daily activities (identify behavior
and results)

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 Linking PM to Strategic
Planning
 Clear the relationship between firm-level
and individual-level goals

 Ensure that strategy cascades down the

organization and leads to concrete actions

 Conscious effort must be made to link the

strategic plan with individual performance

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Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 9
 Linking PM to Strategic
Planning (continued)
 A critical issue is to ensure that each
unit’s or department’s mission and
vision statements, goals, and strategies
are consistent with those at the
organizational level.

 Job descriptions are then revised to

make sure they are consistent with unit
and organizational priorities.
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 Linking PM to Strategic
Planning (continued)
 The performance management
system includes results, behaviors,
and developmental plans consistent
with the organizational- and
department-level priorities as well as
the individual job descriptions.

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 Does the process of aligning organizational,
unit, and individual priorities actually work in
practice?
 Yes
 PMS have a critical role in translating
strategy into action
 PM is the third most important factor
affecting the success of a strategic
plan

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 Strategic Planning Steps

1. Environmental Analysis
2. Mission
3. Vision
4. Goals
5. Strategies

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Is the strategic planning process
linear?
 No
 there is a constant interplay among
these issues: the vision and mission
affect the type of environmental
analysis
 The results of an environmental
analysis are used to revise the mission
and vision.
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 Environmental Analysis

Identifies external and internal

trends
 To understand broad industry
issues
 To make decisions using “big
picture” context

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 External Trends
 Opportunities:
• Environmental characteristics that
can help the organization succeed

 Threats:
• Environmental characteristics that
can prevent the organization from
being successful

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 External Trends—
Factors to Consider
 Economic  Competitors
 Political/Legal  Customers
 Social  Suppliers
 Technological

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 Internal Trends
 Strengths:
• Internal characteristics that the
organization can use for its
advantage
 Weaknesses:
• Internal characteristics that can
hinder the success of the
organization
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 Internal Trends—
Factors to Consider
 Organizational structure
 Organizational culture
 Politics
 Processes
 Size

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 Gap Analysis
 Analyzes:
External environment
vis-à-vis
Internal environment

 Pairing of external opportunities and

threats with internal strengths and
weaknesses.

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Strategic Planning for the
Organization

Environmental and Gap

Analyses provide information
for organizations to decide:
Who they are
What they do

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 Mission
 Should be written after analyzing the
environment
 A good mission statement answers:
 Why does the organization exist?
 What is the scope of the organization’s
activities?
 Who are the customers served?
 What are the products or services offered?

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 Vision
 Written after the mission statement is
completed
 Statement of future aspirations
 Provide direction and focus
 Focuses attention on what is important
(eliminates unproductive activities)
 Provides context for evaluating new
• Opportunities
• Threats

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 Purposes for Setting Goals
 Formalize statements about what the
organization want to achieve (medium to long-
range period)
 Provide specific information how the mission will
be implemented
 Provide motivation
 Provide employee with tangible targets to achieve
 Provide a good basis for making decisions
 Provide the basis for performance measurement
(compare target vs. achieves)

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 Strategies
 Strategies: are description of game plans or
“How to” procedures to reach the stated
objectives.
 Strategies address issues of:
• Growth
• Survival
• Turnaround
• Stability
• Innovation
• Leadership

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How the HR Function Contributes to
create and implement the strategies:
 Communicate knowledge of strategic
plan (mission, vision, goals) to all
employees
 Provide knowledge of KSAs needed for
strategy implementation (in the current
employee or hired ones)
 Propose reward systems to motivate
employees to support the strategic plan.

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Strategic Plans at the Unit Level
 Every Unit mission statement,
vision statement, goals, and
strategies
Must clearly align with
and be congruent with
 the Organization’s mission
statement, vision statement,
goals, and strategies
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Alignment of Strategic Plan with
Performance
Organization’s Strategic Plan
Mission, Vision, Goals, Strategies

Unit’s Strategic Plan Critical to involve all

Mission, Vision, Goals, Strategies levels of management

Job Description
Critical to involve all employees
Tasks, KSAs

Individual and Team Performance

Results, Behaviors, Developmental Plan

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 Strategic Consensus
 Definition: The state in which
various organizational units
agree on a common set of
strategic priorities
• Predicts firm performance

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Two Ways to Achieve Strategic
Consensus
 Goals  Strategies in how to compete
(early development of strategic management)
vs.
 Strategies  Goals (recent organizational
organization perspective)

• Strategies  Goals better predicts

firm performance

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 Job Descriptions
 Tasks and KSAs included in individual
job descriptions must be congruent
with Organization and Unit strategic
plans.

 Job descriptions should include

activities that, if executed well, will
help execute the mission and vision.

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 Individual and Team
Performance
Organization and Unit mission, vision, goals
lead to:
 Performance management system, which:

Motivates employees to display the

behaviors and produce the results
required
Aligns development plans with the unit
and organization priorities

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 Strategic Plan 
Six Choices in PM System Design
1. Criteria (Behavior vs. Results,
or both)
2. Participation (Low vs. High)
3. Temporal Dimension (Short
Term vs. Long Term)

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 Strategic Plan 
Six Choices in PM System Design
(Continued)

4. Level of Criteria (Individual vs.

Team/Group)
5. System Orientation (Developmental
vs. Administrative)
6. Rewards (Pay for Performance vs.
Position)

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 Building Support—
Answering “What’s in PMS for Me?”
 For top management support:
• Emphasize that PM is the primary tool
to carry out an organization’s vision.
How?
1. Allow all employees to understand where the
organization stands and where it needs to go
2. Provide tools to employees so that their
behaviors and results will help the
organization get there

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 Building Support—
Answering “What’s in PMS for Me?”

 For support from all levels:

• Clearly communicate nature and
consequences of PM
• Involve employees in the process of PM
design and implementation

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publishing as Prentice Hall
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