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Targeted Performance Management (TPM) – An Overview

As finance staff, we always hear words like Key Performance Areas (KPA) and Key Performance Indicators (KPI). To know what KPA or KPI is, it is essential that we first understand the concept on Performance Management.

Performance management is named differently by different consultants. Some call it Individual Performance Management (IPM), while others call it Management by Objectives (MBO) or even Targeted Performance Management (TPM). In this article, we shall use Targeted Performance Management (TPM) to describe performance management.

1) Introduction

TPM methodology has always been around a long time. Many Fortune 500’s companies have been using them with hugh successes. Using TPM, those companies achieved high growth in revenues and profitability as their employees understand the company’s objectives and their own individual objectives. The performance of an organization depends on the strengths, creativity, and talents of its people. Therefore, it is not possible to consistently grow the business without also developing the people within the business.

Performance management provides the bridge between the company and its employees as it is an easy to understand and consistent process for managing and achieving required goals and objectives. It is a systematic way to manage employee performance and development. It is also a powerful and effective way to run a business which might ideally lead to the establishing of balanced scorecard to drive the strategic direction of the company.

2) Purpose of Individual Performance Management

The TPM is designed to accomplish the following goals:

• Integrate the Company’s Vision/Mission and business strategy with the best of individuals’ abilities and efforts to achieve corporate, team and individual success
• Enhance communication of our business strategy
  The TPM requires managers to break strategy down into component parts (Key Performance Area (KPA) and Key Performance Indicator (KPI) that make it easier for employees to understand their roles in the organization.
• Give employees more opportunity to participate in the performance management program
  From providing input on KPIs to initiating performance review, the focus is on employee ownership and responsibility for performance.
• Facilitate active coaching and provide timely feedback
  Effective coaching and constructive, prompt feedback are essential to accomplish business goals and achieve continuous improvement.
• Foster an environment of open dialogue based on mutual trust and respect
  This program advocates a positive, collaborative approach for improving performance and accomplishing business goals.
• Promotes fairness throughout the process
• Help the Company and its employees to develop, improve performance and be successful
• Build teamwork and live the Company Culture through common goals

3) Principles of TPM

Leading and innovative companies recognize the critical importance of people. The right management, training and leadership will of course help, but it will be of greatest benefit when we have the right people.

TPM facilitates an active partnership between employees and managers that aim to develop employees, improve employee performance and align employee contributions with the company’s goals, values and initiatives. The principles that guide the TPM include:

• Growing company’s business by developing people
  Improving individual performance not only benefits employees, it has a direct, positive impact on customer satisfaction.
• Communicating expectations to employees helps improve performance
  Clear expectations provide direction and structure. When people know what is expected, they are better prepared to meet or exceed expectations.
• Employee involvement is essential
  TPM is a collaborative program that considers the input and feedback from both individual employees and managers. TPM is best viewed as an ongoing and integrated series of activities that each contribute to the successful achievement of both the organization and individual’s goals. It is a program that requires ongoing leadership commitment and sustained effort to be successful.

4) TPM Process

The TPM program is divided into three phases of activity that run throughout the year. The phases are:

• Phase I: Performance Planning
• Phase II: Mid-Year Review
• Phase III: Assessment, Assignment of Performance Ratings, Annual Appraisal, Individual Development Plan and Rewards

4.1) Phase I: Performance Planning

Performance Planning is the critical first phase of the TPM. Successful performance planning provides a foundation for the entire process.

In Phase 1, the manager will develop and clarify organization and team goals and communicate them to the employees. During this phase (which generally occurs during the first month of the calendar year) and based on the organization and team goals, the manager will develop personal performance plans for all his/her direct reports (with their input as appropriate) that include:

• KPAs
• KPIs

The KPAs and the KPIs are developed to measure individual employee contributions, performance and improvement as part of each employee’s overall performance plan.

4.1.1) Key Performance Areas (KPAs)

KPA is the aspect of the job which should be assessed when determining job performance. It is the area of responsibilities or accountabilities that are described in two to three words. It is normally expected that six to seven KPAs are sufficient.

As a rule, persons leading teams should have KPA covering People Management, Leadership and Development. Persons with primary responsibility for sales should have KPA to cover sales achievement and forecasting.

The weightage of each KPA will be determined by the following factors: