Stage 1 Creating a performance management system

The essence of performance management is suggested by the definition for performance measurement used by Andy Neely and co-workers of Cranfield School of Management's Centre for Business Performance. They define performance measurement as the process of quantifying the efficiency and effectiveness of past actions through acquisition, collation, sorting, analysis, interpretation and dissemination of appropriate data.

Performance management extends this definition to the process of analysis and actioning change in order to drive business performance and returns. Online marketers can apply many of the approaches of business performance management to Internet marketing. As you can see from the definition, performance is measured primarily

Effectiveness

Meeting process objectives, delivering the required outputs and outcomes. 'Doing the right thing.'

Efficiency

Minimising resources or time needed to complete a process. 'Doing the thing right.'

through information on process effectiveness and efficiency as introduced in Chapter 4 in the section on objective setting, where we noted that it is important to include both effectiveness and efficiency measures.

The need for a structured performance management process is clear if we examine the repercussions if an organisation does not have one. These include: poor linkage of measures with strategic objectives or even absence of objectives; key data not collected; data inaccuracies; data not disseminated or analysed; or no corrective action. Many of the barriers to improvement of measurement systems reported by respondents in Adams et al. (2000) also indicate the lack of an effective process. The barriers can be grouped as follows:

• senior management myopia - performance measurement not seen as a priority, not understood or targeted at the wrong targets - reducing costs rather than improving performance;

• unclear responsibilities for delivering and improving the measurement system;

• resourcing issues - lack of time (perhaps suggesting lack of staff motivation), the necessary technology and integrated systems;

• data problems - data overload or of poor quality, limited data for benchmarking.

These barriers are reinforced by the survey by Cutler and Sterne (2000) which describes the main obstacles to metrics development as lack of qualified personnel (31%), data overload (19%) and lack of technical resources (software) (19%).

To avoid these pitfalls, a coordinated, structured measurement process such as that shown in Figure 9.2 is required. Figure 9.2 indicates four key stages in a measurement process. These were defined as key aspects of annual plan control by Kotler (1997). Stage 1 is a goal-setting stage where the aims of the measurement system are defined - this will usually take the strategic Internet marketing objectives as an input to the measurement system. The aim of the measurement system will be to assess whether these goals are achieved and specify corrective marketing actions to reduce variance between target and actual key performance indicators. Stage 2, performance measurement, involves collecting data to determine the different metrics that are part of a measurement framework as discussed in the next section. Stage 3, performance diagnosis, is the analysis of results to understand the reasons for variance from objectives (the 'performance gap' of Friedman and Furey, 1999) and selection of marketing solutions to reduce variance. The purpose of stage 4, corrective action, according to Wisner and Fawcett (1991), is to identify competitive position, locate problem areas, assist the firm in updating strategic objectives and making tactical decisions to achieve these objectives and supply feedback after the decisions are implemented.

Goal setting

Performance measurement

Performance diagnosis

Corrective action

What do we want to achieve?

What is happening?

Why is it happening?

What should we do about it?

CONTROL Who?

MEASURE Who? When? How?

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