What Is Performance Management? Definition & Best Practices for High-Growth Firms

Republished from the Transform Operations & Leaders newsletter on LinkedIn

Harvard Business Review recently published an article about the high cost of Chief Revenue Officer (CRO) turnover. The report cited researched done over the last three years on IT, SaaS and commercial services firms between $100 million and $5 billion in annual revenue indicating that:

  • CRO turnover grew 50% between 2022 and 2023
  • Only 41% of CEOs who participated in the survey expressed confidence in their CRO’s ability to drive success
  • 62% of companies see revenue decline or remain flat after a CRO dismissal

This data makes a strong case for high-growth firms, whose success rests so much on revenue growth, to take a different approach to deliver the success they’re looking for. That approach should be grounded in more rigorous performance management.

What is Performance Management?

Performance management is a strategic approach to matching individual employee performance objectives to the strategic company objectives and key results (OKRs) and then reviewing and compensating employees based on their performance against the objectives.

This modern performance management is characterized by ongoing development across functional, leadership and cultural objectives and is characterized by clear goal setting in pursuit of high-priority outcomes, ongoing performance conversations and annual rewards alignment.

This type of continuous process helps employees understand their roles. When all employees understand how their work contributes to the organization’s strategic goals, they are more engaged and productive and internal leaders can develop.


How to Write Performance Plan Objectives

Each employee should have performance objectives that are defined using the internal standard for objectives, such as the SMART framework, map to at least one OKR and contain a clearly stated outcome to be achieved before the end of the performance period. When I advise my clients, I recommend the performance plan include:

  • 1-3 individual functional/technical objectives
  • 1 leadership objective, regardless of title
  • 1 cultural objective tied to at least one of the company’s core values

For high-growth companies, all employees should have a functional/technical objective that follows a format similar to

By [DATE], deliver [OUTCOME] that creates [BENEFIT] in support of [OKR].


Why Performance Management is Important for High-Growth Firms

For high-growth firms, effective performance management is critical ensuring everyone is focused on the same vision and the short-term results that signal the company is on the right track.

Rather than taking on the high cost of replacing the CRO and stalling growth efforts or going backwards, companies can ensure top-to-bottom alignment on performance objectives to the CRO’s responsibilities.

If the CRO needs high-quality data focused on leading indicators to set sales and pricing strategy, align the Finance team’s objectives with that key result.

If the CRO is responsible for mitigating the risks associated with the growth plan, align the Operations team’s objectives so they have levers to pull to cut costs in order to retain profits, if the plan is slow developing.

With the right performance management processes in-place, high-growth companies will be positioned to deliver aggressive growth and secure market positions that fend off competition.


Common Performance Management Mistakes High-Growth Firms Make

I’ve coached executives at high-growth companies and there are a few performance management mistakes I see repeated over-and-over.

  1. Infrequent Dashboard Reviews: Some measures can be reviewed quarterly, but more frequent dashboard reviews mean that OKR updates can flow into the frequent performance conversations managers have with employees. This helps them feel more motivated and working towards an important goal.
  2. Losing Sight of Core Values: Metrics are important, but it’s important to balance the core values and the soft skills that impact how strategic objectives are met.
  3. Sacrificing Employee Development: High-growth firms focus a lot of investment on recruiting and incentivizing key talent to join the firm, but the investments in capital and time don’t stop after they’re hired. Just like there should be a relationship between performance objectives and strategic business objectives. There should also be a relationship between performance objectives and longer-term development objectives so employees feel they have a future at the firm and opportunities to grow into leadership roles.

Cash Flow Focused Conclusions

Structuring performance management in high-growth firms isn't just about aligning goals and driving engagement—it's a powerful lever for enhancing cash flow and profitability. By systematically aligning every employee’s objectives with the company’s strategic goals, businesses can improve operational efficiency and drive greater financial outcomes.

High-growth firms that prioritize strategic performance management will realize superior cash flow stability and enhanced profitability, empowering them to capitalize on market opportunities.

I help corporations grow profits through leadership strategies that deliver innovation.


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