Understand How Performance Helps Bring It All Together

   Performance definition, communication, and measurement are critical to ensuring that your customers are satisfied and your people feel empowered and that they are contributing something meaningful. Measurement of Performance should not focus on controlling behavior but instead be directly related and aligned with your business' goals, mission, and vision. This sentiment is expressed by Robert Kaplan and David Norton in their book "The Balanced Scorecard" when they say measures should be used . . .
"to articulate the strategy of the business, to communicate the strategy of the business, and to help align individual, organizational, and cross-departmental initiatives to achieve a common goal."

   The balanced scorecard also advocates using four perspectives in creating your performance measures: financial, customer, internal business process, and learning and growth. These four perspectives lead to the creation of performance measures that help ensure your business is addressing all areas needed to continue to grow and become a successful company. Examples of financial measures include revenue growth and mix, cost reduction and productivity improvement, asset use and investment strategies. Measures related to customers can focus on market share, customer retention, customer acquisition, customer satisfaction, and customer profitability. Measures related to the internal business process are meant to focus on processes that are most critical to reaching their financial and customer related objectives (e.g. innovations, operations, and services/follow up). Measures related to Learning and Growth tend to fall in one of three categories: employee capabilities, information systems capabilities, and motivation, empowerment, and alignment. These measures are designed to make sure you are building an organization that is capable of achieving the performance goals set in the other three performance perspectives.

   In dealing with your people and customers, establishing and reworking your business processes, creating performance measures and ensuring your business is profitable you need to try to "bake in" the information and processes in the day to day work you perform. This will help ensure that the measures you establish and the methods used to communicate them to your people and customers are in fact related to your advertised business' values, vision and objectives.

A few good performance management related sites:
Free [performance] Management Library
About.com - Performance Management, Evaluation, Review, Improvement
U.S. Office of Performance Management