PERFORMANCE management remains one of the most misunderstood and misapplied practices in organisations worldwide.

Despite its critical role in driving business outcomes, most systems fall woefully short of their promise.

The issue is not a lack of tools, frameworks, or buzzwords but a deeper disconnect between strategy and the everyday actions of employees.

To address this, we must lay bare the systemic failures and offer a practical roadmap for creating a performance management system that delivers value.

Organisations invest considerable resources in crafting sophisticated strategies yet consistently fail to translate these strategies into meaningful day-to-day actions.

This disconnect between strategic intent and operational reality represents one of the most significant challenges in modern performance management.

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The strategic ivory tower

Research by Kaplan and Norton suggests that 95% of employees do not understand their organisation's strategy.

This startling statistic is not merely about poor communication — it reflects a deeper systemic issue where strategy formulation remains an elite exercise confined to the upper echelons of management.

The Harvard Business Review's comprehensive study of 1 200 organisations revealed that only 8% of company leaders were consistently successful at executing their strategies.

This execution gap stems from what Professor Henry Mintzberg terms the "fallacy of detachment" — the misguided belief that strategy can be effectively formulated in isolation from operational realities.

Failure to link strategy to action

Even when organisations attempt to cascade strategy, the process is often fraught with failure.

Goals and targets at the top become diluted, misinterpreted, or completely detached from the daily activities that drive customer satisfaction and organisational success.

A study published in the Harvard Business Review found that only 37% of employees strongly agree that their performance goals are clear and aligned with their company's objectives.

This misalignment creates a situation where employees go through the motions of their daily tasks with little connection to the broader strategic goals.

After a strategy is communicated, employees frequently continue their work as if nothing has changed.

This inertia stems from a lack of clarity and practical guidance on how their roles contribute to the organisation's ambitions.

For example, a frontline retail employee may hear about a corporate goal to "enhance customer experience" but lack actionable direction on what behaviours or tasks they should prioritise to achieve this.

Organisations attempting to bridge the strategy-execution gap often rely on cascading mechanisms that prove ineffective.

A McKinsey study found that 70% of organisations fail to successfully cascade their strategic objectives into operational metrics that frontline employees can understand and act upon.

This failure stems from several fundamental issues.

First, organisations frequently fall into the trap of metric misalignment, tracking what is easy to measure rather than what truly drives value — a problem highlighted by Gartner's analysis revealing that 80% of performance metrics used in organisations have no direct connection to customer value creation.

Second, a persistent translation breakdown occurs where the language of strategy, expressed in terms like market share, EBITDA, and ROI, rarely translates meaningfully into daily operational activities.

Finally, organisations face the challenge of goal displacement, exemplified by Goodhart's Law, where metrics that become targets often cease to be good as employees shift their focus from creating genuine value to simply hitting numbers.

This cascade of problems creates a disconnect between strategic intent and operational reality, leaving frontline employees without clear direction on how their daily activities contribute to organisational success.

Poor goal-setting practices

Adding to the chaos is the widespread inability to set value-adding goals.

Many organisations rely on vague, output-driven targets that fail to motivate or guide employees effectively.

Goals like "build a robust digital system" or "improve efficiency" lack the specificity required to drive meaningful action.

Moreover, these goals often neglect the customer-centric and operational realities of the frontline.

As a result, employees perceive them as abstract directives disconnected from their day-to-day responsibilities.

A path forward

To break this cycle of failure, leaders must fundamentally rethink how they approach performance management.

Here are four actionable steps to address the challenges:

Democratise strategy

Simplify communication: Leaders must articulate strategy in clear, relatable terms that resonate with employees at all levels. Avoid jargon and focus on the "why" and "how" behind strategic goals.

Involve employees early: Engage teams during the strategy formulation process to create ownership and ensure alignment with operational realities. When employees contribute to shaping the strategy, they are more likely to understand and act on it.

Adopt a systems approach

Link goals across levels: Use practical frameworks to align top-level objectives with team and individual goals. Ensure each goal ties directly to specific, measurable actions.

Focus on customer impact: Goals at every level should reflect activities that matter to customers. For instance, a customer service team's goals might include "reduce response times by 20%" or "increase first-call resolution rates."

Invest in training

Train managers to set better goals: Equip leaders and managers with the skills to set SMART goals that drive performance.

Embed continuous feedback: Shift from annual appraisals to continuous feedback loops where employees receive regular updates on their progress and alignment with strategic objectives.

Translation teams

A crucial step in bridging the strategy-execution gap is the adoption of strategic translation teams—cross-functional groups specifically tasked with translating strategic objectives into operational metrics.

Research by MIT's Sloan School of Management demonstrates that organisations employing such teams achieve 31% higher strategy implementation success rates.

The implementation of these teams requires a thoughtful approach, beginning with establishing diverse groups that combine senior leadership, middle management, and frontline representatives to ensure all perspectives are considered.

These teams then employ value stream mapping to identify critical connection points between strategy and operations, creating a clear line of sight from high-level objectives to daily activities.

The final piece involves creating comprehensive metric hierarchies that demonstrate clear relationships between strategic KPIs and operational measures, ensuring that every level of the organisation can see how their work contributes to overall strategic success.

This systematic approach transforms abstract strategic goals into concrete, actionable metrics that resonate with employees at all levels of the organisation.

The role of leadership

Ultimately, the success of any performance management system hinges on leadership.

Leaders must not only champion the strategy but also model the behaviours and actions they expect from their teams.

They must regularly assess whether the organisation's performance management practices are driving the desired outcomes or perpetuating inertia.

Conclusion

Performance management is at a crossroads.

The old ways of cascading strategy and setting goals no longer suffice in a world where agility and customer focus are paramount.

Leaders must recognise that the gap between strategy and execution is not a technical problem but a leadership one.

Nguwi is an occupational psychologist, data scientist, speaker and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm. — https://www.thehumancapitalhub.com or e-mail: mnguwi@ipcconsultants.com.