Setting Performance Standards

If the end result of situational analysis is an organizational goal statement, how will a manager know if the goal has been accomplished? Only by having performance standards can management know if it has been successful in goal accomplishment. These performance standards must be (1) realistic, (2) behaviorally based, (3) observable, and (4) quantifiable.

Some managers resist the creation of performance standards precisely because they create accountability. When performance can be measured against standards, managers can be held accountable for that performance and the use of organizational resources. Once performance standards have been stated, managers can turn to the generation of alternative courses of action.

It must be recognized that accountability does impact not only the individual manager but also the entire organization, with potentially devastating results. The publicly held corporation that reports its earnings quarterly risks financial disaster should it fail to meet its projected return. In a real sense, the stock market holds the entire business organization to account for its performance, and the marketplace is littered with the remains of corporations that lost a significant portion of their equity value (defined here in limited form as the value of their publicly held stock) based on a single quarter's financial results. Thus, there is a premium placed upon an organization's ability to set performance standards accurately and realistically. It has often been observed, in consideration of this "quarterly results" accountability, that it is a uniquely American phenomenon; in countries such as Japan, the evaluation of organizational performance flows from annual performance or an even longer time frame. In addition, the American emphasis upon a short-term performance evaluation of business organizations leads to short-term decision-making with concomitant payoffs. Organizational decision-making that involves a longer term commitment of resources and similarly longer term pay offs as with esoteric research and development projects is often discouraged.

Generation of Alternatives

There are always at least two courses of action that management can take do something or do nothing. The alternative of doing nothing may in fact prove to be the best action decision if the other potential course of action either does not accomplish the organization goal or creates significant new problems in the process. Under the heading of "doing something," management may creatively generate all sorts of alternatives.

Brainstorming is a technique that is often used with a small group of employees to generate a large number of alternatives in a short period of time. In brainstorming, every participant in a group is confronted with a business problem and then calls out potential solutions. No criticism is voiced during the alternative generation phase because this would interrupt the generation of potential solutions. The ideas are recorded on a chart or chalkboard. When the participants have exhausted their imaginations, each potential solution is evaluated in detail by the group. After evaluation it may be that doing nothing is actually the best course of action. How can management know which is the best course of action or combination of actions to accomplish the organizational goal? The selection of an action alternative is made based on a comparative analysis of the consequences of each action.