Discussion – Managing Performance for Results

Textbook: Aguinis, H. (2023). Performance management (5th ed.). Chicago Business
Press. ISBN: 978-1-948426-48-0
Important: Use Textbook + 1 scholarly reference in APA style.

Chapter 3 discusses various aspects of strategic planning. As noted in the textbook, it is
important to link performance management to strategy. For this discussion board, please
consider the scenario below.
Scenario
You are the newly hired HR Director for a large healthcare organization, which serves elderly
individuals. Over 1,000 healthcare employees (e.g., physicians, nurses, etc.) are employed by
your company. You have been told, by the leaders of your organization, that the performance
management system used by the company is not fully aligned with the organization’s strategic
plan.

For this discussion board post, please address the following: (Use question and answer format).
Question 1: Explain why the job descriptions for all workers must be in alignment with
the organization’s mission, goals, and strategies.
Answer:

Question 2: Address how you can effectively communicate the strategic plan to all
organizational employees.
Answer:
Question 3: Why does the organization’s compensation strategy need to be aligned with
the company’s strategic plan?
Answer:

Directions:
•

Discuss the concepts, principles, and theories from your textbook. Cite your textbook.

•

Important: Provide opinions, examples, of hypotheticals.

•

Your initial post should address all components of the question with a 500 word limit.

•

Important: Use Textbook + 1 scholarly reference in APA style.

Name

Discussion 25

Description

25 points

Rubric Detail
Levels of Achievement
Criteria

Exceeds
Expectations

Meets
Expectation

Some
Expectations

Unsatisfactory

Quantity

5 to 6 points

3 to 4 points

1 to 2 points

0 to 0 points

Initial post and
two other posts
of substance.

Initial post and
one other post
of substance.

Initial post only.

Did not
participate.

5 to 6 points

3 to 4 points

1 to 2 points

0 to 0 points

Demonstrates
excellent
knowledge of
concepts, skills,
and theories
relevant to the
topic.

Demonstrates
knowledge of
concepts, skills,
and theories.

Demonstrates
satisfactory
knowledge of
concepts, skills,
and theories.

Did not
participate.

5 to 6 points

3 to 4 points

1 to 2 points

0 to 0 points

Discussion
post(s) exceed
expectations in
terms of support
provided and
extend the
discussion.

Discussion
post(s) meet
expectations in
terms of
support
provided.

Statements are
satisfactory in
terms of
support
provided.

Did not
participate.

6 to 7 points

4 to 5 points

1 to 2 points

0 to 0 points

Writing is well
organized, clear,
concise, and
focused; no
errors.

Some significant
but not major
errors or
omissions in
writing
organization,
focus, and
clarity.

Numerous
significant
errors or
omissions in
writing
organization,
focus, and
clarity.

Did not
participate.

Content

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CHAPTER 3 PERFORMANCE MANAGEMENT AND
STRATEGIC PLANNING
Strategy is a style of thinking, a conscious and deliberate process, an intensive implementation system, the
science of insuring future success.
—Pete Johnson

Learning Objectives
By the end of this chapter, you will be able to do the following:
Critique the definition and purposes of strategic planning.
Create alignment between performance management and an organization’s strategic priorities and direction.
Assess the critical role of the HR function in the strategic planning process.
Devise an environmental (i.e., SWOT) analysis that includes a consideration of both internal (strengths and
weaknesses) and external (opportunities and threats) trends.
Prepare a gap analysis resulting from a consideration of external and internal trends that point to leverage,
constraints, vulnerabilities, and problems that dictate an organization’s mission.
Produce state-of-the-science mission and vision statements, objectives, and strategies for the organization
and its units.
Devise job descriptions that take into account a unit’s and the organization’s vision, mission, objectives, and
strategies.
Build up support for the performance management system by using it as a tool to help achieve the
organization’s strategic priorities.

In Chapters 1 and 2, we discussed the fact that good performance management systems encourage employees to make
tangible and important contributions toward the organization’s strategic objectives. When these contributions to the top
organizational and unit priorities are made clear, performance management systems are likely to receive crucial top
management support. Without this support, it is unlikely that a performance management system will even get off the
ground. How, then, are these strategic organizational objectives identified? How does an organization know what the “target”
should be, what it is trying to accomplish, and how to do it?
The HR function plays a key role as a strategic partner in helping answer these questions. Unfortunately, the HR function is
often vilified as being merely operational and not able to think or act strategically. Well, over the past two decades or so, an
entire new field of research and practice has emerged that is called strategic human resource management (SHRM). SHRM is
about planning and implementing HR policies and activities with the goal of enabling an organization to achieve its
objectives.1 Performance management is an ideal vehicle to demonstrate the strategic role and contributions of the HR

function because it allows for explicit and clear linkages between what HR is doing and the organization’s mission, vision, and
objectives. By being involved and hopefully leading the rollout of the strategic planning process and linking a firm’s objectives
with the performance management system, the HR function can serve as an expert internal consultant and get a “seat at the
table” of the top management team. In fact, the few current and former CEOs with HR background, including Samuel R. Allen
at John Deere, James C. Smith at Thomson Reuters, Steven L. Newman at Transocean, and Mary Barra at General Motors,
have been able to serve as strategic partners while heading their respective HR units, which is in large part what propelled
their trajectory into the very top of their organizations. First, let’s define strategic planning and describe its purposes.

DEFINITION AND PURPOSES OF STRATEGIC PLANNING
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Strategic planning is a process that involves describing the organization’s destination, assessing barriers that stand in the way
of that destination, and selecting approaches for moving forward.2 Among other useful outcomes, strategic planning allows
for the allocation of resources in a way that provides organizations with a competitive advantage because they are assigned
in a more effective and more targeted manner.3 Overall, a strategic plan serves as a blueprint that defines how the
organization will allocate its resources in pursuit of its most critical and important objectives.

Strategic planning serves the following seven specific purposes: First and foremost, strategic planning allows organizations to
define their identity. In other words, it provides organizations with a clearer sense of who they are and what their purpose is.
Second, strategic planning helps organizations prepare for the future because it clarifies the desired destination. Knowing
where the organization wants to go is a key first step in planning how to get there and then doing so. Third, strategic
planning allows organizations to analyze their external and internal environment, and doing so enhances their ability to adapt
to environmental changes and even anticipate future changes. Although knowledge of the environment does not guarantee
that an organization will be more likely to change and adapt, its knowledge is the first and critical step toward possible
adaptation. Fourth, strategic planning provides organizations with focus and allows them to allocate resources to what
matters most. In turn, the improved allocation of resources is likely to stimulate growth and improve organizational
performance and profitability. Fifth, strategic planning helps produce a common perspective and culture of cooperation within
the organization, given that a common set of objectives is created. Such a common agenda and culture of cooperation can
gain organizations a key competitive advantage. Sixth, strategic planning can be a good corporate eye-opener because it
generates new options and opportunities to be considered. For example, new opportunities can include expanding to new
markets or offering new products. Finally, strategic planning can be a powerful tool to guide employees’ daily activities
because it identifies the behaviors and results that are directly linked to the organization’s objective and really matter. Thus, a
strategic plan provides critical information to be used in the performance management system. To summarize, Table 3.1 lists
the key purposes of a strategic plan.
Table 3.1 Strategic Plan: Purposes
Helps define the organization’s identity
Helps organizations prepare for the future
Enhances ability to adapt to environmental changes
Provides focus and allows for better allocation of resources
Produces an organizational culture of cooperation
Allows for the consideration of new options and
opportunities
Provides employees with information to direct daily
activities

PROCESS OF LINKING PERFORMANCE MANAGEMENT TO THE
STRATEGIC PLAN
The mere presence of a strategic plan does not guarantee that this information will be used effectively as part of the
performance management system. In fact, countless organizations spend thousands of hours creating strategic plans that are
mostly talk and lead to no tangible actions. In fact, many organizations spend too much time and effort crafting their mission
and vision statements without undertaking any concrete follow-up actions. The process then ends up being a huge waste of
time and a source of frustration and long-lasting cynicism, particularly in situations when there is frequent leadership turnover
and a strategic planning process is put into motion over and over again, usually leading to nothing more than reports and
updated website content. In those situations, it is typical to hear people say: “Oh no, again! Another CEO and another
strategic plan!” For example, a worldwide survey of senior executives from 197 companies with combined sales exceeding
$500 million showed that less than 15% spent any time evaluating how the previous year’s strategic plan affected current
performance. The study also found that corporate strategies routinely only deliver between 50% and 63% of their potential
financial performance.4 Thus, to ensure that strategy cascades down the organization and leads to concrete actions, a
conscious effort must be made to link the strategic plan with what everyone does in the organization daily.

Figure 3.1 provides a useful framework for understanding the relationship among an organization’s strategic plan, a unit’s
strategic plan, and job descriptions (which are the drivers of individual and team tasks and knowledge, skills, and abilities
(KSAs)—as described in Chapter 2). The organization’s strategic plan includes a mission statement and a vision statement, as
well as objectives and strategies that will allow for the fulfillment of the mission and vision. The strategies are created with
the participation of managers at all levels. The higher the level of involvement, the more likely it is that managers will see the
resulting strategies favorably.5 As soon as the organizational strategies have been defined, senior management proceeds to

meet with department or unit managers, who in turn solicit input from all people within their units to create unit-level mission
and vision statements, objectives, and strategies. A critical issue is to ensure that each unit’s or department’s mission and
vision statements, objectives, and strategies are consistent with those at the organizational level. Job descriptions are then
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revised and updated to make sure they are consistent with unit and organizational priorities. So, again, because they are
driven by the job descriptions, the performance management system includes results, behaviors, and developmental plans for
individuals that are consistent with the organizational-and department-level priorities.
Does the process of aligning organizational, unit, and individual priorities actually work in practice? Is this doable? The answer
to these questions is “yes,” and the benefits of doing so are widely documented. Specifically, performance management
systems have a critical role in translating strategy into action.6 In fact, a study including 338 organizations in 42 countries
found that performance management is the third most important factor affecting the success of a strategic plan. This is

particularly true for organizations that operate in rapidly changing environments, regardless of their size, industry, and age.7
For example, consider the case of automobile companies, which traditionally embrace the total quality management
movement. Car manufacturers like Toyota instill quality into every activity. But, as documented in a recent study conducted in
the U.K., leaders in many of the car manufacturing companies use a past-oriented, individual-based management system that
is not aligned with a total quality culture. If leaders truly wish to integrate total quality as a key strategic direction,
performance management should be coherent with a total quality management culture. For example, performance
management should focus on process and system-level issues to identify any potential problems before they happen. Also,
such an aligned performance management system would encourage employees to speak up about any potential problems
and would measure not just results but also processes. In other words, this performance management system would have to
be an ongoing activity focused on the development of the individual employee and the assessment of both task performance
and the quality improvement behaviors shown by employees.8

Figure 3.1 Link among Organization and Unit Strategic Plans and Job Descriptions
One way to formalize the link between strategic planning and performance management is through the implementation of a
balanced scorecard. Although this approach has been revised since it was originally proposed by Kaplan and Norton in 19929,
the basic components are largely unchanged. In a nutshell, a balanced scorecard involves creating indicators of individual
performance along four separate “perspectives” of an organization’s success. For the case of a bank, consider the following:
(a) financial (i.e., cost control, sales growth rate, profit growth rate), (b) customer (e.g., service product quality, customer

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satisfaction, service timing), (c) internal process (e.g., information delivery, interaction between employees and clients,
standard operation process), and (d) learning and growth (e.g., corporate image, competitiveness, employee satisfaction).
In addition to including individual performance measures that go beyond pure financial goals, an important feature is that
each of the indicators should be directly related to a firm’s mission and vision. This is usually shown graphically with a
strategy map, which is a flow-chart type diagram with circles and arrows that links objectives developed for each of the four
perspectives in a causal chain that eventually leads to a direct impact on the firm’s objectives. For example, regarding the
illustrative financial indicators mentioned above, a strategy map could show the following sequence: employee satisfaction
(learning and growth) → interaction between employees and clients (internal processes) → customer satisfaction (customer)
→ sales growth rate (financial), which leads to achieving the bank’s objective of increase the number of corporate accounts
and the total value of commercial loans by the end of the quarter. As a more general example of linking strategy and
performance management that does not include the specific balanced scorecard approach, consider the case of KeyBank, a
financial services company with assets of $172 billion (as of 2020), which provides investment management, retail and
commercial banking, consumer finance, and investment banking products and services. KeyBank has about 1,200 branches,
1,600 ATMs, and 18,000 employees. As of 2020, KeyBank was ranked 412th on the Fortune 500 list. In Utah, KeyBank
successfully developed a performance management system that is aligned with the strategic plan of the organization.10 To do
this, the bank first involved managers at all hierarchical levels to develop an organization mission statement. Next, they
developed objectives and strategies that would help achieve KeyBank’s mission. The mission statement, objectives, and
strategies at the organizational level served as the foundation for developing the strategies for individual branches. To
develop these, senior managers met with branch managers to discuss the organization’s objectives and strategies and to
explain the importance of adopting similar ones in each branch. Subsequently, each of the branch managers met with their
employees to develop branch mission statements and objectives. One important premise in this exercise was that each
branch’s mission statement and objectives had to be aligned with the corporate mission statement, objectives, and strategies.
After organizational and branch objectives and strategies were aligned, managers and employees reviewed individual job
descriptions. That is, each job description was tailored so that individual tasks, duties, and responsibilities were clear and
contributed to meeting the department’s and the organization’s objectives. Involving employees in this process helped them
to gain a clear understanding of how their performance affected the branch and, in turn, the organization. A revised version
of the process implemented at KeyBank of Utah is shown in Figure 3.2.

Figure 3.2 Summary of Alignment of Performance Management and Strategic Plan at KeyBank of
Utah
Consider KeyBank’s overall and branch mission statements in Figure 3.2 and the brief job description for bank teller. Now,
reread the more detailed job description from O*NET for truck driver in Figure 2.3. What are critical technology skills and
abilities that could be included in the bank teller job description to make it more specific and useful and congruent with
organization-level and branch-level objectives? What are some key results and behaviors that should be included in the
performance management system to make sure there is good alignment between the objectives of the organization and the

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branch, and individual key accountabilities, performance objectives, and performance standards? (Hint: feel free to look up
the job description for bank teller on O*NET.)
What happened after KeyBank of Utah implemented this system? In general terms, KeyBank was able to enjoy several
positive consequences of aligning corporate, branch, and individual objectives. After the implementation of its new
performance management system, KeyBank found several meaningful benefits, including the following:
Managers knew that employees were focused on meeting important objectives.
Employees had more decision-making power.
Lower-level managers had a better understanding of higher-level managers’ decisions.
Communication increased and improved among managers and between managers and employees.
In sum, to be most useful and impactful, an organization’s performance management system must rely on its strategic plan.
The job descriptions, which serve as roadmaps for what individuals are supposed to do, how, and what results will be
produced, must be aligned with the vision, mission, objectives, and strategies of the organization and unit. Organizations can
expect greater returns from implementing a performance management system when such alignment is in place. Also, to the
extent that the HR function is involved in the design and implementation of the performance management system, it will gain
credibility and will be seen as a strategic and valued contributor to the entire organization.

STRATEGIC PLANNING PROCESS
Chapter 2 included a brief overview of the strategic planning process. But the development of an organization’s strategic plan
requires a careful analysis of the organization’s competitive situation, the organization’s current position and destination, the
development of the organization’s strategic objectives, the design of a plan of action and implementation, and the allocation
of resources (human, organizational, physical) that will increase the likelihood of achieving the stated objectives.11 And the
HR function can and should play an important role in this process.

Critical Role of the HR Function
As mentioned in the opening section of this chapter, the HR function can play a critical role in creating and implementing the
strategies that will allow the organization to realize its mission and vision. Specifically, the HR function can make the following
contributions:

Communicate knowledge of strategic plan. The HR function can be a good conduit to communicate the various
components of the strategic plan (e.g., mission, vision, and objectives) to all the employees.
Outline knowledge, skills, and abilities (KSAs) needed for strategy implementation. The HR function, through job
analyses and the resulting job descriptions, serves as a repository of knowledge regarding what KSAs are needed for a
successful implementation of the strategic plan. Thus, the HR function is in a unique situation to provide information
about whether the current workforce has the KSAs needed to support the strategic plan and, if not, to offer suggestions
about what types of employees should be hired and what types of plans (e.g., training and development initiatives)
should be put in place to develop the needed KSAs internally.
Propose compensation systems. The HR function can provide useful information on what type of compensation system
should be implemented to motivate employees to support the strategic plan.
In addition to serving as a necessary guide for individual and team performance, knowledge of organization-and unit-level
mission and vision provides the HR function with information about how to design the performance management system.
Specifically, there are many choices in how the system is designed. For example, the system might place more emphasis on
behaviors (i.e., processes) than on results (i.e., outcomes), or the system might emphasize more short-term criteria (i.e.,
quarterly objectives) than long-term criteria (triennial). Some of these choices are presented in Table 3.2.
As a result of the strategic planning process, knowledge of the organization and unit vision and mission allows the HR
function to serve as an internal consultant and to make informed decisions about performance management design choices.
More detailed information on each of the factors guiding each of these design choices is provided in subsequent chapters. For
now, as one illustration, assume an organization is producing a mature product in a fairly stable industry. In this situation, an
emphasis on behaviors rather than results may be preferred because the relationship between processes and outcomes is

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well known, and the top priority is that employees display reliable and consistent behaviors in making the product. Regardless
of the type of criteria used, be it behaviors or results, these must be observable (i.e., the person rating the criteria needs to
have the ability to observe what is rated) and verifiable (i.e., there needs to be evidence to confirm the criteria rated).
Table 3.2 Some Choices in Performance Management System Design to be Guided by an Organization’s Strategic Plan

Criteria: Behavioral criteria vs. results criteria
Participation: Low employee participation vs. high employee participation
Temporal dimension: Short-term criteria vs. long-term criteria
Level of criteria: Individual criteria vs. team/group criteria
System orientation: Developmental orientation vs. administrative orientation
Compensation: Pay for performance (i.e., merit-based) vs. pay for
tenure/position
As a second example, consider the actual case of Dell computers. Dell is one of the top players in the personal computer
industry through its mode of online direct selling. Dell’s main strategic business strategy is to be a low-cost leader in an
industry that deals with a product that has now become a commodity. However, in addition to a low-cost strategy, Dell has a
customer relationship business strategy of maintaining customer service at a high level, while reducing costs. Dell’s
performance management system provides a strong link between individual objectives and organizational performance by
including a results component (i.e., cost) and a behavioral component (i.e., customer service).12 At Dell, both low cost and
high levels of customer service (for both internal and external customers) are important dimensions of the performance
management system. Also, the system is strongly linked not only to the strategic objectives (i.e., low cost and high levels of
customer service) but also to the organization’s “winning culture” (i.e., achievement of personal and business objectives
through its focus on interaction between managers and team members).

Next, let’s discuss the several steps involved in the creation of a strategic plan. These include (1) the conduct of an
environmental or SWOT analysis (i.e., the identification of the external and internal strengths, weaknesses, opportunities, and
threats of the external and internal environment in which the organization operates); (2) the creation of an organizational
mission (i.e., statement of what the organization is all about); (3) the creation of an organizational vision (i.e., statement of
where the organization intends to be in the long term, say, about 5 to 10 years); (4) setting objectives (i.e., what the
organization intends to do in the short term, say, one to three years); and (5) the creation of strategies that will allow the
organization to fulfill its mission and vision and achieve its objectives (i.e., descriptions of game plans or how-to procedures to
reach the stated objectives).
Although we will describe these steps sequentially, the strategic planning process is not linear. For example, there may first be
a rough draft of the organization’s mission and vision and then an environmental or SWOT analysis may follow to help define
the mission and vision more clearly. In other words, the mission and vision may be drafted first, and the environmental
analysis may be completed second. The important point is that there is a constant back and forth among these issues: the
vision and mission affect the type of environmental analysis to be conducted, and the results of an environmental analysis are
used to revise the mission and vision. By necessity, we need to discuss them one by one; however, keep in mind that they
affect and inform each other on an ongoing basis. Let’s begin with a discussion of environmental or SWOT analysis.

External and Internal Environmental (i.e., SWOT) Analysis
The first step in conducting a strategic plan is to step back to take in the “big picture.” This is accomplished through what is
called an environmental or SWOT analysis.13 An environmental analysis identifies external and internal parameters with the

purpose of understanding broad issues related to the context and industry where the organization operates so that decisions
can be made against the backdrop of this broader context.14

External Environment
An examination of the external environment includes consideration of opportunities and threats. Opportunities are
characteristics of the environment that can help the organization succeed. Examples of such opportunities might be markets
not currently being served, untapped talent pools, and new technological advances. On the other hand, threats are
characteristics of the external environment that can prevent the organization from being successful. Examples of such threats
range from economic recession to the launching of innovative products and services on the part of competitors. A common
framework for understanding industry-based threats is the now-classic work by Michael E. Porter called five-force analysis.15
These include three forces from horizontal competition (i.e., the threat of substitute products or services, the threat of
established rivals, and the threat of new entrants), and two forces from vertical competition (i.e., the bargaining power of
suppliers and the bargaining power of customers).

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For example, consider the case of Frontier Airlines, which is an affordable-fare airline headquartered at Denver International
Airport serving more than 55 cities in the United States, Mexico, the Dominican Republic, and Cuba on approximately 275
daily flights.16 Frontier commenced operations in July 1994 given two key opportunities in the external environment. First,

two major competing airlines (Continental and United, which since then have merged) engaged in a dramatic downsizing of
its Denver operations, leading to service gaps in various major markets that Frontier filled. Second, the city of Denver
replaced the heavily congested Stapleton Airport with the much larger Denver International Airport. In February 2004, United
Airlines, the largest carrier operating out of Denver International Airport, made changes in the environment that resulted in a
direct horizontal threat to Frontier: United Airlines launched its own low-fare affiliate. The new affiliate, Ted, was going toe-totoe with Frontier. Peter McDonald, then vice president for operations for United Airlines, reported that Ted’s cost per available
seat mile was in the ballpark of Frontier’s 8.3 cents.17 So what had been an opportunity for Frontier no longer remained one,
given the launching of Ted. To make things even worse for Frontier, Southwest Airlines, another low-cost competitor, also
entered the Denver market a few years later—and now Frontier is only the third-largest carrier in Denver after United and
Southwest. To complement the more general five-force analysis proposed by Michael Porter, the following is a nonexhaustive
list of external factors that should be considered in any environmental analysis:

Economic. For example, is there an economic recession on the horizon? Or is the current economic recession likely to
end in the near future? How would these economic trends affect our business?
Political/legal. For example, how will political changes domestically or in the international markets we are planning on
entering affect our entry strategy?
Social. For example, what is the impact of the entry of Millennials in the workforce (and the massive retirement of Baby
Boomers)?
Technological. For example, what technological changes are anticipated in our industry and how will these changes
affect how we do business?
Competitors. For example, how do the strategies and products of our competitors affect our own strategies and
products? Can we anticipate our competitors’ next move?
Customers. For example, what do our customers want now, and what will they want in the next five years or so? Can
we anticipate such needs?
Suppliers. For example, what is the relationship with our suppliers now, and is it likely to change, and in what way, in
the near future?
An examination of external trends is critical for businesses of all sizes. But it is particularly challenging for multinational
organizations because they are concerned with both domestic and international trends. In fact, monitoring the external
environment is so important in the strategic planning of multinational organizations that a survey of U.S. multinational
corporations showed that 89% of departments responsible for the assessment of the external environment report directly to a
member of the board of directors.18

Internal Environment
An examination of the internal environment includes consideration of strengths and weaknesses. Strengths are internal
characteristics that the organization can use to its advantage. For example, what are the organization’s assets and the staff’s
key skills? At Frontier, several key executives from other airlines were recruited, an important strength that was needed given
the emergence of horizontal threats. These executives created a senior management team with long-term experience in the
Denver market.
Weaknesses are internal characteristics that are likely to hinder the success of the organization. These could include an
obsolete organizational structure that does not allow for effective organization across units; the misalignment of
organizational-, unit-, individual-level objectives; a talent pool with skills that have become obsolete given changes in the
industry and in technology.
The following is a nonexhaustive list of internal issues that should be considered in any environmental analysis:

Organizational structure. For example, is the current structure conducive to fast and effective communication?
Organizational culture. Organizational culture includes the unwritten norms and values espoused by the members of the
organization. For example, is the current organizational culture likely to encourage or hinder innovation and

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entrepreneurial behaviors on the part of middle-level managers? Is there a culture in which new ideas and suggestions
are quickly suppressed with the argument that “this has never been done before”?

Politics. For example, are the various units competing for resources in such a way that any type of cross-unit
collaboration is virtually impossible? Or are units likely to be open and collaborative in cross-unit projects?
Processes. For example, are the supply chains working properly? Are all touchpoints with customers working properly?
Can customers reach us when they need to and receive a satisfying response when they do?
Size. For example, is the organization too small or too large? Are we growing too fast? Will we be able to manage
growth (or downsizing) effectively?
Table 3.3 includes a summary list of external and internal trends to be considered in conducting an environmental analysis.
Think about your current employer (or last employer, if you are not currently employed). Look at Table 3.3. Where does your
organization stand regarding each of these important external and internal issues? Regarding the external issues, what are
some of the opportunities and threats? Regarding the internal issues, what are some of the strengths and weaknesses?
Table 3.3 Trends to Consider in Conducting an External and Internal Environmental (i.e., SWOT) Analysis
External

Internal

Economic

Organizational
structure
Political/lega Organizational culture
l
Social
Politics
Technologic Processes
al
Competitors Size
Customers
Suppliers

Gap Analysis
After external and internal issues have been considered, information is collected regarding opportunities, threats, strengths,
and weaknesses. This information is used to conduct a gap analysis, which analyzes the external environment in relation to
the internal environment. The pairing of external opportunities and threats with internal strengths and weaknesses leads to
the following situations (ranked from most to least competitive):
1. Opportunity + Strength = Leverage. The best combination of external and internal factors occurs when there is an
opportunity in the environment and a matching strength within the organization to take advantage of that opportunity.
These are obvious directions that the organization should pursue. Consider the case of IBM, the world’s largest
information technology company, as well as the world’s largest business and technology services provider with a 2020
net income of $5.53 billion and total assets of $155.97 billion. IBM has concluded that the personal computer–driven
client-server computing models no longer apply and that network-based computing is taking over. As noted by former
IBM CEO Virginia (Ginni) Rometty, “Digital is the wires, but digital intelligence, or artificial intelligence as some people
call it, is about much more than that. This next decade is about how you combine those and become a cognitive
business. It’s the dawn of a new era.” This realization shifted the focus to servers, databases, and software for
transaction and data management. Furthermore, IBM recognized the upsurge of network-connected devices, including
smartphones and tablets. To take advantage of this external opportunity, IBM now focuses its resources on supporting
network systems, developing software for the network-connected devices, and manufacturing specialized components.
Consider the categories of products that IBM offers today: (a) Cloud, (b) Cognitive, (c) Data and Analytics, (d)
Internet of Things, (e) IT Infrastructure, (f) Mobile, and (g) Security.19 This is a long way from IBM’s first products
involving clocks and cash registers! IBM built up its software capabilities through internal development and outside
acquisitions. In short, IBM developed a leverage factor by identifying internal strengths that matched external
opportunities, which in turn led to a successful business model.
2. Opportunity + Weakness = Constraint. In a constraint situation, the external opportunity is present; however, the
internal situation is not conducive to taking advantage of the external opportunity. At IBM, this situation could have
taken place if IBM did not have the internal capabilities to develop software and other products for the networkconnected devices and specialized components. The external opportunity would still be there but, absent the internal
capabilities, it would not turn into an advantageous business scenario.

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3. Threat + Strength = Vulnerability. In this situation, there is an external threat, but this threat can be contained
because of the presence of internal strengths. If this had been the case at IBM, the company would not have been
able to take advantage of a new situation; nevertheless, existing strengths would have allowed IBM to continue to
operate in other areas.
4. Threat + Weakness = Problem. In the worst scenario, there is an external threat and an accompanying internal
weakness. For example, in the 1980s, IBM refused to adapt to the demands of the emerging microcomputer market
(i.e., today’s personal systems including desktops, laptops, and notebooks). IBM did not have the internal capability to
address customers’ needs for personal systems and instead continued to focus on its internal strength: the mainframe
computer. IBM’s poor performance in the early 1990s was a direct consequence of this problem situation: the external
threat (increasing demand for personal systems and dwindling demand for mainframe computers) was met with an
internal weakness (lack of ability to shift internal focus from the mainframe to the personal systems and devices).
Consider the organization you are currently working for, or the organization for which you have worked most recently. Try to
identify one leverage and one problem based on an analysis of opportunities, threats, strengths, and weaknesses. What was
the situation like? What were the outcomes?
In sum, the process of creating a strategic plan begins with an environmental, also called SWOT, analysis, which considers
internal as well as external trends. Internal trends can be classified as either strengths or weaknesses, and external trends
can be classified as either opportunities or threats. A gap analysis consists of pairing strengths and weaknesses with
opportunities and threats and determining whether the situation is advantageous (i.e., leverage), disadvantageous (i.e.,
problem), or somewhere in between (i.e., constraint and vulnerability). A SWOT analysis offers critical information for all
organizations—as illustrated with the case of Airbnb in Company Spotlight 3.1.

Mission
After the environmental analysis has been completed and the gap analysis reveals an organization’s leverage, constraints,
vulnerabilities, and problems, the members of the organization must determine who they are and what they do. This
information will then be incorporated into the organization’s mission statement. The mission statement summarizes the
organization’s most important reason for its existence. Mission statements provide information on the purpose of the
organization and its scope. State-of-the-science mission statements provide answers to the following questions:
Why does the organization exist?
What is the scope of the organization’s activities?
Who are the customers served?
What are the products or services offered?

Company Spotlight 3.1: Swot and Gap Analysis at
Airbnb20
Airbnb is an online hospitality service broker that allows customers to rent short-term lodging from local residents.
Launched in 2008, it has more than 7 million listings in 100,000 cities and 220 countries. The company is now
valued at over $130 billion.21
Strengths

Weaknesses

First to market

Lack of brand awareness in new markets

Host incentive (hosts can make money)

Company quality dependent on hosts and customers

Ease of use (search by price, location,
dates)

Ease of competitor entry

Website design

Legal costs to deal with zoning laws (e.g., prohibiting people
from running a business)

Profiles (browse hosts and review them)

Insurance costs to protect hosts and customers

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Strengths

Weaknesses

No daily updates required for listings
Opportunities

Threats

Lower prices than hotels

Established lodging providers (e.g., hotels)

More connected to city and its culture

Online rooms (e.g., Craigslist, couchsurfing.com)

Easy to become a host and connect with
local residents

Competitors copying business model

Large market for temporary housing

Bad press surrounding poor room, poor customers, or poor
hosts

Growing use of online booking

Gap Analysis (Leverage):
Provide alternative to hotels by providing temporary housing that allows hosts to make money and users to
save money and experience local culture.
Provide easy-to-use web platform that allows hosts to easily post temporary housing by posting their listing
once, and users to easily search and filter.

As an example, consider the mission statement for the Coca-Cola Company:
To refresh the world mind, body, and spirit.
To inspire moments of optimism and happiness through our brands and actions.
To create value and make a difference.22
Presumably, this mission statement was preceded by an environmental analysis examining external and internal trends. We
do not have information on this. But what we do know is that this mission statement provides some information regarding the
four questions noted earlier. Based on this mission statement, we have information about why the company exists (i.e., “to
refresh the world”) and the scope of the organization’s activities (i.e., “to inspire moments of optimism and happiness, create
value, and make a difference”). The mission statement does not, however, include information about who the customers are.
Also, there is no information about specific products (e.g., Fanta, Sprite, Minute Maid, Powerade, Dasani, Fresca).
More specific and detailed information would be needed if Coca-Cola’s mission statement is to be used by its various units to
create their own mission statements. More detailed information is also needed if both the organization and unit mission
statements will be used as input for individual job descriptions, which will in turn be used for managing individual and team
performance. State-of-the-science mission statements include the following components:
Basic product or service to be offered (does what?)
Primary markets or customer groups to be served (to whom?)
Unique benefits and advantages of products or services (with what benefits?)
Technology to be used in production or delivery
Fundamental concern for survival through growth and profitability
Mission statements can also include information about the organization’s values and beliefs, but these are sometimes listed
separately, including:
Managerial philosophy of the organization

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Public image sought by the organization
Self-concept of business adopted by employees, shareholders, and other stakeholders
In sum, a mission statement defines why the organization exists, the scope of its activities, the customers served, and the
products and services offered. Mission statements also include specific information, such as the technology used in production
or delivery, and the unique benefits or advantages of the organization’s products and services. Finally, a mission statement
can include a statement of values and beliefs, such as the organization’s managerial philosophy, or these can be presented
separately.

Vision
An organization’s vision is a statement of future aspirations. In other words, the vision statement includes a description of
what the organization would like to become in the future—about 5 to 10 years out. Vision statements are typically written
after the mission statement is completed because the organization needs to know who they are and what their purpose is
before they can figure out who they want to be in the future. Note, however, that mission and vision statements are often
combined and, therefore, in many cases it is difficult to differentiate one from the other. In such cases, the vision statement
usually includes two components: a core ideology, which is referred to as the mission, and an envisioned future, which is
what is referred to as the vision per se. The core ideology contains the core purpose and core values of an organization, and
the envisioned future specifies long-term objectives and a picture of what the organization aspires to.
Spectrum Brands provides an example of combining mission and vision into one statement. Spectrum Brands is a global
consumer products company and a leading supplier of batteries, kitchen appliances, shaving and grooming products, personal
care products, pet supplies, and home and garden products. Originally founded in 1906 as the French Battery Company in
Madison, Wisconsin, and renamed Rayovac Company during the 1930s, the company changed its name to Spectrum Brands
to reflect its diverse portfolio and position as a publicly held company. Some of its more recognizable brands include Rayovac,
VARTA, Remington, George Foreman, Black+Decker, Nature’s Miracle, Littermaid, and Liquid Fence. Based in Middleton,
Wisconsin, Spectrum Brands’ products are sold by the world’s top 25 retailers and are available in more than one million
stores in approximately 160 countries. Spectrum Brands’ combined mission and vision statement is the following:
Spectrum Brands is a rapidly growing, global, diversified, market-driven consumer products company.
We will continue to grow our company through a combination of strategic acquisitions and organic growth.
We will strengthen our brands and generate growth through emphasis on brand strategy/marketing and
innovative product technology, design and packaging.
We will leverage IT infrastructure, distribution channels, purchasing power and operational structure globally to
continue to drive efficiencies and reduce costs.
We will profitably expand distribution in all served markets.23
This statement includes components of a mission statement (i.e., “a rapidly growing, global, diversified, market-driven
consumer products company”) as well as components of a vision statement (e.g., “will strengthen our brands and generate
growth through emphasis on brand strategy/marketing and innovative product technology, design and packaging”). Thus, this
statement combines the present (i.e., who the company is, what it does) with the future (i.e., aspirations).
Other organizations make a more explicit differentiation between the mission and vision statements. Consider the vision
statement for Greif, a global company headquartered in Delaware, Ohio, with approximately 13,000 employees and more than
200 operating locations in more than 50 countries. Greif offers rigid industrial packaging and services (e.g., steel, rigid
intermediate bulk containers; blending, filling, and other packaging services), flexible products and services (e.g., flexible
intermediate bulk containers, shipping sacks; reconditioning flexible intermediate bulk containers), paper packaging (e.g.,
containerboard, corrugated sheets and other corrugated products; packaging services), and land management (e.g., timber,
timberland, and special use properties). Greif’s vision statement is the following:24

Vision
In industrial packaging, be the best performing customer service company in the world.

Our Core Values. Our people are our past, present and future. We will honor The Greif Way, building upon our
rich history as a special place to work. We will operate within a culture of integrity, character and respect. We

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will maintain a safe working environment. We will attract and cultivate a responsible, competent, efficient and
empowered workforce. We will provide opportunities to excel. We will communicate. We will listen.

Our customers are our reason for being. We will keep our promises to our customers. We will be synonymous
with quality and service. We will solve their packaging challenges. We will prove the value of our relationship by
being the best at what we do.
Our products are our livelihood. We will be a low-cost manufacturer and the high-value supplier in our business
segments. We will innovate, using our ingenuity and creativity to provide better solutions. We will maintain our
focus on where we can be the best and apply our expertise to do it better.
Our shareholders are our support. We will conduct our business ethically and with transparency. We will
establish rigorous financial goals that will drive our business decisions and measure our progress. We will strive
to attain a superior rate of return and maintain trust with our investors.
Our stage is the world. Our communities and the environment are our backdrop. We will be a conscientious
global citizen, a responsive community neighbor and a responsible steward of the earth’s natural resources.
Greif’s vision statement is clearly future-oriented. It provides direction and focus. In addition, it includes several features that
are required of useful vision statements. First, it focuses attention on what is most important and thus eliminates
unproductive activities. Second, it provides a context from which to evaluate new external opportunities and threats. For
example, the vision statement indicates that new opportunities for profitable growth in the industrial packaging and services
business should be pursued. In addition, state-of-the-science vision statements have the following characteristics, not all of
which are present in Greif’s vision statement:

Brief. A vision statement should be brief so that employees can remember it.
Verifiable. A good vision statement should be able to stand the reality test. For example, how can we verify if Greif
indeed becomes “one of the most desirable companies to work for in our industries, focusing on establishing a work
atmosphere in which our employees can excel”?
Bound by a timeline. A good vision statement specifies a timeline for the fulfillment of various aspirations.
Current. Outdated vision statements are not useful. Vision statements should be updated on an ongoing basis, ideally
as soon as the old vision is fulfilled.
Focused. A good vision statement is not a laundry list of aspirations but rather focuses on just a few (perhaps not more
than three or four) aspects of an organization’s performance that are important to future success.
Understandable. Vision statements need to be written in a clear and straightforward manner so that they are
understood by all employees.
Inspiring. Good vision statements make employees feel good about their organization’s direction and motivate them to
help achieve the vision.
A stretch. Consider Microsoft’s vision statement in the 1980s of “putting a computer on every desk and in every home,”
which was the vision when CEO Bill Gates started the MS-DOS operating system. This vision statement was such a
stretch that it was considered ludicrous at a time when the mainframe computer still reigned supreme and the first
personal computers were being made and sold. But that vision became a reality. Two decades later, Microsoft revised
their vision as follows: “putting a computer in every car and every pocket.” Once again, this vision has now become a
reality—in the form of car dashboards and smartphones.
Table 3.4 Characteristics of Good Vision Statements
Brief
Verifiable
Bound by a
timeline
Current
Focused
Understandable
Inspiring
A stretch

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In sum, a vision statement includes a description of future aspirations. Whereas the mission statement emphasizes the
present, the vision statement emphasizes the future. Table 3.4 includes a summary list of the features that should be present
in a good vision statement. Think about your current employer (or last employer, if you are not currently employed). Look at
Table 3.4. How many of these features are reflected in your organization’s vision statement? What should be added to the
vision statements to make it more congruent with an ideal one?

Objectives
After an organization has analyzed its external opportunities and threats as well as internal strengths and weaknesses and
has defined its mission and vision, it can realistically establish objectives that will further its mission. The purpose of setting
such objectives is to formalize statements about what the organization hopes to achieve in the medium-to long-range period
(i.e., within the next three to five years). Objectives provide more specific information regarding how the mission will be
implemented. Objectives also provide a good basis for making decisions by keeping desired outcomes in mind. Objectives
provide the basis for performance measurement because they allow for a comparison of what needs to be achieved versus
what each unit, group, and individual is achieving. Moreover, objectives can also be a source of motivation and provide
employees with a more tangible target for which to strive.
Consider the case of Harley-Davidson, Inc., the motorcycle manufacturer. Matthew S. Levatich, president and CEO from May
2015 to February 2020, said that a major objective is to “deliver those customer-growth objectives, not chassis-growth
objectives. It sounds kind of trite: We’re not really in the business of manufacturing motorcycles. We’re in the business of
building customers. When I joined [in 1994], we had made 86,000 motorcycles the prior year. Compare that to the peak in
2006 at about 350,000. It’s less today, but we’re working hard to get that volume back up. But the emphasis has shifted from
making motorcycles to what I would say is identifying and finding customers—with product, with distribution, with everything
we do at the company.”25 Operationally speaking, this means that Harley Davidson is trying to achieve the following:26
Lead in every market: Harley-Davidson plans to achieve the leadership position in the 601cc motorcycle segment. As
the company’s CEO Matt Levatich put it, “This is not just about competing, but winning.”
Grow sales at a faster rate: Harley-Davidson plans to grow its retail sales in the United States as well as internationally
at a faster pace. In the next five years, the company plans to add 150 to 200 dealers globally to achieve this objective.
Grow earnings faster than revenues: Harley-Davidson has stated an objective of growing its revenues over the next five
years. It’s also aiming at growing its earnings faster than its revenues through 2020 and beyond.
These objectives provide a clear direction for Harley-Davidson. In fact, they provide useful information to guide unit-level
objectives as well as individual and team performance. The entire organization has a clear sense of focus because all
members know that there are clear objectives in terms of market presence, growth, sales, earnings, and financial
performance.

Strategies
At this point, we know what the organization is all about (mission), what it wants to be in the future (vision), and what it
needs to do to get there (objectives). What remains is a discussion of how to fulfill the mission and vision and how to achieve
the stated objectives. This is done by creating strategies, which are descriptions of game plans or how-to procedures to reach
the stated objectives. The strategies could address issues of growth, survival, turnaround, stability, innovation, talent
acquisition, and leadership, among others.
There is an entire field of study called “strategic management studies” devoted to the development and implementation of
strategies. In fact, Deloitte, Boston Consulting Group, Bain & Company, KPMG, and Accenture offer consulting services in the
domain of business strategy. Also, there are hundreds of books written on this topic. But to give you a brief overview of some
possibilities, consider the following strategies, out of many, that could be implemented:27

Operations: Addressing issues about the global economic environment in terms of market, capital, interest rates, labor
costs, taxes, regulations, and available infrastructure.
Competitiveness: Operating at optimum levels of productivity and efficiency: Continuous benchmarking, use of
statistical tools for process optimization, total quality model, gathering data on customer expectations and experiences.
Optimal use of resources: Optimization of global collaboration with suppliers, parts standardization and reduction, and
flexible manufacturing and services.

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Global corporate culture. Respecting cultural values of different regions, constant training at all levels, policies of respect
and recognition to individuals, and selecting of highly qualified employees.
Research and development: Ongoing initiatives aimed at innovation and creativity.

Developing Strategic Plans at the Unit Level
As shown in Figure 3.1, the organization’s strategic plan has a direct impact on the units’ strategic plans. The case of KeyBank
of Utah described earlier illustrates how the branches had a mission statement that was aligned with the overall
organizational mission statement. Similarly, the vision statement, objectives, and strategies of the various units need to be
congruent with the overall organizational vision, objectives, and strategies. Consider the case of Microsoft Corporation’s
mission statement:28

Our Mission
Our mission is to empower every person and every organization on the planet to achieve more.

What We Value
Innovation: Learn about innovations from our computer science research organization. With more than 1,000
researchers in our labs, it’s one of the largest in the world.
Diversity and Inclusion: Explore how we maximize every person’s contribution—from our employees to our customers—
so that the way we innovate naturally includes diverse thought.
Corporate Social Responsibility: See how we work to be a responsible partner to those who place their trust in us,
conducting business in a way that is inclusive, transparent, and respectful of human rights.
Philanthropies: Find out how we empower people by investing technology, money, employee talent, and the company’s
voice in programs that promote digital inclusion.
Environment: Discover how we lead the way in sustainability and use our technologies to minimize the impact of our
operations and products.
Trustworthy Computing: Check out how we deliver secure, private, and reliable computing experiences based on sound
business practices.
Now, consider the mission statement of one of Microsoft’s units, Training and Education:
With the charter to enable Microsoft engineering workgroups to realize their full potential for innovation and
performance through world-class learning strategies, Microsoft Training and Education (MSTE) provides
performance support strategies to support the overall corporation’s software engineering efforts. Our efforts
include the design, development, and delivery of learning programs, online information, and resources for
Microsoft employees. MSTE’s integrated suite of technical offerings supports our objective of having a significant
impact on Microsoft’s business. We promote best practices, cross-group communication, Microsoft expertise and
Industry expertise.
As you can see, the mission of the training and education unit regarding the realization of people’s full potential for innovation
and performance is consistent with the overall mission to empower every person plays a central role. Of course, MSTE’s
mission is more focused on issues specifically relevant to the training and education function. Nevertheless, the link between
the two mission statements is readily apparent.
The congruence between the mission of the organization and its various units is important regardless of the type of industry
and the size of the organization. High-performing organizations have a clear alignment in the mission and vision of the overall
and unit-level mission and vision statements. Consider the case of Norfolk State University (NSU), located in Norfolk, Virginia.
NSU, the seventh-largest historically African American university in the United States, serves many students who are the first
in their families to attend college. It offers about fifty academic programs, including sixteen master’s and two doctoral degree
programs. NSU has seven main schools offering courses to their approximately 6,200 and 800 undergraduate and graduate

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students, respectively: School of Business, School of Education, School of Liberal Arts, College of Engineering, Science &
Technology, School of Social Work, and School of Extended Learning. The university’s mission statement is the following:
Through exemplary teaching, scholarship, and outreach, Norfolk State University transforms lives and
communities by empowering individuals to maximize their potential, creating life-long learners equipped to be
engaged leaders and productive global citizens.29
The mission statement of the School of Business indicates that its objective is to:
…be your path to an amazing future. At Norfolk State’s School of Business, high character combines with high
expectations, excellence in instruction and a global perspective to prepare students to succeed personally and
professionally. Our graduates will be known for mastery of their academic specialties and the ability to apply
their knowledge in the workplace and in service to others. It is precisely this type of preparation that has
allowed our graduates to assume leadership roles in great organizations worldwide.”30
Note that both mission statements are aligned and refer to similar issues. Specifically, they include the delivery of a highquality education and academic achievement and educating productive citizens who will contribute to a global society.
In sum, the organization’s strategic plan, including the mission, vision, objectives, and strategies, cascades down to all
organizational levels. Thus, each division, branch, department, or unit also creates its own strategic plan, which should be
consistent with the organization’s overall plan.

Job Descriptions
Continuing with the sequence of components shown in Figure 3.1, job descriptions also need to be congruent with the
organization and unit mission, vision, objectives, and strategies. We discussed the job analysis process leading to the creation
of job descriptions in Chapter 2. Recall that job descriptions are important because they serve as a roadmap for what
individuals are supposed to do, how, and what results will be produced. Moreover, job descriptions are important for new
employees because they set clear expectations from day one. So, if job descriptions are consistent with the organization and
unit mission, vision, objectives, and strategies, it is more likely that results produced by individuals and teams will contribute
to the success of their units and organization as a whole. Please be patient for now. Chapter 4 will address how to define
behaviors and results, and Chapter 5 and 6 will address how to measure them in great detail. For now, let’s continue to
address the links between strategic business priorities and job descriptions.
After the strategic plan is completed, some rewriting of the existing job descriptions may be in order. Recall the job
description for Trailer Truck Driver as used by the Civilian Personnel Management Service (U.S. Department of Defense) (see
Figure 3.3).
This description provides information about the various tasks performed together with a description of some of the KSAs
required for the position. But what is the link with the organization and unit strategic plans? How do the specific tasks
contribute to the strategic priorities of the transportation division and the organization as a whole? This description includes
only cursory and indirect information regarding these issues. For example, one can assume that the proficient handling of bills
of lading, expense accounts, and other papers pertinent to the shipment contributes toward a smooth shipping operation and,
therefore, contributes to the transportation division. However, this link is not sufficiently clear.

Figure 3.3 Job Description for Trailer Truck Driver: Civilian Personnel Management Service, U.S.
Department of Defense
Figure 3.4 Job Description for Performance Solutions Group Manager at Microsoft
On the other hand, consider a job announcement describing the position of Performance Solutions Group Manager in
Microsoft’s training and education unit (see Figure 3.4). This job description makes the link between the individual position
and MSTE quite clear. First, the description includes MSTE’s mission statement so that individuals become aware of how their
specific role fits within the overall mission of the department. Second, the job description includes language to the effect that
the work must lead to an “industry leading” product, which is consistent not only with MSTE’s mission but also with
Microsoft’s overall mission. Third, in the needed qualifications section, there is a clear overlap between those needed for this
specific position and those mentioned in MSTE’s as well as in Microsoft’s overall mission. In short, the person working as
Performance Solutions Group Manager has a clear sense not only of her position but also of how behaviors and expected
results are consistent with expectations about MSTE and Microsoft in general.

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In sum, the tasks and KSAs included in individual job descriptions must be congruent with the organization’s and unit’s
strategic plans. In other words, job descriptions should include activities that, if executed well, will help execute the mission
and vision. Job descriptions that are detached from strategic priorities will lead to performance evaluations focused on
behaviors and results that are not central to an organization’s success, and the performance management system will be seen
as irrelevant and a big waste of time by managers and employee alike.

BUILDING SUPPORT
Given the many competing projects and the usual scarcity of slack resources, some organizations may be reluctant to
implement a performance management system. Primarily, the reasons include a lack of any perceived value-added, an
initiative that requires many resources (particularly time from supervisors), and something that, simply put, seems to produce
few tangible payoffs and even cause more harm than good. The need to align organization and unit priorities with the
performance management system is one of the key factors contributing to obtaining the much-needed top management
support for the system.
A good question that top management is likely to and, frankly, should ask is: “Why is performance management important
and even necessary?” One answer to this question is that performance management is the primary tool that will allow top
management to carry out its vision. The performance management system, when aligned with organization and unit
priorities, is a critical tool to (1) allow all employees to understand where the organization stands and where it wants to go
and (2) provide tools to employees (e.g., motivation, developmental resources) so that their behaviors and results will help
the organization get there. Fundamentally, the implementation of any performance management system requires that the
“What’s in it for me?” question be answered convincingly. In the case of top management, the answer to the “What’s in it for
me?” question is that performance management can serve as a primary tool to realize its vision and achieve strategic
objectives.
Building support for the system does not stop with top management, however. A critical aspect to keep in mind when
developing a performance management system is whether managers are cynical about it. Leaders who are more cynical
about the performance management system tend to be less effective and are also more likely to consider leaving their firms.
To address this problem, HR leaders must ensure that managers see the performance management system as useful and
track managers’ cynicism through climate surveys31. In other words, all participants in the system need to understand the

role they play and also receive a clear answer to the “What’s in it for me?” question. Accordingly, communication about the
system is key. This includes a clear description of the system’s mechanics (e.g., when the performance planning meetings will
take place, how to handle disagreements between supervisor and employees) and the system’s consequences (e.g.,
relationship between performance evaluation and compensation). As discussed in Chapter 1, not involving people in the
process of system design and implementation can create resistance, and the performance management system may result in
more harm than good.
Consider the role that good communication played in the launching of a revamped performance management system at
Bankers Life and Casualty, an insurance company specializing in insurance for seniors and headquartered in Chicago. When
Edward M. Berube was appointed as its president and CEO, he understood that Bankers Life and Casualty was facing
important challenges, including new customer demands, the impact of the Internet, outsourcing, and increased competition.
So, Bankers Life and Casualty engaged in a very aggressive marketing campaign, which included retaining actor Dick Van
Dyke as its company spokesperson. In spite of these efforts, however, internal focus groups revealed that while employees
understood the organization’s strategic plan, they did not understand what role each person was supposed to play in helping
the organization execute its strategy. In other words, employees did not have a clear understanding of how each person could
help achieve the organization’s strategic objectives, including focusing on the following three key areas: (1) distribution scope,
scale, and productivity; (2) home office productivity and unit costs; and (3) product revenue and profitability.
Bankers Life and Casualty realized that a better link between strategy and job descriptions could be established by improving
its performance management process. The HR function, therefore, proceeded to overhaul the performance management
system so that the three areas of strategic importance just outlined would be part of everyone’s job descriptions. The design
and implementation of the new system was a joint venture between the HR and the communications departments. First, the
HR and communications teams spoke candidly with the CEO about his expectations. The CEO responded with overwhelming
support, stating that the performance management system would be implemented for every employee on preestablished
dates and that he would hold his team accountable for making this happen. Then, to implement the performance
management system, each unit met with its VP. During these meetings, each VP discussed how his or her unit’s objectives
were linked to the corporate objectives. Next, HR and communications led discussions surrounding objective setting, giving
feedback, and writing developmental plans. Managers were then given the opportunity to share any feedback, concerns, or
questions that they had about the program. During this forum, managers exchanged success stories and offered advice to
one another. These success stories were then shared with the CEO. The CEO then shared these stories with those who
reported directly to him to strengthen the visibility of his support for the program.
In short, the performance management system at Bankers Life and Casualty helped all employees understand their
contributions to the organization’s strategic plan. This was a key issue that motivated the CEO to give unqualified support to

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the system. This support gave a clear message to the rest of the organization that the performance management system was
an important initiative that added value to the entire organization. The support of the CEO and other top executives,
combined with a high degree of participation from all employees and their ability to voice concerns and provide feedback
regarding the system, was a critical factor in the success of the performance management system at Bankers Life and
Casualty.

SUMMARY POINTS
Strategic planning involves defining the organization’s present and future identity. Overall, the strategic plan serves as a
blueprint that allows organizations to allocate resources in a way that provides the organization with a competitive
advantage.
The HR function can play a critical role as a strategic partner and expert internal consultant in creating the strategic
plan. Also, performance management is an ideal vehicle to demonstrate the strategic role of the HR function because it
allows for explicit and clear linkages with organization’s mission, vision, and objectives. By helping implement the
strategic planning process and linking a firm’s objectives with the performance management system, the HR function
can get a “seat at the table” of the top management team.
Strategic planning serves several specific purposes, including defining an organization’s identity, preparing for the
future, analyzing the environment, providing focus, creating a culture of cooperation, generating new options, and
serving as a guide for the daily activities of all organizational members.
Performance management systems must rely on the strategic plan to add value and be useful. The job descriptions of
all employees must be aligned with the vision, mission, objectives, and strategies of the organization and unit. It is
critical to align organizational, unit, and individual priorities. One formal approach to do this is the balanced scorecard
approach.
The process of creating a strategic plan begins with an environmental (SWOT) analysis, which considers internal (e.g.,
organizational structure, processes) as well as external (e.g., economic, technological) trends. Internal trends can be
classified as either strengths or weaknesses, and external trends can be classified as either opportunities or threats. A
gap analysis consists of pairing strengths and weaknesses with opportunities and threats and determining whether the
situation is advantageous (i.e., leverage), disadvantageous (i.e., problem), or somewhere in between (i.e., constraint
and vulnerability).
The second step in creating a strategic plan is to write a mission statement based on the results of the gap analysis. A
state-of-the-science mission statement defines why the organization exists, the scope of its activities, the customers
served, and the products and services offered. Mission statements also include information about what technology is
used in production or delivery, and the unique benefits or advantages of the organization’s products and services.
Finally, a mission statement can include a statement of values and beliefs, such as the organization’s managerial
philosophy, although some organizations choose to create separate value statements.
The third component of a strategic plan is the vision statement, which includes a description of future aspirations.
Whereas the mission statement emphasizes the present, the vision statement emphasizes the future. In many cases,
however, the mission and vision statements are combined into one statement. State-of-the-science vision statements
are brief, verifiable, bound by a timeline, current, focused, understandable, inspiring, and a stretch.
After the mission and vision statements are created, the fourth step in the strategic planning process is to generate
objectives that will help fulfill the mission and vision. Objectives provide more specific information regarding how the
mission and vision will be implemented. Typically, objectives span a three-to five-year period.
The fifth and final step in the strategic planning process is to identify strategies that will help achieve the stated
objectives. These strategies are game plans and usually address issues surrounding growth, survival, turnaround,
stability, innovation, and leadership.
The organization’s strategic plan, including the mission, vision, objectives, and strategies, cascades down to all
organizational levels. Thus, each division, department, or unit also creates its own strategic plan, which should be
consistent with the organization’s overall plan. The most effective sequence for doing so is for the units to first agree on
common strategies and then specify unit-level objectives.
The tasks and KSAs included in individual job descriptions must be congruent with the organization’s and unit’s strategic
plans. In other words, job descriptions should include activities that, if executed well, will in turn help execute the
mission and vision. Job descriptions that are detached from strategic priorities will lead to performance evaluations
focused on behaviors and results that are not central to an organization’s success.

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To build support for the performance management system, top management must be aware that it is a primary tool and
ideal conduit to execute an organization’s strategic plan. This awareness will lead to top management’s support for the
system. In addition, all organizational members need to be able to answer the “What’s in it for me?” question regarding
the system. Implementing the performance management system will require considerable effort on the part of all those
involved. Those doing the evaluation and those being evaluated should know how the system will benefit them directly.

EXERCISE 3-1
Linking Individual with Unit and Organizational Priorities
Obtain a copy of the job description for your current or most recent job. If this is not feasible, obtain a copy of a job
description of someone you know. Then, obtain a copy of the mission statements for the organization and unit in question.
Revise the job description so that it is aligned with the unit and organizational strategic priorities. Revisions may include
adding tasks and KSAs important in the mission statement that are not already included in the job description.

EXERCISE 3-2
Building Support for a Performance Management System at the Gap,
Inc.*
You have just been appointed the Chief Human Resource Office (CHRO) for The Gap, Inc., a large retail clothing company
with more than $1 billion in sales, 3,000 retail stores in the United States, and over 130,000 employees. The mission of the
company is “to create emotional connections with customers through our brands, unique designs, and enjoyable store
experiences.”
The current performance management system is not delivering results in terms of business performance, with the company
posting a 10% decline in sales during last month, the 12th monthly decrease in a row. The chief executive officer (CEO)
believes that this is because of a lack of strategic alignment between the company’s overall mission and its retail stores.

Imagine the class instructor is the CEO of the company, and the other students are members of the top management team.
Your task is to devise a new strategic plan that achieves the CEO’s goal of greater alignment between organizational-and
store-level strategies. Based on the mission statement of the company and other information provided:
1. Develop a mission and vision statement that translates the organization’s mission statement for the retail stores using
the guidelines below (Hint: Sections 3.3.3 and 3.3.4 provide detailed guidance and examples of mission and vision
statements).
Mission statements should include: The product offered (clothing); the target customer group (young adults and
casual wear for professionals); benefits of the product (cost, quality, style); technology used (if applicable); and
a focus on sales growth and profitability (increasing revenue).
Vision statements should be: succinct, verifiable, time-bound, focused, clear, inspirational, and challenging.
2. Develop 2-3 retail store objectives and the strategies to achieve those objectives. These should be closely linked to
the new mission and vision statement. (Hint: Sections 3.3.5, 3.3.6, and 3.3.7 provide detailed guidance and examples
of setting objectives and strategies)
Objectives should address the next three to five years and provide a clear performance target to aim for. They
might address issues such as sales revenue, payroll, or advertising.
Strategies should address how the objectives will be achieved. They might address issues such as operations,
customer surveys and benchmarking, or inventory management.
3. Prepare a brief (5–10 minute) presentation that:

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Presents the new strategic plan (mission, vision, objectives, and strategies) to the CEO and the top management
team
Convinces the CEO and the top management team to support the new plan
Your presentation should clearly answer the question “What’s in it for me?” for both the CEO and the rest
of the top management team
Articulate how the new plan aligns with the organization’s overall mission and how it will lead to greater
sales
Consider how you can make the CEO and the rest of the top management team feel a sense of
involvement and ownership (e.g., allow top management team members to provide suggestions about the
verbiage of the mission or vision; allow them to take responsibility for some part of the process)
* This exercise is loosely based on Gap Inc. Encouraging Employees to Grow, Perform and Succeed—without Ratings.

CASE STUDY 3-1: EVALUATING VISION AND MISSION
STATEMENTS AT PEPSICO
Consider the mission and vision statements for PepsiCo and then answer the questions included below:

PepsiCo’s Mission Statement*
Our mission: Create more smiles with every sip and every bite.
For our consumers: By creating joyful moments through our delicious and nourishing products and unique brand
experiences.
For our customers: By being the best possible partner, driving game-changing innovation, and delivering a level of
growth unmatched in our industry.
Four our associates and our communities: By creating meaningful opportunities to work, gain new skills and build
successful careers, and a diverse and inclusive workplace.
For our planet: By conserving nature’s precious resources and fostering a more sustainable planet for our children and
grandchildren.
Four our shareholders: By delivering sustainable top-tier TSR and embracing best-in-class corporate governance.

PepsiCo’s Vision Statement
Be the global leader in convenient foods and beverages by winning with purpose. This reflects our ambition to win sustainably
in the marketplace and accelerate our top-line growth, whilst keeping our commitment to do good for the planet and our
communities. It builds on decades of progress we’ve made since PepsiCo was founded in 1965, while setting a firm
foundation for a new era of growth and prosperity. To help us achieve this vision, we’ve defined a new set of aspirations: to
become Faster, Stronger, and Better.
1. The table below summarizes the key characteristics of ideal mission and vision statements as discussed in Chapter 3.
Use the Y/N columns in the table to indicate whether each of the features is present, or not, in the mission and vision
statements of PepsiCo.
2. How do the mission and vision statements relate to the eight characteristics of an ideal mission statement and the
eight characteristics of an ideal vision statement? What are the gaps?
3. How useful are the mission and vision statements of PepsiCo in terms of linking organizational priorities with individual
and team performance? In creating such a linkage, which ideal mission/vision statement characteristics (shown in the
table above) seem to be more important than others? What other places might the HR department at PepsiCo look for
information regarding how to more effectively cascade firm-level strategy to each individual’s objectives?

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Y
/
N

Characteristics

Basic product/service to be offered (does what)
Primary markets or customer groups to be served (to whom)
Mission statement—who we are
and what we do

Unique benefits, features, and advantages of products/services (with what
benefits)
Technology to be used in production or delivery
Fundamental concern for survival through growth and profitability
Managerial philosophy of the organization
Public image sought by organization
Self-concept of business adopted by employees, shareholders, and other
stakeholders
Brief—so that employees can remember it
Verifiable—able to stand the reality test
Bound by a timeline—specifies a timeline for fulfillment of the various
aspirations
Current—updated on an ongoing basis

Vision—Statement of future
aspirations

Focused—lists a few (3–4) aspects of organization’s performance that are
important to future success
Understandable—written in a clear and straightforward manner so that they
are understood by all employees
Inspiring—makes employees feel good about their organization’s direction and
motivates them to help achieve the vision
Stretch—objective not easily attained

* PepsiCo (2021). Mission & vision. PepsiCo, Inc. Used with permission.

CASE STUDY 3-2: LINKING PERFORMANCE MANAGEMENT TO
STRATEGY AT BOEING
Consider the following description about Boeing32:
The Boeing Company is an American multinational firm that designs, manufactures, and sells airplanes, rotorcraft, rockets,
satellites, telecommunications equipment, and missiles worldwide. Boeing is the world’s largest aerospace company and the
second-largest defense contractor in the world based on 2018 revenue. It is also the largest exporter in the United States by
dollar value.
In March 2019, the Boeing 737 MAX passenger airliner was grounded worldwide after 346 people died in two crashes, Lion
Air Flight 610 on October 29, 2018, and Ethiopian Airlines Flight 302 on March 10, 2019. Ethiopian Airlines immediately
grounded the entire MAX fleet. The next day, the Civil Aviation Administration of China ordered the first nationwide
grounding, and many other aviation authorities followed suit. The U.S. Federal Aviation Administration (FAA) also ended up
grounding all 737 MAX planes on March 13 after an investigation determined evidence of accident similarities. These
groundings became the longest ever of a U.S. airliner and included a total of 387 aircraft, which had served 8,600 flights per
week for 59 airlines. However, this was not the first scandal for Boeing. Before the 737 MAX crashes, Boeing was having
difficulties creating an aircraft that would meet the demand for a midsized aircraft in between its single-aisle 737 and larger
twin-aisle 787 planes. With the MAX crisis, the plans to launch an entirely new jetliner for this midsize market (the fastest
growing market in the industry) have been abandoned.
Those familiar with the company highlighted that the severe problems that Boeing was facing were a consequence of a
culture that consistently prioritized short-term rewards to shareholders over engineering-driven decisions and long-term
strategy, including investments in R&D. Even Wall Street analysts were complaining that the board of directors was unable to
provide the leadership the company needed.
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Imagine you are an HR executive at Boeing. The board of directors just met and decided to prioritize the safety of the planes
and promote R&D to ensure long-term sustainability. They are asking you to develop a new performance management
system and ensure that these strategic goals are properly implemented in the next six months. Given the company’s new
strategic orientation, what would you do to help align a new performance management system with this strategic direction?
How would you explain anticipated benefits? What would you say and do to garner company-wide support for your proposed
performance management system?

Descriptions of Images and Figures
Back to Figure

Operates gasoline-or diesel-powered truck or truck tractor equipped with two or more driving wheels and with
four or more forward speed transmissions, which may include two or more gear ranges. These vehicles are
coupled to a trailer or semi-trailer by use of a turntable (fifth wheel) or pintle (pivot) hook. Drives over public
roads to transport materials, merchandise, or equipment. Performs difficult driving tasks such as backing truck to
loading platform, turning narrow corners, negotiating narrow passageways, and keeping truck and trailer under
control, particularly on wet or icy highways. May assist in loading and unloading truck. May also handle manifest,
bills of lading, expense accounts, and other papers pertinent to the shipment.
Back to Figure
As the Performance Solutions Group Manager, you will be accountable for developing and delivering on a portal
strategy that touches over 20,000 employees worldwide and involves a complex data delivery system.
Additionally, the person is responsible for defining the cutting-edge tool suite used by the team to develop and
maintain the portal, the content housed by the group, and all e-learning solutions. Key initiatives include
redesigning the Engineering Excellence Guide within the next six months and evolving it over the next eighteen
months to three years to become the industry-leading performance support site. Key challenges include
maintaining and managing the cutting-edge tool suite used by the team and driving a clear vision for an industryleading portal and content delivery plan.
Qualifications for this position are a minimum of five years of senior management experience, preferably in
knowledge management, e-learning, or Web-based product development roles; ability to think strategically and
exercise sound business judgment on behalf of Microsoft; excellent leadership, communication, interpersonal, and
organizational skills; firsthand experience delivering/shipping Web-based learning and content management
solutions; proven record of successful team management; and ability to work well independently and under
pressure, while being flexible and adaptable to rapid change. Knowledge of performance support and training
procedures, standards, and processes is preferred.
With the charter to enable Microsoft engineering workgroups to realize their full potential for innovation and
performance through world-class learning strategies, Microsoft Training and Education (MSTE) provides
performance support strategies to support the overall corporation’s software engineering efforts. Our efforts
include the design, development, and delivery of learning programs, online information, and resources for
Microsoft employees. MSTE’s integrated suite of technical offerings supports our objective of having a significant
impact on Microsoft’s business. We promote best practices, cross-group communication, Microsoft expertise and
industry expertise.

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PART TWO SYSTEM IMPLEMENTATION

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