Article: Theory of organisational performance

Performance Management

Theory of organisational performance

The performance of any organization can be made a reality if the company correctly identifies the professional skills, behavioral competencies and the resource needs for every position in the company

Behavioral competencies are the ‘How' of a job and are ingrained from early childhood


Performance of an individual or an organization is a function of professional skills, competencies, and resources available


The performance of any organization can be made a reality if the company correctly identifies the professional skills, behavioral competencies and the resource needs for every position in the company

Every organization is, and rightly so, focused on its performance espe-cially in an age of globalization where companies want to produce where it is cheaper and sell where one can get the best price. This leads to a huge number of challenges, as the way companies did business earlier is completely different from the way in which it is being done today. The strategies are different, environmental issues are different, cultures are different and so are the consumers and people who are the employees. However, despite a myriad of differences, one aspect that remains unchanged is the clear emphasis on performance.

Today companies are not only being judged by their financials but also by other issues such as CSR, sensitivity demonstrated for the environment, employer brand, whether the corporation is doing something for the larger good of the population in terms of creating social awareness or not, and so on.

In the midst of this entire milieu, companies are also grappling with challenges associated with talent, specifically how to attract, develop, grow and retain talent. Talent is again something which is believed to be scarce and more often than not, very mobile especially in the context of the current business scenario.

So, the critical aspect is how one assesses talent at the very early stage, either as a first time employee or even in the mid-career stage at the time of hiring. What does an organization need to do to really create performance? It is not that all companies across all sectors of the economy would be getting their share of outstanding talent in terms of intellect and competence. Hence, it becomes all the more necessary for businesses to appreciate as to what creates performance in an organization given the talent that exists. This is where the Theory of Performance has its relevance. Because if we were to understand what creates performance, then we will be in a position to design systems and provide inputs for ensuring that an individual performs at the aggregate level of the performance of the company.

Hypothesis on “Theory of Performance”

Performance of an individual or an organization is a function of professional skills (or domain knowhow), behavioral competencies, and resources available. Professional skill is the ‘what’ of a job and is the subject matter of any profession be it technical, finance, human resources, quality, supply chain or any other key area.

Professional skills can broadly be characterized as single domain, multiple domain or specialist/unique. Everyone in the company has to have professional skills without which he/she is just not capable of doing even rudimentary tasks. These professional skills come out of a body of knowledge which may be primary, secondary, advanced or tertiary. The professional skills will be unique to every organization and may significantly vary even between the needs of two companies in the same business domain.

Behavioral competencies are the ‘how’ of a job and are very much ingrained in a person from early childhood. However, there are many which can also be nurtured over time either through life experiences, self development initiatives or coaching. Again, the framework for behavioral competencies will vary according to the nature of the organization and the kind of business and customers it serves. An FMCG company may require competencies which may be significantly different from a Project Engineering like an EPC (Engineering, Procurement and Construction) company. It is well known that competency frameworks can be identified which deliver the ultimate goal of an organization.

Resource is something which is a lesser discussed subject when we talk of performance. Performance is not only determined by the extent of professional skills or behavioral competencies one possesses, but also by the resources that are made available in today’s world right from a decent work place to IT connectivity and various other assets depending upon the nature of work and outcomes expected by the company.

It is only a combination of all the above mentioned factors that performance is created with. The basic premise of this theory is that performance can be made a reality if the company were to correctly identify the professional skills, behavioral competencies and the resource needs for every position in the company. It is possible to characterize each of these three components of performance at the individual level as well as at the organizational level. Such characterization would lead to providing an empirical value which can then be termed as Human Capital for that company.

Scope of the Theory

The scope of this theory is vast and has various applications. First, there is a need to characterize the three components of performance. Second would be to create a framework within which these components interplay. Third, need to develop a model which will be able to provide linkages by level and complexity of domain knowhow to the probability of success of the enterprise and lastly it is required to develop a method to predict future performance.

Benefits of this theory

The Theory of Performance clearly enables predicting probability of future performance of an employee as well as its organization. The theory also helps in the computation of Human Capital as a tangible value. At a company level, the theory provides an understanding of how it stands on the three components which create performance. And at the individual level, it provides clarity on what is to be

To conclude, we need to first characterize the three components which enable performance and aggregate the values across the organization for arriving at an empirical value which in turn would predict future performance and give an empirical value to a hitherto considered non tangible asset in the organization.

Sudhir V. Sohoni is Founder Director at Purple HR Consulting Private Limited. He can be reached at

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Topics: Performance Management, Strategic HR

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