The inner loop of job performance is much more complex. Since the interactions between factors at this level are quite interrelated, depicting all of them can become quite difficult to represent graphically. The diagram shown in this article is thus a simplified view of only a subset of these interactions (yet will need to be printed out on large-format paper just to review and understand this subset).

This diagram's purpose is to highlight how several important factors involved in effective performance management can interact over time, yet remain relatively 'invisible' to the outer loop. It also highlights how discretionary investments towards improved capabilities (which was represented on the outer-loop diagram) can be further influenced by these same factors.

When one considers this 'inner loop' of job performance, the importance of the following critical factors become evident:

• Clarity of business goals and priorities (see the lower left hand corner of the inner loop diagram)

  Your ability to leverage your knowledge and experience, combined with the clarity of business goals and priorities, are keys to being able to effectively produce and execute a plan that will deliver expected results. Effective planning based upon those goals, in turn, is crucial to being able to maintain focus and attention on your assignments, and on your own ability to work efficiently on what's important (and thus, to maximize the value you can deliver in a given period of time).

• The clarity of performance standards (on the top middle part of the diagram)

  Performance standards establish the basis of determining what the quality standards are for the work group, how each individual is expected to work with others to achieve those ends, and what the rules of thumb are for the time it should take to do certain tasks. Such standards should be community-based, and targetted to the roles an individual performs in different business scenarios. Appraisals which are done in the absence of such standards can still provide useful feedback, but until these standards are established, some individuals may perceive the results that they receive from their appraisals as subjective and arbitrary. Additionally, since such standards become the basis of group (rather than individual) improvement, and are essential for enabling organizational learning, they should be an important focus for groups to invest in, as surplus capacity is available.

• The robustness and credibility of the appraisal process itself (on the right side of the diagram, in the middle of the page)

  The appraisal process is useful when it produces results that highlight areas of improvement for people to work on. The areas that are identified don't have to be the 'most important' areas relevant to a specific situation in order to be useful, because what's important itself will change over time. But if the feedback that is received is not consistent, or is not trusted for some reason, it will be less likely that it will be considered as important to act upon relative to competing demands for time and attention.

All of these factors collectively and iteratively contribute to two key outcomes, which themselves are key to establishing momentum and overcoming inertia in influencing the the outer loop over time:

• Job satisfaction (in the center of diagram)

  This factor is a key influence on future performance, as it impacts both short-term motivation to apply discretionary efforts, and the belief that such investments will pay off. Satisfaction is typically derived not from external motivators like pay, but through the accomplishment of meaningful goals, from customer and internal team awareness of your contributions, from confidence that your contributions matter, and a belief that your talents are being leveraged appropriately to make a real difference in a worthwhile endeavor.

• Capacity and capabilites (left hand side of the diagram)

  These attributes collectively enable accomplishments to be achieved on the outer loop. Unless they are improved, the outer loop pursuit of stretch business goals is risky and likely to be frustrated by growing gaps between targets and the results actually achieved.

As these factors interact and generate growth over time, they enable a realistic commitment to high performance that is the means of reducing cycle times and achieving quality results, with low rework, which all businesses need. This also can result in excess capacity, which can then be reinvested for even better performance in the future, or to produce new products that allow the business itself to grow. This is the engine that enables businesses to stay competitive, and the means of generating higher profits that can be shared back to employees in the form of higher bonuses and compensation pools.