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Transcript of Performance Management
Steps of Performance Management
Manager's Role in Performance Management
Measures of Performance
"The process of managing an organization's strategy through fully integrated systems of business improvement methodologies, metrics, processes, software tools and systems that manage the performance of an organization" (Gary Cokings)
Failure to execute strategy
companies struggle to reach their goals
miss the right tools, principles and techniques
Unfulfilled return on investment
struggle to bring positive returns to investors
Escalation in accountability for results with consequences
pace of information/decisions requires more accountability
track performance by employees
Types of Indicators
Balanced Scorecard Focus Areas
Internal Business Process
Learning & Growth
Each area contains actions or goals that employees are expected to achieve
Coors Balanced Scorecard: A Decade of Experience
Third largest beer brewer in the U.S.
Case deals with the company in the late 1990s
Valuable tool for any company
Needs to be implemented effectively
Helps to develop valuable human assets
Workers are accountable for their actions
Helpful for accounting
Lagging Indicators: measures of performance that reflect results of a prior period
Leading Indicators: measures that inform the progress made on specific, current initiatives
Based on historical data
Company examples are ROE, EPS, yearly sales, liquidity ratios
Economic examples are unemployment rate, change in GDP and CPI, interest rates
Advantage: easy to identify and calculate
Disadvantage: does not reflect current activities and thus, lacks predictive power
1780 - 1830
Nine rank system
Authorities selected talented candidates
Workers were categorized based on their abilities
Bad ranking = dismissal from system
Managers faced new challenges
Officer ratings and recommendations
Review and Feedback by peers
Complaints about officers who didn't perform their duties
management by objective
process of defining objectives within organization
Theory X and Theory Y
Emerged with Strategic Human Resource Management
new thinking to change and align employee participation and engagement
need for a more continuous concept
Challenge to be successful in today's rapidly changing business environment
Tool is needed for organization to move as an unified alliance
Misunderstood concept in the business world
It's a process, not a system
Focused on monitoring individual employees
A lot of different expressions for it (BPM, IPM, EPM, etc.)
Mostly focus on customer value, internal business process, and learning and growth measures
Company examples: rate of new product development, number of new accounts/customers, and training and development cost
Economic examples: stock market, manufacturing activity, and number of new business start ups
Advantage: predictive and allows organizations to make adjustments to account for the future
Disadvantage: difficult to identify and capture,
can be a new measure with no historical data
to base results off of
Source: Paulson Gjerde, Kathy, and Susan Huges
P.I.s vs. K.P.I.s
Metrics: data produced by events that occur within the company
Performance Indicators: metrics that give an indication of the performance of a business unit or the organization as a whole
Key Performance Indicators: P.I.s that are valuable to the business and indicate if it is successful or at least on the path to success
K.P.I.s have the following attributes: measurable, have a current value as well as a desired target value, and have a time frame for when the target value must be reached
: Metric, PIs, and KPIs
Mostly lag measures
"Through the eyes of the owners of the business, how will they judge financial success?"
Examples of goals: maintain adequate return to shareholders, increase revenues by 5%, reduce operating costs by 2%
Examples of P.I.s: EPS, ROE, sales, operating expense ratio
Souce: Kaplan and Norton
Mix of lead and lag indicators
"Through the eyes of our customers, how will they judge the value of our products and services? How will we differentiate ourselves in the market?
Examples of goals: increase market share by 6%, produce higher quality products than the competition, achieve highest customer satisfaction within the industry
Examples of P.I.s: % of company product sales/total industry sales, average life of products compared
to competitors, % of return customers
Source: Kaplan and Norton
Study on PM
Danielle McDonald (1995)
Investigated 437 organizations over three years
205 implemented performance management
2014 Performance Management Seminars
The Conference Board
NY, New York
04 December, 2014
Workshop I: Reinventing Performance Management through Neuroscience
05 December, 2014
Workshop II: Performance Management: Best Practice for Optimal Business Results
Wolfgang Jetter, Performance Management (2006)
Manager's Effect on PM
Companies invest in world-class systems, but forget the importance of the people element
Manager is key component, who gives the direction of the system
Study on how manager affects effectiveness of the performance management system
Employee rate managers on how much managers:
1. helped employee feel empowered
2. recognized or praised employees' achievements
3. cared about their employees
4. had regular discussion with employees
Seventy percent of employees who gave their managers "best ratings" rated their performance management system as "very good"
In contrast, only 2% of employees who rated their managers "below average" gave their system a "very good" rating
Clearly communicated standards and what good performance looks like
Helped employees understand that performance management system was to aid in the employees development
Regularly communicated with their team members on performance expectation
Gallup, Performance Management (2012)
Setting performance expectations and goals for groups and individuals to channel their effort toward achieving organizational objectives
Constantly measuring performance and providing ongoing feedback to employees and work groups on their progress toward reaching their goals
Provides the opportunity to check on how the process is going and to identify and resolve any issues early
direction, guidance, and support
maximize strengths and improve weaknesses
Evaluating employee performance against the elements and standards
Summarizing performance /assign a performance rating
Identify areas for improvement
Specifically define what is expected to do (depending on experience and personality)
What is employee expected to do?
Does the employee understand the goal?
Is it clear who is involved?
Is the outcome clear?
Goal needs to be achievable
Can the employee achieve the task at hand in the suggested time frame?
Are there any limitations that could get in the way?
Compare to other employee's goals
Can the goals be achieved with the available resources?
Does employee have the skill to finish the objectives?
If not, how can he/she be helped to obtain them?
Objective linked to other department to show how goal is aligned
When does it need to be completed?
Is there a stated deadline?
When will the objective be accomplished?
Be able to measure if employee is meeting expectation
A method to measure the performance (quality, quantity, time or cost)
Can indicator demonstrate that employee successfully completed task?
Can these measurements be obtained?
Important to communicate the results with employee
Compare actual results to expected results
Recognition for positive results
New cycle begins
KPI Institute, Performance Management Review (2012)
Internal Business Process
Mostly lead measures
"How can internal processes be improved to improve product, program and service quality, timeliness, economics, and functionality?"
Examples of goals: improve manufacturing efficiency and create effective distribution networks
Examples of P.I.s: product defect rate, product cycle time, turnaround time
Learning and Growth
Mix of lag and lead measures
"How can our employees continually get smarter, innovate, and improve?"
Examples of goals: Retain employees, create more leaders within the company, and continuously implement new technology
Examples of P.I.s: employee turnover rate, training and development costs, IT department budget
Need for quick trade-off decision analysis
decisions have to be made at rapid pace
tool to make the right decision towards the goals of the company
Mistrust of the financial accounting system
allocation to different departments can lead to confusion
Poor customer value management
struggle to keep customer happy
Dysfunctional supply chain
money is lost along the process
more difficulties with global companies
Broken budgeting process
hard to combine across departments
poor capacity planning
Understanding the concept
developed vs. non-developed
Automates task of regularly evaluating employees
Easier for managers to track employee's goals and performance
Employees can use the programs to run self-evaluations
Link Coors' vision statement to the six planks/key business strategies described on page 4 and identify any shortcomings/gaps
List possible explanations for the performance gaps identified on the benchmarking analysis (page 5)
Identify 2-3 possible performance measures Coors' may use within the four areas of the balanced scorecard
FAQ questions: 4, 5, 12, 13, 14
What are some important takeaways from the case?
What kind of challenges does performance management face?
Setting the Strategy
The most effective corporate strategy should focus on sustainability
Sustainability is composed of social, environmental, and financial performance
Focus needs to be on the long-term effects
Setting the Strategy
Only successful if top management incorporates sustainability into the company strategy
Lead by example
Overall employee satisfaction will be increased
Before anonymous feedback was included, everybody received good reviews
Boss is afraid to be honest
Transferred worker did not perform well
Struggled with identifying problem
Alleviating Administrative Misery
Performance review process was mundane
Frustrating and time-consuming process
Implemented fitting system
The Developmental Breakthrough
Employee's manager gave harsh comments during performance review
Opened up new opportunities
Became future leader
Difficulties hiring new workers
Worker experienced problems with women
Employee wasn't good fit
Overseen with Loving Grace
Firm valued group talent reviews
Senior executives want to retain talent
Identification of high and low performers
Successful Stories of PM