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What gets measured gets done If you cant measure it, you can’t
manage it
Performance It is determined by a combination of
Declarative knowledge Procedural knowledge Motivation
Performance = Declarative knowledge x Procedural knowledge x motivation
Performance dimensions
Approaches to performance Trait based
Emphasize on individual traits that are stable in nature
the presence of these need not engage necessarily in productive behaviours
Results basedEmphasize the outcome and results produced by
the employee Most appropriate when
Workers are skilled in needed behaviours Behaviours and results are related Results show consistent improvement over time There are many ways to do the job right
Approaches to performance
What to measure ?
What to measure ?Some of the pitfalls There are too many measures Measures do not relate to strategyMeasurement is result based and did not tell
mangers how the results were achieved Reward systems are no aligned to
performance measures Measures do not support team based
management structures
Appropriate performance measurement must ensure ….Ensure that customer requirements are met Provides a standard for establishing comparisonsProvides visibility to monitor their own
performance Highlights quality problems and determines which
areas require priority attentionGives an indication of the costs of poor quality Justify the use of resources Provides feedback for driving the improvement
effort
Criteria for performance measures
Measurement issues
Diversity of organizations and professionals If a bank has 10,000 staff, are we going to have
10,000 different performance measurements? It will be a challenge for an organization to keep
track of the huge diversity of skilled professionals and ensure alignment to its mission and values
Measurement issuesIntangible and non-financial measurements
When two salesmen achieve the same sales target , how will the manager measure who is more motivated, hardworking, responsible or trustworthy
Also, unlike financial measurements which are governed by accounting standards and principles, non-financial measures will be more susceptible to misuse and manipulation
Change management practices First of all, nobody likes to be measured. Managers who are
experts in their field may have the freedom to choose and manipulate measures for their own benefit
In large, global organizations, consistency in implementation across departments may be a problem if communication and coordination is not executed well.
Lastly, inexperienced managers may not know what they want to find out and collect data and statistics which may not be that useful. This will cause frustrations and unnecessary effort for staff.
Guidelines for Performance MeasurementProcess Improvement
Throughout the implementation of a PMS , there is a need to constantly focus on the critical goals that can bring visible progress and enhancement. Otherwise, there is a tendency for busy employees to lose sight of the ultimate objective of performance measurement, and treat its implementation as a mere data collection exercise for management
Employee Involvement Truly empowered teams must be able to develop a well
defined PMS which aligns with their individual and organizational goals . But the empowerment should not be limited to the departmental heads alone but should be even at the individual level
Guidelines for Performance MeasurementReportable
Measurements must focus on most the critical items and not sacrifice quality for quantity.
Too much measurement may mean that teams end up spending too much time collecting data, monitoring their activities, and not enough time managing the project outcome.
Forward Looking Unlike financial measurements that often record past
accounting numbers, a good Performance Measurement system should capture its relevance to the organization vision, validate its strategies and chart new directions.
It should not dwell in the past but focus on measurements that impact future deliverables.
Guidelines for Performance MeasurementOptimization
Whether improvement in one area of the organization be achieved at the expense of another?
If it does, how much sacrifice or risk should the organization take?
For example, should a manufacturer delay production dateline because a new supplier is coming with cheaper alternatives to save cost?
Guidelines for Performance MeasurementRealistic
The measures agreed by the employer and employee have to be ambitious and challenging, and at the same time, be realistic and attainable.
Too little means employees fall into complacency; too much and they start to rebel or leave
Management Commitment The focus should be on strategy and vision, and not day-to-day
operational controls. Managers should dictate strategic goals, ensure that each
team understands how its job fits into the strategy, and provide training so that the team can devise its own measures.
Managers should allow the teams to decide which measures will best help them perform their jobs.
Managers should not make the mistake of thinking that they know what is best for the team.
Three types of measures :organizational
Types of measuresFinancial : income ,shareholder value, added value,
rates of return, costs etcOutput: units produced or processed, new accountsetcImpact: attainment of standards, changes in behaviour,
completion of work/project, level of take up of service ,innovation
Reaction: judgment by others ,colleagues, internal and external customers
Time : speed of response or turnaround, achievements compared to timetables ,amount of backlog,delivery times
Measurement indicesPQCDMS IndexProduction –PQuality – QCost – CDelivery – DMorale – MSafety -S
Different approaches to measurement Balanced score cardEuropean foundation for quality management
(EFQM) ModelEconomic Value AddedOther traditional financial measures
Applications 1. As a framework which organisations can use to help them
develop their vision and goals for the future in a tangible, measurable way.
2. As a framework which organisations can use to help them identify and understand the systemic nature of their business, the key linkages and cause and effect relationships.
3. As the basis for the EFQM Excellence Award, a process which allows Companies to recognise its most successful customer experience (internal and external) and promote them to achieve the organizational target guided by their mission statements
4. As a diagnostic tool for assessing the current health of the organisation. Through this process an organisation is better able to balance its priorities, allocate resources and generate realistic business plans.
1. This fourth, diagnostic use, is also known as self-assessment
Balanced score card
EFQM ModelIt is a TQM based framework criteriaFive of them are enablers –what the
organization does People Partnerships Resources Processes leadership
Four are results which are cause by enablers and this is what organization achieves
Performnace Customers People Society
CONCEPTS OF EFQM ModelResults orientation: achieve results that
delight all the stakeholdersCustomer focus: Create sustainable value Leadership and constancy of purpose Management by processes and facts People development and involvementContinuous learning, innovation and
improvementPartnership developmentCorporate social responsibility
EVA modelThis measure represents the difference b/w
the company’s post tax profits and cost of the capital invested in the business
The theory is if the company makes profit it does not mean that the company is doing good ,but has to justify the cost of capital
Other economic measure Added value Market value addedTotal shareholder returnTraditional
Earning per share Return on equity Return on capital employed Price earnings ratioAsset turnoverReturn on sales Profit or sales Output per employee
5 s philosophy
Performance @BHELThey created a culture of performance and excellence
through award schemes They devised a PMS which rewards direct or indirect
contribution towards parameters of profitability and growth
This includes Excellence in quality Timeliness Speed and response rateOutstanding technical paperResearch and development Customer service Contribution to environment and society
EVA model @TCS TCS worked out a EVA (ECONOMY VALUE
ADDED) framework to align corporate value with the performance of the constituent business units and the individuals who comprised these
The objective was to align its people to the corporate mission, creating an entrepreneurial culture through an empowered work force
The performance was linked to the compensation of the employee – variable pay component
EVA model @TCSThe individual works towards the improvement of
the benefit package, which essentially has three components - the Corporate EVA, the Business Unit EVA, and the Individual Performance Factor. Out of the total EVA payment a certain percentage
goes to each employee on the basis of corporate EVA improvement.
Secondly, if your business unit did better than another business unit, then automatically you got more than the other business unit. Again it is a team reward concept.
The third one depends on the evaluation of individual performance
Performance objectives Objectives are statements of an important and
measurable outcome that when accomplished will help ensure success for the accountability
Establishing objectives will help to identify the the highly important results that needs to be achieved
Help the employees to guide their efforts to wards these objectives
Once objectives for employees are set ,they should be getting feedback on their progress towards attaining the objective
Rewards should be allocated to those employees who have reached their objectives
Accountability
A job description will have a number of tasks Tasks included in the job can be clustered
together based on their degree of relatedness. Each of these clusters is known as accountability for which the employee is responsible for producing results
Characteristics of Objectives Specific & clearChallengingAgreed upon b/w the manger and employee Significant enoughShould be prioritized Bound by time Achievable Fully communicated Flexible Limited number of objectives
Performance standards What kind of approach towards measurement ?
BEHAVIOUR BASED
RESULT BASED
Performance standards These are yardsticks designed to help people
understand to what extent the objective has been achieved
These standards provide raters with information as to what extent an objective has been achieved
Quality Quantity Time
Results based approach QUALITY
How well the objectives has been achieved Usefulness to the
strategy ,responsiveness,effect obtained,acceptance rate
QUANTITYHow much has been produced ,how many ,how
often and at what cost TIME
Due dates ,adherence to schedule ,cycle times,deadlines (how quickly)
Performance standards should include an action ,the desired result ,a due date and some type of quality or quantity indicator For eg; reduce overtime from 150 hours
/month by Dec 1 2009 to 50 hours /month ,at a cost not exceeding 12000/-
Once the standard has been fixed stds for minimum and excellent performance should also be fixed
Behaviour based approach Identify the competencies based on the job
descriptionDescribe the behavioural indicators ,to what
etent one should possess List suggestions to improve on those
competency (training,mentoring,coaching,etc )
Choose an appropriate measurement system Comparative Absolute
Behavioral Measurement systems Comparative stds Simple ranking orderAlternation ranking
orderPaired comparisons Forced distribution
Absolute Essays Behaviour checklists Critical incidents Graphic rating
scales
Determinants to Performance stds Related to the positionConcrete ,specific and measurable Practical to measure Meaningful Realistic and achievable Reviewed regularly
References Performance Management, Herman Aguinis,
second edn, Pearson Publications .Performance Management , Varsha Dixit, Ist
edn, Vrinda publications Performance measurement and management :
GK Suri,CS Venkataraman,NK Gupta ssssssHRM Review,icfai university press,july
2008,ocober 2008