1. Performance Management
Lectures No. 6 & No. 7
Prof. Sherif Mohamed
2014

2. Introduction What is Organisational Performance?
The results of organisational activities over a given period of time.
It can be viewed from 2 perspectives
Desired results and Actual results
Performance are usually measured in a lagging fashion ‘after-the-fact’.
Why do we measure performance?

3. Introduction
In a perfect world, a measurement system will actively promote performance improvement by;
measuring what matters.
providing corrective feedback and positive reinforcement to enthusiastic people who enjoy taking improvement on as a challenge.

4. Operating plans and budgets Performance-based management
Introduction
Strategies
Resources
Action
Review
Needs Assessment
Operating plans and budgets
Performance-based management
Performance Measurement
Without the right information, you’re just another person with an opinion
Tracy O’Rourke
CEO, Allen-Bradley

5. Introduction
Good measurement systems don’t just measure things done according to the organizational chart.
Rather,
They measure things done to satisfy stakeholders.
Are we talking quality here? Or what?

6. Introduction Profit Return on Investment Time Cost Market Share
Customer Satisfaction
Value
And ……many more

7. Introduction What do measures do for us?
Tell us where we need improvement
Help prioritize where to devote energies and allocate resources
Motivate
Let us know we have gotten better
Design
Measure & Evaluate
Perform C O N T I U S M P R V E
Intervene to Improve

8. Introduction What is Performance Management?
Managing activities in a way that ensures that goals are consistently being met in an effective and efficient manner.
Focus could be on a project, unit, or the whole of the organisation.

9. Group Exercise
Think about an educational institution (for example, a university).
Identify 4 activities that need to be managed.
Link the identified activities to the institution's performance measures.

10. Performance Framework
It consists of:
Corporate Governance
Organisational & Business planning
Performance Outputs and Outcomes
Performance Review and Feedback

11. Performance Framework
Corporate Governance
Vision, Mission and Aims
Management structure
Organisational & Business planning
Policies
Procedures
Budget cycle
Resources

12. Performance Framework
Vision
Mission
Strategy S1 S2 O3 O2 O1
Objectives
Measures
“Metrics”
Targets M1 M2 T1 I1 I2

13. Performance Framework
Vision
Mission
Strategy
Processes
Systems
Performance Management
Behaviour and Action
Results

14. Performance Framework
A vision statement answers – WHAT do we aim to achieve?
A mission statement answers – HOW do we plan to achieve this vision?

15. Performance Management
Vision
A vision of the future as a result of the organisation's performance, a growth strategy, how organisational objectives will be accomplished.
Mission
A mission statement that identifies the purpose for which the organisation is established.

16. Performance Framework
Evaluating Vision- Here are some useful criteria to use when developing and evaluating a compelling Vision Statement:
Measurable – how would we know if progress is being made
Attainable – must be able to take it seriously
Inspiring – must engage people emotionally
Cultural – must fit with the organization’s unique style
Single minded – must be focused
Vivid – must be clear and easily understood

17. Group Exercise
Select a company you are familiar with, and attempt to re-write their vision and mission statements.
What was driving your thoughts?

18. Performance Framework
PF links a performance management plan to organisation strategic and business performance plan.
Performance management, however, focuses on performance of the organisation, employees or processes to produce a product or deliver a service.

19. Performance Management
Goals:
To organise a collection of best practice attributes, not only at the process level but also at the organisation level
To establish a performance model that deals with:
Organisational procedures and processes
Organisational and social impacts
Environmental impacts
Health and Safety impacts
Goal: to increase process quality but at the same time to reduce impact risk, and improve predictability.

20. Performance Management
Measurement
and
Evaluation
Management
Team
Improvement
Intervention
Outputs
Inputs
Value Adding Processes:
Production operations
Marketing operations
……………………
Upstream
Systems
Downstream
Systems
Goods
&
Services
Suppliers and vendors
Internal/external
Customers
Internal/external

21. Performance Management
In the context of quality:
Quality improvement processes
Performance progress reporting
Performance standards
Performance measurements

22. Performance Management
Performance Standards
Performance Measurements
Progress Reporting
Quality Improvement Process
PMS

23. Performance Standards
Identify relevant standards
Select performance measures and indicators
Set goals and targets
Communicate expectations

24. Performance Measurements
Develop data gathering system
Collect appropriate PM data
Profit
Return on Investment
Time
Cost
Market Share
Customer Satisfaction
Value
And ……many more

25. Progress Reporting Analyse PM data
Feed data back to managers and policy makers
Develop a regular reporting cycle

26. Quality Improvement Process
Use data for decisions to improve policies, procedures and processes
Manage changes
Create a learning organisation

27. Performance-based Management
A systematic approach to performance improvement through an ongoing process of;
Establishing strategic performance objectives
Measuring performance
Collecting, analysing, reviewing and reporting performance data
Using performance data to drive performance improvement.

28. Performance-based Management
Uses Performance measurements information to manage and improve performance.
Performance Measurements
Comparison of actual levels of performance to pre- established target levels of performance.

29. Performance-based Management
Accounts- describe the overall effect of an alternative in a specific area (e.g. cumulative economic impacts)
Metrics - statistical or numerical measure of system performance
Metrics are often treated as sub-accounts or used as surrogates for estimating total effects (e.g. system reliability)

30. Performance-based Management
Customer
Product/service
Public/society/natural environment
Marketing
Human Resources
Production
Maintenance
Operations
Finance

31. Performance-based Management
unit cost efficiency
How well are materials used, (excessive waste)
How well is labour used, (excessive idle time)
How well is overhead used (idle capacity)
maintaining and improving quality
lower consumer prices

32. Performance-based Management
financial returns
improve market share
meet current and future demand
Investment returns
Customer Satisfaction
Social Impacts
What else....?

33. The 30-minutes Guarantee
Starting in 1973, Domino's Pizza had a guarantee that customers would receive their pizzas within 30 minutes of placing an order or they would receive the pizzas free.
The guarantee was reduced to $3 off in the mid 1980s. In 1992, the company settled a lawsuit brought by the family of an Indiana woman who had been killed by a Domino's delivery driver, paying the family $2.8 million.
In another 1993 lawsuit, brought by a woman who was injured when a Domino's delivery driver ran a red light and collided with her vehicle

34. The 30-minutes Guarantee
The guarantee was dropped that same year because of the "public perception of reckless driving and irresponsibility.
In December 2007, Domino's introduced a new slogan, "You Got 30 Minutes", alluding to the earlier pledge but stopping short of promising delivery in a half hour.
What happens if Pizza delivery people are offered a cash bonus for every delivery made within 30 minutes, and what does this do to pizza quality?

35. The Need for a Balanced View
If Our Organizational System is
It will very
likely be
We will have to
maintain
To maintain
Quality of
work life and innovation
Effective
And
Efficient
Productive
Profitability
And our products, services and processes meet customer needs To
achieve
Excellence
Survival
Growth
Quality
Right things (on-time)
Right way (first time)
Right amount of resources
The job of the management team
The conptroller and the budget
ACHIEVING BALANCE
The Need for a Balanced View

36. The Balanced Scorecard
Focus organization on past performance
Encourage a short-term strategy
Failing to provide the long-term strategic management capabilities
By R.S. Kaplan and D. P. Norton (1992)
A set of financial and non-financial measurements relating to a company's critical success factors

37. Financial Perspective
Goals Measures
Customer Perspective
Innovation & Learning
Perspective
Internal Business
How do we look
to shareholders?
VISION
&
STRATEGY
How do customer
see us ?
What business
process
must we excel?
Can we continue to
improve and
create value?

38. BSC Perspectives Financial: How do we look to our Shareholders?
Customer: How do our Customers See Us?
Internal Business Process: What should we do that is Excellent?
Employee and Organization Innovation and Learning: Can we continue to Improve and Add Value?

39. The Balanced Scorecard
A proven approach to strategic management
Imbeds the long-term strategy into management system through the mechanism of measurement
Translates vision and strategy into a tool that effectively communicates strategic intent and motivates
Tracks performance against the established goal

40. Financial Perspective
Measures the ultimate result that the business provides to its shareholders
Financial perspective cannot be overlooked
A good financial control system can even help enhance performance with respect to other perspectives

41. Innovation/Learning Perspective
Focuses on organization response to change
Measures under this perspective typically relate to characteristics such as ability to launch new products or services, enhance customer value, and improve operating efficiency.

42. Internal Business Perspective
Incorporate measures related to business processes that have the most significant impact on customer satisfaction.
Such measures typically relate to cycle time, quality, employee skills, and productivity.

43. Customer Perspective
Considers the business through the eyes of a customer our categories that customers concern: cost, time, quality, and performance.
Management must obtain feedback from customers.

44. The Balanced Scorecard
Reasons for the Need of a Balanced Scorecard
Executive performance needs to be judged on success at meeting a mix of both financial and non-financial measures to effectively operate a business.
(Source: Kaplan & Norton, 1996)

45. The Balanced Scorecard
Reasons for the Need of a Balanced Scorecard
Some non-financial measures are drivers of financial outcome measures which give managers more control to take corrective actions quickly.
(Source: Kaplan & Norton, 1996)

46. Causal Links Employee Measures Employee satisfaction
Employee retention
Employee productivity
Learning Measures
Employee skill levels (certification rate)
# suggestions per employee
Employee learning curve (time to reach acceptable level of output or quality).

47. BSC integral part of Business Planning
Top-down Strategy Pyramid
Vision
Mission
Business Planning and Strategy
Goals and Objectives
Balanced Scorecard
Corporate Measurement and Reporting System
BSC integral part of Business Planning

48. BSC as a Management System
To be one of the top 3 universities in the country
Vision
Manage teaching, research & community service
in an integrated way
Mission
S1: Engage students in research
S1-O1: Increase resources (Internal)
S1-02: Raise quality learning (customer)
S1-03: Reduce total cost (financial)
Strategy S1 S2 O1 O2 O3
Objectives
Measures
“Metrics”
S1-O1-M1: # students engaged
S1-O1-M1-T1: 100% in 2010
S1-O2-M1 % student failure
S1-O2-M1-T1 5% in 2010
S1-O2-M2 %cost reduction M1 M1 M2
Targets T1 T1 T1
I1: New partnership program
I2: Compulsory training I1 I2

49. BSC as a Management System1 9 2 8
9 Steps to implement
the BSC 3 7 4 6 5
Source: Rohm & Averson

50. BSC as a Management System
1. Conduct an organizational assessment
2. Define strategic themes or focus areas
3. Develop strategic objectives
4. Draw strategy maps
5. Define performance measures
6. Develop initiatives
7. Visualize & communicate performance (Automation)
8. Cascade to business units
9. Evaluate performance and adjust

51. Group Exercise
What happens to the BSc when the strategy changes? (e.g.: moving from a “growth” to a “realise profits” strategy)
How should resistance by executives or managers to new measures be handled?
What if executives or managers only focus on categories in the reward matrix with the largest payoff – such as Customer Satisfaction?