Performance Management. Application and Improvement

Module 3 Performance Management Application and improvement Performance Management in Practice After analysing the data collected from different organizations in different sectors, the following broad trends have been identified: 1) Performance Management is regarded as a number of interlinked processes rather than a single system. 2) It is seen as a continuous process. 3) There is an increasing emphasis on inputs. 4) The focus is on development rather than pay. 5) There is a shift towards line managers’ accepting and owning performance management as a natural process. 6) There is a rejection of bureaucracy. Performance Management as an interlinked process - The performance system is linked to other HR processes like – i) Salary / Pay ii) Rewards / Recognition systems iii) Career Development iv) Training & Development v) Knowledge Management vi) Recruitment vii) Punishment / Discipline 2) Performance Management as a continuous process – Performance Management System is no longer seen as an annual exercise. The different steps involved in it are carried out throughout the year culminating in performance appraisal and review. 3) Increasing emphasis on inputs – There is a conscious move towards competence-based inputs. This means that the objective setting stays. From the objectives there is a top down approach which flows downs to individual competence as inputs. 4) Focus of development – In the 90’s there was a paradigm shift in emphasis from pay to development. The key aspect is to help individuals realise their potential and still contribute to business improvement. There is a strong system of Performance - related – Pay in many organizations, however these are also linked to development of the individual. 5) Line-manager ownership of performance management – It is the responsibility of the line manager to ensure that individuals understand the performance management system of the company, are convinced by it from their business units’ point of view. 6) Rejection of bureaucracy – There is an underlying trend in many organizations where employees are moving away from the bureaucratic form-filling and rating methods to a more informal setup where the emphasis is one improving the quality of conversations between managers and subordinates rather than gathering data. Key Features of Performance Management in the Manufacturing & Service Sector Key Performance Indicator (KPI) • A KPI is a type of performance measurement that evaluates the success of specific business functions. • KPIs are the targets that are set to help an organization define and measure progress. • KPIs must be quantifiable, and be core-critical success factors of the organization. • They should also reflect the organization’s goals. • There are literally thousands of measures (KPI’s) that could be implemented. • The key to success is finding the few key measurements that impact the business the most. • The type of industry and the internal goals of a company usually decide the KPIs on which the business should focus on. • KPIs vary depending on the type of business – whether it produces physical products or offers services. • Hence we have to understand performance management from the perspective of a manufacturing setup as well as a service industry. Key Features of Performance Management in the Manufacturing Sector i) Aligning with business purpose - The overall goal of performance management is to align the top level goals of the business to the complex network of activities within the business. Top level goals can include items such as customer satisfaction, product variety, quality and a host of others. For success, it is imperative that all the activities in the business point and execute towards these goals. ii) Achieving operational success - Another overriding goal of performance management to optimize of all the sub processes within the business. Developing feedback for each of the operations can start the incremental process improvements necessary for organization success. It is critical to determine the key performance indicators for each role or operation, and start the process of unit improvement. Measuring each role or operation can also provide the motivational push to initiate incremental improvements. iii) ERP Integration • The first step to measure all activities in the operations is to collect data about all the activities. • ERP manufacturing systems have now integrated all the business management functions, including planning, inventory/materials management, engineering, order processing, manufacturing, purchasing, accounting and finance, human resources, and more. • The latest ERP manufacturing systems not only collect all this information, but provide an IT structure of how one activity relates to another, thereby allowing a view that crosses departments. • For example, a report of production orders and the associated raw material status is easy to produce, because the relationship of both has been pre-defined. You can imagine the difficulty of creating the report if the linkage between them did not exist (as in manual or piece meal systems). iv) Using Data as a Strategic Asset • Performance management can align all these processes into the company-wide goals, and achieve a strategic advantage. • A Simple Example - You have decided that your strategic advantage is to provide the shortest lead times for your customer orders, even if your prices are a little higher. You want to appeal to customers who need quick turnaround for whatever reason. You set this as a strategic goal, and now want to set some focused KPIs to accomplish it. Your KPIs would need to focus on achieving your goal, and would probably emphasize such things as material lead time performance, shop queue time, machine cycle times, and the like. Your employees would then know what you want to emphasize, and can focus their attention on improving those areas. Other goals would exist, but would always be secondary to your lead time strategy. Shop floor KPIs: vi) Starting with a Goal Operation Due Dates Met Material Usage Variances Cost of Scrap & Re-work Operator Efficiency % Some High Level Common Goals Labor Rate Variances On-time delivery Quality improvement Shorter lead times Improved productivity Information sharing Continuous improvement Cost reduction Demand reliability Profitability by unit, product, or area Market share Measurement of Corrective Actions to Customer Issues Reduction of Returned Materials Flexibility Reduced inventory Quality KPIs Example KPI’s in Manufacturing Maintenance KPIs Critical Machine Availability Downtime MTBF (Mean Time Between Failures) Maintenance/Dept Budget vs. Actual Maintenance Inventory Levels Lead Time Reduction Conformance with Outside/Government Regulations vi. Delivering Timely, Actionable Information The final piece of the performance management puzzle involves delivering the business insights to the decision makers within the timeframe for action. This becomes near impossible for all but computerized systems. For those with modern systems, it is easy to provide real-time visibility into key operating performance targets, and to react as crucial changes occur. Performance Management in Service Sector The service sector consists of the following industries : a) Hotels and Restaurants b) Transport (Railways, Airways, Roadways), Transport and Communication c) Banking, Financial services & Insurance d) Real estate e) Public Administration etc Service industries often rely on exceptional customer service to ensure strong operations and to attract repeat business. Continually setting goals and measuring performance in these key areas helps the business remains competitive, profitable and successful. Helping staffers understand expectations through goal-setting can increase productivity and empower staffers to higher levels of performance. Main features of Performance Management in the Service industry 1. Key Objectives i) high customer satisfaction levels ii) increased revenue iii) positive word-of-mouth reputation iv) increased market share v) low employee turnover Objectives can be measured through customer comment and suggestion cards, online surveys, focus groups and in-person interviews. Management may opt to develop a numerical classification system to gauge and measure performance in key service areas. 2. Service Initiatives - Service initiatives that can increase performance and goal meeting include: i. Ongoing on-the-job training ii. Peer-to-peer mentoring iii. Providing regular feedback iv. Mechanism for employees to approach management with concerns and suggestions can help increase overall service performance v. Inclusion of staffers in the goal-setting process 3. Setting Goals - Developing clear, measurable service goals can help employees in the service industry understand management expectations and set the stage for how an organization wants customers treated. Goals can be set by department or by individual and be monitored and measured through customer satisfaction surveys and performance appraisals. Goals should be clearly defined, have timelines for completion and should be achievable. 4. Performance Indicators- These could include: i) high marks on customer feedback surveys ii) Increased repeat business figures iii) Production/output iv) Revenue generation and v) Customer referral numbers. vi) Levels of absenteeism, meeting deadlines, taking initiative, staying on budget and participating in team environments. 5. Performance Evaluation - Staffers in the service industry should be regularly evaluated on their customer attitudes, knowledge of the company’s products and services and through customer interaction observance. Employees can be evaluated on their goal progress. Unsatisfactory evaluations should be followed with detailed improvement plans, mentoring and ongoing service training. Consider reverse appraisals to gauge management performance as well as peer-to-peer evaluations to get a well-rounded picture of performance levels. 6. Value of Performance Measurement - Organizations that regularly monitor and measure performance in key service areas can stay ahead of their competition. Having such a system in place allows an organization to monitor customer service attitudes, get employee feedback, notice areas of concern quickly and fix problems before they become costly. Performance Management System at NALCO Steps in the Appraisal process of NALCO Strategies for Improving Performance 1. Clarify expectations of good performance. Employees need to know what is expected so that they can meet those expectations. This is often communicated through a job description, a performance review and a conversation with their manager so that they can discuss examples of what good performance looks like. 2. Explain consequences of poor performance. Take a performance improvement discussion as an opportunity to be clear on what the consequences are if performance isn’t improved and to hold the team member accountable. This isn’t to threaten or scare the employee but to emphasize the importance of the need for improvement. You don’t want the employee to leave the conversation feeling that the discussion included some “suggestions” for improvement; you want them to understand that there is a sense of seriousness to the situation. 3. Monitor performance and provide specific feedback. When you see behaviour from an employee that needs to change, you need to be specific in your feedback. Vague comments, alluding to a needed behaviour change, or ignoring the situation does not help the situation. The more specific you are with the person, the more likely you are to see things improve. This also applies to positive feedback – if an employee does something awesome, be sure and provide them with specific feedback so that they will continue to give you awesome performance. Strategies for Improving Performance 4. Provide advice for improvement. Many times, employees are at a loss for ways to change their performance and they can be stuck. If you find that the employee is trying but they continue to produce lackluster results, have a conversation and give them some examples of what you are looking for. Discuss the situation in a way that can inspire them to try new strategies or attempt tasks differently. 5. Give them time to improve. Employees need time to try out new strategies and opportunities to focus on the desired improvements and to see if their efforts are effective. It is important to give people enough time before you move forward with any consequences if things haven’t improved. The more feedback you provide during this time the better, so that the employee can become clearer on what it is that they are striving for. 6. Follow through on your consequences. As a part of this process, you outlined the consequences of poor performance. If performance has not improved then it is important that you follow through with those consequences. You can always modify the consequences; however, a conversation with the employee is always warranted in that situation. Improving Organizational Performance To improve organizational performance, top management needs to focus on developing a high-performance culture. The characteristics of such a culture are − • a clear line of sight exists between the strategic aims of the organization and those of its departments and its staff at all levels; • management defines what it requires in the shape of performance improvements, sets goals for success and monitors performance to ensure that the goals are achieved; • leadership from the top that engenders a shared belief in the importance of continuous improvement; • focus on promoting positive attitude that results in a committed, motivated and engaged workforce. Improving Team Performance At a team level, performance management approach to teamwork can be used to improve team performance in the following areas: i. Setting Objectives - Team objectives can be concerned either with the achievement of work targets and standards or with the way in which the team operates. ii. Work Objectives - Work objectives for teams are formulated in the same way as individual objectives. They may be related to the mission and overall objectives of the organization and the function, unit or department in which the team operates. The team should agree on its overall mission or purpose and then on the specific objectives that will support the accomplishment of that mission. iii. Team working objectives - Team working objectives could be agreed on such matters as working together, contribution of team members, decision making and getting into action. iv. Work plans - It is important for teams to get together to create plans for achieving their agreed objectives. Work plans will specify programs (staged as necessary), priorities, responsibilities, timetables, budgets and arrangements for monitoring performance, feedback and holding progress meetings. Work plans can also be useful for the team to discuss the critical success factors — what must be done and how it must be done if its mission and objectives are to be attained. Improving Team Performance v. Team performance reviews - Team performance review meetings analyzes and assesses feedback and control information on their joint achievements against objectives and work plans. • The agenda for such a meeting could be as follows − • General review − of the progress of the team as a whole. • Work review − the results obtained by the team and how well it has worked together. • Group problem-solving − an analysis of reasons for any major problems and agreement of steps to be taken to solve them or to avoid their reoccurrence in the future. • Updating of objectives and work plans − review of new requirements, and amendment and updating of objectives and work plans. Improving Individual Performance To improve performance, therefore, attention has to be paid to − • increasing ability − by recruitment (people will want to join the organization), selection (choosing the right people) and learning and developing (people will want to enhance their knowledge and skills); • increasing motivation − by the provision of extrinsic and intrinsic rewards; • increasing opportunity − by providing people with the opportunity to use, practice and develop their skills. At the individual level, improvement in performance can also be achieved through policies and practices designed to increase learning by coaching, mentoring and self-managed learning. The aim should be to increase ‘discretionary learning’, which happens when individuals actively seek to acquire the knowledge and skills required to achieve the organization’s objectives. Line managers play a pivotal role in this by encouraging discretionary learning and supporting it through coaching and mentoring. Performance management provides a valuable platform for doing this. Essentially, the approach covers seven steps − • Select the goal − establish priority areas for action. • Define expectations − targets and standards. • Define performance measures − the basis upon which progress to achieving the goal can be monitored. • Plan − the improvement program. • Act − implement the improvement program. • • Monitor − review progress and analysis feedback to ensure the target or standard is achieved. Extend the process − continue the development program as required. Analyzing Performance Problems There are a variety of psychological mechanisms that managers sometimes use to avoid the unpleasant truth that performance gaps exist. The psychological mechanisms have been described as follows – a) Evasion through rationalization - Managers may escape having to demand better performance by convincing themselves that they have done all they can to establish expectations. They overlook the possibility of obtaining greater yields from available resources. b) Reliance on procedures - Managers may rely on a variety of procedures, programs and systems to produce better results. Top managers say, in effect, ‘Let there be performance-related pay, or performance management’ and sit back to wait for these panaceas to do the trick – which, of course, they won’t unless they are part of a sustained effort led from the top, and are based on a vision of what needs to be done to improve performance. c) Attacks that skirt the target - Managers may set tough goals and insist that they are achieved, but still fail to produce a sense of accountability in employees or provide the support required to achieve the goals. What’s a performance problem? ● Missing deadlines ● Being late for meetings ● Not getting compliance training done ● Takes a long time to fulfil his duties ● Using an ethnic joke to kick off sales meeting