Potential Pitfalls & Criticisms

Potential Pitfalls & Criticisms • Lack of a well-defined Strategy - The balanced scorecard relies on a well defined strategy and understanding of linkages between strategic objections and metrics. Without this foundation the implementation could fail. • Too much focus on the lagging measures - Focusing on only the lagging measures may cause a lack of priority or opportunity for the leading measures. • Use of Generic Metrics - Don’t just copy metrics from another firm. Identify the measures that apply to your strategy and competitive position. • Self-serving managers - Managers whose goal is to achieve a desired result in order to obtain a bonus or other self reward. • Setting measures that don’t relate to critical success factors • Over-measuring the organisation • Allowing the measurement process to interfere with employees' ability to get on with the job 2) The European Foundation for Quality Management (EFQM) model • The EFQM Excellence Model was introduced at the beginning of 1992 as the framework for assessing applications for The European Quality Award. • It is a widely used organisational framework in Europe and has become the basis for a series of national and regional Quality Awards. • The EFQM model is used as a management system that encourages the discipline of organisational self-assessment. • The EFQM Excellence Model is a practical tool to help organisations to do this by measuring where they are on the path to Excellence; helping them understand the gaps; and stimulating solutions. • It is applicable to organisation irrespective of size and structure, and sector. Self- assessment has wide applicability to organisations large and small, in the public as well as the private sectors. • The outputs from self-assessment can be used as part of the business planning process and the model itself can be used as a basis for operational and project review. • The EFQM Model is a non-prescriptive framework that recognises there are many approaches to achieving sustainable excellence. • Within this approach there are some fundamental concepts which underpin the EFQM model. However, these concepts are not fixed. It is accepted that they will change over time as excellent organisations develop and improve. • It provides an integrated approach to performance management in that it provides the basis to assess how well the things are done. There are 9 elements in the model out of which 5 are ‘Enablers’ and 4 are ‘Results’. Enablers - The five enablers assess and question whether there are effective approaches in place to enable the achievement of what the organisation has planned to deliver in terms of its results. Results - The four results areas question whether there are comprehensive measures in place which can monitor and track performance and assess whether strategic objectives have been met. • The link between the Enablers and the Results is two way. • If there is a need to improve the results, then a change to one or more enabling factors needs to take place. • In the same way, if a change to an enabling factor is made, the impact this will have on the results needs to be tracked and traced. The 9 elements are as below: 1) Leadership – How the behaviour and actions of the executive team and all other leaders inspire, support and promote a culture of total quality management (TQM). 2) Policy and Strategy – How the organization formulates, deploys and reviews its policy and strategy and turns it into plans and actions. 3) People Management – How the organization realizes the full potential of the people. 4) Resources – How the organization manages resources effectively and efficiently 5) Processes – How the organization identifies, manages, reviews and improves its processes 6) Customer Satisfaction – What the organization is achieving in relation to the satisfaction of its people. 7) People Satisfaction – What the organization in achieving in relation to the satisfaction of its people. 8) Impact on Society – What the organization is achieving in satisfying the needs and the expectations of the local, national and international community. 9) Business Results – What the organization is achieving in relation to its planned business objectives and in satisfying the needs and expectations of everyone with a financial interest or stake in the organization. Advantages of EFQM • Developing a fuller understanding of how business results are achieved, and processes continually improved • Offering mechanisms for tackling systems problems in the workplace • Promoting performance management as a two-way dialogue • Providing a positive and universal framework for the description of jobs and roles • Helping to align individual and business objectives • Pointing the way to identifying, defining and building the competencies that the organization needs its people to demonstrate. 3) The Economic Value Added Model (EVA) • EVA is Economic Value Added, a measure of economic profit. • EVA is the invention of Stern Stewart & Co., a global consulting firm, which launched EVA in 1989. • EVA is a performance metric that calculates the creation of shareholder value. It distinguishes itself from traditional financial performance metrics such as net profit and EPS. • EVA is the calculation of what profits remain after the costs of a company's capital - both debt and equity - are deducted from operating profit. • Technically speaking EVA is nothing but the residual income after factoring the cost of capital into net operating profit after tax • EVA's most important use is in measuring and rewarding performance inside the firm. It is said, if carried out consistently, EVA should help us identify the best investments, that is, the companies that generate more wealth than their rivals. All other things being equal, firms with high EVAs should over time outperform others with lower or negative EVAs. 4) Other traditional financial measures 1. Return on Equity (ROE) 2. Return on Capital Employed (ROCE) 3. Earnings per Share (EPS) 4. Price / Earning Ratio (PE Ratio) 5. Return on Sales 6. Asset Turnover 7. Overall Overhead / Sales Ratio 8. Profit or Sales or Added Value per employer 9. Output per Employee (productivity) B) Types of Performance Measures for a Team Team – A team is a group of people with a full set of complementary skills required to complete a task, job, or project. The three main types of teams based on task complexity and membership configuration dimensions are: • Work or service teams: These teams are engaged in routine tasks, including manufacturing or service tasks. An example is a group of people working at the assembly line is a car manufacturing plant such as Toyota or Honda. • Project teams: These teams are assembled for a specific purpose and are expected to dis band as soon as their specific tasks have been completed. The tasks are outside the core production or service of the organization and are therefore not as routine as those of work or service teams. • Network teams: These teams include members who are not constrained by time or space and members who are not limited by organizational boundaries. Usually, team members are geographically dispersed and stay in touch via telecommunications technology such as video conference and mobile phones. Principles of Team Performance Management The basic principles of team management are as follows : 1. Make sure your team is really a team: There are different types of teams. Before a team component is introduced in the performance management system, we need to make sure the organization has actual teams. 2. Make the investment to measure: Measuring team performance as is the case with measuring individual performance, takes time and effort. 3. Define measurement goals clearly: Defining how the data will be used is a decision that must be made before measures of team performance are designed. Use a multi method approach to measurement: The measurement of team performance is complex. Thus, multiple methods and sources of data are often necessary. 4. Focus on process as well as outcomes: Behavioural process oriented measures as well as results are as useful for team performance management systems as for individuals. 5. Measuring long term changes: Although short term processes and results are easier to measure, it is important to also consider long term measures of performance. Team members need to have the following competencies to be able to succeed: i) Interpersonal understanding ii) Influence on each other iii) Customer – service orientation iv) Adaptability v) Teamwork and cooperation vi) Group communication vii) Achievement orientation viii) Organizational commitment Performance measures for teams Performance measures for teams will be related to the purpose of the team and its objectives. Team performance measures are likely to fall in either of the following categories: i) Output ii) Activity levels iii) Customer Service and satisfaction iv) Financial results Types of Measures This can be either output / result measures of team performance or input / process measures. Output / Results Achievement of team goals Customer satisfaction Quantity of Work Quality of Work Process Knowledge Maintenance of technical systems Input / Process Support of team process Participation Oral & Written Communication Collaboration & Collective effort Conflict Resolution Planning and Goal - setting Participative decision-making Problem solving and analytical skills Credibility and trust Interdependence Interpersonal relations Acceptance & change Adaptability & Flexibility Team Performance Management Process The components of the team management process are : 1. Prerequisites • The first component of performance management process involves two prerequisites. First, there is a need to have good knowledge of the organizations mission. This prerequisite is present regardless of whether there is an emphasis on team performance. • Second, there is need to have a good knowledge of the job in question. In the case of individual jobs, a job analysis is conducted to determine the key components of a particular job: what task need to be done, how they are to be done and what knowledge, skills and abilities are needed to do them. • There are KSAs that are especially conducive to team performance. Examples include the following: i) Communication: Giving and receiving constructive feed back, listening, and sharing information and ideas. ii) Decision making: Help the team make decision. Collaboration: Dealing with conflict effectively, committing to the team and its goals, valuing the diversity and experience of other team members, and sharing accountability. iii) Team leadership: Taking on the role of team leader, including knowing how to extract the best out of the team iv) Self control: Keeping emotions under control and not displaying negative actions even when faced with opposition or even hostility from others. 2. Performance Planning • The second component of performance management process includes the consideration of results and behaviours. • It planning involves the creation of developmental plan. Each of these issues need to be considered at the team level, results expected of the team, behaviours expected of team members, and developmental objectives to be achieved by the team and its members. • A discussion of results must include key team accountabilities, specific objectives for each key accountability and performance standards. A discussion of behaviours need to include competencies. • Finally, the developmental plan includes a description of area that need improving and goals to be achieved in each area. The plan includes goals not only for the team as a whole, but also developmental objectives for individual performance that will benefit team performance. 3. Performance Execution • The third component of performance management process involves performance execution. Autonomous teams are solely responsible for performance execution, however, when a team has a supervisor, then both the team and the supervisor share responsibility for performance execution. For example, team members need to be committed to goal achievement and should take a proactive role in seeking feedback from one another as well as from the supervisor. • The supervisor also has some important responsibilities, including observing and documenting team performance and relative contribution of team members, updating the team on any change in the goals of the organization and providing resources and reinforcement so that team members will be motivated to succeed. 4. Performance Assessment • The fourth component of performance management process is performance assessment. All team members must evaluate one another’s performance as well as the performance of the overall team. • Peer evaluation are a key component of the assessment stage because they lead to higher level of work-load sharing, cooperation and performance. Involvement of each team member in the evaluation process increases their ownership and commitment to the system. • Self-appraisal also provides important information to be discussed during the performance review. In the absence of self-appraisal, it is often not clear to supervisors whether the team and its members have a real understanding of what is expected of them. • Three types of performance need to be assessed: i) Individual performance or task performance ii) Contextual performance iii) Team performance as a whole. 5. Performance Dimensions Team performance as a whole can be measured using the following four performance dimensions: i) Effectiveness: This is the degree to which results satisfy team stakeholders including both internal and external customers. ii) Efficiency: This is the degree to which internal team processes support the achievement of results, team growth and team member satisfaction. iii) Learning and growth: This is the degree to which the team is able to learn new skills and improve performance over time. Specific measures can include innovation, documented learning, best practices and process involvement. iv) Team members’ satisfaction: This is the degree to which team members are satisfied with their team membership. Specific measures can include team members perceptions regarding the extent to which teamwork contributes to their growth and personal well-being. 6. Performance Review • This component of performance management process is the performance review, which takes place when the team members meet with the supervisor or manager to discuss how they have been working. • In organizations that are structured around autonomous teams, there may not be a supervisor or manager. In that case, a team leader or representative would meet with a performance review board, which includes representatives from all teams. • At-least two meetings are needed. First, the supervisor meets with all members of team together. The focus of this meeting is to discuss the overall team performance including results achieved by the team as a whole. Information for this meeting comes from team members evaluating their collective performance, other teams evaluating the team in question, and the supervisors evaluation. • Second, the supervisor meets each team member individually. The focus of this meeting is to discuss how the individual behaviours contributed to team performance. Information for this meeting comes from individuals evaluating their own performance, peer ratings of the individuals performance, and the supervisors evaluation. 7. Performance Renewal and Re-contracting • The final component of performance management process involves renewal and re-contracting. Essentially, this component is identical to the performance planning stage; however, performance renewal and re-contracting uses information gathered during the review period to make adjustments as needed. • For example, some new key accountabilities and competencies may be included. Conversely, some goals may have to be adjusted either upward or downward. C) Types of Performance Measures for an Individual Individual Measures 1. 2. 3. 4. 5. Quantity Productivity Quality Timeliness Cost-efficiency What Makes a Good Performance Measure? Performance measures should be SMART • S = Specific, Strategic • M = Measurable • A = Achievable, Attainable, Action-Oriented, Agreed-upon, Aligned, Ambitious • R = Relevant, Realistic, Resourced, Reasonable, Results-based • T = Time-bound, Time-based, Time-limited, Timely, Time-sensitive Additional characteristics of strong performance measures outside the S.M.A.R.T. framework are listed below. • Easy to understand • Encourage the right behaviour • Visible/transparent to those involved Guidelines for defining Performance Measures Performance measures need to be agreeable at the same time as objectives are defined. This provides a fair assessment of the progress and achievements for both individuals and teams. It also provides a basis for feedback. The following are the guidelines for defining performance measures: 1. Measures should relate to results and observable behaviours 2. The results should be within the control of the team or individual and be based on agreed targets. 3. Behavioural requirements (competencies) should be defined and agreed. 4. Data must be available for measurement. 5. Measures should be objective. Performance Reviews • A performance review is a formal regulated feedback mechanism in which managers and other key stakeholders assess an employee’s work performance. • The purpose is to identify their strengths and weaknesses, offer constructive feedback for skill development in the future, and assist with goal setting. • The performance review is a summary of the ongoing feedback the employee has received throughout the specified time period and working with them on their goals for the future. • It is not just looking behind; it is future focused for the employee and the organization. • Whichever methodology you choose for performance reviews, a well-planned and executed performance review boosts employee engagement and sets the tone for creating a culture of feedback and continual development at your organisation. Importance of Performance Review • Gives an employee a summary of how they have performed and goals for the future. • Provides clear and objective feedback based on organizational and employee goals. • States the areas the employee needs to improve and whether they are meeting the expectations of the position. • Is a written record of employee performance. Basis of Performance Review - The five key elements of performance review meetings are: 1. Measurement – Assessing results against agreed targets and standards 2. Feedback – Providing information on how a person has been doing 3. Positive Reinforcement – Emphasizing what has been done well so that it is done even better in the future. 4. Exchange of views – Ensuring that the discussion ensure a free and frank discussion by both the parties. 5. Agreement – Jointly coming to an understanding about what has to be done by both the parties to improve performance. What to do before the Performance Review • Have frequent conversations with your employees on their goals, their performance. • Train supervisors in Performance Reviews. • Make clear that supervisors understand to rate employees equitably. • Discuss the halo/horn effect and how to avoid it. • Communicate the Performance Review process to all employees and how it relates to their compensation. • Do this frequently so it is understood. • Let employee know that the performance review is coming up and ask them to put together areas they would like to discuss Preparing for the meeting Reviewer’s (the person conducting the review side) – • He should take into account how well the individual has done in achieving his objectives • how much has he achieved since his last meeting • the feedback that needs to be given with the evidence • the factors that have affected his performance • the future course of action • the possible directions that the employees career can take and • the possible objectives for the next review period. Reviewee’s side – The individual being reviewed (reviewee) needs to list out his achievements in meeting his objectives, his progress since the last meeting, the areas in which he feels he can improve and how, his T&D needs and aspirations for the future. He has to do a self-appraisal for this. Self Appraisal / Self - Assessment This means getting people to analyse and assess their own performance. This has the following advantages : i) helps generate less inhibited and more positive discussion. ii) involves reviewees directly in the review process iii) is likely to reduce defensive behaviour iv) provides scope to run the review meeting as a constructive dialogue However, this also has the following disadvantages: i) Individuals should have clear targets and standards against which they can assess their performance. ii) There has to be a climate of mutual trust between the two parties. iii) The reviewee must believe that the reviewer will not take advantage of his honest self-assessment. iv) The reviewee might over assess his performance. Guidelines for the Review meeting The meeting aims at discussing the following points: i) What individuals have learned or need to learn? ii) Where they have to go? iii) Where they are going? iv) How they are going to get there? v) What they believe they know and can do? vi) What help or guidance can be provided to them? Agenda for the review meeting The agenda for the review meeting is set by both the parties by a pre-discussion. This may consist of the following items: i) A review of the key elements in the job ii) A point-by-point examination of the results of the objectives, actions and the achievement of the PDP discussed in the last meeting. iii) A discussion and agreement on the performance objectives for the next period iv) A discussion and agreement in the reviewee’s developmental objectives v) A Performance Development Plan (PDP) should be formulated for the next period vi) An agreement on the action plans to conclude the meeting Characteristics of a Constructive Review Meeting A constructive review meeting should : 1. Encourage reviewees to do most of the talking 2. Listen actively to what they say 3. Allow scope for reflection and analysis 4. Analyse performance, not personality 5. Consider the whole period of review and not isolated events 6. Recognise achievements and reinforce strengths 7. End the meeting positively with agreed action plans Performance Review Skills The reviewer should possess the following skills to conduct a proper review meeting. A. Asking the right questions B. Listening C. Giving feedback A. Asking the right question - There are two kinds of approaches to this: i) Open questions – These are general questions and nor specific. They encourage people to open up and talk freely. They create an atmosphere of calm and friendliness. Some examples of these kinds of questions are as follows: • How do you feel about that? • How can we build on that in future? • Tell me, how did you handle that situation? • Tell me, how is your project going? ii) Probe questions – These seek specific information on what has happened and why. For example : • To what extent do you believe that …….? • Have I got the right impression? Do you feel…? B. Listening – This is an art which needs to be practised. Good listeners : • Concentrate on the speaker and are aware to subtle body language or nuances of what is being said. • Do not interrupt unnecessarily but respond quickly when required. • Ask questions to clarify their meaning. C. Giving feedback – Feedback should be given based on fact and not subjective judgement. The aim is to be able to explain the action that will be taken based on the review of their performance. The following are the guidelines for giving feedback: • Build feedback into the job • Provide feedback on actual events • Describe but don’t judge • Refer to specific behaviours • Ask questions • Select key issues • Focus on positive aspects • Show understanding