Performance Management

Balanced Score Card Jigar Patel LOGO

Performance Management Performance management reminds us that being busy is not the same as producing results. It reminds us that training, strong commitment and lots of hard Work alone are not results. The major contribution of performance management is its focus on achieving results Performance management redirects our efforts away from busyness toward effectiveness.

Performance Performance is often defined simply in output terms the achievement of quantified objectives. But performance is a matter not only of what people achieve but how they achieve it. High performance results from appropriate behavior, especially discretionary behavior, and the effective use of the required knowledge, skills and competencies.

Performance Management
Performance means both behaviors and results. Behaviors emanate from the performer and transform performance from abstraction to action. Not just the instruments for results, behaviors are also outcomes in their own right the product of mental and physical effort applied to tasks and can be judged apart from results. This definition of performance leads to the conclusion that when managing performance both inputs (behavior) and outputs (results) need to be considered. It is not a question of simply considering the achievement of targets as used to happen in management-by-objectives schemes. Competence factors need to be included in the process. This is the so-called mixed model of performance management, which covers the achievement of expected levels of competence as well as objective setting and review.

Performance Measurement Systems

Limitations of Financial Control Systems: Relying solely on financial measurements is inadequate. It may encourage short term actions that are not in companys long term interests Bausch & Lomb (1993) Some divisional presidents under pressure to produce bottom line results adopt tactics which maximized short term bonuses but harmed company in long term. Under pressure to beat sales target in 1993, B&L managers shipped products that doctor never ordered and forced distributors to take up two years of unwanted inventory, while assuring many that they wouldnt have to pay till they sold the lenses.
(Source: BusinessWeek)

Balanced Scorecard Balanced Scorecard is a tool developed by Robert S. Kaplan and David P. Norton. The Balanced Scorecard translates an organization's vision and strategy into a comprehensive set of performance measures that provides the framework for a strategic measurement and management system.

Balanced Scorecard Why? Important to have a plan, set goals, and measure your success Having a plan is more important than the specific tool you use Holistic approach that extends beyond financials measures and incorporates other priorities Linking strategic institutional plans and priorities

Objectives of Balanced Scorecard Consistently deliver superb customer experience Optimize resource utilization and be accountable and financial stewards Achieve operational excellence in our internal processes Organization must consistently strive for learning and growth

Balanced Scorecard
Financial Perspective
How

should we appear to our customers? Are they satisfied?

How

Goals Measures

do we appear to our stakeholders? What financial outcomes do we need to generate?

Customer Perspective

Organizational Learning Perspective

Goals Measures

Vision and Strategy

Goals Measures

Are What

business processes must we excel at to satisfy our customers? Are these processes effective (i.e., adding value for customers)? Are they efficient?

Process/Product Perspective

Goals Measures

we able to sustain innovation, change and improvement? How will we maintain our ability to meet customer expectations?

Customer Perspective How do customers see us? ECI (Electronic Circuits Incorporated, , a semi conductor company) established general goals for customer performance Get standard products to the market sooner Improve customers time to market Become customers supplier of choice through partnerships Develop innovative product tailored to customer needs

Customer Perspective
Goals Measures

New Products

Percentage of sales from new products

Percentage of sales from proprietary products

Responsive Supply

On Time Delivery (as defined by Customer)

Share of key accounts purchases

Preferred Suppliers

Ranking by key accounts

Customer partnerships Number of cooperative engineering efforts

Financial Perspective How do we look to our shareholders? ECIs Goals To Survive To Succeed To Prosper

Financial Perspective
Goals Measures

Survive

Cash Flow

Succeed

Quarterly sales growth and operating income by division

Prosper

Increased market share and ROE

Internal Business Perspective What must we excel at? Managers at ECI identified the following: Submicron technology was critical to its market position Have to focus on manufacturing excellence Design productivity New product introduction

Internal Business Perspective

Goals Technology Capability Measures Manufacturing geometry versus competition

Manufacturing Excellence Design productivity

Cycle Time, Unit Cost, Yield Silicon efficiency, engineering efficiency

New product introduction

Actual introduction schedule versus plan

Innovation & Learning Perspective Can we continue to improve and create value? Intense global competition requires that companies make Continual improvement ECIs innovation measures focus on the companys ability to develop and introduce standard products rapidly, the products that the company expects will be the bulk of its future sales

Innovation and Learning

Goals Measures

Technology leadership

Time to develop next generation

Manufacturing learning

Process time to maturity

Product focus

Percentage of products that equal 80% of sales

Time to market

New product introduction versus competition

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