Building a High Performance Culture and the Business ...Presentation Transcript
2003 AMCHAM HR Seminar Building a High Performance Culture and the Business Performance Management (BPM) Michael Keppler Managing Principal, Asia May 23, 2003
High performers “ Of all the things I’ve done, the most vital is coordinating the talents of those who work for us and pointing them toward a certain goal.” Walter Elias Disney, Founder, Walt Disney Company, 1954 Source: Collins and Porras, “Built to Last”.
What Differentiates High Performing Companies?
Companies With “Performance-enhancing Cultures” Significantly Outperform Their Peers
Values aligned with interests of all key stakeholders
Top managers invest significant time communicating, modeling, and reinforcing core values and associated behaviors
Leaders at all levels accountable for living and managing values
Continuous adaptation — apart from core values
207 companies in 22 different industries
11 years of data
Average Growth (%) 0 200 400 600 800 1000 682 166 282 36 901 74 756 1 Revenue Employment Stock Price Profit With Performance-Enhancing Culture Without Performance-Enhancing Culture
Characteristics of Winners
Invest in building organization capabilities needed for long-term success
Focus on more than profits
Preserve core values while stimulating progress by…
– Setting bold goals – Growing own leaders
– Nurturing the culture – Driving continuous improvement
Continually align strategies and practices
Leading Companies Manage Their People and Cultures Differently High Performing Cultures*$6,356 Comparison Companies** $955 General Market $415 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 1948 1960 1972 1984 1990
Companies With Aligned HR Systems Generate Substantially Higher Shareholder Value Than Their Peers Study confirms that the “integrated systems” rather than isolated programs makes the difference $290,000 $310,000 $330,000 $350,000 $370,000 $390,000 0 20 40 60 80 100 Quintile Changes in Sophistication of HR Architecture Dollar Change in Market Value per Employee
In This Session We Will…
Review how organizations build high performing cultures
Towers Perrin Research
The role of the Balanced Scorecard
Business Performance Management
What makes high performing companies different regarding their approach to Human Resources?
It Provides a Performance Management Framework for Effective Strategy Implementation Balanced Scorecard Clarifying and Translation Vision and Strategy Planning and Target Setting Communicating And Linking Strategic Feedback and Learning
Set stretch targets
Identify and rationalize strategic initiatives
Invest to support strategy
Annual budgets are linked as milestones to long term strategy
Feedback process to test strategy
Strategy development is continuous and adapts to environment
Shares strategic framework
Facilitate strategy review and learnings
Strategy informs entire management process
Shared vision is foundation for strategic learning
Education and open communication
Top to bottom goal alignment
Reward system linkage
The Scorecard Approach Ensures a “Balanced” Perspective on What Is Measured Vision and Strategy Financial Perspective Goal Key Performance Indicator Target Employee Perspective Customer Perspective Goal Key Performance Indicator Target Goal Key Performance Indicator Target Goal Key Performance Indicator Target A statement of intent that supports the organisation strategy and objectives A specific measure of performance that is quantifiable Specific, definable outcome for the KPI The interests of all stakeholders are represented: shareholders, customers, management, and employees Internal Business Process
Key Learnings for Successful Implementation of Balanced Scorecards
The measures used must reflect the key performance drivers and employee influence
The selection and deployment of scorecard measures need to be performed in a rigorous and analytical manner that reflects the economics of the business
The design should involve the explicit consideration of such factors as the organization’s structure, strategy, external environment, and the scorecard objectives
The scorecard design and implementation processes must incorporate a change management framework and leadership involvement
Towers Perrin’s Business Performance Management (BPM) was specifically designed to address these issues
Business Performance Management (BPM)
Why Is BPM Important?
Data suggests that an employee’s positive emotion about work translates into improved performance for the company
Reward dollars are shrinking and the pay mix is shifting
HR is under pressure to further increase the ROI of this shrinking reward investment
All of these changes transfer the risk of earning an “acceptable” level of reward onto the employee
BPM addresses these “realities”
Business Performance Management (BPM) Is About Changing the Way People Behave and Make Decisions
What business results must the organization deliver to be successful?
Are leaders in agreement on how to execute the strategy?
How can managers impact these results?
What metrics have the greatest impact on shareholder value?
What do managers need to know and do to implement the strategy?
What do employees need to know and do differently?
How can we link pay and other rewards to the business strategy?
What pay and performance management plans work best for your organization?
How can we truly foster a results-based culture?
What tools and systems will support the implementation?
Step 1: Focus on Clarifying Your Organization’s Strategy
Clarify the strategic direction and priorities of the organization, as well as key expectations
Conduct an organizational capability assessment to identify what is important to strategic success
Provides clarity and consensus around the rewards strategy
Step 2: Identify What Drives Value
Value Trees identify the financial and operational drivers of shareholder value, along with the underlying activities which impact these drivers. As such, they demonstrate the quantitative linkage between metrics and identify where value can be added in the organization
Business Driver Drives our success as an organization First Level Metrics Most relevant components of the business driver Sub-metrics Further breakups of the first level metrics Customer Satisfaction Product Innovation Customer Value Returns Quality Failure Rates Cost of Transaction to Customer Brand Image Delivery Time Number of Innovative Features Implemented # of Customer Suggestions Incorporated into Design Price Customer Support Relationship with Customer Cycle Time Number of Call Backs Identifies the most important business drivers and metrics. Provides the analytical proof necessary to improve reward program effectiveness
Step 3: Improve Business Literacy to Build Employee Awareness and Commitment Provides a tangible tool for employees to make better informed decisions that will increase business performance
Step 4: Ensure That Employees Are Focused on Doing the Right Things and Then Design and Develop the Right Links to Rewards Job title & Description Global Account Manager : Being overall responsible for the client relationship, its development and its profitability. Developing, pursuing and closing sales opportunities….. Individual Measures Team Measures
Total revenue of own accounts
Number of accounts won/ lost
Customer satisfaction: Speed, quality of solutions, and relationship
Team customer satisfaction
Personal Performance Factor 10% 20% 30% 40% 50% Team Measure 80% 100% 120% 90% 110% 10% 20% 30% 40% 50% Individual Measure Few Most Some All Company Performance Factor Determines the appropriate program, measures and share of performance to drive value creating behaviour
Step 5: Develop a Performance Management System that Ensures Employee Engagement
Successful engagement must: 1. Link Strategy to Actions 2. Assign accountability 3. Provide visual, timely and
Our research and experience also suggest that there are six key factors to highly effective management systems performance
Measurement and Alignment Performance Management System Business Driver Linkage Pay for Performance Development Engagement tools provide the feedback and support tools to sustain the performance management process Process for Sustained Change Involvement
Services and Tools Exist to Ensure an Effective BPM Process Performance Management (feedback and support)
Incentives for nonexecutive managers and employees (including mission-critical functions/roles)
Rewards Design Performance Management (defining individual performance) Reward/Performance Management Strategy BusinesSight TM Suite of Services
Business Driver Analysis
Financial, customer, operational and employee drivers
Reward strategy clarification sessions and workbooks
Leadership interviews and focus groups
BPM Offers an Opportunity to Effectively Address the Key HR Challenges of Today
Reality #1: Data suggests that an employee’s positive emotion about work translates into improved performance for the company
Reality #2: Reward dollars are shrinking and the pay mix is shifting
Reality #3: HR is under pressure to further increase the ROI of this shrinking reward investment
Reality #4: All of these changes transfer the risk of earning an “acceptable” level of reward onto the employee
Case Study Orion Frito-Lay
Founded in 1987 as a joint venture of Tong Yang Corp. and Pepsico.
One of the favorite snack companies in Korea
Headquarter in Seoul and 2 Factories in Cheongjoo and Icheon
Financial Performance (2001)
Revenue 122,988 Mil. Won
Net Income 5,049 Mil. won
Business Performance Management was designed and implemented as one component of total HR innovation for Orion Frito-Lay
HR Innovation includes…
Business Performance Management
KPIs for each Department and Job
Performance Management Process
Strategic Incentive System
Job Redesign based on Business Process Innovation
Job Grade Structure
Compensation Strategy and Program
First, we clarified the objectives of using balanced scorecard and KPIs Corp. BSC Division. KPI Team KPI Job KPI Financial Customer Employee Operation Division A Team A Job A Linked with….
Business Planning and Monitoring
Compensation for Managers
Compensation for Employees
BSC development was the result of sequential interactive work session from top management team to line managers Development process itself was an organizational learning and consensus-building process -Take out “shading” Corp. BSC Division KPI Team KPI Job KPI
1. Executive Work Session
CEO + Division Heads
2. Division Work Session
Division Head + Team Managers
3. Manager Work Session
All Team Managers
Financial Customer Employee Operation Division A Team A Job A
Balanced scorecard was developed as a result of executive work session based on insights from strategy clarification Financial Value Tree Strategy Themes Orion Frito-Lay Strategy Clarification Organizational Capabilities OFL BSC Model Employee Financial Customer Operational Maximize Profitability NOPBT Sales Growth Revenue Customer Satisfaction M/S Freshness … .. …… . ……………… .. …… . …… . … ... …… ... …… . ……… . Employee Satisfaction …… .. Brand Equity CRS Index …… . … ... OPEX (Operational Excellence) ……… .
Balanced scorecard map was used as a platform to link strategy with each KPIs KSF KPI Employee Financial Customer Operational Maximize Profitability NOPBT Sales Growth Revenue Customer Satisfaction M/S Freshness … .. …… . ……………… .. …… . …… . … ... …… ... …… . ……… . Employee Satisfaction …… .. Brand Equity CRS Index …… . … ... OPEX (Operational Excellence) ……… .
Four guiding principles were used to identify KPIs for each organizational unit 1 Clear Linkage with Business Strategy 3 Measurability 4 Practical Usefulness 2 Accountability (Link with Each Unit’s Mission)
Accountability Map was developed to link strategy, process, KSF/KPI, and organizational unit KSF
Sub-KSF KPI Measurement Detail Accountability Main Support
적시성 ( 기획기간 , 적시출시 )/ 정보공유원가절감
Marketing Division R&D Division Product Planning … .. … . Sourcing Production Advertising/Promotion Planning Main Process Strategy Map 사원 관점 재무적 관점 고객 관점 운영 관점 … .
KPI allocation to each organizational unit was finalized following the validation and prioritization process Team A Draft KPI Importance Account- ability H M H L H M H H L M H H Team C Team B KSF KPI Team A Team B Team C
Job KPI was developed to link team KPI and each job’s mission Step 2 Understand Team KPI Step 1 Define Job Step 3 Draft Job KPI Step 4 Set Performance Standard Step 5 Validation
Quantitative: Measurement Detail
Qualitative : Clear Definition of Performance Standard
Check consistency with Guiding Principles
Detail performance management process was defined for effective implementation CEO COO Division Team Staff … .. Jan Feb. … . … . … . … . Goal Setting Evaluation Coaching
… and Created a broad-based incentive plan aligned with the value drivers 3 Private & Confidential Copyright Towers Perrin Division/Team Performance Multiplier Matrix Multiplier 를 적용하여 산정된 1 Private & Confidential Copyright Towers Perrin Cost Impact Analysis 80% 100% 120% Corporate Performance Multiplier 150% Achievement 50% 80% 100% 120% 150% 50% 80% 100% 120% 150% 50% 필요 재원 규모 필요 재원 규모 필요 재원 규모 Total Cost for Each Case Total Cost for Each Case Illustration * Data presented are hypothetical numbers. 0% 100% 150% N B M E O 0% N 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 70% B 0% 70% 0% 75% 85% 100% M 70% 100% 120% 105% 130% E 130% 160% O 130% 160 부문 평가 등급 팀 평가 등급 (70%)
Breakthrough performance improvement through...
Awareness of strategic drivers from top management to each employee
Executives’ more focused communication around strategic agenda rather than operational issues
Linking employee’s day-to-day activities with strategic drivers
Building a performance-oriented culture
In Conclusion, BPM….
Aligns execution of the business strategy with the creation of shareholder value
Applies a rigorous measurement methodology to focus and align the business measures that define success for the company
Enables measures and weightings to be customized to reflect the cause and effect
Integrates measures across organizational functions, processes, and levels in support of value drivers and key company measures
Creates line-of-sight for employees by linking activities and processes to benchmark measures which are then linked to the financial drivers of success
Supports modeling of impact of changes in behaviors on company performance
The imperative to build a performance based culture has never been stronger