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  • Thursday, May 13, 2010
  • Thursday, May 13, 2010
  • Thursday, May 13, 2010
  • Thursday, May 13, 2010 Direction of change. The current workforce needs are becoming more critical as companies seek people who are creative, risk-taking and e-literate. Key employees and qualified employees will be in hot demand. Companies may not treat all employees the same any more. High-performing companies define which employees create value, build hiring strategies to get them and help those employees understand how their actions/decisions affect business and reward them differently based on their performance. Some questions for you to think about: What people issues does your organization face? What skills are or will be critical in executing your business strategy? Will those skills be readily available?
  • Thursday, May 13, 2010 Vision Barrier: What is the company’s vision?, What is our business strategy?,How do I impact execution of the strategy & vision? Management Barrier : How do I provide meaningful timely feedback to employees?, What systems/measures should be in place? How do I free up time to focus on strategic issues? Resource Barrier: What technology will allow us to link planning & measurement? How do we ensure people have the right information at the right time? People Barrier: What is my financial stake in the company’s success?, How do my objectives align with the company’s strategy? What can I control to drive the company’s economic success?
  • Thursday, May 13, 2010
  • Thursday, May 13, 2010
  • Thursday, May 13, 2010
  • Thursday, May 13, 2010 Reality 1: TP data suggests that more than half of employees describe their current work experience in negative terms and a third feel intensely negative.Consequently. 1. Employers have a call to action 2. They must find ways to make employees feel better about their work experiences 3. the imperative to “get rewards right” has never been stronger Reality 2. Consequently 1. The traditional approach of rewarding everyone equally no longer works 2. Companies are being forced to segment and differentiate their workforce 3. Organizations are reducing the fixed elements of rewards in favor of more variable rewards that are performance driven Reality 3 Consequently 1. Increasing the ROI on any investment requires that the investment be directed at the investment opportunities with the greatest return potential 2. In the case of people assets, this means those that have the greatest potential impact on the performance of the organization (mission-critical roles) and those who contribute the most (high performers) 3. This requires that organizations have the tools to recognize, differentiate and reward performance (i.e., manage performance) Reality 4 Consequently, 1. Individual performance will need to be a greater determinant of reward payouts than in the past (forcing organizations to ensure that individual metrics are aligned with key business drivers) 2. Employees will demand the tools to allow them to contribute (e.g., line-of-sight training and performance feedback tools)
  • Thursday, May 13, 2010 Goals and potential outcomes of Business Performance Management Business Performance Management is a methodology about: Clarifying strategic priorities and Communicating performance drivers Business education/ Line-of-sight goal-setting and alignment with rewards Performance feedback
  • Thursday, May 13, 2010
  • Thursday, May 13, 2010
  • Thursday, May 13, 2010
  • Thursday, May 13, 2010
  • Thursday, May 13, 2010
  • Thursday, May 13, 2010 Reality 1: TP data suggests that more than half of employees describe their current work experience in negative terms and a third feel intensely negative.Consequently. 1. Employers have a call to action 2. They must find ways to make employees feel better about their work experiences 3. the imperative to “get rewards right” has never been stronger Reality 2. Consequently 1. The traditional approach of rewarding everyone equally no longer works 2. Companies are being forced to segment and differentiate their workforce 3. Organizations are reducing the fixed elements of rewards in favor of more variable rewards that are performance driven Reality 3 Consequently 1. Increasing the ROI on any investment requires that the investment be directed at the investment opportunities with the greatest return potential 2. In the case of people assets, this means those that have the greatest potential impact on the performance of the organization (mission-critical roles) and those who contribute the most (high performers) 3. This requires that organizations have the tools to recognize, differentiate and reward performance (i.e., manage performance) Reality 4 Consequently, 1. Individual performance will need to be a greater determinant of reward payouts than in the past (forcing organizations to ensure that individual metrics are aligned with key business drivers) 2. Employees will demand the tools to allow them to contribute (e.g., line-of-sight training and performance feedback tools)
  • Thursday, May 13, 2010 The imperative

Building a High Performance Culture and the Business ... 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
    • Performance-enhancing Cultures
      • 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
        • – Experimenting
      • 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?
  • The Balanced Scorecard
  • The Balanced Scorecard Was Designed to Overcome Common Barriers Only 5% of the work force understands the strategy 60% of organizations don’t link budgets to strategy Only 25% of managers have incentives linked to strategy 85% of executive teams spend less than one hour per month discussing strategy 9 of 10 companies fail to execute their business strategy The People Barrier The Vision Barrier The Management Barrier The Resource Barrier ©1999 The Balanced Scorecard Collaborative, Inc. All rights reserved. The Balanced Scorecard , Dr. Bob Kaplan
  • 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
    • Performance leadership
    • behaviors
  • 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?
    • 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
    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
    Rewards Strategy Internal Objectives External Practices
    • Business strategy
    • Viewpoints of executive/ professionals
    • Overall objectives for plan performance
    • Behaviours required to support strategy
    • Compensation practices
    • Best practices for the industry
    • Characteristics of effective incentive plans
    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
    • Account profitability
    • Number of accounts won/ lost
    • Customer satisfaction: Speed, quality of solutions, and relationship
    • Customer penetration
    • Team Revenue
    • Team profitability
    • 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
    • accurate feedback
    • 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)
    • Merit and recognition programs
    • Manager tools:
      • Performance evaluation, ranking and calibration
      • Communicating performance, providing feedback
      • Pay Applications (Kadiri)
    • HR tools
      • Pay/performance modeling tools
      • Process guidelines
      • High-performer management: identification, reward analysis, turnover analysis
    • Employee performance feedback tools
    • Simulation application (with Root Learning)
    • Web-based education module
    • Line-of-sight training
    Rewards Design Performance Management (defining individual performance) Reward/Performance Management Strategy BusinesSight TM Suite of Services
    • Goal setting
    • Competency development
    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
  • Company Overview
    • 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
        • Balanced Scorecard
        • 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
      • Change Management
  • 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
    • Executive Incentive
      • Short-term Incentive
      • Long-term Incentive
    • Compensation for Managers
      • Base salary
      • Incentive
    • Compensation for Employees
      • Base salary
      • Incentive
  • 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
    • 고객니즈 부합
    • 적시성 ( 기획기간 , 적시출시 )/ 정보공유원가절감
    • 신제품 매출액
    • 히트상품출시율
    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
    • --------
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             
  • 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
    • Team Mission
    • Team KSF/Sub-KSF
    • Team KPI
    • Job Title
    • Job Mission
    • Main Tasks
    • Brainstorm
    • Benchmark
    • 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%)
  • Results…..
    • 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
  • Questions?