Bridge Knowle Workshop - Developing Effective KPIs (Main Slides)

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Learn How to Setup, Implement & Monitor Effective Benchmarks for Departmental and Corporate Growth Using Result-Driven KPI Initiatives.

KPI Measurements for Employee & Performance
Know how to effectively use KPI to manage people and
their performance. This will mean you can effectively set
goals, measure their performances, provide feedback as
well as giving all a clear picture of what is important.
KPI Measurements for Departments & Company.

Learn how you can use KPI to improve various functions
in your organization including for departments, business
units including new or existing business ventures

Published in: Business, Technology
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Bridge Knowle Workshop - Developing Effective KPIs (Main Slides)

  1. 1. http://totallyunrelatedrandomanddebatable.blogspot.com/ Developing Effective Key Performance Indicators Main Slides Compilation Kenny Ong
  2. 2. http://totallyunrelatedrandomanddebatable.blogspot.com/ Intro What is your objective?
  3. 3. http://totallyunrelatedrandomanddebatable.blogspot.com/ Managing Expectations • Exercise: Please note down one important item you want to learn or get out from this workshop
  4. 4. http://totallyunrelatedrandomanddebatable.blogspot.com/ Why do we hate Performance Appraisals? (How to develop better KPIs)
  5. 5. http://totallyunrelatedrandomanddebatable.blogspot.com/ As an Appraisee As an Appraisor Complaints about Performance Appraisals Mgmt/HR
  6. 6. http://totallyunrelatedrandomanddebatable.blogspot.com/ Complaints about Performance Appraisals - Summary 1. Process problem 2. Form problem 3. People problem
  7. 7. http://totallyunrelatedrandomanddebatable.blogspot.com/ What‟s the Difference? Performance Appraisal Performance Management
  8. 8. http://totallyunrelatedrandomanddebatable.blogspot.com/ What is the OBJECTIVE of a Performance Management System? • What is the ultimate objective of a Performance Management System? • „Performance‟ – achievement, • „Management‟ – controllable, improvement • „System‟ – predictable outcome, autorun Summary? • A Predictable process to Improve Controllable Achievements
  9. 9. http://totallyunrelatedrandomanddebatable.blogspot.com/ What‟s In Between Planning and Execution? Succession Planning (Business Continuity) Talent Management Differentiation Performance Management System Budgeting + Planning KPIs BSC Business Model
  10. 10. http://totallyunrelatedrandomanddebatable.blogspot.com/ What is the OBJECTIVE? Succession Planning (Business Continuity) Talent Management Differentiation Performance Management System Budgeting + Planning BSC and KPIs Strategy Business Model Business Strategy Execution Talent Management
  11. 11. http://totallyunrelatedrandomanddebatable.blogspot.com/ Intro Performance Management System = Business Plan Implementation
  12. 12. http://totallyunrelatedrandomanddebatable.blogspot.com/ Performance Management Process [FULL]
  13. 13. http://totallyunrelatedrandomanddebatable.blogspot.com/ KPIs, Strategy & Behavior
  14. 14. http://totallyunrelatedrandomanddebatable.blogspot.com/ “…in the past 18 months, we have heard that profit is more important than revenue, quality is more important that profit, people are more important than profit, customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our performance is inconsistent" CEO, Anonymous
  15. 15. http://totallyunrelatedrandomanddebatable.blogspot.com/ Before we start… In the old days of HR… • Average training hours per staff • % of staff attending training • # of training programs • % of training programs conducted • Training needs analysis conducted • Competency models developed • Training budget as % of payroll What’s wrong with this picture?
  16. 16. http://totallyunrelatedrandomanddebatable.blogspot.com/ Before we start… Moral of the story… 1. Innovation: – Business models – Products – Services 2. Market Leadership 3. Competitive differentiation Get the picture?
  17. 17. http://totallyunrelatedrandomanddebatable.blogspot.com/ “What is the moral of the story?”
  18. 18. http://totallyunrelatedrandomanddebatable.blogspot.com/ What is Strategic Planning? Strategic Planning Variables: Research Growth Risks Stakeholders Constraints SWOT Misc. Output: Plans Priorities KPIs
  19. 19. http://totallyunrelatedrandomanddebatable.blogspot.com/ Before we start… Which comes first? 1. Strategies -> KPI? 2. KPI -> Strategies?
  20. 20. http://totallyunrelatedrandomanddebatable.blogspot.com/ Before we start… Which comes first? 1. Strategies -> KPI? 2. KPI -> Strategies? •already know our priorities, aware of all strategy options available •creating something UNIQUE, INNOVATIVE and DISRUPTIVE e.g. Air Asia •conducting a business Turnaround e.g. MAS
  21. 21. http://totallyunrelatedrandomanddebatable.blogspot.com/ Before we start… Which comes first? 1. Strategies -> KPI? 2. KPI -> Strategies? •want to find out possible strategies, •determine our priorities first thru selection of important KPIs; •growing through „normal‟ business, not a Turnaround.
  22. 22. http://totallyunrelatedrandomanddebatable.blogspot.com/ Wrong KPIs “What is the moral of the story?”
  23. 23. http://totallyunrelatedrandomanddebatable.blogspot.com/ KPIs and Behavior Before: “Handle Time” Per Call • Motivated Call Centre staff to transfer callers, getting rid of complainers, making them someone else‟s problem • Callers at 45% chance of being transferred • 7,000 customers each week suffered transfers 7 times or more
  24. 24. http://totallyunrelatedrandomanddebatable.blogspot.com/ KPIs and Behavior After: “Minutes Per Resolution” of a problem • Resolution in ONE CALL become the core goal • Reduced probability of call transfers from 45% to 18%
  25. 25. http://totallyunrelatedrandomanddebatable.blogspot.com/ Performance Contracting Model Review performance & results - provide feedback Provide coaching & counselling Discuss and agree on objectives & key measures Prioritise the accountabilities agreed upon and discuss on competencies required for the job. Discuss & agree on standards for performance Discuss and agree on role accountabilities Grievance level Absenteeism Discipline issue Poor workethics Unclear ResultsDriven Low Level of trust & commitment (between team leader and team member) Procedure driven High Degreeandclarityofjobresults High level of employee empowerment High employee performance High employee satisfaction High employee involvement Challenging working environment Optimum HRM cost structure High Visionled Step 5 Step 4 Step 3 Step 2 Step 1 Performance Contracting Model
  26. 26. http://totallyunrelatedrandomanddebatable.blogspot.com/ Performance Planning
  27. 27. http://totallyunrelatedrandomanddebatable.blogspot.com/ Performance Planning Diagram
  28. 28. District Engineer Duties and Responsibilities If stated as Accountabilities then the job must produce : Control, operate and maintain the District Distribution System Ensure uninterrupted supply to consumers in the district by operating the District Distribution System. Manage major supply projects to customers in the district. Ensure satisfaction of the major customers in the district by managing supply and Distribution. Supervise all technical staff in the district. Ensure high performance and Productivity of technical staff by adopting proper human resource management methods on selection, training, coaching, counselling and motivation. Plan and design the High voltage system Ensure availability of adequate supply for future needs of industries in the district by planning and designing the High voltage System
  29. 29. http://totallyunrelatedrandomanddebatable.blogspot.com/ Results Driven Activity vs. Accountability
  30. 30. http://totallyunrelatedrandomanddebatable.blogspot.com/ Exercise: Results Description Key Result Key Activities (Major Supporting Actions) KPIs 1. 1. 2. 3. 4. 1. 2. 3. 4. 2. 1. 2. 3. 4. 1. 2. 3. 4. 3. 1. 2. 3. 4. 1. 2. 3. 4. 4. 1. 2. 3. 4. 1. 2. 3. 4.
  31. 31. http://totallyunrelatedrandomanddebatable.blogspot.com/ • Exercise: Results Description Questionnaire
  32. 32. http://totallyunrelatedrandomanddebatable.blogspot.com/ Sources of Goals and KPIs • Exercise: List down the sources of Goals and KPIs available in your company: – E.g. Job Description (RDQ)
  33. 33. http://totallyunrelatedrandomanddebatable.blogspot.com/ Basics of the Balanced Scorecard
  34. 34. http://totallyunrelatedrandomanddebatable.blogspot.com/ Reminder: Why BSC? • Reason 1: Balanced • Reason 2: Cause-and-Effect www.myCNI.com.my www.OOBEY.com
  35. 35. http://totallyunrelatedrandomanddebatable.blogspot.com/ Financial “To satisfy our stakeholders, what Financial objectives must we accomplish?” Internal Process “To satisfy our customers, in which internal business processes must we excel?" Customer “Who are our target customers? What is our value proposition?” Learning & Growth “What capabilities and tools do our employees require to help them execute our strategy? Balanced Scorecard: Corporate
  36. 36. http://totallyunrelatedrandomanddebatable.blogspot.com/ Mission “Who are our targets? What is our value proposition?” Internal Process “To satisfy our targets, in which internal processes must we excel?" Learning & Growth “What capabilities and tools do our staff require to help them execute our strategy? Financial “To fulfill the Mission, what Financial, how do we fund Internal Processes?” Balanced Scorecard: NGOs, Non-Profits, Governments
  37. 37. http://totallyunrelatedrandomanddebatable.blogspot.com/ Side notes on BSC 1. BSC should be a Thought Process and a Tool not a Religion (e.g. Excel™ vs. Budgeting) 2. BSC ≠ Appraisal 3. New BSC implementations should start linking with Budgeting right from the beginning 4. The „proper‟ BSC approach should rightly fully be heavily customized to the organization 5. „Strategic Planning‟ trainings should be provided before „BSC‟ trainings 6. Clear definitions for Accountability vs. Impact vs. Influence vs. Assistance
  38. 38. http://totallyunrelatedrandomanddebatable.blogspot.com/ Revenue Base Retention Share Gain Positioning Adjacent Market New Business Financial Learning & Growth Internal Process Customers Cost Margin Cause and Effect Cash Flow Asset Operational Excellence Product Leadership Customer Intimacy Investment Strategy Competencies Information Systems Motivation, empowerment, alignment Satisfaction
  39. 39. http://totallyunrelatedrandomanddebatable.blogspot.com/ Financial Learning & Growth Internal Process Customers / Distributors Revenue Growth ProductivityMarket Value Department Operations Supplier & Alliances External Involvement Target Markets Products/ Services Channel Strategies Human Resources Technology Information & IntelligenceSystems & Processes Cause and Effect: An Example
  40. 40. http://totallyunrelatedrandomanddebatable.blogspot.com/ Financial Learning & Growth Internal Process Customers / Distributors Example: 1st Level BSC & KPIs Profit after Tax. Revenue. Cash-to-cash cycle. Operating cash flow Customer Complaints. Customer Acquisition Rate. Product Availability. Product Quality & Service. Renewal Annual Subscription. Distributor Rank Achievement. No. of Active Distributor. No. DC/Regional Sales. Distributor with commission Customer Database Availability. Accuracy of Forecast Planning. Continuous Improvement. Response Time to Customer Needs. Perfect Order Fulfillment. Inventory Turnover. Number of Effective Sponsoring Program. On Time Delivery. No. of Effective Training. Number of Effective A&P % of staff evaluated on Core Competency Framework. % of staff with Career Development Plans. No. of training hours completed per staff. % of staff with access to strategic information. Q12 Index. % staff evaluated on Culture alignment
  41. 41. http://totallyunrelatedrandomanddebatable.blogspot.com/ Leading and Lagging KPIs
  42. 42. http://totallyunrelatedrandomanddebatable.blogspot.com/ Cause and Effect Goal: Healthy! What are my Vital Signs? •Blood Pressure? •Temperature? •Cholesterol? •Fever? •Chest Pain? •Dizziness?
  43. 43. http://totallyunrelatedrandomanddebatable.blogspot.com/ Cause and Effect Also known as: Leading vs. Lagging Indicators
  44. 44. http://totallyunrelatedrandomanddebatable.blogspot.com/ Exercise: Leading vs. Lagging Lagging? • Monthly Sales • Customer Retention • Project success • Event attendance • ARPU • Customer Satisfaction • Dealer Satisfaction Leading?
  45. 45. http://totallyunrelatedrandomanddebatable.blogspot.com/ Financial “To satisfy our stakeholders, what Financial objectives must we accomplish?” Internal Process “To satisfy our customers, in which internal business processes must we excel?" Customer “Who are our target customers? What is our value proposition?” Learning & Growth “What capabilities and tools do our employees require to help them execute our strategy? Cause & Effect: Strategy
  46. 46. http://totallyunrelatedrandomanddebatable.blogspot.com/ Top Performers and the „No Contribution‟ Problem Lagging Leading Historical, Outcome, Results, 1st Level, Usually Financial or tangible, Quarterly and Annually Current, Indicators, Drivers, 2nd Level onwards, usually non- financial or intangible, Weekly, Monthly and Quarterly
  47. 47. http://totallyunrelatedrandomanddebatable.blogspot.com/ Developing „Driver‟ KPIs Customer Retention % Lagging, 1st Level Customer Satisfaction Index Leading, 2nd Level On time delivery Time to market for new products TNA % Defect levels, warranty claims Leading, 3rd Level onwards
  48. 48. http://totallyunrelatedrandomanddebatable.blogspot.com/ What is the Objective? „Do-or-Die‟ KPIs for CNI • Revenue • ARPU • Sponsoring • Retention • Commission Plan (BDP) • Product • Corporate Image
  49. 49. http://totallyunrelatedrandomanddebatable.blogspot.com/ • Exercise: What are the Key 1st Level KPIs for your Industry?
  50. 50. http://totallyunrelatedrandomanddebatable.blogspot.com/ Sample: Other 1st Level KPIs across industries… Financial Services Retail Telecommunications •Maximize ARPU •Minimize Churn •Mutichannel customer service •Understand customer behavior related to customer conversion, acquisition, and retention •Single view of customer •Multichannel customer experience •Personalized customer experience •Anticipate and prevent churn despite compensation •Increase number of products per customer •Turn call center information opportunity to up-sell and cross-sell •Increase customer satisfaction and loyalty Hospitality Travel & Leisure Manufacturing •Personalized customer experience •Maximize share of wallet •Player/customer loyalty •Multichannel customer service •Increase customer loyalty and preference •Maximize customer revenue •Improve service quality and efficiency •Capture and close sales opportunities •Single view of customers across supply chain •Zero-error order capture •Streamline opportunity to cash processes •Leverage investment in ERP and backoffice systems
  51. 51. http://totallyunrelatedrandomanddebatable.blogspot.com/ • Exercise: Developing your own Leading and Lagging KPIs
  52. 52. http://totallyunrelatedrandomanddebatable.blogspot.com/ Performance Standards
  53. 53. http://totallyunrelatedrandomanddebatable.blogspot.com/ MBO Standards A Excellent B Good C Average D Poor E Useless
  54. 54. http://totallyunrelatedrandomanddebatable.blogspot.com/ MBO Standards A Excellent B Good C Average Good D Poor E Useless
  55. 55. http://totallyunrelatedrandomanddebatable.blogspot.com/ MBO Standards A Excellent Excellent B Good Very Good C Average Good D Poor Not Good E Useless Commit Suicide
  56. 56. http://totallyunrelatedrandomanddebatable.blogspot.com/ MBO Standards A Excellent Consistently achieved 4 for 3 quarters B Very Good Higher than planned results C Good Achieved Planned Results D Not Good Did not fully meet planned results E Commit Suicide Unacceptable performance
  57. 57. http://totallyunrelatedrandomanddebatable.blogspot.com/ Rating Scale ≥ 105 million kilo of A5 98 million kilo of A4 95 million kilo of A3 94 million kilo of A2 ≤ 93 million kilo of A1 Key Results KPIs Objectives Ensure the achievement of current production targets within cost specification by regularly monitoring production reports and directing corrective action, where necessary. 1.Production targets/figures 2.Variance in operating expense budget 1.95million kilogram of Product A 2.Within budgeted factory cost i.e. RM20 million
  58. 58. http://totallyunrelatedrandomanddebatable.blogspot.com/ Business Model The biggest impact
  59. 59. http://totallyunrelatedrandomanddebatable.blogspot.com/
  60. 60. http://totallyunrelatedrandomanddebatable.blogspot.com/
  61. 61. http://totallyunrelatedrandomanddebatable.blogspot.com/
  62. 62. http://totallyunrelatedrandomanddebatable.blogspot.com/ The McPlaybook* Make it easy to eat • 50% drive-thru • Meals held in one hand Make it easy to prepare • High Turnover • Tasks simple to learn & repeat Make it quick • “Fast Food” • Tests new products for Cooking Times Make what customers want • Prowls market for new products • Monitored field tests *Adapted from: Businessweek , Februrary 5th 2007
  63. 63. http://totallyunrelatedrandomanddebatable.blogspot.com/ What is the Business Model? USP Market Discipline Profit Model •Google •Tata Nano
  64. 64. http://totallyunrelatedrandomanddebatable.blogspot.com/ What is the Business Model? USP Market Discipline Profit Model
  65. 65. http://totallyunrelatedrandomanddebatable.blogspot.com/ Business Model: USP USP (How do I position my organization?) Trends Customer Internal
  66. 66. http://totallyunrelatedrandomanddebatable.blogspot.com/ Business Model: USP Unique Selling Proposition (USP) = Targeted Customer = Core Buying Purpose/ Customer Value Proposition/ Job To Be Done (JBTD)
  67. 67. http://totallyunrelatedrandomanddebatable.blogspot.com/ Business Model: USP “The Product is Not the Product” • What is the customer really buying? • What is the “Core Buying Purpose”? • What is the “Job To Be Done”?
  68. 68. http://totallyunrelatedrandomanddebatable.blogspot.com/ Business Model: USP Obstacles to JBTD: 1. Insufficient WEALTH 2. Insufficient ACCESS 3. Insufficient SKILL 4. Insufficient TIME
  69. 69. http://totallyunrelatedrandomanddebatable.blogspot.com/ What is the Business Model? USP Market Discipline Profit Model
  70. 70. http://totallyunrelatedrandomanddebatable.blogspot.com/ Business Model: Profit Model Revenue Cost Margin Cash Flow Assets
  71. 71. http://totallyunrelatedrandomanddebatable.blogspot.com/ Revenue Financial Learning & Growth Internal Process Customers Cost Margin Strategy + BSC Cash Flow Asset
  72. 72. http://totallyunrelatedrandomanddebatable.blogspot.com/ What is the Business Model? USP Market Discipline Profit Model
  73. 73. http://totallyunrelatedrandomanddebatable.blogspot.com/ Market Discipline "They are the most innovative" "Constantly renewing and creative" "Always on the leading edge" "A great deal!" Excellent/attractive price Minimal acquisition cost and hassle Lowest overall cost of ownership "A no-hassles firm" Convenience and speed Reliable product and service "Exactly what I need" Customized products Personalized communications "They're very responsive" Preferential service and flexibility Recommends what I need "I'm very loyal to them" Helps us to be a success Product Leadership Operational Excellence Customer Intimacy • Cost • Convenience • TCO • Features, Benefits • Limited Range • Solutions • Customization • Breadth & Depth
  74. 74. http://totallyunrelatedrandomanddebatable.blogspot.com/ Market Discipline "They are the most innovative" "Constantly renewing and creative" "Always on the leading edge" "A great deal!" Excellent/attractive price Minimal acquisition cost and hassle Lowest overall cost of ownership "A no-hassles firm" Convenience and speed Reliable product and service "Exactly what I need" Customized products Personalized communications "They're very responsive" Preferential service and flexibility Recommends what I need "I'm very loyal to them" Helps us to be a success Product Leadership Operational Excellence Customer Intimacy•Air Asia •LV •Ramly
  75. 75. http://totallyunrelatedrandomanddebatable.blogspot.com/ Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) Alignment & Consistency: Market Disciplines
  76. 76. http://totallyunrelatedrandomanddebatable.blogspot.com/ Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) Alignment & Consistency: Market Disciplines
  77. 77. http://totallyunrelatedrandomanddebatable.blogspot.com/ Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) Alignment & Consistency: Market Disciplines
  78. 78. http://totallyunrelatedrandomanddebatable.blogspot.com/ Operational Excellence • Competitive price • Error free, reliable • Fast (on demand) • Simple • Responsive • Consistent information for all • Transactional • 'Once and Done' Customer Intimacy • Management by Fact • Easy to do business with • Have it your way (customization) • Market segments of one • Proactive, flexible • Relationship and consultative selling • Cross selling Product Leadership • New, state of the art products or services • Risk takers • Meet volatile customer needs • Fast concept-to- counter • Never satisfied - obsolete own and competitors' products • Learning organization Alignment & Consistency: Disciplines, Priorities, and KPIs
  79. 79. http://totallyunrelatedrandomanddebatable.blogspot.com/ Operational Excellence (low cost producer) Product Leadership (best product) Customer Intimacy (best total solution) Alignment & Consistency
  80. 80. http://totallyunrelatedrandomanddebatable.blogspot.com/ Operational Excellence (low cost producer) Product Leadership (best product) Customer Intimacy (best total solution) Alignment & Consistency HP well-balanced portfolio, mass customization Acer super lean cost structure, aggressive pricing Apple powerful products, premium pricing, limited range Still Doing well in 2009/2011
  81. 81. http://totallyunrelatedrandomanddebatable.blogspot.com/ Alignment & Consistency: Business Model USP Market Discipline Profit Model
  82. 82. http://totallyunrelatedrandomanddebatable.blogspot.com/ Strategy + BSC = How „Hope‟ is not a strategy
  83. 83. http://totallyunrelatedrandomanddebatable.blogspot.com/ What is your Goal? 1. Cost Reduction 2. Growth 3. Both?
  84. 84. http://totallyunrelatedrandomanddebatable.blogspot.com/ Growth Strategy 1.Base Retention 2.Share Gain 3.Positioning4.Adjacent Market 5.New Business GROWTH “Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com
  85. 85. http://totallyunrelatedrandomanddebatable.blogspot.com/ Growth Strategy 1. Base Retention 2. Share Gain 3. Positioning4. Adjacent Market 5. New Business GROWTH “Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com •Increase switching cost •Customize products •Preempt Defections •Brand •Neutralize Competitor advantages •Superior Value •Buy market share •Spot growth opportunities •Organized search •Promising Market? •Make or Buy?
  86. 86. http://totallyunrelatedrandomanddebatable.blogspot.com/ How Markets determine Growth Strategies (1) • Growth Rate Growth Rate Strategy Why? Fast 1. Market Positioning 2. Share Gain 3. Base Retention •Maintain market share in strategic segments •Prepare for market decline •Competitors focus too much on getting new customers Flat 1. Base Retention 2. Share Gain (Acquisitions) •Lose customers slower than competitors •Create scale economics, squeeze costs
  87. 87. http://totallyunrelatedrandomanddebatable.blogspot.com/ • Churn Rate Churn Rate Strategy Why? Low 1. Share Gain (Acquisitions) 2. Adjacent Markets •Buying customer base is cheaper than own efforts •New products, old customers strategy High 1. Base Retention 2. Share Gain 3. Adjacent Market •Lose customers slower than competitors •Customers are always open to the best value and offer •Desperate to gain revenue How Markets determine Growth Strategies (2)
  88. 88. http://totallyunrelatedrandomanddebatable.blogspot.com/ How Markets determine Growth Strategies (3) Fast Growth, Low Churn 1.Market Positioning 2.Share Gain 3.Base Retention 4.Adjacent Markets •Example: XYZ Sector
  89. 89. http://totallyunrelatedrandomanddebatable.blogspot.com/ Side Notes on Cost Reduction Strategy Cost Reduction Business Model •USP •Profit Model •Market Discipline •Invest/Divest Operational •Finance, HR, IT •Supply Chain •R&D •Sales & Marketing 5% - 30% 30% - 80%
  90. 90. http://totallyunrelatedrandomanddebatable.blogspot.com/ Revenue Base Retention Share Gain Positioning Adjacent Market New Business Financial Learning & Growth Internal Process Customers Cost Margin Strategy + BSC Cash Flow Asset Satisfaction
  91. 91. http://totallyunrelatedrandomanddebatable.blogspot.com/ Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) Strategy: Disciplines, Priorities, and KPIs
  92. 92. http://totallyunrelatedrandomanddebatable.blogspot.com/ Operational Excellence • Competitive price • Error free, reliable • Fast (on demand) • Simple • Responsive • Consistent information for all • Transactional • 'Once and Done' Customer Intimacy • Management by Fact • Easy to do business with • Have it your way (customization) • Market segments of one • Proactive, flexible • Relationship and consultative selling • Cross selling Product Leadership • New, state of the art products or services • Risk takers • Meet volatile customer needs • Fast concept-to- counter • Never satisfied - obsolete own and competitors' products • Learning organization Strategy: Disciplines, Priorities, and KPIs
  93. 93. http://totallyunrelatedrandomanddebatable.blogspot.com/ • Operational Excellence • Move know-how from top performing units to others • Benchmark against best in class • Ensure operations training for all employees • Use disciplines like TQM for continuous learning to reduce costs and improve quality Strategy: Value Disciplines
  94. 94. http://totallyunrelatedrandomanddebatable.blogspot.com/ Strategy: Value Disciplines • Customer Intimacy • Capture knowledge about customers • Understand customer needs • Empower front line employees • Ensure that everyone knows the customer • Make company knowledge available to customers
  95. 95. http://totallyunrelatedrandomanddebatable.blogspot.com/ • Product Leadership • Reduce time to market • Commercialize new products fast • Ensure that ideas flow • Reuse what other parts of the company have already learned • Ensure there are multiple sources of funding Strategy: Value Disciplines
  96. 96. http://totallyunrelatedrandomanddebatable.blogspot.com/ Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders, 1995 Product/Service Attributes Relationship Image
  97. 97. http://totallyunrelatedrandomanddebatable.blogspot.com/ Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders, 1995 Product/Service Attributes Price Quality Time Selection √ √ Smart Shopper Relationship Image Operational Excellence: Quality and selection in key categories with unbeatable prices
  98. 98. http://totallyunrelatedrandomanddebatable.blogspot.com/ Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders, 1995 Product/Service Attributes √ Brand Time Function √ √ Best Product Relationship Image Product Leadership: Unique products and services that push the standards
  99. 99. http://totallyunrelatedrandomanddebatable.blogspot.com/ Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders, 1995 Product/Service Attributes √ √ √ √ Service Trusted Brand Relationship Image Customer Intimacy: Personal service tailored to produce results for customer and build long-term relationships Relations
  100. 100. http://totallyunrelatedrandomanddebatable.blogspot.com/ Revenue Base Retention Share Gain Positioning Adjacent Market New Business Financial Learning & Growth Internal Process Customers Cost Margin Strategy + BSC Cash Flow Asset Operational Excellence Product Leadership Customer Intimacy Investment Strategy Satisfaction
  101. 101. http://totallyunrelatedrandomanddebatable.blogspot.com/ Alignment: 4-Wheels Model Culture Business Model Strategic Planning Structure Person Leadership Resources
  102. 102. http://totallyunrelatedrandomanddebatable.blogspot.com/ Alignment: Framework • Focus point • Alignment • Quality • Innovation & Differentiation • Risk taking • Performance Management • Corporate obsession • Decision making Culture
  103. 103. http://totallyunrelatedrandomanddebatable.blogspot.com/ Alignment: Framework • Org Structure • Job Design • C&B • Policies & procedures • Decision making • Job fit • Management Systems • BSC and KPIs • Decentralized & Empower Structure
  104. 104. http://totallyunrelatedrandomanddebatable.blogspot.com/ Strategy: Framework • Role modeling • Vision/Mission/Philosophy • Leadership Style • Delegation & Empowerment • C&B, Promotions • Sense of Urgency • Speak regularly about Performance Leadership
  105. 105. http://totallyunrelatedrandomanddebatable.blogspot.com/ Strategy: Framework • Recognition • Recruitment • Training • Profit sharing • Values • Motivation • Self Efficacy • Awareness • Useful Competencies • Career aspirations • Attribution (control) Person
  106. 106. http://totallyunrelatedrandomanddebatable.blogspot.com/ Strategy: Framework Enablers • Technology • Equipment • Materials • Human • Intellectual Property • Partners • Property Resources Funding • CAPEX • OPEX
  107. 107. http://totallyunrelatedrandomanddebatable.blogspot.com/ Alignment: 4-Wheels Model Culture Business Model Strategic Planning Structure Person Leadership Resources
  108. 108. http://totallyunrelatedrandomanddebatable.blogspot.com/ Operational Excellence Customer Intimacy Product Leadership Organization, jobs, skills Management systems Information and systems Culture, values, norms Each Discipline Requires Different Priorities & Resources
  109. 109. http://totallyunrelatedrandomanddebatable.blogspot.com/ Operational Excellence •Central authority, low level of empowerment •High skills at the core of the organization •Disciplined Teamwork •Process, product- driven •Conformance, 'one size fits all' mindset •Integrated, low cost transaction systems •The system is the process •Command and control •Quality management Organization, jobs, skills Management systems Information and systems Culture, values, norms Each Discipline Requires Different Priorities & Resources
  110. 110. http://totallyunrelatedrandomanddebatable.blogspot.com/ Organization, jobs, skills Management systems Information and systems Culture, values, norms Product Leadership •Ad hoc, organic and cellular •High skills abound in loose-knit structures •Concept, future-driven •Experimentation and 'out of the box' mindset •Person-to-person communications systems •Technologies enabling cooperation •Rewarding individuals' innovative capacity •Risk and exposure management •Product Life Cycle profitability Each Discipline Requires Different Priorities & Resources
  111. 111. http://totallyunrelatedrandomanddebatable.blogspot.com/ Organization, jobs, skills Management systems Information and systems Culture, values, norms Customer Intimacy •Empowerment close to point of customer contact •High skills in the field and front-line •Customer-driven •Variation and 'have it your way' mindset •Strong customer databases, linking internal and external information •Strong analytical tools •Customer equity measures like life time value •Satisfaction and share management •Focus on „Share of Wallet‟ Each Discipline Requires Different Priorities & Resources
  112. 112. http://totallyunrelatedrandomanddebatable.blogspot.com/ Market Disciplines & Learning & Growth Employee Motivation, Competencies and Alignment
  113. 113. http://totallyunrelatedrandomanddebatable.blogspot.com/ Case Study Customer Satisfaction Service Product Facilities Store Profitability Sales Revenue Operating Cost © Rajiv D. Banker Employee Satisfaction Training Support Managerial Support Merchandise Support Associate Support
  114. 114. http://totallyunrelatedrandomanddebatable.blogspot.com/ Case Study The company can now predict that: for every 5% increase in employee satisfaction influences 1.3% increase in customer loyalty influences 0.5% increase in revenue Source: Balanced Scorecard, P. Niven; 2002
  115. 115. http://totallyunrelatedrandomanddebatable.blogspot.com/ Learning & Growth Capabilities Tools Culture & Climate Employee Satisfaction
  116. 116. http://totallyunrelatedrandomanddebatable.blogspot.com/ • Operational Excellence • Move know-how from top performing units to others • Benchmark against best in class • Ensure operations training for all employees • Use disciplines like TQM for continuous learning to reduce costs and improve quality Strategy: Value Disciplines
  117. 117. http://totallyunrelatedrandomanddebatable.blogspot.com/ • Product Leadership • Reduce time to market • Commercialize new products fast • Ensure that ideas flow • Reuse what other parts of the company have already learned • Ensure there are multiple sources of funding Strategy: Value Disciplines
  118. 118. http://totallyunrelatedrandomanddebatable.blogspot.com/ Strategy: Value Disciplines • Customer Intimacy • Capture knowledge about customers • Understand customer needs • Empower front line employees • Ensure that everyone knows the customer • Make company knowledge available to customers
  119. 119. http://totallyunrelatedrandomanddebatable.blogspot.com/ Market Disciplines & The Role of ICT
  120. 120. http://totallyunrelatedrandomanddebatable.blogspot.com/ Operational Excellence • Providing reliable products and services at competitive prices with minimal difficulty and inconvenience • Role of IT – Optimizing business processes for efficiency (e.g., workflow automation) – Substituting information systems for inventory – Using integrated information systems to coordinate order entry with production, distribution and service
  121. 121. http://totallyunrelatedrandomanddebatable.blogspot.com/ Product/Service Leadership • Producing a continuous stream of state-of-the-art products and services that are attractive to customers • Role of IT – Optimizing business processes for product development speed – Providing support for quick product-related decision- making (e.g., design, pricing, advertising) – Information Awareness for discovering new product ideas – Knowledge Management for assimilating and disseminating information
  122. 122. http://totallyunrelatedrandomanddebatable.blogspot.com/ Customer Intimacy • Customizing products and services to increasingly fine definitions of customer segments • Role of IT – Enhancing relationships through the use of IT-based channels – Optimizing business processes for flexibility and responsiveness (e.g., intelligent call centers, flexible manufacturing systems) – Database marketing and other data-mining tools for customer profiling and segmentation – Decision Architecture empowers employees closest to the customers
  123. 123. http://totallyunrelatedrandomanddebatable.blogspot.com/ Operational Excellence • Role of IT – Optimizing business processes for efficiency (e.g., workflow automation) – Substituting information systems for inventory – Using integrated information systems to coordinate order entry with production, distribution and service – Examples: Wal-Mart, Federal Express, Seven Eleven Japan
  124. 124. http://totallyunrelatedrandomanddebatable.blogspot.com/ Customer Intimacy • Role of IT – Enhancing relationships through the use of IT- based channels – Optimizing business processes for flexibility and responsiveness (e.g., intelligent call centers, flexible manufacturing systems) – Database marketing and other data-mining tools for customer profiling and segmentation – Decision Architecture empowers employees closest to the customers – Examples: Amazon.com, Merrill Lynch, Kraft
  125. 125. http://totallyunrelatedrandomanddebatable.blogspot.com/ Product/Service Leadership • Role of IT – Optimizing business processes for product development speed – Providing support for quick product-related decision-making (e.g., design, pricing, advertising) – Information Awareness for discovering new product ideas – Knowledge Management for assimilating and disseminating information – Examples: Intel, Microsoft, Nokia, Sony
  126. 126. http://totallyunrelatedrandomanddebatable.blogspot.com/ Revenue Base Retention Share Gain Positioning Adjacent Market New Business Financial Learning & Growth Internal Process Customers Cost Margin Strategy + BSC Cash Flow Asset Operational Excellence Product Leadership Customer Intimacy Investment Strategy Competencies Information Systems Motivation, empowerment, alignment Satisfaction
  127. 127. http://totallyunrelatedrandomanddebatable.blogspot.com/ B2B/B2G BSC Matching Revenue Base Retention Share Gain Positioning Adjacent Market New Business Financial Learning & Growth Internal Process Customers Cost Margin Cash Flow Asset Operational Excellence Product Leadership Customer Intimacy Investment Strategy Competencies Information Systems Motivation, empowerment, alignment Satisfaction Customer/Client/ Government BSC Revenue Base Retention Share Gain Positioning Adjacent Market New Business Financial Learning & Growth Internal Process Customers Cost Margin Cash Flow Asset Operational Excellence Product Leadership Customer Intimacy Investment Strategy Competencies Information Systems Motivation, empowerment, alignment Satisfaction Your BSC 1. Draw your „customer‟s‟ BSC 2. Match their CP/IP with your CP 3. Identify IPs that support/conflict
  128. 128. http://totallyunrelatedrandomanddebatable.blogspot.com/ Financial Learning & Growth Internal Process Customers / Distributors Revenue Growth ProductivityMarket Value Department Operations Supplier & Alliances External Involvement Target Markets Products/ Services Channel Strategies Human Resources Technology Information & IntelligenceSystems & Processes Cause and Effect: An Example
  129. 129. http://totallyunrelatedrandomanddebatable.blogspot.com/ Dangers of Best Practice and Benchmarking
  130. 130. http://totallyunrelatedrandomanddebatable.blogspot.com/ Dangers of Best Practice and Benchmarking… “Abraham Wald‟s Work on Aircraft Survivability”, M. Mangel and F.J. Samaniego Where would you focus reinforcement?
  131. 131. http://totallyunrelatedrandomanddebatable.blogspot.com/ Dangers of Best Practice and Benchmarking… Company Performance high low „Best Practice‟ theories low high zero Perfor mance Trend line “Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005
  132. 132. http://totallyunrelatedrandomanddebatable.blogspot.com/ Dangers of Best Practice and Benchmarking… Company Performance high low „Best Practice‟ theories low high zero Perfor mance Trend line “Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005
  133. 133. http://totallyunrelatedrandomanddebatable.blogspot.com/ Dangers of Best Practice and Benchmarking… Selection Bias: 1. Success Traits = Failure Traits 2. Successful Cases + Failure Cases 3. Worst effects in „Old‟ industries 4. Overvalue „best practice‟ theories 5. Current accomplishments unfairly magnified by past achievements 6. Reverse Causal
  134. 134. http://totallyunrelatedrandomanddebatable.blogspot.com/ Dangers of Best Practice and Benchmarking… Also known as „Beware of Consultants‟: 1. Selection Bias 2. Big vs. Small company 3. Selective success stories 4. Correlation vs. Causal 5. Survey problems 6. Practical vs. Glamour-to-have 7. Leaders who benchmark
  135. 135. http://totallyunrelatedrandomanddebatable.blogspot.com/ Survey Problems… “In business after business, 60% to 80% of lost customers reported on a survey just prior to defecting that they were satisfied or very satisfied.” HBR March/April 1996
  136. 136. http://totallyunrelatedrandomanddebatable.blogspot.com/ Cascading from Company-Department- Individual
  137. 137. http://totallyunrelatedrandomanddebatable.blogspot.com/ Sample: Other 1st Level KPIs across industries… Financial Services Retail Telecommunications •Maximize ARPU •Minimize Churn •Mutichannel customer service •Understand customer behavior related to customer conversion, acquisition, and retention •Single view of customer •Multichannel customer experience •Personalized customer experience •Anticipate and prevent churn despite compensation •Increase number of products per customer •Turn call center information opportunity to up-sell and cross-sell •Increase customer satisfaction and loyalty Hospitality Travel & Leisure Manufacturing •Personalized customer experience •Maximize share of wallet •Player/customer loyalty •Multichannel customer service •Increase customer loyalty and preference •Maximize customer revenue •Improve service quality and efficiency •Capture and close sales opportunities •Single view of customers across supply chain •Zero-error order capture •Streamline opportunity to cash processes •Leverage investment in ERP and backoffice systems
  138. 138. http://totallyunrelatedrandomanddebatable.blogspot.com/ Sample KPIs for Each Discipline Operational Excellence • Price • Selection • Convenience • Zero Defects • Growth Customer Intimacy • Customer Knowledge • Solutions Offered • Penetration • Customer Data • Customer-success focus Product Leadership • Marketing • Functionality • # of Successes • # of Failures • Learn from key users • Interdisciplinary teams • Pipeline
  139. 139. http://totallyunrelatedrandomanddebatable.blogspot.com/ Company – Business Unit – Department KPIs Department: Corporate Business Unit Department Financial Increase Profitability (Margins +15%) Customer Internal Process Learning & Growth
  140. 140. http://totallyunrelatedrandomanddebatable.blogspot.com/ E3 – Department BSC Financial Perspective Goals Measures Targets CAPEX OPEX Quality Innovation On Time Delivery
  141. 141. http://totallyunrelatedrandomanddebatable.blogspot.com/ Individual Performance 1.0 Key Results Area (Max 6) 2.0 Goals and Targets for Q1 3.0 Achievem ents and Efforts for Q1 4.0 Merit* 5.0 Rating (Merit x Weight) 6.0 Appraiser Overall Comments / Feedback
  142. 142. http://totallyunrelatedrandomanddebatable.blogspot.com/ Cascading Customer Perspective Goals Strategies Targets Direct Indirect Base Retention Mkt Share Gain Mkt New Business BD
  143. 143. http://totallyunrelatedrandomanddebatable.blogspot.com/ E3 – Department BSC Customer Perspective – Marketing Department Goals Strategies Targets CAPEX OPEX Base Retention Share Gain Budgeting
  144. 144. http://totallyunrelatedrandomanddebatable.blogspot.com/ Individual MBO Employee A – Marketing Executive KRAs Action Plans Targets Weight (%) Score Class A Customer Retention Class B Customer Retention Competition Crossovers Re: Base Retention
  145. 145. http://totallyunrelatedrandomanddebatable.blogspot.com/ Performance Planning Worksheet
  146. 146. http://totallyunrelatedrandomanddebatable.blogspot.com/ Planning, Budgeting, Schedules, Processes Tying it all up
  147. 147. The Planning & Budgeting Process Stages Output Month 1. Pre-Planning Analysis & Brainstorming •Current ½ yr budget & revision •Next yr options and budgets required July - Sep 2. High-level Group Strategy and Targets •High-level strategy of Group Corp Plan. •Circulation of Main Budget simulation to all departments Sep 3. Functional Strategy and Budgets •BSC & Budget preparation by HODs to HODivs Sep - Oct 4. Formal Results Planning •BSC & Budget to CEOs, followed by BOD •Revised and Finalized Plans and Budgets Oct-Nov 5. Communication and Cascading •Presentation of Group Budget and Planning summary & distribution •Communication of Highlights to the field and staff Nov-Jan
  148. 148. http://totallyunrelatedrandomanddebatable.blogspot.com/ Review processes 1. Result Planning schedule inc. BSC, Budget 2. Quarterly Performance Appraisals 3. Sales performance 4. QMS – non-sales performance 5. Divisional meetings 6. Annual Appraisals 7. Specialized KPI committees 8. CAR, PAR, SCAR KPI improvements 9. Internal Audit & MSD – process problems 10. HRM & TND – people problems 11. Supervisor Induction – PM training 12. Talent Management
  149. 149. http://totallyunrelatedrandomanddebatable.blogspot.com/ Problems, problems and more problems…
  150. 150. http://totallyunrelatedrandomanddebatable.blogspot.com/ Problems, problems and more problems… 1. No serious budget to tackle key risks 2. Too much optimism or pessimism 3. Innovation vs. Results vs. Baseline 4. Investment ≠ Portfolio Management 5. Top down vs. Bottom up 6. Good to have vs. Need to have 7. Line Manager not thinking like Investors 8. Too focused on KPI and BSC 9. Budget allocation seen as „popularity‟ vote 10.Public Listing -> pressure for short-term budgets and results vs. long-term innovation
  151. 151. http://totallyunrelatedrandomanddebatable.blogspot.com/ KPI Documentation and Dashboard
  152. 152. http://totallyunrelatedrandomanddebatable.blogspot.com/ Data Elements and Collection Logic: An online survey will be administered to clients, both internal* (within LLSG and SJHC) and external (those who refer in work e.g. HICL). *Physicians, Nurses, Ward Clerks, PSA/TSA, Managers/Coordinators, Researchers, Students, Allied Health Professionals, others. Dave Schaus will create the survey form and collect the data with Omniform Perform. Data will exported to MS Access for review and analysis. Calculation Formula: For each question: # survey participants response for each rating (1-4)/ total # of survey participants = x/100 = x% Frequency: Yearly For the first initiative, customers will be resurveyed once training is completed to see if there has been an increase in customer satisfaction. Baseline: Not known Target: Target Rationale: Limitations and Exclusions: Analysis Considerations: Initiatives: Develop and administer Customer Service Training for existing and new employees References: Sample 1: KPI Data Collection Form
  153. 153. http://totallyunrelatedrandomanddebatable.blogspot.com/ Data Elements and Collection Logic: Calculation Formula: Frequency: Baseline: Target: Target Rationale: Limitations and Exclusions: Analysis Considerations: Initiatives: References: Sample 1: KPI Data Collection Form
  154. 154. http://totallyunrelatedrandomanddebatable.blogspot.com/ Sample 2: KPI Data Collection Form
  155. 155. http://totallyunrelatedrandomanddebatable.blogspot.com/ Sample 2: KPI Data Collection Form KPI Name Description Objective Type  Quantitative  Qualitative Effort  Low  Medium  High Unit Assessment Method Possible Tools Analysis Frequency  Day  Week  Month  Quarter  Year  Year+ Comments
  156. 156. http://totallyunrelatedrandomanddebatable.blogspot.com/ Sample 3: Scorecard/KPI Data Collection Template
  157. 157. http://totallyunrelatedrandomanddebatable.blogspot.com/ Sample 3: Scorecard/KPI Data Collection Template Measure Owner: Data Owner: Actual Results Measure Name Perspective Description Mth 1 Mth 2 Mth 3 Commentary
  158. 158. http://totallyunrelatedrandomanddebatable.blogspot.com/
  159. 159. http://totallyunrelatedrandomanddebatable.blogspot.com/
  160. 160. http://totallyunrelatedrandomanddebatable.blogspot.com/
  161. 161. http://totallyunrelatedrandomanddebatable.blogspot.com/
  162. 162. http://totallyunrelatedrandomanddebatable.blogspot.com/
  163. 163. http://totallyunrelatedrandomanddebatable.blogspot.com/
  164. 164. http://totallyunrelatedrandomanddebatable.blogspot.com/
  165. 165. http://totallyunrelatedrandomanddebatable.blogspot.com/ 4. Building a Performance Culture
  166. 166. http://totallyunrelatedrandomanddebatable.blogspot.com/ Alignment: 4-Wheels Model Culture Business Model Strategic Planning Structure Person Leadership Resources
  167. 167. http://totallyunrelatedrandomanddebatable.blogspot.com/ Alignment: Framework • Org Structure • Job Design • C&B • Policies & procedures • Decision making • Job fit • Management Systems • BSC and KPIs • Decentralized & Empower Structure
  168. 168. http://totallyunrelatedrandomanddebatable.blogspot.com/ Strategy: Framework • Role modeling • Vision/Mission/Philosophy • Leadership Style • Delegation & Empowerment • C&B, Promotions • Sense of Urgency • Speak regularly about Performance Leadership
  169. 169. http://totallyunrelatedrandomanddebatable.blogspot.com/ Strategy: Framework • Recognition • Recruitment • Training • Attitude • Values • Motivation • Self Efficacy • Awareness • Useful Competencies • Career aspirations • Attribution (control) Person
  170. 170. http://totallyunrelatedrandomanddebatable.blogspot.com/ Strategy: Framework Enablers or Obstacles • Technology • Equipment • Materials • Human • Intellectual Property • Partners • Property Resources Funding • CAPEX • OPEX
  171. 171. http://totallyunrelatedrandomanddebatable.blogspot.com/ Alignment: Framework • Focus point • Alignment • Quality • Innovation & Differentiation • Risk taking • Performance Management • Corporate obsession • Decision making Culture
  172. 172. http://totallyunrelatedrandomanddebatable.blogspot.com/ 4-Wheels Model Culture Business Model Strategic Planning Structure Person Leadership Resources
  173. 173. http://totallyunrelatedrandomanddebatable.blogspot.com/ The Integrated and Holistic Performance Management System
  174. 174. http://totallyunrelatedrandomanddebatable.blogspot.com/ Why Performance Appraisal? Performance Management Development Motivation Selection Evaluation
  175. 175. http://totallyunrelatedrandomanddebatable.blogspot.com/ Talent Segmentation Group I (Talent Pool) 2345 PERFORMANCE 2 3 4 5 POTENTIAL• Identify
  176. 176. http://totallyunrelatedrandomanddebatable.blogspot.com/ Employee Differentiation Group I (Talent Pool) Group II ( Potential) Group III ( Performance) Group IV (Counseling) 2 3 4 5 2345 PERFORMANCE POTENTIAL• Identify
  177. 177. http://totallyunrelatedrandomanddebatable.blogspot.com/ Selection and Identification PERFORMANCE APPRAISAL 1. Results 2. Values 3. Special Contributions
  178. 178. http://totallyunrelatedrandomanddebatable.blogspot.com/ Selection and Identification POTENTIAL EVALUATION 1. Capacity 2. Competencies 3. Culture
  179. 179. http://totallyunrelatedrandomanddebatable.blogspot.com/ Selection and Identification POTENTIAL EVALUATION 1. Capacity Learn Next Level Ambition
  180. 180. http://totallyunrelatedrandomanddebatable.blogspot.com/ Selection and Identification POTENTIAL EVALUATION 2. Competencies Competent Reliable/Consistent Pressure
  181. 181. http://totallyunrelatedrandomanddebatable.blogspot.com/ Selection and Identification POTENTIAL EVALUATION 3. Culture Demonstrate Improve Influence
  182. 182. http://totallyunrelatedrandomanddebatable.blogspot.com/ Exercise Define ‘Performance’ Define ‘Potential’
  183. 183. http://totallyunrelatedrandomanddebatable.blogspot.com/ Performance Coaching
  184. 184. http://totallyunrelatedrandomanddebatable.blogspot.com/ Coaching & Counseling Month 1 Performance Planning Month 12 Performance Appraisal Month 2-11 ? Refer: Coaching Self- Assessment
  185. 185. http://totallyunrelatedrandomanddebatable.blogspot.com/ Designing Your Own Performance Appraisal Form
  186. 186. http://totallyunrelatedrandomanddebatable.blogspot.com/ Performance Appraisal Form • Exercise: Performance Appraisal Form - Critical Components – What Do you Want to Evaluate? – What are Your Objectives?
  187. 187. http://totallyunrelatedrandomanddebatable.blogspot.com/ Performance and Motivation
  188. 188. http://totallyunrelatedrandomanddebatable.blogspot.com/ Motivating Talent Hope Control
  189. 189. http://totallyunrelatedrandomanddebatable.blogspot.com/ Motivating Talent Passion Job GrowthTalent Minimum Motivation Target: 2 out of 4 Delegation
  190. 190. http://totallyunrelatedrandomanddebatable.blogspot.com/ 8. Performance and Reward
  191. 191. http://totallyunrelatedrandomanddebatable.blogspot.com/ „Basic Values‟ Driven C&B 1. Performance 2. Differentiation
  192. 192. http://totallyunrelatedrandomanddebatable.blogspot.com/ What to Pay? • Pay for Service • Pay for Job • Pay for Competency • Pay for Performance
  193. 193. http://totallyunrelatedrandomanddebatable.blogspot.com/ •Competency - Knowledge - Skills - Experience •Problem solving - Complex - Type of problems - Special Problems •Responsibility - Authority - Success/Failure - Freedom to act Pay for Job
  194. 194. http://totallyunrelatedrandomanddebatable.blogspot.com/ Performance and Incentives 1. Internal Equity 1. Internal Job Rates 2. Performance differentials 2. External Competitiveness 1. External Job Rates - Benchmarking 2. Demand & Supply
  195. 195. http://totallyunrelatedrandomanddebatable.blogspot.com/ What‟s the Difference? • Increment • Bonus • Promotion Exercise: How does your company define the difference?
  196. 196. http://totallyunrelatedrandomanddebatable.blogspot.com/ What to Pay? • Pay for Service • Pay for Job • Pay for Competency • Pay for Performance Exercise: Which ones does your company use for Pay?
  197. 197. http://totallyunrelatedrandomanddebatable.blogspot.com/ Compa Ratio Table Use this if your company: • Pays for Performance, and • Pays for Job rates Def: Mid-Point = Mid Point of Pay Grade Grade E2 Min RM2,000 MID RM2,500 Max RM3,000
  198. 198. http://totallyunrelatedrandomanddebatable.blogspot.com/ Compa Ratio Table < 0.7 ≥0.7 - ≤0.9 >0.9 - <1.1 ≥1.1 - ≤1.3 > 1.3 5 4 3 2 1
  199. 199. http://totallyunrelatedrandomanddebatable.blogspot.com/ Compa Ratio Table < 0.7 ≥0.7 - ≤0.9 >0.9 - <1.1 ≥1.1 - ≤1.3 > 1.3 5 4 3 5% 2 1
  200. 200. http://totallyunrelatedrandomanddebatable.blogspot.com/ Compa Ratio Table < 0.7 ≥0.7 - ≤0.9 >0.9 - <1.1 ≥1.1 - ≤1.3 > 1.3 5 9 4 7 3 9 7 5% 4 3 2 2 1 0
  201. 201. http://totallyunrelatedrandomanddebatable.blogspot.com/ Compa Ratio Table < 0.7 ≥0.7 - ≤0.9 >0.9 - <1.1 ≥1.1 - ≤1.3 > 1.3 5 15 12 9 8 7 4 12 9 7 5 3 3 9 7 5% 4 3 2 6 4 2 1 0 1 4 2 0 0 0
  202. 202. http://totallyunrelatedrandomanddebatable.blogspot.com/ Employee Differentiation through Relative Performance and Talent Management
  203. 203. http://totallyunrelatedrandomanddebatable.blogspot.com/ Values Driven C&B 1. Performance 2. Differentiation
  204. 204. http://totallyunrelatedrandomanddebatable.blogspot.com/ Employee Distinction Group I (Talent Pool) Group II ( Potential) Group III ( Performance) Group IV (Counseling) 2 3 4 5 2345 PERFORMANCE POTENTIAL• Identify
  205. 205. http://totallyunrelatedrandomanddebatable.blogspot.com/ Employee Distinction? < 0.7 ≥0.7 - ≤0.9 >0.9 - <1.1 ≥1.1 - ≤1.3 > 1.3 5 9 8 7 6 5 4 8 7 6 5 4 3 7 6 5% 4 3 2 6 5 4 3 2 1 5 4 3 2 1
  206. 206. http://totallyunrelatedrandomanddebatable.blogspot.com/ Employee Distinction? < 0.7 ≥0.7 - ≤0.9 >0.9 - <1.1 ≥1.1 - ≤1.3 > 1.3 5 20 15 12 8 5 4 18 12 9 5 3 3 9 7 5% 4 3 2 1 1 1 0 0 1 0 0 0 0 0
  207. 207. http://totallyunrelatedrandomanddebatable.blogspot.com/ Employee Distinction Average Rating Rating Multiply Factor Example Rating Example Increme nt > 4.1 5 2 4.2 8.4% > 3.3 – 4.1 4 1.2 3.5 4.2% > 2.3 – 3.3 3 0.75 2.8 2.1% > 1.3 – 2.3 2 0.5 1.8 0.9% ≤ 1.3 1 0 1.0 0%
  208. 208. http://totallyunrelatedrandomanddebatable.blogspot.com/ VARIABLE AND INCENTIVE SCHEMES Part B-3
  209. 209. http://totallyunrelatedrandomanddebatable.blogspot.com/ Incentive Scheme Design Agenda 1. Objective 2. Situation Analysis 3. Target Areas to be improved 4. Current Incentive 5. Recommended KPIs 6. Proposed Incentive Scheme 7. Improving Performance
  210. 210. http://totallyunrelatedrandomanddebatable.blogspot.com/ Objective? 1.What are you trying to achieve? 2.How to measure? 3.What is the Gap?
  211. 211. http://totallyunrelatedrandomanddebatable.blogspot.com/ Target group? The following positions are eligible to participate in this scheme:
  212. 212. http://totallyunrelatedrandomanddebatable.blogspot.com/ Situation Analysis? 1. Retention? 2. Working environment? 3. The current basic pay? 4. Teamwork? 5. Supervision/Leadership style? 6. Attitude? 7. Turnover issues? 8. Absenteeism?
  213. 213. http://totallyunrelatedrandomanddebatable.blogspot.com/ Target areas to be improved? 1. Increase/Decrease the basic pay? 2. Fixed costs? 3. Incentives tied to… ?? 4. Absenteeism? 5. Quality improvement? 6. Easily understood by employee?
  214. 214. http://totallyunrelatedrandomanddebatable.blogspot.com/ Recommended KPIs to be incentivised Output Skill (Proficiency) Behavioural (Attitude) •Manpower productivity •Operational Cost •Safety and Environment •Quality (e.g. Defect/unit) •Volume •Job Specific Skills •Punctuality •Absenteeism/Attenda nce •Teamwork •Turnover
  215. 215. http://totallyunrelatedrandomanddebatable.blogspot.com/ Proposed incentive scheme 1. Fixed Salary Proportion (Fixed Personal Income, Variable Team Bonus) Total Payout = Fixed Quantum + Team Based Bonus
  216. 216. http://totallyunrelatedrandomanddebatable.blogspot.com/ Example: 1. Budgeted incentive = 5.8 months of basic payroll 2. Fixed Quantum = 0.4 months (for example) [4.8 mths 12] 3. Monthly Total Payout = Basic Pay + Fixed Quantum = RM500 + 0.4 months = RM500 + RM200 = RM700 4. Amount available for bonus = 5.8 months - 4.8 months = 1.0 month Proposed incentive scheme 1. Fixed Salary Proportion (Fixed Personal Income, Variable Team Bonus)
  217. 217. http://totallyunrelatedrandomanddebatable.blogspot.com/ Team Performance Rating 5 1.50 months 2.00 months 2.50 months 4 1.25 months 1.75 months 2.25 months 3 1.00 months 1.50 months 2.00 months 2 0.75 months 1.25 months 1.75 months 1 0.00 months 0.00 months 0.00 months Production Operator Team Leader Group Leader Annual Bonus Annual Bonus Annual Bonus Annual Bonus Incentive Matrix Proposed incentive scheme 1. Fixed Salary Proportion (Fixed Personal Income, Variable Team Bonus)
  218. 218. http://totallyunrelatedrandomanddebatable.blogspot.com/ Monthly Incentive Payout Matrix Personal Rating 5 1.2 months 4 1.0 months 3 0.8 months 2 0.5 months 1 0.0 months Monthly Incentive Proposed incentive scheme 2. Two-tier Multiplier (Variable Personal Income, Variable Team Bonus) Total Payout = Basic Pay + Monthly Personal Target Achievement + (Personal Target Achievement x Team Performance Multiplier)
  219. 219. http://totallyunrelatedrandomanddebatable.blogspot.com/ Proposed incentive scheme 2. Two-tier Multiplier (Variable Personal Income, Variable Team Bonus) Personal Performance Rating 500 550 600 650 700 750 800 5 1,100 1,210 1,320 1,430 1,540 1,650 1,760 4 1,000 1,100 1,200 1,300 1,400 1,500 1,600 3 900 990 1,080 1,170 1,260 1,350 1,440 2 750 825 900 975 1,050 1,125 1,200 1 500 550 600 650 700 750 800 Monthly Basic Pay (RM) Example: Production Operator
  220. 220. http://totallyunrelatedrandomanddebatable.blogspot.com/ Proposed incentive scheme 2. Two-tier Multiplier (Variable Personal Income, Variable Team Bonus) Personal Rating 5 1.2 months 1.70 months 2.20 months 4 1.0 months 1.50 months 2.00 months 3 0.8 months 1.30 months 1.80 months 2 0.5 months 1.00 months 1.50 months 1 0.0 months 0.00 months 0.00 months Monthly Incentive Team Leader Group Leader Monthly Incentive Monthly Incentive Production Operator Annual Bonus Incentive Matrix
  221. 221. http://totallyunrelatedrandomanddebatable.blogspot.com/ 5 4 3 2 1 5 2.4 1.8 1.2 0.6 0 4 2 1.5 1 0.5 0 3 1.6 1.2 0.8 0.4 0 2 1 0.75 0.5 0.25 0 1 0 0 0 0 0 Team Performance PersonalPerformance Annual Bonus Incentive Matrix (in months) Proposed incentive scheme 2. Two-tier Multiplier (Variable Personal Income, Variable Team Bonus)
  222. 222. http://totallyunrelatedrandomanddebatable.blogspot.com/ Proposed incentive scheme 3. Team Ratio Plan (Team-based Income, No Annual Bonus) Total Payout = Basic Pay + Monthly Incentive Payout (No Annual Bonus) Team Rating 5 2.00 months 2.25 months 2.50 months 4 1.50 months 1.75 months 2.00 months 3 1.20 months 1.45 months 1.70 months 2 0.75 months 1.00 months 1.25 months 1 0.00 months 0.00 months 0.00 months Production Staff Team Leader Group Leader Monthly Incentive Monthly IncentiveMonthly Incentive Monthly Incentive Payout Matrix
  223. 223. http://totallyunrelatedrandomanddebatable.blogspot.com/ Team Performance Rating 500 550 600 650 700 750 800 5 1,500 1,650 1,800 1,950 2,100 2,250 2,400 4 1,250 1,375 1,500 1,625 1,750 1,875 2,000 3 1,100 1,210 1,320 1,430 1,540 1,650 1,760 2 875 963 1,050 1,138 1,225 1,313 1,400 1 500 550 600 650 700 750 800 Monthly Basic Pay (RM) Example: Production Operator Proposed incentive scheme 3. Team Ratio Plan (Team-based Income, No Annual Bonus)
  224. 224. http://totallyunrelatedrandomanddebatable.blogspot.com/ Improving Performance Performance Improvement Area Intervention Methods Effectiveness of Direct Incentive Measures Skill Deficiency •Off site Training •Job redesign •On-the-job training •Process Redesign Yes Performance Punishing •Review performance management processes •Study on supervision style of Team Leader •Remove punishment No Non-performance rewarding •Proper performance monitoring process •Arrange positive consequence No Coordination & Teamwork •Communication of clear direction and goals •Shared Accountabilities •Focus on Team Competencies Partly Behavioural •Communication of clear behavioural indicators •Focus on Behavioural •Coaching and Counselling Partly Supervision Style •Leadership styles of team leaders •Regular tracking on morale of team members Yes but not for team members
  225. 225. http://totallyunrelatedrandomanddebatable.blogspot.com/ Curse of the Bell Curve „A‟ Staff „B‟ Staff „D‟ Staff „E‟ Staff „C‟ Staff
  226. 226. http://totallyunrelatedrandomanddebatable.blogspot.com/ 9. Performance Management: Issues and Challenges
  227. 227. http://totallyunrelatedrandomanddebatable.blogspot.com/ Other Performance Review processes 1. Result Planning schedule inc. BSC, Budget 2. Quarterly Performance Appraisals 3. Sales performance KPIs 4. QMS – non-sales performance KPIs 5. Divisional meetings 6. Annual Appraisals 7. Specialized KPI committees 8. CAR, PAR, SCAR KPI improvements 9. Internal Audit & MSD – process problems 10. HRM & TND – people problems 11. Supervisor Induction – PM training 12. Talent Management
  228. 228. http://totallyunrelatedrandomanddebatable.blogspot.com/ More Problems…. 1. cost of evaluation vs. gains of evaluation 2. defer achievements of a good year to next 3. barely achieve so that next target is not high 4. spread improvements over several years 5. value reducing actions to increase performance 6. most ratings are 4 or 5, new people are 3
  229. 229. http://totallyunrelatedrandomanddebatable.blogspot.com/ Before I forget… • Re-train Appraisers • Train new Appraisers
  230. 230. http://totallyunrelatedrandomanddebatable.blogspot.com/ Issues and Challenges 1. HODs unclear 2. HODs disagree/unsupportive 3. HODs not committed 4. Functional silos 5. HODs not willing to openly differentiate 6. Incompetent superiors/HODs 7. Difficult to evaluate 8. Aligning with Business Goals 9. Unsynchronized and unmonitored training and development
  231. 231. http://totallyunrelatedrandomanddebatable.blogspot.com/ End Point The end of the Beginning
  232. 232. http://totallyunrelatedrandomanddebatable.blogspot.com/ QUESTIONS, ANSWERS, COMMENTS forum
  233. 233. http://totallyunrelatedrandomanddebatable.blogspot.com/ Which Company? American Customer Satisfaction Index (ACSI) • 64 out of100-point scale: lower than IRS (Tax) • 2nd last among 30 companies surveyed • Lowest 5% among 223 companies surveyed • Bottom 5% of all measured private sector companies • 500 million customers 2010 American Customer Satisfaction Index (ACSI) E-Business Report
  234. 234. http://totallyunrelatedrandomanddebatable.blogspot.com/ Popularly Unpopular Popularity ≠ Affection
  235. 235. http://totallyunrelatedrandomanddebatable.blogspot.com/ Don‟t forget… “The business of business is Business, not KPIs”
  236. 236. Thank You. soft copy of slides: http://totallyunrelatedrandomanddebatable. blogspot.com/

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