Management

1. PERFORMANCE MANAGEMENT

2. Why performance management?
1. Performance management should be seen as a conduit for
the proactive achievement of an organisation’s strategic
objectives
2. The first step in managing performance is understanding
what all parts of the organisation are trying to achieve in
relation to these strategic objectives
3. An effective performance management system helps to
‘break down’ the company’s strategic objectives so that they
are clear to those at all levels of the organisation
4. Measuring performance provides a baseline from which to
assess progress towards achieving objectives

3. Setting the Context
Slack Fig 2.2

4. Operations Performance Management

5. Components of a Performance Management
system
A set of
appropriate
targets
System/process
to be measured
As set of
relevant
measures

6.  Even if we measure everything in sight, we won’t know how well we’re doing if
we don’t know where we want to be!
• we work out where we would like to be
• we check that it is possible to get there
• we pick points along the way (measures) so that we know we’re getting there
• we measure, take stock and continue or, if needed, change direction
Appropriate Targets
?
A
B

7. Where do the Targets come from?
STRATEGY
TARGETS
DIVN
OBJECTIVES
DEPT
OBJECTIVES
TEAM
OBJECTIVES
TARGETS
TARGETS

8. Relevant measures
input measures
e.g. litres
output measures
e.g. distance
process measures
e.g. miles per hour

9. • Too focused on limited areas e.g. finance
• Can have unintended consequences
• Can create information overload
• Can encourage dysfunctional behaviour
Problems in Performance Measurement

10. Balanced Scorecard
Slack Fig 2.13

11. The Financial Perspective
 How are we viewed by shareholders?
• Purpose - to represent share holder value
• Describes - the tangible outcomes of the strategy in simple financial terms or
put it another way the economic consequences of good or bad strategy
• Example Measures - could be profit, cost or revenue related
• Change levers - are revenue growth and efficiency (sell more and spend
less)
Efficiency Growth

12. The Customer Perspective
 How are we viewed by customers?
• Purpose - to represent the customer value proposition
• Describes - what is important to the customer - what makes them come to
you
• Example Measures - satisfaction, retention, market share, etc.
• Change Levers - customer relationship building, performing well on current
business, etc.
PRICE
QUALITY SERVICE
AVAILABILITY FUNCTIONALITY
SELECTION
PARTNERSHIP
BRAND
PRODUCT/SERVICE ATTRIBUTES RELATIONSHIP IMAGE

13. The Internal Perspective
 What must we excel at?
• Purpose - to ensure you are using the correct processes effectively and
efficiently
• Describes – what you do and how you do it or to put in another way what
makes up your core competence
• Example Measures – WIP, design time, change requests, accidents.
• Change levers – TQM, 6 Sigma, CI, etc.
OPERATIONS
PROCESSES
-SUPPLY
-ENGINEERING
-PRODUCTION
-DISTRIBUTION
CUSTOMER
MANAGEMENT
PROCESSES
-SELECTION
-AQUISITION
-RETENTION
REGULATORY
PROCESSES
-ENVIRONMENT
-HEALTH AND SAFETY
-EMPLOYMENT
-COMMUNITY
INNOVATION
PROCESSES
-R & D MANAGEMENT
-MANAGE KNOWLEDGE
-MARKETING

14. The Learning & Growth Perspective
 How can we build capabilities and create value from our
intangible assets?
• Purpose - to ensure you managing your intangibles in the correct way

• Describes - human Capital (skills, talent and know how), Information
Capital (systems and infrastructure) & Organisation Capital (ability to
mobilise and sustain effort)
• Example Measures - training logs, IT fault logging, change initiatives
• Change Levers - training, investing in infrastructure and recruitment
HUMAN CAPITAL
STRATEGIC
COMPETENCIES
INFO CAPITAL
STRATEGIC
INFORMATION
ORG CAPITAL
STRATEGIC
MOBILISATION

15. Choosing Measures
The truth test
The focus test
The consistency test
The clarity test
The access test
The so what test
The cost test
The timeliness test
The gaming test
Is the measure definitely measuring what it’s meant to measure?
Is the measure only measuring what it’s meant to measure?
Is the measure consistent whenever or whoever measures?
Is any ambiguity possible in interpretation of the results?
Can the data be readily communicated and easily understood?
Can, and will, the data be acted upon?
Is it going to be worth the cost of collecting and analysing the data?
Can the data be analysed soon enough so that action can be taken?
Will the measure encourage any undesirable behaviours?