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From fixed to relative performance contracts
and towards simple, ethical and empowering ways
of dealing with value creatio...
Performance Culture
Formal part of
value creation
Solution: Machine
Dynamic part of
value creation
Solution: Man
high
dynamics
Local markets,
high customization
Sluggish/dull,
low dynamics
high
dynamics
Spacious markets,
little competition
Local markets,
high customization
Sluggish/dull,
low dynamics
high
dynamics
high
dynamics
Spacious markets,
little competition
“Outperformers” exercise
mark...
Formal part of
value creation
Solution:
Machine
Dynamic part of
value creation
Solution: Man
Sluggish/dull,
low dynamics
h...
Periphery
Market
Center
1 Impulse
4 Command
3 Decision
2 Information
5 Reaction
Center
Market
Periphery
Client
Is in
charge!
1 Impulse
2 Decision
3 Reaction
Center
Market
Periphery
Client
Serves the
periphery,
if needed
Is in
charge!
•! Fixed,!individual!targets!
•! Management!by!Objectives!
•! Budgets!and!Plans!
•! Performance!Appraisal!
•! Hierarchical...
•! Fixed,!individual!targets!
•! Management!by!Objectives!
•! Budgets!and!Plans!
•! Performance!Appraisal!
•! Hierarchical...
Theory!X! Theory!Y!
People!need!to!work!and!want!to!take!an!interest!
in!it.!Under!right!conditions,!they!enjoy!it!
People...
Behaviors!
Context!
Human!!
Nature!
”Meritocracy“
Budgeting Planning
Control of work hours
Job Descriptions
Competencies Management
Incentives
Individual targ...
Fixed,!negotiated!targets!
Most!
important!
competitor!
"28%#!
!!
Market!
"25%#!
!!Plan!
"15%#!!
Actual!
"21%#!!
Target:!a...
Accounts/KPIs!vs!prev.!periods!
last!
mnth!
!
!
!
!
!
Same!
mnth!
last!
year!
!
!
!
!
!
Same!
mnth!
prev..!
year!
!
!
!
!
...
Data Information ? ?
Industry!
Retail!
Services!
Government/!
NGOs!
It!is!possible.!
!
Law! !Beta! !Alpha!!
§§1!!Freedom!to!act !Connectedness !not!Dependency!
§2! !Responsibility !Cells !not!Departments!
§3...
From!fixed!to!relative!performance!contracts!!
and!towards!simple,!ethical!and!empowering!ways!!
of!dealing!with!value!cre...
From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Fo...
From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Fo...
From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Fo...
From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Fo...
From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Fo...
From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Fo...
From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Fo...
From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Fo...
From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Fo...
From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Fo...
From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Fo...
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From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Forum (Sydney/AUS)

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From fixed to relative performance contracts
and towards simple, ethical and empowering ways
of dealing with value creation
Sydney, 15.10.2015
Cubewise Performance Management Leadership Forum
@NielsPflaeging

Published in: Leadership & Management
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From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Forum (Sydney/AUS)

  1. 1. From fixed to relative performance contracts and towards simple, ethical and empowering ways of dealing with value creation Sydney, 15.10.2015 Cubewise Performance Management Leadership Forum @NielsPflaeging
  2. 2. Performance Culture
  3. 3. Formal part of value creation Solution: Machine Dynamic part of value creation Solution: Man
  4. 4. high dynamics Local markets, high customization
  5. 5. Sluggish/dull, low dynamics high dynamics Spacious markets, little competition Local markets, high customization
  6. 6. Sluggish/dull, low dynamics high dynamics high dynamics Spacious markets, little competition “Outperformers” exercise market pressure over conventional companies Local markets, high customization
  7. 7. Formal part of value creation Solution: Machine Dynamic part of value creation Solution: Man Sluggish/dull, low dynamics high dynamics high dynamics Age of Crafts Manu- facturing Industrial Age/ Age of Tayloristic Industry Age of Global Markets 1850/1900 Spacious markets, little competition “Outperformers” exercise market pressure over conventional companies Local markets, high customization 1970/80 today
  8. 8. Periphery Market Center
  9. 9. 1 Impulse 4 Command 3 Decision 2 Information 5 Reaction Center Market Periphery Client Is in charge!
  10. 10. 1 Impulse 2 Decision 3 Reaction Center Market Periphery Client Serves the periphery, if needed Is in charge!
  11. 11. •! Fixed,!individual!targets! •! Management!by!Objectives! •! Budgets!and!Plans! •! Performance!Appraisal! •! Hierarchical!Pressure! •! Pay!by!Position!or!Performance! •! Incentives!and!Bonuses! •! …! Low!dynamics!
  12. 12. •! Fixed,!individual!targets! •! Management!by!Objectives! •! Budgets!and!Plans! •! Performance!Appraisal! •! Hierarchical!Pressure! •! Pay!by!Position!or!Performance! •! Incentives!and!Bonuses! •! …! •! Transparency!&!Improvement! •! Comparisons!between!peers! •! Comparisons!with!previous!periods! •! Dialog!and!Dissent! •! Social!and!group!pressure! •! Pay!by!market!value! •! Results!Sharing! •! …! Low!dynamics! High!dynamics!
  13. 13. Theory!X! Theory!Y! People!need!to!work!and!want!to!take!an!interest! in!it.!Under!right!conditions,!they!enjoy!it! People!dislike!work,!! find!it!boring,!and!will!avoid!it!if!they!can!! Attitude! Direction! Responsibility! Creativity! Motivation! People in work, can People!will!direct!themselves! towards!a!target!that!they!accept!! People!will!seek!and!accept!responsibility,! under!the!right!conditions!! Under!the!right!conditions,!people!are!motivated! by!the!desire!to!realize!their!own!potential! Creativity!and!ingenuity!are!widely!distributed! and!grossly!underused! People!must!be!forced!or!bribed!! to!make!the!right!effort!! ! People!would!rather!be!directed!than!accept! responsibility,!"which!they!avoid#! People!are!motivated!mainly!by!money!! and!fears!about!their!job!security!! Most!people!have!little!creativity!-!except! when!it!comes!to!getting!round!rules!
  14. 14. Behaviors! Context! Human!! Nature!
  15. 15. ”Meritocracy“ Budgeting Planning Control of work hours Job Descriptions Competencies Management Incentives Individual targets Performance Appraisal/360° Salary Ranges Training budgets Personnel Development Org charts Target negotiation Holiday applications ”Personnel Expenses“ Suggestion boxes Assessment Centers Knowledge Management Pay for Performance Paid extra hours Bonuses Sales Quotas Dress codes Job titles HR Allocations Cost Management Plan-Actuals variances Forecasting MbO Development Centers Bosses hire Strategic Planning Travel policies Jours fixes Earnings Guidance Matrix Structures Key Accounting, Business Areas Business Partners SWOT Analysis …
  16. 16. Fixed,!negotiated!targets! Most! important! competitor! "28%#! !! Market! "25%#! !!Plan! "15%#!! Actual! "21%#!! Target:!absolute!ROCE!in!%!"here:!15%#! !expected market Ø: 13%" Plan! Comparison:! Plan-Actual! Actual! Relative,!self-adjusting!targets! Target:!relative!ROCE!in!%!"to!market#! Most! important! competitor! "28%#! !! Market! "25%#! !! Target:!ROCE!! in!%!better!! than!market!avrg.! Actual! "21%#!! !independent from expected market Ø" Target! Actual! Comparison:! Market-Actual! targets
  17. 17. Accounts/KPIs!vs!prev.!periods! last! mnth! ! ! ! ! ! Same! mnth! last! year! ! ! ! ! ! Same! mnth! prev..! year! ! ! ! ! ! Ø!! last! 12!! mnths! ! ! ! ! ! Ø!! 12!! prev.! mnths! ! ! ! ! ! ! Indicators! or! Groups!of!accounts! Rankings!"“league!tables”#! Company! !KPI! Competitor!A !31%! Competitor!E !24%! Competitor!C !20%! Us ! !18%! Competitor!B !13%! Competitor!D !12%! Competitor!G !10%! Competitor!F !!!8%! Regions!!KPI! Region!G!!7%! Region!E!!7%! Region!B!!6%! Region!F!!4%! Region!A!!3%! Region!D!!3%! Region!C!!1%! Region!H!!0%! Snapshot!"static#!w/benchmarks! KPI!2! Us! Our! unit!B! Our!! unit!A! Compe-! titor!B! Compe-! titor!A! KPI!1! Trend!with!references! "A#!Maximum! Curve!with!variance! KPI! "B#!Gliding!average! Time!"Actuals#! Trend!with!benchmark! Us! Competitor!A! Time!"Actuals#! KPI! Trend!with!tolerance! Tolerance!levels! Time!"Actuals#! KPI! Us! out!of!bounds!
  18. 18. Data Information ? ?
  19. 19. Industry! Retail! Services! Government/! NGOs! It!is!possible.!
  20. 20. ! Law! !Beta! !Alpha!! §§1!!Freedom!to!act !Connectedness !not!Dependency! §2! !Responsibility !Cells !not!Departments! §3! !Governance !Leadership !not!Management! §4! !Performance!climate !Result!culture !not!Duty!fulfillment! §5! !Success !Fit !not!Maximization! §6! !Transparency !Intelligence!flow !not!Power!accumulation! §7! !Orientation !Relative!Targets !not!Top-down!prescription !! §8 !Recognition !Sharing !not!Incentives! §9! !Mental!presence !Preparedness !not!Planning! §10!!Decision-making !Consequence !not!Bureaucracy! §11!!Resource!usage !Purpose-driven !not!Status-oriented! §12!!Coordination !Market!dynamics !not!Commands !! !
  21. 21. From!fixed!to!relative!performance!contracts!! and!towards!simple,!ethical!and!empowering!ways!! of!dealing!with!value!creation! @NielsPflaeging! nielspflaeging.com! organizeforcomplexity.com! betacodex.org! slideshare.net/npflaeging!

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