Download to read offline
Uploaded byTapasya Lade
Hrms presentation
This document provides guidance on developing performance measurements. It is divided into 6 sections: 1) Introduction 2) Measurement as a management support system 3) What is a balanced scorecard? 4) Developing a customized balanced scorecard 5) Target setting and quantifying performance for incentive programs 6) New performance management system and the performance improvement process
![Balance Score Card[1]](https://cdn.slidesharecdn.com/ss_thumbnails/balancescorecard1-1211536377291298-9-thumbnail.jpg?width=640&height=640&fit=bounds)
Hrms presentation
- 1. Performance Measurement Systems Thispackage has been created as a practical guide to developing performance measurements in any industry. It has been divided into the following 6 sections: 1. Introduction 2. Measurement as a management support system 3. What is a balanced scorecard? 4. Developing a customized balanced scorecard 5. Target setting and quantifying performance for incentive programs 6. New performance management system and the performance improvement process
- 2. Performance Measurement Systems: 1.0 Introduction There are 3 charts in this section Chart 1.1: This is a general introductory chart which has been tailored for measurements to demonstrate that a balanced scorecard is an integral part of business planning and strategy Chart 1.2: This chart emphasizes that strategy implementation must be top-down and a good measurement system is a powerful tool for achieving this. It also shows how a balanced scorecard decomposes as it permeates downwards from the top - making company objectives actionable at all levels Chart 1.3: An important chart which demonstrates that the balanced scorecard is a powerful approach for identifying areas of improvement and inadequacies in support processes. A balanced scorecard should be a prelude to a business re-design or a process re-engineering
- 3. 1.1 The balancedscorecard is an integral part of business planning and strategy Vision Mission Business Planning and Strategy Goals and Balanced Objectives Scorecard Corporate Measurement and Reporting System
- 4. 1.2 A performancemeasurement system is a tool for implementing strategic planning and achieving continuous improvement at all levels of an organization Measures send signals into the s organization as to what is rin ive important. To send the right ha ject Balanced g Me Scorecard y S Ob signal measure the right things, as teg , ur i.e., the value drivers ra als em Business Units St , Go en t S on In order for a measurement si ys process to serve as a force for Vi mte Business Operating Systems improvement, it must be understood and accepted by its users. This is achieved by involving the users in it's Department and Work Centers development
- 5. 1.3 A balancedscorecard identifies performance improvement opportunities/targets and highlights the need for business redesign or enterprise processes Customer Expectations This is a balanced set of measures based on your Vision vision and your understanding Balanced of what creates 'ideal Scorecard customer value' A O L P I P Some projects align with the Improvement G O requirements of the customer N R Projects E T value drivers, others do not. D U N The latter represent true I T opportunities for performance I improvement and change E Business S Processes Support Inadequacies in the business Processes Human Resources support systems and the Information Technology enabling infrastructure are identified Opportunities Aligned
- 6. Performance Measurement Systems: 2.0Measurement as a management support system This section shows that measures provide the necessary information for management decision making and as such are a natural and inherent part of management process Chart 2.1: Outline the Bindra continuous improvement cycle. This puts the Deming/Shewhart cycle in more contemporary terms Chart 2.2 These charts demonstrate that a good performance measurement system - 2.4: is an important information system for management. It is important to measure total business operating systems (BOS) to avoid sub- optimization Chart 2.5: This is an example of an input/output exercise to determine the customer value drivers. These are labeled "Requirements"
- 7. 2.1 First, letus consider why measures are important What do measures do for us – Tell us where we need improvement – Help prioritize where to devote NT IN UOU energies and resources O – Motivate C S – Let us know we have gotten better Intervene Good, high-quality measurement systems have to be designed and developed and to Design maintained Improve Well-designed and developed measurement Measure Perform systems linked to a business strategy that is understood and accepted drive continuous & performance improvement I T M EN Measurements are a natural and inherent PR part of the management process O V EM Evalu ate
- 8. 2.2 Measurement isa decision support system for management Who What is Used Manages to Manage What is Managed A management system consists of three components which are interrelated
- 9. 2.3 Measurement isan integral part of the management process Measurement: The process of deciding what to measure, Measurement Management and collecting data, tracking over Team time, etc. Evaluation Evaluation: The process by which we impose standards, Organizational specifications, etc. to determine Systems if performance meets needs/expectations Organizational system: A generic phrase used to describe a work group, department, function, plant, division, corporation or firm
- 10. 2.4 To ensurethat plans are implemented effectively we measure all the way from downstream to upstream systems Management's Role: Ensure that the jobs get done, on time, within specifications, and within budget; and Continuously improve the performance of the system(s) they are managing Measurement Management and Team Evaluation Improvement Intervention Inputs Value Adding * Outputs Upstream Processes: Downstream Systems Systems Packaging operations Goods Suppliers and vendors Marketing operations Services Internal/external Customers e.g. Mills Internal/external *For a Container Company
- 11. 2.5 Here isan example of an organizational systems diagram developed for a publicly owned electric utility Demand Policy System Need for reliable cost-effective Local Government electricity by: Regulatory Body Residents Advisory Board Businesses Government Management Suppliers Customers Inputs Outputs School system Labor Power generated Residential Employment Capital Power bought and Commercial service Material sold Government Banks Energy Bills sent Value Vendors Cash collected Adding Complaints Others Activities handled Connections made Requirements Requirements Reliability Reliability Timeliness Affordability Affordability Timeliness Quality Quality
- 12. Performance Measurement Systems: 3.0 What is a balanced scorecard? Chart 3.1: Definition of the balanced scorecard in terms of focused performance Chart 3.2 Our version of the balanced scorecard & 3.3: Chart 3.4: Norton and Kaplan version of the balanced scorecard Chart 3.5: This chart demonstrates that Norton & Kaplan accommodate only 77% of 1992 Baldrige criteria. Our version, by creating a customizes balanced scorecard matches 100% with client requirements (See section 4)
- 13. 3.1 A balancedscorecard provides a system for measuring focused performance, i.e., managing things that really matter Focused performance may be defined as: An approach for driving good trade-off decisions that balance share-holder, employee and customer requirements A flexible framework that makes company objectives actionable at all levels of the organization An approach for prioritizing improvement issues cross-functionally An integrater of effort to capture the most significant opportunities To focus improvement, business concepts like strategy, value adding processes and performance measures must be connected but remain flexible for custom design, focused performance is an approach that accomplishes this
- 14. 3.2 It isimportant to create a balanced scorecard across all performance criteria to ensure desired outcomes are achieved If Our Organizational It will very We will have to To System is likely be maintain maintain Quality of Effective work life and innovation And Efficient Productive Profitability And our products, services and To processes meet customer achieve needs Excellence Quality Survival Growth Right things (on-time) Right way (first time) Right amount of resources The job of the management team The comptroller and the budget ACHIEVING BALANCE
- 15. 3.3 Perhaps LeeIacocca said in better words what we are trying to describe in model form By their very nature financial analysts tend to be defensive, conservative, and pessimistic. On the other side guys in sales and marketing are aggressive, speculative, and optimistic. They're saying let's do it, while the bean counters are cautioning why you shouldn't. If the bean counters are too weak, the company will spend itself into bankruptcy. But, if they are too strong the company would not meet the market or stay competitive. In a company you need both sides of the equation. Lee Iacocca, Iacocca: An Autobiography
- 16. 3.4 Organizations shoulddevelop measures for their business units creating a balanced scorecard from which to measure continuous improvement Kaplan and Norton have surveyed several companies to create a model of a balanced scorecard Financial Perspective How do we look to shareholders? Internal Customer Perspective Business Perspective How do customers Balanced Scorecard What must we see us? excel at? Innovation and Learning Perspective Can we continue to improve and create value? *Kaplan, R.S. and Norton, D.P. (1992)
- 17. 3.5 Only 77%of the Baldrige National Quality Award Criteria is covered by the Kaplan/Norton approach - hence the need for a customized balanced scorecard Financial Perspective Customer Perspective 30% Internal 32% Business Perspective 7.1 - Knowledge of customer requirements QA of Products and Services and expectations 5.1 - Design and introduction of products 7.2 - Comparison of quality results 5.2 - Process and quality control 7.3 - Customer service standards 5.3 - Continuous improvement 7.4 - Commitment to customers Balanced Scorecard 5.4 - Quality assessment 7.5 - Complaint resolution for quality 5.5 - Documentation improvement 5.6 - Quality of support services and processes 7.6 - Customer satisfaction information 5.7 - Quality of suppliers 7.7 - Customer satisfaction results Quality Results 7.8 - Customer satisfaction comparison Innovation and 6.1 - Quality of product and services Learning 15% 6.2 - Comparison of quality results 6.3 - Business process, support services Perspective 6.4 - Supplier quality 4.1 - Human resource management 4.2 - Employee involvement 4.3 - Quality education and training 4.4 - Employee recognition and performance measurement 4.5 - Employee well-being and morale
- 18. Performance Measurement Systems: 4.0Developing a customized balanced scorecard There are 7 charts in this section outlining the practical steps necessary to create a customized balanced scorecards Chart 4.1: Outlines the total methodology including the balanced scorecard, data collection and data portrayal and perception. Greater details on each step may be obtained from the author Chart 4.2 - Show the steps we go through to create a customized balanced scorecard. 4.5: A two day workshop with the top management team is necessary for this. 4.5 is an example of the workshop output Chart 4.6: The audit process to ensure high quality measures Chart 4.7: Definitions of generic measurement criteria
- 19. 4.1 The generalmeasurement methodology outlined in process flow fashion here drives measurement from an improvement focus Step 0: Preparation General Measurement Form measurement team Methodology Create suitable climate Definition Step 1: What to Measure Develop measures Recycle and Modify Audit measures Break down measures Validation and Operationalize Evaluation Step 2: Step 5: Develop Process Link to Improvement Select technique Asses output Form design team Link to goals Link to awards Etc. Details for each phase are described 3: Step Step 4: next Data Collection Process and Output Validation Data sources Is the output accurate? Eliminate infeasible Is the format correct? measures Etc. Check accountabilities Begin collection
- 20. 4.2 Developing abalanced scorecard requires determining the strategic performance dimensions and the appropriate measures and indicators Determine Strategic Performance Dimensions (Value Driver) Develop Measures and Indicators Test/Audit Measures Against Generic Performance Criteria Balanced Scorecard This represents Step 1 of the General Measurement Methodology
- 21. 4.3 We willconduct a workshop with the management team to develop first the global measures The type of questions used to generate the list of measures include: – How will we know how well we are doing? – What measures and indicators should we monitor on a periodic basis to determine how well we are performing? – What should we measure to help us know if we are improving, or where we need to improve? The thinking process while developing this set of measures should not be constrained by feasibility issues. The focus should be on providing the executive team the information it needs The output of this process will be a list of prioritized measures
- 22. 4.4 First, generatea list of ranked measures that are linked to the strategic performance dimensions This is an example of the output Top Ranked Top Ranked ty f a er Performance 1 3 Performance n 2 4 fa e e n i li io h ti s o m re re re re io ti s l o y t Measures ab Measures ct ow su su su su ct S a u st Sa mp fi t ea ea ea ea Gr o C M M E M M Pr Audit Factor Audit Factor 1 2 3 4 Strategic Performance Strategic Performance Dimensions Dimensions Innovation Innovation Quality Quality Service Service Capabilities Capabilities Environmental Environmental Leadership Leadership
- 23. Audit Factor Growth Customer Employee Ranked Profitability Satisfaction Satisfaction Measures Ra Ind nked ica No tor .o s fC om Wa pla rra int n ty s On Co -Ti sts me Cu De st o live me ry rS To urv t al ey Sa Sa l es les Gr ow Re pe th at Ra Bu te sin ess Em plo yee Em Inv olv & T ploye em rai eE en nin du t Re g cat co ion gn i ti o Em n/A plo wa yee rds Su rve y RO S RO A cannot be directly operationalized Pro fits /Em plo yee 4.5 Then, develop indicators for those measures that
- 24. 4.6 Mapping themeasures to the generic performance criteria results in the balanced scorecard t en & io n em s rd s s te Ind nked tor cat ery yee i nt o lv y ess y Ra rve wa rve ts pl a du el i v I nv p lo ica s si n th n /A Su Su Co ini yee E m ow s /E m eD yee Ra Bu Co a le i ti o yee er nt y Audit Gr m p lo m ng eat fits lS gn of plo p lo rra -Ti A S l es sto ta Factor Em p RO RO co . P ro No Em On Wa Em Re To Sa Tra Cu Re Ranked Measures Customer Satisfaction Growth Employee Sat. Profitability Generic Performance Criteria Effectiveness Efficiency Quality Productivity Quality of Work Life Innovation Profitability
- 25. 4.7 A genericset of performance criteria for organizational systems is suggested here Operational Definitions of Performance Criteria Quality Upstream Input Transformation Output Downstream System Process System Innovation Effectiveness Efficiency Quality of Work Life Productivity Profitability/ Budgetability While all seven criteria are relevant to all organizational systems, their relative importance varies as a functions of the type of system
- 26. Performance measurement system: 5.0Target setting and quantifying performance for incentive programs Chart 5.1: This chart describes the importance of rewards and incentives to a measurement system Chart 5.2: Target setting Chart 5.3: Shows data portrayal Chart 5.4: Depicts performance diagnosis format Chart 5.5: Indices of performance are developed in this chart. We have used the "Weighting Factor" approach. This approach is subjective and requires management concentration. But, then, the basic requirement of a good measurement system is management concentration and input. Besides, any algorithm developed for purposes of rewards and incentives tends to be subjective
- 27. 5.1 Here aresome roles rewards, incentives and recognition play What gets rewarded gets measured Rewards and incentives systems help keep the focus on company goals and objectives e.g., – Customer satisfaction – Improved quality When consistent with measures, rewards and incentives encourage everyone to excel – Individual – Work group – Business unit It is necessary to quantify performance before a rewards and incentives program can be implemented
- 28. 5.2 In orderto drive measurement from an improvement focus it is necessary to identify improvement targets first The process for identifying improvement targets is a subjective one. Our knowledge of the business combined with the risks and uncertainties leads to preference curves of the type shown Linear S - Shaped Targets Targets 4Q95 4Q95 100 100 2Q95 Performance Level (%) 2Q95 4Q94 90 90 4Q94 2Q94 2Q94 80 80 1Q 2Q 3Q 1994 1Q 2Q 3Q 1995 1Q 2Q 3Q 1994 1Q 2Q 3Q 1995 Baseline Time Baseline Time
- 29. 5.3 The performanceimprovement data may be represented in the form of a curve (I) or in the 'Bar Chart' format (II) I II 100 100 Performance Level (%) 90 90 80 80 1Q 2Q 3Q 1994 1Q 2Q 3Q 1995 1Q 2Q 3Q 1994 1Q 2Q 3Q 1995 Curve represents the improvement Improvement Targets targets and the points the actual Actual Performance Data performance data
- 30. 5.4 Each performancemeasurement chart should be followed by a performance diagnosis and action planning chart. Here is an example... Data-Trends Against Targets Root Causes Analysis Action Plans 1. 2. Pareto, Detailed Research, etc. 3.
- 31. 5.5 It isfirst necessary to quantify performance This is an example of how we develop a composite index of performance Customer Employee Measures Satisfaction Quality Satisfaction Profitability 1 2 3 4 Rating 40 30 20 10 Weighting 0.4 0.3 0.2 0.1 Performance level 5 8 6 8 S Weighted score 2.0 2.4 1.2 0.8 6.4
- 32. Performance Measurement Systems: 6.0New performance management system and the performance improvement planning process These charts identify elements of the measurement system not covered by the other sections Chart 6.1: Emphasizes that performance improvement planning has got to be a part of strategic planning Chart 6.2: Outlines performance improvement planning as an eight step process. The number of steps a client deploys depends upon his level of sophistication in planning. Details concerning each step may be obtained from the author Chart 6.3: A summary chart demonstrating, once again, that a balanced scorecard is a tool to focus the company's value drivers Chart 6.4: Highlights the need for cross-functional process and measurement focus
- 33. 6.1 To meetthe new competitive challenge it is necessary to create a new performance management system Vision Business Planning Stimulus for Business Goals and Change Strategy Objectives Enhanced Strategic Planning Evaluation Enhanced Performance Improvement Strategic Planning Planning Measurement Performance System Improvement Development Interventions Value Adding Processes Upstream OrganizationalDownstream Systems Systems System Performance Measurement Process Measures The New Performance Management Process Flow
- 34. 6.2 Performance improvementplanning is a step-wise process 1 Business Context Analysis The process by which one plans 2 for performance improvement determines the level of quality Planning Assumptions and acceptance for the plan and Recycle Continual 3 actions necessary to implement Evolution and Improvement Performance it Improvement Objectives A well thought out plan - 4 Key developed by all levels of Tactical Objectives and Performance Action Items management - is essential to Indicators realize the vision 5 8 Action Teams Key Manage Effective Scoping Proposals & Performance Implementation Track Project Planning Indicators & Control 6 7 Project Management Measurement and Evaluation Performance Improvement Planning Process
- 35. 6.3 An approachto developing and implementing a measurement system is summarized here Measures & Performance Evaluation Measurement in Vision Measures to ensure the Organization of A brief description of continuous improvement the Future what the organization is trying Rewards and to accomplish incentives to encourage everyone to excel Commitment Strategy Projects Description of actions Value Drivers required to achieve Strategic performance desired results dimensions Balanced Scorecard Identification of the Action performance criteria to Focus manage and achieve the vision
- 36. 6.4 It isconcluded that a good measurement system highlights the need for business redesign or enterprise processes Processes (generally) are organizational activities that cut across functional lines, e.g., complaint handling Functions are intact organizational entities, e.g., business units, departments, etc. It is possible to define the system as the vertical dimension or as the horizontal dimension as shown in the figure Organizational Structure Function Function Function Function Function I II III IV V A. Order Entry Alternate unit of analysis for B. Complaint Handling measurement Typical unit of N analysis for measurement Organizations moving into TQM are increasingly slicing the organization horizontally in terms of processes to examine and improve