creating performance based culture trough performance management systems
TRANSCRIPT
CREATING A PERFORMANCE-BASED CULTURESESSION 1: THROUGH PROPER PERFORMANCE MANAGEMENT SYSTEMSCNI’s Journey, Mistakes, and Lessons Learned
Kenny OngCNI Holdings Berhad
Intro: CNI
1. 18 years old
2. Core Business: MLM
3. Others: Contract Manufacturing, Export/Trading, eCommerce
4. Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan
5. Staff force: ± 500
6. Distributors: 250,000
7. Products: Consumer Goods and Services
Why we hate Performance Appraisals
As an Appraisee
As an Appraisor
Complaints about Performance Appraisals
Mgmt/HR
As an Appraisee
Complaints about Performance Appraisals
• Bias• Different Standards• Surprise• Subjective• No linkage*• No differentiation• Secretive• No follow up• No control
As an Appraiser
Complaints about Performance Appraisals
• Cannot remember• Tedious• Subjective• Right targets• Scoring Competencies*• Defensive staff• No $$ to differentiate• Prejudices• Results or Activities
Complaints about Performance Appraisals
• Flexible or Control?• MBO or Character?• Best Practice or Fit Culture?• Backward or Forward?• Quarterly Results or Long-term?• No $$ to differentiate*• Perfect System, Bad performance• Recency and Halo effects• Untrained Appraisers
Mgmt/HR
Complaints about Performance Appraisals - Summary
1. Process problem
2. Form problem
3. People problem
What is Performance Appraisal used for?
Reward?
Discipline?
Development?
Motivation?
Promotion?
Monitor?
Performance Management
Performance Appraisal
Performance Development
Performance Measurement
Common terms and definitions
What is the OBJECTIVE?
• 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
Summary… What went Wrong?
1. Wrong Business Model – blame PM Systems. Having a good PM System cannot correct a bad business model
2. Focusing on the Process (Best Practices), instead of the Business (Customization)
3. Good strategy, Bad Implementation, No Linkage
4. No Alignment – PMS is treated a single, separate process
5. System Weaknesses - Process, Form, People
1. Get the right Business Model first
Summary… What went Wrong?
1. Wrong Business Model – blame PMS. Having a good PMS cannot correct a bad business model
2. Focusing on the Process (Best Practices), instead of the Business (Customization)
3. Good strategy, Bad Implementation, No Linkage
4. No Alignment – PMS is treated a single, separate process
5. System Weaknesses - Process, Form, People
• How to fail without trying
1. Wrong Business Model
The Roadmap to Failure
Fred Wiersema and Mike TreacyP
erf
orm
ance
Time
Clear Sailing
Today’s performance
Ad-hoc Tactics
Denial & Defense
Doom Projections
Overdue Failure
The Moment of Truth
X
Performance Freefall
Tomorrow’s actual
performance
Downpresure of Unclear Strategy
Denial and Defense
• “It’s not really good value our competitor is offering, because it doesn’t include a lot of our features.” - ABC vs Air Asia
• “It’s good value but not in our preferred customer market.” - ABC vs Toyota
• “Sure they’re hurting us, but with their unfair advantage, what can we do?” – ABC vs MILO
• “The rules we are playing by have always worked before” – AMEX vs VISA
The Roadmap to Failure
Fred Wiersema and Mike TreacyP
erf
orm
ance
Time
Clear Sailing
Today’s performance
Ad-hoc Tactics
Denial & Defense
Doom Projections
Overdue Failure
The Moment of Truth
X
Performance Freefall
Tomorrow’s actual
performance
Downpresure of Unclear Strategy
Ad Hoc Tactics• Selectively hold discounts to hold business that has
started to go elsewhere• Introduce new promotions, terms, conditions, and offers to
confuse and cloud the market• Beef up customer service by adding people to fix mess-
ups and quicken delayed shipments• Delay capital investments and adjust accounting methods
to portray quarterly financial results more favorably• Introduce “new and improved” products that are new in
form, but not in substantive ways that are of consequence to purchasers
• Introduce Balanced Scorecards and Performance Management Systems
The Roadmap to Failure
Fred Wiersema and Mike TreacyP
erf
orm
ance
Time
Clear Sailing
Today’s performance
Ad-hoc Tactics
Denial & Defense
Doom Projections
Overdue Failure
The Moment of Truth
X
Performance Freefall
Tomorrow’s actual
performance
Downpresure of Unclear Strategy
“What is the moral of the story?”
2. Focusing on the Business
Strategy and Intent
Summary… What went Wrong?
1. Wrong Business Model – blame PMS. Having a good PMS cannot correct a bad business model
2. Focusing on the Process (Best Practices), instead of the Business (Customization)
3. Good strategy, Bad Implementation, No Linkage
4. No Alignment – PMS is treated a single, separate process
5. System Weaknesses - Process, Form, People
“…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
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?
Before we start…
Moral of the story…
1. Innovation:– Business models– Products– Services
2. Market Leadership
3. Competitive differentiation
Get the picture?
“What is the moral of the story?”
Example: FSS Objectives?
TransactionalCost reduction, Efficiency, Agility, Fast Copy
AP, General Ledger, B/S analysis, Accounting, Fixed Assets, AR, Facilities
Value-addedBudgeting, Reporting, Financial Analysis, Forecasting, Tax, Legal, Treasury
Consistency, Analysis, Value creation, customization
Systems, Standardize, Benchmarking, ERP, Streamlining, Automation, Governance
Best PracticesProcess improvement, service innovation, secondary KPIs, internal customers
Transformation
Market Leadership, Competitive Differentiation, Business model, M&A, CSI
Direct Business Impact, primary KPIs, external customers
Example: FSS Open & Hidden Objectives
1. Eliminate redundancies
2. Remove no value-adding activities
3. Cost Savings
4. Focus on Core
5. Economies of Scale
6. Compete with external vendors
7. Specialized skill sets
8. Move from staff to line
9. Salary Band
10.Career Path
11.Manage external vendors
12.B.U.s appreciate services
13.Additional revenue w/o interfering core
14.Divestment/IPO
15.MSC tax break
16.Make accountable to SBU vs. HQ
17.Undertake large infra projects
Strategy
• Mamak stall
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: Value Disciplines
Operational Excellence
• Competitive price
• Error free, reliable
• Fast (on demand)
• Simple
• Responsive
• Consistent information for all
• Transactional
• 'Once and Done'
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
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
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: Value Disciplines
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
Sample KPIs for Each Discipline
Operational Excellence
• Price• Selection• Convenience• Zero Defects• Growth
Operational Excellence
• Price• Selection• Convenience• Zero Defects• Growth
Customer Intimacy
• Customer Knowledge
• Solutions Offered• Penetration• Customer Data• Customer-success
focus
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
Product Leadership
• Marketing• Functionality• # of Successes• # of Failures• Learn from key
users• Interdisciplinary
teams• Pipeline
• 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
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
• 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
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: Value Disciplines
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: Value Disciplines
Business Situation vs. Performance Mgmt Focus
Upturn Flat Downturn
Fight Complacency
Sharpen Edge
Keep Momentum
Conquer
‘Change’ mgmt
Reduce Fat
Continuity
Everyone Happy
Innovation
Acquire
Profits
Build momentum
Sales
Cash Flow
Talent Mgmt
Innovation/R&D
Early wins
Slow Down HR Costs
Top Talent focus
Sales, Sales, Sales
Increase attrition
3. Performance Management = Business Plan Implementation
Strategy and Intent
Summary… What went Wrong?
1. Wrong Business Model – blame PMS. Having a good PMS cannot correct a bad business model
2. Focusing on the Process (Best Practices), instead of the Business (Customization)
3. Good strategy, Bad Implementation, No Linkage
4. No Alignment – PMS is treated a single, separate process
5. System Weaknesses - Process, Form, People
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?
Focus: Corporate Alignment
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
Focus: Corporate Alignment
Financial
Learning & Growth
Internal Process
Customers / Distributors
Focus: Corporate Alignment
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
E3 – Department BSC
Financial Perspective
Goals Measures Targets CAPEX OPEX
Quality
Innovation
On Time Delivery
Individual Performance
1.0 Key Results
Area (Max 6)
2.0 Goals and
Targets for Q1
3.0 Achievements and
Efforts for Q1
4.0 Merit* 5.0 Rating (Merit x Weight)
6.0 Appraiser
Overall Comments/ Feedback
4. Aligning for Performance
Summary… What went Wrong?
1. Wrong Business Model – blame PMS. Having a good PMS cannot correct a bad business model
2. Focusing on the Process (Best Practices), instead of the Business (Customization)
3. Good strategy, Bad Implementation, No Linkage
4. No Alignment – PMS is treated a single, separate process
5. System Weaknesses - Process, Form, People
Alignment: 4-Wheels Model
Philosophies
Corporate
ObjectivePerformance Objectives
StructureResources
Leadership
Person
Alignment: Framework
• Equal / Fair• Happy / Productive • Performance vs Potential • Retention / Engagement
Philosophies
Alignment: Framework
• Org Structure• Job Design• C&B• Policies & procedures• Decision making• Job fit• Management Systems• BSC and KPIs• Decentralized & Empower
Structure
Strategy: Framework
• Tools• Physical facilities• Peer support• Information• T&D Programs• Mentors• Guides• ICT• OJT
Resources
Strategy: Framework
• Role modeling• Vision/Mission/Philosophy• Leadership Style• Delegation & Empowerment• C&B, Promotions• Sense of Urgency• Speak regularly about Performance
Leadership
Strategy: Framework
• Recognition• Recruitment• Training• Profit sharing• Values• Motivation• Self Efficacy• Awareness• Useful Competencies• Career aspirations• Attribution (control)
Person • Appraiser• Appraisee
Alignment: 4-Wheels Model
Philosophies
Corporate
ObjectivePerformance Objectives
StructureResources
Leadership
Person
5. Implementing the Right System
Summary… What went Wrong?
1. Wrong Business Model – blame PMS. Having a good PMS cannot correct a bad business model
2. Focusing on the Process (Best Practices), instead of the Business (Customization)
3. Good strategy, Bad Implementation, No Linkage
4. No Alignment – PMS is treated a single, separate process
5. System Weaknesses - Process, Form, People
What is Performance Appraisal used for?
Reward?
Discipline?
Development?
Motivation?
Promotion?
Monitor?
Behavior-based
Knowledge/Skill based
Results-based
Trait-based
Which system should we use?
Managing Performance = Managing Expectations
What’s YOUR expectation?
Activity based
Performance Management for Change
o Grievance levelo Absenteeismo Discipline issueo Poor work ethics
Deg
ree
of
Cla
rity
of
Job
Res
ult
sV
isio
n L
ed
Pe
rfo
rma
nc
e d
rive
n
High
Low HighLevel of Trust & Commitment (Between Subordinate & Boss)
UNCLEAR
Discuss & Agree on Account
Objectives & Key Measures
Standards for Perform
ance
Provide Coaching & Counselling
RESULTS
DRIVEN
High Level of employee
empowerment
High Employee Performance
High Employee Satisfaction
High Employee Involvement
Challenging Working
Environment
Optimum HRM Cost Structure
Review Perform
ance & Results
District Engineer, TNB
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
MBO Target Setting - Objectives and Measures
SMART Targets• Specific (definite objective and purpose to be
achieved)• Measurable (by definite observation and a certain time
one should be able to tell whether or not it is attained)• Achievable (Must be within reach of the employees,
e.g. to meet stated deadlines, neither too high nor too low)
• Rewarding (Rewarding means it must be satisfying to you, no one else)
• Time phased (per quarter, per year. By end of fiscal year, by 15th of November)
MBO Target Setting - Objectives and Measures
Quality How well the result is produced / performed
Errors and Appearance
Quantity How much / many of the results are produced or performed
Cost At what expense the result is produced / performed
Timeliness When is the result to be produced / performed
MBO – Sources of KRAs and KPIs, Targets
1. Department Scorecard [E3],
2. Employee’s Job Description,
3. Department SOP,
4. Department Quality Objectives,
5. Corrective Action Requests (CAR),
6. Preventive Action Requests (PAR), or
7. Special Projects relevant to the employee.
MBO Standards
A Excellent
B Good
C Average
D Poor
E Useless
MBO Standards
A Excellent
B Good
C Average Good
D Poor
E Useless
MBO Standards
A Excellent Excellent
B Good Very Good
C Average Good
D Poor Not Good
E Useless Commit Suicide
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
Competency Target Setting
1. Initiative
2. Teamwork
3. Problem Solving
4. Leadership
5. Integrity
What’s the problem here?
Competency Target Setting
Initiative
1. Minimize problems quickly without needing to be asked
2. Seeks personal growth and professional self-development
3. Doing more than is required/expected in a job
4. Seeks new and improved solutions and approaches to completing assignments
5. Looks for opportunities to help others and team
Competency Standards
3 Meets behavioral standards consistently. Is a good role model for others.
2 Meets behavioral standards some of the time. Needs improvement.
1 Does not meet behavioral standards. Require counseling or disciplinary actions.
Coaching & Counseling
Month 1
Performance Planning
Month 12
Performance Appraisal
Month 2-11
?
Performance Setting & Review ScheduleStep One - August
Senior Management – Facilitate BOD Strategic Planning process by studying & producing appropriate papers from BOD
• Macro economic data and observations
• Emerging business conditions
• CNI’s strategic considerations/needs
Step Two - AugustBOD consideration & consensus on:
• Macro economic information
• Emerging business conditions
• SWOT
• Strategic Needs
• Broad business goals & operating philosophy
Sr. Mgmt Strategic Planning Process
Study BOD observations and directions & review:
• Corporate vision / mission
• Change dimensions
• Strategic initiatives
• Corporate key results
Step Three September - October
Sr. Management Annual Management Plan for Board of Directors Approval
Step Five - November
Approved Annual Management Plan for execution
Step Six - December
• Senior managers performance plans, objectives and standards
• Performance vs. plans for top management review
Quarterly performance review reports of the Board of Directors
Step Four - November
Step Seven - January
• Review annually performance plans vs. results
Performance Review processes
1. Result Planning schedule inc. BSC, Budget2. Quarterly Performance Appraisals3. EMC – sales performance4. QMS – non-sales performance5. Divisional meetings6. Annual Appraisals7. Specialized KPI committees8. CAR, PAR, SCAR KPI improvements9. Internal Audit & MSD – process problems10. HRM & TND – people problems11. Supervisor Induction – PM training12. Talent Management
Summary… What went Wrong?
1. Wrong Business Model – blame PM Systems. Having a good PM System cannot correct a bad business model
2. Focusing on the Process (Best Practices), instead of the Business (Customization)
3. Good strategy, Bad Implementation, No Linkage
4. No Alignment – PMS is treated a single, separate process
5. System Weaknesses - Process, Form, People
Thank You.
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