Performance ManagementA Strategic Management Tool

Terry Layton

Brisbane City Enterprises Pty Ltd25 October 2002 - Pretoria, South Africa

Structure of this Seminar

Session 1 - Strategic Management -the contextual settingSession 2 - Focussing on PerformanceManagementSession 3 - Interactive Session -Implementing a PerformanceManagement program

Session 1

Strategic Management -the contextual setting

Strategic Management- a definition

The planning, decision-making and actions thatdetermine the success ofthe organisation in the

medium- to longer-term

The Strategic to OperationalManagement Process

Strategies(Planned Outputs to achieve Planned Outcomes)

Operational Action Plans and Budgets(Planned Inputs/Outputs)

ImplementationActual Inputs/Outputs)

Goals and Objectives(Planned Outcomes)

The key strategic questions:

Where are we now?

Where do we want to be in three tofive years time?

How are we going to get from wherewe are now to where we want to be?

What is a strategic plan?A broad master plan that:

states the organisation’smission and objectives, andshows how these will beachieved over a three- tofive-year period

What, then, is anoperational plan?

A one-year slice of thestrategic plan expanded toshow the details of individualtasks, including their manningand timetabling

Operational PlanningRudyard Kipling’s “Six Honest

Serving Men”

I keep six honest serving-men(They taught me all I knew);Their names are What and Why and WhenAnd How and Where and Who.

The Operational Plan

What? Tasks What needs to be done?

Why? Rationale Why is each task necessary?

When? Timing andSequencing

When should each task start andfinish?

What task sequencing implicationsare there?

How? Methodology How should each task beundertaken?

The Operational Plan

Where? Location Where should each task take place?

Who? Responsibilities Who is responsible at each level ofthe organisation?

Who are the corporate and unit“champions”?

Who is responsible for the technicalaspects?

Who has to do what in relation toeach task?

Who will guide and facilitate theprocess?

So where do budgetsfit into the picture?

A budget is a statement of:the anticipated financial resourcesthat will underpin implementationof the operational plans, andthe anticipated financial outcomesfrom the effective implementationof the operational plans

Operational plans ….

…. and budgets ….

…. are two sides of the same coin

Operational Management

… is about day-to-day taskmanagement - ensuring thatresources are made availablewhen required, and that tasks arecompleted on time and to anacceptable quality

Financial Management(Budgetary Control)

… is about ensuring on a day-to-day basis that financial resourcesare made available when requiredand that expected financialoutcomes are achieved

Time Out

Session 2

Focussing onPerformanceManagement

Performance Management… “is the systematic, data-orientedapproach to managing people atwork that relies on positivereinforcement as the major way tomaximize performance.”

Professor Jon S. Bailey (Florida State University)Founder of The Society of Performance Management

Performance-BasedManagement

... is a systematic approach to performanceimprovement through an ongoing process of:

• establishing strategic performanceobjectives;

• measuring performance;

• collecting, analysing, reviewing, andreporting performance data; and

• using that data to drive performanceimprovement.

US Department of Energy

Balancing PerformanceMeasures

• The concept of a balanced set ofperformance measures is now widelyaccepted

• The central idea is to focus on asmall set of critical business domainsor perspectives

• Uses a small number of criticalmeasures within each domain orperspective

The Classic BalancedScorecard Perspectives

Financial - How do we look to our stakeholders?Customer - How well do we satisfy our internaland external customers’ needs?Internal Business Process - How well do weperform at key internal business processes?Learning and Growth - Are we able to sustaininnovation, change and continuous improvement?

“The Balanced Scorecard”Robert Kaplan & David Norton

The US DoE’s BalancedScorecard Perspectives

Financial - Cost efficiency, delivering maximumvalue to the customer for each dollar spentCustomer Satisfaction - Provide quality goodsand services, effective delivery and overallcustomer satisfactionInternal Business - Internal business resultsleading to financial success and satisfied customersLearning and Growth - The ability of employees,information systems and organisational alignmentto manage the business and adapt to change

US Department of Energy

BCC’s Balanced ScorecardPerspectives

Financial Outcomes Perspective

Community and Customer Perspective

Business Processes and InnovationPerspective

People and Learning Perspective

Brisbane City Council

BCC’s Financial OutcomesPerspective

Focuses on two key aspects of financialperformance:

• Financial capacity, and

• Value from Council’s businessand services

Brisbane City Council

BCC’s Community &Customer Perspective

Focuses on three key aspects ofcommunity & customer performance:

• Customer service excellence

• Satisfied community, and

• Enhanced livability

Brisbane City Council

BCC’s Business Processes &Innovation Perspective

Focuses on four key aspects of businessprocesses and innovation performance:

• Continuous process improvement

• Well managed risk

• Strategic alignment, and

• Innovation & product developmentBrisbane City Council

BCC’s People & LearningPerspective

Focuses on three key aspects of peopleand learning performance:

• Flexible and adaptable workforce

• Capable employees, and

• Satisfied employees

Brisbane City Council

NPR’s Balanced MeasuresApproach

The NPR advocates a “BalancedMeasures” approach to performancemanagement based on three perspectives:

• Employee perspective

• Customer perspective, and

• Business perspective

US National Partnership for Reinventing Government

Mark Graham Brown’sBalanced Scorecard Model

Consultant and management author Mark GrahamBrown suggests a model based on five perspectives:

• Financial Performance

• Process/Operational Performance

• Customer Satisfaction

• Employee Satisfaction, and

• Community/Stakeholder Satisfaction

“Keeping Score : Using the Right Metrics to Drive World-Class Performance” -Mark Graham Brown

The South African BusinessExcellence Model

The Triple Bottom Line

… is used as a framework for measuring andreporting corporate performance against:

• economic, parameters• social parameters ,and• environmental parameters

i.e the profit, people and planet approach

Focus on the Critical Few“The most common mistakeorganisations make ismeasuring too many variables.The next most commonmistake is measuring too few”

Mark Graham Brown

Benefits of PerformanceManagement

Facilitates an integrated approach tostrategic managementProvides a balanced view of strategicperformance objectivesCreates ownership of strategicperformance objectives

Continued next slide

Benefits of PerformanceManagement

Establishes accountability for theachievement of strategic objectivesShares the responsibility forperformance improvement

Time Out

Session 3

Implementing aPerformance

Management program

Establishing a performancemanagement program

Step 1: Define organisational missionand strategic performance objectivesStep 2: Establish an integratedperformance measurement systemStep 3: Establish accountability forperformance

Continued Next Slide

Establishing a performancemanagement program

Step 4: Establish a process or systemfor collecting performance dataStep 5: Establish a process or systemfor analysing, reviewing and reportingperformance dataStep 6: Establish a process or systemfor using performance information todrive improvement

Implementing aPerformance Management

System

Step 1:Define organisational mission

and strategic performanceobjectives

Implementing aPerformance Management

System

Step 2:Establish an integrated

performance measurementsystem

Implementing aPerformance Management

System

Step 3:Establish accountability for

performance

Implementing aPerformance Management

System

Step 4:Establish a process or system

for collecting performancedata

Implementing aPerformance Management

System

Step 5:Establish a process or systemfor analysing, reviewing andreporting performance data

Implementing aPerformance Management

System

Step 6:Establish a process or system

for using performanceinformation to drive

improvement