PERFORMANCE MANAGEMENT

CONSULTING

Churchill Consulting is a boutique consultancy

specialising in organisational performance

improvement. Established in 2003, Churchill

Consulting focuses on the needs of Asia Pacific

businesses seeking high-level strategic counsel.

Integral to our business approach is the quality

of our consultants. Our principal consultants

have the experience and expertise to deliver

critical business improvements that drive

sustained performance benefits for our clients.

We demand both intellectual and service

excellence from every member of our team.

In addition to the calibre of our consultants,

Churchill Consulting distinguishes itself by

utilising rigorous methodologies that are applied

to business critical issues. This incorporates the

review of current business performance as well

as the development, implementation and

management of core performance improvement

initiatives.

Churchill Consulting is committed to working in

partnership with clients. We establish an

Churchill Consultingintegrated project team to develop business

solutions within the context of current and

emerging issues.

As part of the broader Churchill Capital Group,

Churchill Consulting is also able to provide its

clients with access to property and corporate

advisory services.

“Checking the results of a decisionagainst its expectations showsexecutives what their strengthsare, where they need to improve,and where they lack knowledge orinformation”.Peter Drucker

PERFORMANCEIMPROVEMENT

INFORMATIONTECHNOLOGY

STRATEGY

PROJECTMANAGEMENT

LEAD INGCHANGE

PERFORMANCEMANAGEMENT

CUSTOMERRELATIONSH I PMANAGEMENT

BUS INESSSTRATEGY

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PERFORMANCE MANAGEMENT

Organisational success comes from regularly ensuring the alignment betweenstrategic objectives and the changingorganisational environment. Organisationsmust ensure they have robust measurementand monitoring systems to assess theperformance against strategy.

Performance management is the discipline of aligning employeeaccountabilities and behaviours with business objectives. If donewell it is a key contributor to sustained business success.

Key components of a performance management system include:

• Business strategy development – clear articulation ofbusiness key result areas, objectives and performancemeasures.

• Divisional business planning – setting divisional measuresand targets, alignment of strategic initiatives.

• Performance reporting – balanced scorecards, reportregularity, performance review meetings.

• Performance review – rewards, discipline, role clarity,performance assessment.

Performance Management

We have found Value Driver Trees (VDTs) are a usefulmechanism to determine the affect of businessactivities on the overall value (eg. “if I improve X, will it affect our value?”). This visual-based helpspeople understand the complexity of and therelationships between different key business activities.It also can prioritise the many things we have to do and drive accountability for achieving desiredoutcomes. Selected key points from our approach are outlined below:

Defining Valued Outcomes• Identify the main overarching value of the

organisation (eg. “we provide... or our goal is tobe...), or highest level economic outcome (ROI).

• Next, determine the key business functional areas (economic drivers) that deliver that overall value.

• Finally, determine the business activity drivers andtheir measures that make up the key businessfunctions.

• Consider different perspectives of Value - cost vsprofit, customer vs business unit, etc.

This process is illustrated in the diagram on Page 3.

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PERFORMANCE MANAGEMENT

Linking key business activities to the bottom lineChurchill Consulting has found that our clients often have troubleensuring that the key measures(KPI's) they have set for theirpeople will actually drive businesssuccess. This is usually becausethose accountable for KPI's don't have a tool to allow them to see this link.

Our experience highlights theimportance of the overall approach,not just to defining the valuedoutcomes but also to ensure theseare realised.

Main overarchingvalue of the organisation

Metric

Plan vs actual

Plan vs actual

Training hrs

Equipmentrunning

TroubleReports: closedvs open trend

Customer coaluse measure

Key functional areasor economic drivers

MineOperations

People/TeamEnvironment

CustomerSpecifications

Growth

Safe and cost effective delivery of Metal X to customer specifications

Activities

Equipmentoperating time(hrs)

Productivity(bcm/hr)

Utilisation ofavailability

PS millingefficiency

Skill building

Non-conformance

Sub-Functionalareas or drivers

Financial

People Resources

Product Performance

On Time

Cost

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Value Driver Tree (mineral producer example)

PERFORMANCE MANAGEMENT

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PERFORMANCE MANAGEMENT

Realising the valued outcomesUsing VDT’sReferring to the example VDT on page 5 we seethere is powerful information managers and theirteams can use to improve the business andcommunicate to their teams what the key thingsare to drive business improvement.• Use “traffic light” colours to ensure focus on

what is actionable (red requires explanation fora variance).

• Action meetings review trends and highlightneed to develop improvement projects toeliminate root causes.

• Focus on drivers that determine Value drives roleaccountability and a performance orientedorganisation.

• Assign each VDT measure to an accountable rolein the organisation, i.e. a VDT turned 90 degreesshould resemble the organisational chart.

While careful construction of VDT's is an important strategicexercise to hone in on businessvalue, it is the timely measurementand management of the identifiedeconomic drivers that will improvethe valued outcomes.

Determining the Economic Drivers - The Value Driver Tree approachThings to consider when determining the drivers are:

• Drivers must be Mutually Exclusive andCollectively Exhaustive (MECE).

• Pareto applies - focus on key economic driversthat link directly to the Valued Outcome.

• What is controllable in terms of the drivers? A role in the organisation must be able tomanage the driver.

• Measurable - can the data be collected (eg. manually, ERP)? How often will it need tobe updated? Is it mathematically logical?

• Is there a “best demonstrated performance”yardstick that can be used to highlight priorityareas for improving performance.

• What is the appropriate time frame to measureand report the drivers?

We construct the driver tree working from left (our Valued Outcome) and map out the drivers tothe right until there is either no measure available or the detail is not useful (see page 5).

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PERFORMANCE MANAGEMENT

Value Driver Tree (open cut mine haulage example)

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A well constructed and managed VDT will give your business managers a simple butpowerful tool to keep their staff focussed on the key economic drivers to deliverbusiness value.

The VDT makes clear role accountability,provides a trigger for business varianceidentification and directs people to whereimprovement projects should be focussed.

Key benefit measures can be communicatedquickly and clearly up to Board and out to all employees.

Automation of data collection keeps focus onmanaging improvements – not on “checkingthe numbers”.

BenefitsExamples of recent client engagements:

Wesfarmers Premier CoalChange management of major cross businesstransformation project including use of VDT's to link front line process changes with overallimprovement KPI's

Zinifex Century MineDesign and implementation of VDT's for mine(contractor alliance) and process plant

OceanaGold (NZ)Design and implementation of VDT's across mineand processing operations

Pasminco SmeltersDesign and implementation of VDT's for Port Piriesmelting operations

For Further information on Value Driver Treesby Churchill please contact:

Craig Hook on +61 (0)8 6311 7011 orcrh@churchillcapital.com.au

Jeff Innes, Deputy General ManagerZinifex Century Mine

“With the help of ChurchillConsulting, Zinifex Century Mineimplemented a Driver Tree projectthat provided us with a deeperunderstanding of what drives valuein our business. The project hasallowed more effective tracking andreporting of key performanceindicators that are relevant to eachof our work groups”.

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Craig HookCraig is a leading practitioner in the design and implementation ofbusiness strategy and organisationalcapability systems. With a strongtechnical and leadership background,Craig has a proven record in theimplementation of systems that drivean improvement culture of increasedprofitability and teamwork.

Before working for ChurchillConsulting, Craig has heldoperational and strategicmanagement roles with Rio Tinto,BHP-Billiton and Oceana Gold.

Professional QualificationsMBA (Melbourne Business School)B.Eng (University of Queensland)

Skills Summary• Craig has significant experience in Project

and Programme Management including technicalfeasibility studies, design and implementation ofbusiness improvement systems and improvementprojects.

• Design of implementation framework for businessimprovement projects, evaluation of cost savingopportunities, design and implementation ofbusiness improvement systems.

• Design and implementation of integrated culturaland systemic systems and tools to affect change.

• Mentoring of senior managers in change anddelivery of leadership training.

Contact DetailsTelephone: (08) 6311 7011E-mail: crh@churchillcapital.com.au

Key ClientsRio Tinto, BHP Billiton, OceanaGold, AngloGoldAshantiZinifex, Wesfarmers Premier Coal

PERFORMANCE MANAGEMENT