Session 4: Using Performance Management Systems to Support Successful Plan Implementation

1. Session 4:Using Performance Management Systems to Support Successful Plan Implementation

2. Using Performance Management Systems to Support Successful Plan Implementation Purpose Help you understand how to maximize results by developing and implementing effective performance management systems. Objectives • Identify the steps needed to design and effectively implement performance management systems at the company, department, and individual levels. • Highlight the impact that effective performance management systems have on long-term organizational success. • Provide you with strategies for implementing effective performance management systems within your company. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

3. Performance Management Systems and Their Role in Organizational Effectiveness © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

4. Performance Management Systems A set of mechanisms (both processes and techniques) designed to increase the probability that people will behave in ways that lead to the attainment of organizational objectives. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

5. Lack of Goal Congruency Individual’s Needs/Goals Company or Departmental Needs/Goals © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

6. Individual’s Needs/Goals Company or Departmental Needs/Goals Goal Congruency © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

7. The Environment Organizational Culture Structure Core Control Levels of Organizational Control © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

8. Elements of the Performance Management System © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

9. Elements of Core Control Systems • Key Result Areas (From corporate or department plans or individual role descriptions) • Objectives (From corporate or department plans or individual role descriptions) • Goals (From corporate, department, or individual plans) • Measurement • Progress Review • Performance Evaluation • Rewards © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

10. Key Result Areas • Areas of performance which are essential to the company’s, department’s or individual position-holder’s success. • Nine KRAs is considered the maximum number © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

11. Objectives • Broad statements of what needs to be in achieved in each Key Result Area. • For the company/department, objectives define “strategy” – results to be achieved over the longer term. • For position-holders, objectives/activities define what needs to be achieved within each KRA. • Not changed unless the strategy or structure of the organization changes. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

12. Goals • Specific, measurable, time-dated performance targets to be achieved. Each objective will have one or more goals. • Requirements for effective goals: • Limited in number • Realistic; something that can be attained • Stated in measurable terms • Expectation of success should not be 100% © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

13. SMART Goals S Specific Outcome M Measurable A Accountable and Achievable R Results-Oriented and Realistic T Time-Dated © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

14. Performance Measures • Methods and procedures used to evaluate performance • Guidelines include: • A preference for objective tests • If subjective means are used, several different measurements are suggested © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

15. Measurement Methods • Profit Measurement • Monetary Measurement • Non-monetary Measurement • Ratio: Numbers indicate the actual amounts of the property being measured. Has an empirically meaningful 0. • Interval: Numbers have quantitative significance – they represent distances between objects. The difference between a score of 8 and a score of 10 is the same as the difference between a score of 2 and 4. • Ordinal: Numbers signify rank order, but have no arithmetic significance. • Nominal: Numbers are “labels” intended for classification. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

16. Progress Review: Periodic Review of Progress Made Toward Goals Regular, periodic feedback to each member of a manager’s team on performance against goals, tasks assigned, and on-going responsibilities. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

17. Performance Evaluation A formal process of evaluation and feedback (based on established goals) from which adjustments in an individual employee’s performance can be made. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

18. Rewards • Positive reinforcers for accomplishing appropriate, goal-directed behavior. • Rewards need to be valued by people. • Something not desired does not constitute a reward. • Types of rewards • Intrinsic • Extrinsic © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

19. Goals Behavior Results Progress Review/ Feedback Rewards PerformanceEvaluation/Appraisal Measurement System The Performance Management System • Strategy/ • Role Description • KRAs • Objectives © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

20. Operationalizing the Performance Management System – Individual Level © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

21. What is a Key Result Area-Based Role Description? • Designed to support corporate strategy by identifying specific areas where a position contributes to the achievement of the organization’s mission. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

22. MISSION STATEMENT KEY RESULT AREAS MISSION STATEMENT OBJECTIVES KEY RESULT AREAS MISSION STATEMENT GOALS OBJECTIVES KEY RESULT AREAS MISSION STATEMENT ACTION STEPS GOALS OBJECTIVES KEY RESULT AREAS ACTION STEPS GOALS OBJECTIVES/ ACTIVITIES ACTION STEPS GOALS CALENDARED ACTION STEPS Strategic Planning Waterfall Organization Business Unit Department Individual/ Manager © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

23. What is a Key Result Area-Based Role Description? • Designed to support corporate strategy by identifying specific areas where a position contributes to the achievement of the organization’s mission. • Communicates the dimensions of a position to current and potential holders of that position, as well as others within the organization. • A guide for individual behavior. • A tool that managers can use as input for hiring, training, and day-to-day supervision. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

24. Mission Broad statement of why the position exists. Key Result Areas Position-Specific Categories of activities on which the position holder should focus to maximize success. Objectives/Activities Broad statements of what should be focused upon in each category. Goals Results to be achieved within the next 12 months within each KRA. Action Steps Person-Specific Calendared activities to achieve each objective. Role Description © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

25. Date Department Title Mission Key Result Areas Time Allocations Objectives/Activities Position Requirements Authority What are the Components of the KRA Role Description? © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

26. Date, Department, Title • When was the role description created or last updated? • Where in the organization does this position reside? • What do we call this position? © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

27. Mission • Why does this position exist in our organization? • What is its basic purpose? • How does it support the organization’s mission? © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

28. Sample Mission Statement Director of Marketing To develop, implement, monitor and evaluate strategic marketing plans that enable our firm to profitably capture a dominant share of the market. To effectively and efficiently utilize the resources of the marketing team in meeting or exceeding customer requirements. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

29. Sample Mission Statement Executive Assistant To ensure that the executive’s needs are met in a smooth and timely manner. To serve as the executive’s liaison with customers and staff. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

30. What is a “Key Result Area”? • An area where performance is critical to success. • A “category” of activities. • Expressed in one, two, or three words (e.g., People Development, Manufacturing Capability, Planning). • Used in planning at the corporate, department, and individual level. • There should be 5 to 9 Key Result Areas. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

31. Example KRAs Company President • Financial Performance • Strategic Planning • Organizational Development • Shareholder and Public Relations • Corporate Culture Management • Board Relations • Staff Development and Supervision © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

32. KEY RESULT AREAS Time Utilization Now Goal 1. 2. 3. 4. 5. 6. 7. Position Requirements: Education/Experience: Skills/Knowledge/Ability: Authority: Role Description Worksheet Date: Department: Title: Mission: © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

33. Objectives/Activities • For each KRA, what are the specific activities that must be completed to fulfill the performance requirements of that area? • Specific to the position vs. the individual. • Ongoing responsibilities vs. time-dated goals. • Expressed as an action (starts with a present tense action verb). © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

34. Oversees Analyzes Approves Authorizes Controls Coordinates Creates Designs Develops Ensures Negotiates Schedules Plans Decides Inspires Motivates Writes Edits Purchases Sells Present Tense Action Verbs • Participates • Trains • Coaches • Hires • Fires • Serves • Maintains • Facilitates • Initiates • Implements © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

35. Levels of Decision-Making 1. I have complete authority to decide and to act. 2. I have complete authority, but must notify someone else after I have decided. 3. I have complete authority, but must consult with someone else before I decide. 4. I need the prior approval of someone else before I decide. 5. Someone else must consult with me before deciding. 6. Someone else informs me of their decision. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

36. Example Objectives/Activities Administrative Support • Word processes correspondence, manuscripts, reports and other documents. • Transcribes tapes. • Screens and handles telephone calls. • Maintains filing system. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

37. Example Individual Objectives/Activities Supervision • Recruits, hires and fires direct reports • Oversees the development and maintenance of role descriptions for direct reports • Works with direct reports to establish their annual goals that support the corporate strategy • Meets periodically with direct reports to review operations • Monitors the performance of direct reports toward their annual goals • Conducts annual formal performance reviews for direct reports • Gives informal performance feedback periodically to direct reports • Decides compensation for direct reports • Coaches, develops and serves as a resource to direct reports • Disciplines employees as appropriate © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

38. Role Description Worksheet KEY RESULT AREA OBJECTIVES/ACTIVITIES 1. _______________________ a. ______________________________ ______________________________ b. ______________________________ ______________________________ c. ______________________________ ______________________________ d. ______________________________ ______________________________ e. ______________________________ ______________________________ 2. _______________________ a. ______________________________ ______________________________ b. ______________________________ ______________________________ c. ______________________________ ______________________________ d. ______________________________ ______________________________ e. ______________________________ ______________________________ © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

39. Sample Role Descriptions © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

40. Example of a Company President Role Description Date: February 9, 200X Department: Corporate Title: Company President Mission: To profitably and effectively manage the company and to maintain the highest possible level of customer satisfaction. Key Result AreasTime Utilization 1. Profitability 15% 2. Staff Development/Management 10% 3. Corporate Management 15% 4. Planning 20% 5. Corporate Culture Management 10% 6. External and Public Relations 15% 7. Organizational Development 10% 8. Miscellaneous 5% 100% © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

41. Example of a Company President Role Description KEY RESULT AREAS OBJECTIVES/ACTIVITIES 1. Corporate Management a. Working with the senior management team, ensures that corporate performance is aligned with the company’s strategy. b. Meets regularly with each senior manager to identify and resolve issues related to corporate performance. 2. Planning a. Leads the corporate strategic planning process. b. Works with senior management to develop the corporate plan. c. Works with members of senior management to evaluate performance and develop strategies for improving performance against the corporate plan. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

42. Goals, Performance Review, Performance Evaluation and Rewards © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

43. Strategies for Establishing Individual Performance Goals • Link to the individual’s Key Result Areas • Support of the company’s business unit’s plan. • Consider the individual’s needs, goals, skills, abilities. • Limit number – no more than 3 to 5 in each Key Result Area. • Establish such that the individual responsible can exert control over their achievement. • Record in writing on the Performance Appraisal Form or a “Goal Setting Form” so that they can be referred to regularly by the manager and the individual responsible for achieving them. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

44. Key Result Area Goals Support for Division/ Department Goals Support for Personal Goals 1. 2. 3. 4. 5. Goal Setting Worksheet Individual’s Name:___________ Position:_______________ © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

45. Performance Evaluation Form Individual’s Name:___________ Position:_______________ © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

46. Exercise: What Do People Value? © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

47. Sample Plan Page KEY RESULT AREA: 1.0 Markets and Products Objective 1.1: Grow active buyer base at a rate consistent with overall sales growth per year. © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

48. Operationalizing the Performance Management System – Company Level © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

49. Key Result Areas for the Company We suggest using the 6 levels of the Pyramid of Organizational Development + Financial Results: - Markets - Operational Systems - Products - Management Systems - Resources - Culture - Financial Results (Fiscal Management) Why? © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.

50. Corporate Culture Values Beliefs Norms Management Systems Management Development Perf. Mgmt. Planning Organization Operational Systems • Accounting: • Billing • Payroll • Personnel: • Hiring • Compensation • Marketing: • Selling • Production: • Shipping Resources Management Human Resources Technological and Physical Resources Financial Resources Products & Services Develop Products (Services) Markets Define Market Segments and Niche Business Foundation  Business Definition  Strategic Mission  Core Strategy Pyramid of Organizational Development © Management Systems Consulting Corporation, 1989. Revised 2004. All rights reserved.