Creating Performance Based Culture trough Performance Management Systems

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


• Bias• Different Standards• Surprise• Subjective• No linkage*• No differentiation• Secretive• No follow up• No control

As an Appraiser


• Cannot remember• Tedious• Subjective• Right targets• Scoring Competencies*• Defensive staff• No $$ to differentiate• Prejudices• Results or Activities


• 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


1. Wrong Business Model – blame PMS. Having a good PMS cannot correct a bad business model





• 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



erf

orm

ance

Time

Clear Sailing


Ad-hoc Tactics

Denial & Defense

Doom Projections

Overdue Failure

The Moment of Truth

X


Tomorrow’s actual

performance


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



erf

orm

ance

Time

Clear Sailing


Ad-hoc Tactics

Denial & Defense

Doom Projections

Overdue Failure

The Moment of Truth

X


Tomorrow’s actual

performance


“What is the moral of the story?”

2. Focusing on the Business

Strategy and Intent

“…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'


• 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


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


• Price• Selection• Convenience• Zero Defects• Growth


• 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



• 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


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)


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

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


Financial

Learning & Growth

Internal Process

Customers / Distributors


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

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

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

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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


1. Wrong Business Model – blame PM Systems. Having a good PM System cannot correct a bad business model





Thank You.

soft copy of slides: www.totallyunrelatedrandomanddebatable.

blogspot.com

Creating Performance Based Culture trough Performance Management Systems

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