From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance...
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Transcript of From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance...
![Page 1: From fixed to relative performance contracts - Keynote by Niels Pflaeging at Cubewise Performance Management Leadership Forum (Sydney/AUS)](https://reader033.fdocuments.in/reader033/viewer/2022050614/5884296c1a28ab485c8b6f73/html5/thumbnails/1.jpg)
From fixed to relative performance contracts and towards simple, ethical and empowering ways of dealing with value creation
Sydney, 15.10.2015 Cubewise Performance Management Leadership Forum
@NielsPflaeging
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Performance Culture
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Formal part of value creation Solution: Machine
Dynamic part of value creation Solution: Man
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high dynamics
Local markets, high customization
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Sluggish/dull, low dynamics
high dynamics
Spacious markets, little competition
Local markets, high customization
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Sluggish/dull, low dynamics
high dynamics
high dynamics
Spacious markets, little competition
“Outperformers” exercise market pressure over conventional companies
Local markets, high customization
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Formal part of value creation Solution: Machine
Dynamic part of value creation Solution: Man
Sluggish/dull, low dynamics
high dynamics
high dynamics
Age of Crafts Manu- facturing
Industrial Age/ Age of
Tayloristic Industry
Age of Global Markets
1850/1900
Spacious markets, little competition
“Outperformers” exercise market pressure over conventional companies
Local markets, high customization
1970/80 today
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Periphery
Market
Center
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1 Impulse 4 Command
3 Decision
2 Information
5 Reaction
Center
Market
Periphery
Client
Is in charge!
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1 Impulse 2 Decision
3 Reaction
Center
Market
Periphery
Client
Serves the periphery, if needed
Is in charge!
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•! Fixed,!individual!targets!•! Management!by!Objectives!•! Budgets!and!Plans!•! Performance!Appraisal!•! Hierarchical!Pressure!•! Pay!by!Position!or!Performance!•! Incentives!and!Bonuses!•!…!
Low!dynamics!
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•! Fixed,!individual!targets!•! Management!by!Objectives!•! Budgets!and!Plans!•! Performance!Appraisal!•! Hierarchical!Pressure!•! Pay!by!Position!or!Performance!•! Incentives!and!Bonuses!•!…!
•! Transparency!&!Improvement!•! Comparisons!between!peers!•! Comparisons!with!previous!periods!•! Dialog!and!Dissent!•! Social!and!group!pressure!•! Pay!by!market!value!•! Results!Sharing!•!…!
Low!dynamics!
High!dynamics!
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Theory!X! Theory!Y!
People!need!to!work!and!want!to!take!an!interest!in!it.!Under!right!conditions,!they!enjoy!it!
People!dislike!work,!!find!it!boring,!and!will!avoid!it!if!they!can!!
Attitude!
Direction!
Responsibility!
Creativity!
Motivation!
Peoplein
work,can
People!will!direct!themselves!towards!a!target!that!they!accept!!
People!will!seek!and!accept!responsibility,!under!the!right!conditions!!
Under!the!right!conditions,!people!are!motivated!by!the!desire!to!realize!their!own!potential!
Creativity!and!ingenuity!are!widely!distributed!and!grossly!underused!
People!must!be!forced!or!bribed!!to!make!the!right!effort!!
!
People!would!rather!be!directed!than!accept!responsibility,!"which!they!avoid#!
People!are!motivated!mainly!by!money!!and!fears!about!their!job!security!!
Most!people!have!little!creativity!-!except!when!it!comes!to!getting!round!rules!
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Behaviors!
Context!Human!!Nature!
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”Meritocracy“ Budgeting Planning
Control of work hours Job Descriptions
Competencies Management
Incentives Individual targets
Performance Appraisal/360°
Salary Ranges
Training budgets Personnel Development
Org charts
Target negotiation
Holiday applications
”Personnel Expenses“
Suggestion boxes
Assessment Centers
Knowledge Management
Pay for Performance
Paid extra hours
Bonuses
Sales Quotas
Dress codes
Job titles
HR
Allocations
Cost Management
Plan-Actuals variances
Forecasting
MbO
Development Centers
Bosses hire
Strategic Planning
Travel policies Jours fixes
Earnings Guidance Matrix Structures
Key Accounting, Business Areas
Business Partners
SWOT Analysis …
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Fixed,!negotiated!targets!
Most!important!competitor!"28%#!!!
Market!"25%#!!!Plan!
"15%#!!
Actual!"21%#!!
Target:!absolute!ROCE!in!%!"here:!15%#!
!expected market Ø: 13%"
Plan!
Comparison:!Plan-Actual!
Actual!
Relative,!self-adjusting!targets!Target:!relative!ROCE!in!%!"to!market#!
Most!important!competitor!"28%#!!!
Market!"25%#!!!
Target:!ROCE!!in!%!better!!
than!market!avrg.!Actual!"21%#!!
!independent from expected
market Ø"
Target! Actual!Comparison:!Market-Actual!
targets
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Accounts/KPIs!vs!prev.!periods!
last!mnth!!!!!!
Same!mnth!last!year!!!!!!
Same!mnth!prev..!year!!!!!!
Ø!!last!12!!mnths!!!!!!
Ø!!12!!prev.!mnths!!!!!!
!Indicators!or!Groups!of!accounts!
Rankings!"“league!tables”#!
Company! !KPI!
Competitor!A !31%!Competitor!E !24%!Competitor!C !20%!Us ! !18%!Competitor!B !13%!Competitor!D !12%!Competitor!G !10%!Competitor!F !!!8%!
Regions!!KPI!
Region!G!!7%!Region!E!!7%!Region!B!!6%!Region!F!!4%!Region!A!!3%!Region!D!!3%!Region!C!!1%!Region!H!!0%!
Snapshot!"static#!w/benchmarks!
KPI!2!
Us!Our!unit!B!
Our!!unit!A!
Compe-!titor!B!
Compe-!titor!A!
KPI!1!
Trend!with!references!"A#!Maximum!
Curve!with!variance!
KPI!"B#!Gliding!average!
Time!"Actuals#!
Trend!with!benchmark!
Us!
Competitor!A!
Time!"Actuals#!
KPI!
Trend!with!tolerance!
Tolerance!levels!
Time!"Actuals#!
KPI!
Us!
out!of!bounds!
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Data Information ? ?
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Industry!
Retail!
Services!
Government/!NGOs!
It!is!possible.!
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!Law ! !Beta! !Alpha!!§§1!!Freedom!to!act !Connectedness !not!Dependency!§2! !Responsibility !Cells !not!Departments!§3! !Governance !Leadership !not!Management!§4! !Performance!climate !Result!culture !not!Duty!fulfillment!§5! !Success !Fit !not!Maximization!§6! !Transparency !Intelligence!flow !not!Power!accumulation!§7! !Orientation !Relative!Targets !not!Top-down!prescription !!§8 !Recognition !Sharing !not!Incentives!§9! !Mental!presence !Preparedness !not!Planning!§10!!Decision-making !Consequence !not!Bureaucracy!§11!!Resource!usage !Purpose-driven !not!Status-oriented!§12!!Coordination !Market!dynamics !not!Commands !!!
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From!fixed!to!relative!performance!contracts!!and!towards!simple,!ethical!and!empowering!ways!!of!dealing!with!value!creation!
@NielsPflaeging!nielspflaeging.com!
organizeforcomplexity.com!betacodex.org!
slideshare.net/npflaeging!