Management By Results

Our Belief

PERFORMANCE POTENTIAL =

Performance is delivery against set standards

Potential is the ability to deliver present role and the readiness to take on higher order

roles

E.g. - A great performing Sales Officer (Individual Contributor) may not necessarily be a great Sales Manager (Team Leader)

Performance Management

Management by Results (MBR)

Sound behavioral motivational theory stretching to ones potential is motivating

Goals should motivate a person to give his best and help one to achieve his potential

Clarity on the expectation at the start of the year enables performance

Reward delivery of Results and not Efforts (without Results)

Guiding Philosophy of MBR

Beliefs

Guiding Philosophy of MBR (contd.)

A process to enable the performance of the organization & the individual by Aligning the areas of work of an individual with the overall direction of the

organization

A collective endeavor in stimulating individuals & teams by helping them set their goals that motivate them

By providing them the opportunity to:

Stretch themselves to give their best

Set measures for expected result delivery

Get recognized and rewarded for delivery of superior results

Manifestation

Strategic Business Plan

Thrust Areas for the Year

Business / Functional Thrust Areas

Department / Team Thrust Areas

Superiors Goal Sheet

Members Goal Sheet

Goal Audit & Finalization

Mid Year Review

Annual Review

Annual Incentive

MBR Process Overview

Types of goals

Shareholder Value Creation goals e.g. Market Cap. Index to FMCG Index

Routine goals- e.g. Sales volumes, production efficiency, etc

Cost cutting goals e.g. Packaging cost reduction

Cutting loses goals e.g. From loss making to profit making

Innovation goals e.g. New Product / New Country Development

Business Developmental goals- e.g. New product enhancement, Distribution expansion, etc

Problem solving goals e.g. Rejection levels reduction

People goals e.g. Retention, Talent development, Engagement scores, etc

MBR Key Concepts

Goal

A goal is a significant, shorter-term, measurable target that will contribute to a result in a period of time (usually a year)

A longer term measurable goal (beyond a year) is defined by taking yearly milestones in the annual goal sheet

MBR Key Concepts

Premise

External circumstances which are beyond the control of the organization and are likely to have a significant impact on the result of the organization. E.g. Natural calamity, Govt. policy

Assumption Changes/events in the environment that are within the control/influence of the organization and can have impact on the result of the organization. E.g. Competitor activity

PDA & Action

Planning

Potential Deviation Analysis and Action Planning are done to prevent an event from occurring & planning a contingency in the event of its occurrence despite a preventive plan

Features of Goal Every goal has assumptions

Goals can be dynamic and may undergo a change during the year

depending on environment, opportunity or underperformance

Every member will have maximum 4 goals with respective weightages Total weightage of all goals is 100% in a goal sheet An Indicator /sub-goal should have a weightage of not less than 10%

Every Goal must have Basic & Outstanding Indicators The indicator for all quantitative goals must strictly be of the type from

____ (Basic) to ____ (Outstanding)

MBR Key Concepts

MBR Key Concepts

Outstanding Target

Is a stretch

Requires stretched efforts to achieve

Basic Target Realistic, achievable based on present condition &

resources

Minimum acceptable performance

All should strive for outstanding, ultimately

Achievement of Basic Target by all

Between Basic and Outstanding by majority

Outstanding & above by some

Goal Indicators Element of Stretch

Goal Setting - Target examples Sample Goal Sheet

Goal Indicators Basic Target (Goal Score 1)

Outstanding Target (Goal Score 3)

Weightage

Business Goal Turnover (INR Cr) 950 1000 20%

PAT (INR Cr) 100 120 20%

Increase Brand Franchise

Volumes (KL) 60,000 75,000 15%

Market Share (%) 50% 51% 15%

Value Enhancement Project

Cost Savings (INR Cr/annum)

30 34 15%

Commissioning of new Factory

Timelines 1st March 2013 31st December 2012

15%

100%

Note: Goal sheet is not only about Turnover and Profits targets but includes long term organization capability building goals as well

Mid-Year Review Management by Results (MBR)

The intent is to provide a confirmation of direction and to maintain commitment for the balance of the year. Half-yearly reviews are critical to success of Goal achievement Guidelines: Is it desirable to continue/discontinue work towards any goal? Is it desirable to add new goals or revise priorities on existing goals? Discussion and decision reached should be documented & added as

an addendum to the goal sheet

Half Yearly Review

If there is a change in Premise OR Underperformance OR Over-performance OR Significant change in Assumption (+/- 10% of the range) during the year that can impact the achievement of goals, they should be suitably modified.

Goal Review

Few examples that merit a change in goal or indicators

Half Yearly Review (contd.)

Brand Divestment/

Acquisition

Impact to goals pertaining to the brand (s)

Egypt Revolution

The unanticipated country turmoil impacting market working and production

Role Movements

Change in roles and responsibilities merit goal sheet change for the new role

Kaya Business Targets

Based on mid year review of business performance, H1 goal was rated and targets for H2 were reviewed and revised downwards

Few examples that merit a change in goal or indicators

Half Yearly Review (contd.)

Deflationary Year

Profit targets have been increased

Raw Material Price changes

Drastic changes in commodity prices have merited recalibration of the profit targets

Opportunities E.g. Dropsy disease in mustard oil created opportunity for branded oils; hence targets for edible oil brands were increased during the year

How we prevent misuse of goal/indicator changes

Half Yearly Review (contd.)

Only change in premise,

under/over performance

merits a change in goal

Egypt revolution in the 1st year is a Premise change

Tsunami in South India is a Premise change

Assumption during goal setting was that Govt. will introduce a new tax at 3%. However, the Govt. introduced a tax of 4% ( +/- 10% of anticipated tax of 3%)

Principle Events/Examples

Annual Review Management by Results (MBR)

Objective is to find ways to achieve better results in the future. The key actions are:

Document results achieved for each goal

Exchange points of view on the degree to which the results were satisfactory or unsatisfactory

Identify underlying causes for less than satisfactory results

Make tentative plans for improving results

Recognize and encourage subordinates for accomplishments

Annual Results Review

Goal Review

On a rating of 0-4, the performance on a goal will be rated as follows:

Performance below budget: Rating of 0

Performance at budget: Rating of 1

Performance between budget & outstanding: Rating between 1 & 3

Performance at outstanding: Rating of 3

Performance beyond outstanding: Rating of 4

Direction on Assessment

Goal Review Goal Sheet Rating

Goal Sheet Score = Sum Total of each (Goal Score * Goal Weightage)

Performance Reward Scheme Management by Results (MBR)

The real driver behind the Rewards Scheme is the

philosophy of Giving our Best in order to Beat the

Budget & Gun for Outstanding

When the organization gains, members also gain along

with it based on performance

Gains arising out of the performance beyond budget are

shared

The philosophy of gain sharing goes in conjunction with

the philosophy of giving our best

Performance Reward Scheme

Performance Reward Scheme (contd.)

Performance Incentive

Linked to performance of individual on the goal sheet

Can be earned independent of company performance (corporate kitty)

Variable Incentive

This is linked to the performance of the company (corporate kitty) as well as performance of individual on the goal sheet

Corporate Kitty

The exact amount of kitty available is decided by Maricos Top Team:

Respective Business Unit/Geography performance (surplus available)

Overall Maricos performance (surplus available)

Achievement of other organizational goals

Taking into account external factors

Annual Incentive = [Performance Incentive] + [Variable Incentive * Kitty Factor]