week 3 Flashcards
Performance Management System Effectiveness
Focus on strategic and tactical goals
Active role of Senior managers
Regular communication about performance expectations
Minimal evidence of use of rater training in high performing firms (Biron et al., 2011)
Employee involvement to build sense of ownership (Nankervis et al 2014)
Traditional budget and financial statements
2
only focuses on the financial dimensions of performance
Can be too myopic
Management By Objectives (Peter Drucker, 1954)
5
Cascading of objectives
SMART goals, actions taken and measures used are discussed
Continuous monitoring and feedback, periodic reviews
Responsibilities and authorities for positions are defined, which brings in clarity in the organizations
Linked to outcomes
MBO Examples
Overall Company Performance
Overall Company Performance Become market leader Become a member of the fortune 500 Reduce carbon footprint by 5% Raise brand profile by 25%
MBO Examples
Human Resources MBO Examples
Human Resources MBO Examples
Maintain employee satisfaction index of 85%
Keep quarterly retention rate at 97%
Increase employee engagement to 85%
Maintain compensation at 10% above industry average
Hold a minimum of three interviews for new hires
Get 15% of hires from employee references
Finance MBO Examples
Finance MBO Examples
Complete independent financial audit
Increase rate of debt collection by 25%
Increase financial automation by 5%
Marketing MBO Examples
Generate 1,000 new Marketing Qualified Leads per month
Earn 40% of overall company revenue from marketing efforts
Increase annual product subscribers by 35%
Increase regular weekly website visitors by 45%
Increase surveyed brand awareness by 25%
Operations MBO Examples
Reduce software testing time to one week
Reduce product sourcing and logistics expenses by 5%
Reduce logistics shipping travel time & distance by 5% (local sourcing)
Deliver 98.5% of products on time
Fulfil 100% of warranty obligations
Management By Objectives (Peter Drucker, 1954)Limitations
Top management support
Might increase employee resentment and pressure
Rests heavily on quantifying measures, use graphic ratings scales
Requires managers to be great coaches and well trained
Kaplan and Norton’s Balanced Scorecard
Strategic, holistic approach to managing performance through considering 4 performance perspectives:
4 perfromance perspectives of Kaplan and Norton’s Balanced Scorecard
Financial Perspec
Customer Perspective
Internal processes perspec
Learning and growth perspective
Financial Perspective:
Revenue growth or Productivity Strategic Approach
Customer Perspective:
Operational Excellence, Customer Intimacy, Product Leadership Strategic Approaches
Internal processes perspective:
Management Processes, Operation and Logistics Processes, Regulatory and Environmental Processes
Learning and growth perspective:
Employee Competencies, Technology, Corporate Culture
Internal Organisational Needs
8
to clarify and gain consensus about organisation’s vision and strategy
to build a management team
to communicate the organisation’s strategy
to link rewards to strategies
Set strategic targets
Align resources and strategic initiatives
Sustain investment in intellectual and intangible assets
Provide a foundation for strategic learning
Designing a balanced scorecard step 1 and 2a1+3
Step 1- Choose an appropriate organisational unit
Does the unit have a strategy to accomplish its mission?
Step 2a) Identify unit/corporate linkages
Relationship of unit to rest of organisation
financial objectives for unit,
key corporate themes (e.g. safety, community relations, quality, innovation)
Linkages to other units (e.g. common customers, core competencies)
Designing a Balanced Scorecard: Step 2b
3
Develop a proposal for senior management
Identify (or develop) organisation mission, values, vision and strategy
Map out past performance in terms of overall competitive position (SWOT analysis) and across key perspectives
Develop a tentative list of objectives and measures (4 or 5 measures per perspective)
Designing a Balanced Scorecard Steps 3 & 4
2 2
Step 3
Conduct interviews with senior managers
Build consensus around strategic objectives
Step 4 Select and design measures
Conduct meetings with subgroups and executives to develop meaningful and relevant measures
Common core outcome measures
Balanced Scorecard Step 5 Build the implementation plan
4
Includes
How measures are linked to information systems
Communicating balanced scorecard through organisation
Timeline
Kaplan and Norton, (1996), suggest 16 week period
Fraser (2007) suggest process takes 2 to 4 months
Benefits of Balanced Scorecard
5
Popular model of best-practice performance management
Aligns employee goals with the organisation’s goals
Encourages thinking about performance across different functional areas
Attempts to link to performance outcomes
Long-term rather than short term focus.
Criticisms of Balanced Scorecard
6
Time-consuming and ambiguous
Can struggle to adapt to changing environments
It can be difficult to translate organisation’s goals into goals for individual employees
Can be ‘top-down’ rather than participative
May not include key perspectives for a business
Not clear that practices cause improvements in performance.
Contextual influences on balanced scorecards
6
Government
Nonprofit
A whole range of different industries (e.g. food, finance, tourism)
Different types of business (e.g. family, small businesses)
In businesses across a wide range of developed countries
Some businesses in developing or emerging markets
Balanced Scorecard Summary
5
Different performance management systems include Management by Objectives, Goal Setting and the Balanced Scorecard
The Balanced Scorecard is widely used and incorporates a broader understanding of performance but can be time consuming and resource intensive to implement.
The design of the balanced scorecard is 5 step process.
Innovation can be incorporated into existing balanced scorecard perspectives through consideration of sources of innovation, competitive and collaborative networks, knowledge management processes, and broadening shareholders to stakeholders.
The balanced scorecard has been widely applied in different contexts.
