PHASE 1: PERFORMANCE PLANNING AND CONTRACTING

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1 PHASE 1: PERFORMANCE PLANNING AND CONTRACTING PERFORMANCE PLANNING Performance Planning is the first step of the Performance Management Process. Performance Planning refers to the process through which the management of the organisation documents the performance results they wish to achieve in the next financial year. These performance results are then cascaded down to lower levels in order to determine the required performance results of each of the Units, as well as for each of the individual roles. A simple way to document the required results is through using the Balanced Scorecard approach, which identifies specific Business Results (Financial), Stakeholder (Customer), Governance and Internal Processes, and People Management (Learning and Growth) results or outcomes to be achieved. Consensus between the manager and the employee on exactly what is required in terms of performance results and behaviours is one of the key success factors of effective performance management. The manager will have gone through the process of agreeing his / her own performance contract with his / her own manager, and must share this with his / her employees. This will create the context for the specific expectations being put to the employee (the employee is required to achieve his / her results and to display the desired behaviours in order to contribute to the achievement of the goals of their manager, the Unit and the Business. The process through which consensus is reached between manager and employee on performance results and desired behaviour is referred to as Performance Contracting. PERFORMANCE CONTRACTING The Business goals are used as an input into individual performance contracting. During the process of Performance Contracting a manager and his / her employees should agree (usually individually, but sometimes also within a team context) on the following: 1. The Key Performance Areas (KPA s), measures and targets to be achieved (the What ); and 2. Competencies (knowledge, skills and behaviour) required to deliver these results (the How ). The following is some background information on how to ensure effective Performance Planning and Contracting

2 Defining Key Performance Areas (KPA s) A KPA is defined as a specific performance area (for example as per Balanced Scorecard perspectives) directed at achieving the strategic objectives of the business. Each KPA has one or more specific measurements; Each measurement has a specific target; Each target is described by the underlying assumptions (if applicable), and Each measurement should indicate the source of evidence of performance. Make sure KPA s are SMART: Specific Measurable Action Orientated Realistic Time Bound Clearly states the outcome, result, or output you expect to achieve. Clearly states yardsticks for assessing success. Describe what action will take place and what the result will be. They are reasonable and can be expected to be achieved, with some opportunity for growth. Specifies a time frame / deadline in which results should be achieved. The KPA s should be written at the EXPECTED PERFORMANCE level. The KPA s should also reflect business priorities, with an alignment between individual KPA s, measures and targets, and the business objectives. Ensure that each KPA: Supports the objectives of the business / unit objectives. Are clear and understood by both the manager and the employee. Is challenging and realistic. Are within the employee s line of sight or within his scope of authority. Ensure that the KPA s can be achieved by answering an affirmative answer to each of the following questions: Are there sufficient resources available for the execution of the tasks? Does the employee have the required knowledge and skills to carry out the tasks? Does the employee have the authority required to act?

3 Selecting Appropriate Measures To verify whether a KPA has been accomplished, measurements need to be in place. Performance Measures gauge the extent to which employees achieve their KPA s. They ensure that performance will not be dependent on subjective manager perceptions, but upon specific, observable and objective measures. Tips Include Stakeholder s Point of View: Be sure that the role s contribution to the stakeholders is clearly defined. Are there multiple stakeholders? Focus on end result to specific stakeholders. Ensure Resource Availability: Make sure the person being measured has the skills, tools and authority to achieve the outcomes. Target the Desired Behaviour: Measures should drive the desired behaviour and not inadvertently result in unsatisfactory behaviour. When selecting measures, ask yourself: What do you want to measure? Why do you want to measure it? Once you ve measured it, what does it tell you? How will the measurement foster improvement? Is there a more appropriate way to measure?

4 Setting Targets Expected levels of performance are defined by setting appropriate targets. Performance targets help: To align manager and employee expectations; Manager and employee to judge how well a KPA was achieved; To distinguish between highest and lowest performing employees; and Employees to understand the basis for their review and appraisal. When Establishing Performance Targets, consider measures for: Quality. Quantity. Cost. Time. When setting targets: Consider past performance (lessons learned) and levels of achievement; Decide how to evaluate success; Further specify a measurement (%, number, quality, etc); Determine how information on measurement will be collected; and Compare current results with others performing similar functions (internal and external). Since targets can seldom be defined as one specific value but rather intervals, for each target, provide the following performance standards for each target: What constitutes meeting the target? What constitutes below expectation? What constitutes exceed expectation? PERSONAL DEVELOPMENT PLANNING A critical component of effective Performance Management is to understand and assess the COMPETENCIES required of the individual in order to achieve the set targets and to exhibit the desired behaviour. The purpose of such an assessment is to be able to identify competency gaps relevant to job performance, and to then plan appropriate development (typically noted in a Personal Development Plan).

5 Competence and Value Assessment During the process of assessing competencies and values, whether assessing your own or that of another individual, a number of principles need to be kept in mind: Assess each competency and value separately; Make sure you have BEHAVIORAL EVIDENCE for your rating; Be honest this is not about being nice to people. If you are not honest in your rating, you may be depriving someone else of a learning opportunity! For each competency and value required, the evidence, as well as lack of evidence is defined in behavioral terms. In other words how would you know that an individual is either competent or not, either living the values or not, and what behavior would indicate this? Addressing Gaps in Competence When selecting a training and development intervention, consider the following: The individual s learning style; Different learning and development approaches such as SelfStudy, Experiential Learning, Training, Lecturing, Role Playing, Job Rotation, Planned Reading, Computerbased Training, Business Games, Case Studies, Role Models, Mentorship, Video, Outdoor Training; and Learning interventions available within your institution. With the background information above, the manager should now be in a position to document the Performance and Development Contract in consultation with the employee. TEMPLATE The following table illustrates, the steps to draw up a performance contract and associated development plan.

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