At the end of the programme, the participants should be able to:- Understand the real meaning and importance of KPIs and KRAs to the organisation

Transcription

1

2 PROGRAMME OBJECTIVES At the end of the programme, the participants should be able to:- Understand the real meaning and importance of KPIs and KRAs to the organisation Link PMS to KPIs and KRAs by having a clear Line of Sight Implement the operation process in developing the KPIs and KRAs Set and cascade the KPIs and KRAs to their next level

3 PROGRAMME CONTENT/OUTLINE CONCEPT OF KEY RESULTS AREAS (KRA) What & Why of KRA Differences between KRA & KPIs Organisation or Business KPIs and KRAs: What & why of organisationor Business KPIs and KRAs? Define your strategic organization or business direction Specify your strategic organization or Business KRAs & KPIs Specify your strategic organisation or business target Turn your organisationor business measurement into excellent services or profits

4 PROGRAMME CONTENT/OUTLINE CONCEPT OF KEY RESULTS AREAS (KRA) SETTING OPERATIONS KPIs and KRAs What & Why of operations KPIs and KRAs (Down Stream Concept) Specify the operations processes Specify the interaction of operations processes Measurement Principle : QQCT Specify the KPI of the operations processes

5 PROGRAMME CONTENT/OUTLINE CASCADING DOWN THE KPIs and KRAs TO YOUR NEXT LEVEL Concept : Results Focus vs. Task Oriented Breakdown of your KPIs and KRAs by section Assess the competency of your department Assign & set KPIs and KRAs for your next level Assess the feasibility of your assigned KPIs and KRAs

6 CORPORATE PERFORMANCE MANAGEMENT

7 PERFORMANCE MANAGEMENT FRAMEWORK Vision Mission Strategy Strategy Map Key Performance Indicators Identifying Defining Measuring Monitoring Reporting Company strategy

8 PERFORMANCE MANAGEMENT COMPONENT Three critical components for effective process of performance management Performance Management Process Performance management cycle is continuous and consistent Logistic support and performance management administration Performance Management Infrastructure Performance Management Culture Culture that is based on performance accountability

9 PERFORMANCE MANAGEMENT CYCLE STRATEGY Set Measures and Target Reward and Coach Plan and Execute Monitor and Evaluate

10 MANAGING PERFORMANCE WITH BALANCED SCORECARD Balanced Scorecard is a management tool that provides stakeholders with a comprehensive measure of how the organization is progressing towards the achievement of its strategic goals.

11 MANAGING PERFORMANCE WITH BALANCED SCORECARD Balances financial and non-financial measures Balances short and long-term measures Balances performance drivers (leading indicators) with outcome measures (lagging indicators) Leads to strategic focus and organizational alignment.

12 4 PERSPECTIVES IN BALANCED SCORECARD The Strategy Financial Perspective If we succeed, how will we look to our shareholders? Learning & Growth Perspective Internal Perspective Customer Perspective To achieve our vision, how must we look to our customers? To satisfy our customers, which processes must we excel at? To achieve our vision, how must our organization learn and improve?

13 STRATEGY AND BALANCED SCORECARD Mission Why We Exist Vision What We Want to Be Strategy : Our Game Plan Strategy Map : Translate the Strategy Strategic Outcomes Satisfied Shareholders Delighted Customers Values What s Important to Us Balanced Scorecard : Measure and Focus Excellent Processes Motivated Workforce

14 STRATEGY MAP FRAMEWORK The strategy map framework is presented in the following slides. This framework describes the types of strategic target that should be presented in each perspective, namely the financial perspective, customers, internal business process, and learning & growth perspective.

15 STRATEGY MAP FRAMEWORK Long-term Shareholder Value Cost Efficiency Revenue Growth Financial Price Quality Service Availability Brand Customer Internal Process Operations Management Processes Customer Management Processes Innovation Processes Regulatory and Social Processes Learning & Growth Human Capital Organization Capital Information Capital

16 Mission: F0: Top Financial Objective (Tab F0_1, Financial Vision Statement F2: Financial Objective 2 Strategic Theme 1 BSC Report as of _ F1: Financial Objective 1 Navigation: Click on ovals to view objective measures F3: Financial Objective 3 Strategic Theme 2 Strategic Theme 3 Strategic Theme 4 Customer C1: Customer Objective 1 C2: Customer Objective 2 C4: Customer Objective 4. C3: Customer Objective 3 P7: Process Objective P4: Process Objective P8: Process Objective People Internal Processes People statement P3: Process Objective 3 P2: Process Objective L1: Learning/People Objective P5: Process Objective L2: Learning / People Objective P6: Process Objective P1: Process Objective L3: Learning / People Objective P11: Process Objective L4: Learning / People Objective P9: Process Objective P10: Process Objective L5: Learning / People Objective

17 FINANCIAL PERSPECTIVE In private companies, the financial perspective is the main objective (ultimate goal) without having to sacrifice the interests of other relevant stakeholders (community, environment, government, etc.) In the financial perspective, the strategic goal is the long-term shareholder value. This goal is driven by two factors, namely : revenue growth and cost efficiency.

18 STRATEGIC OBJECTIVES IN FINANCIAL Long-term Shareholder Value Cost Efficiency Improve Cost Structure Increase Asset Utilization Revenue Growth Expand Revenue Opportunities Enhance Customer Value

19 CUSTOMER PERSPECTIVE This perspective is very instrumental, because without customers, how can a company survive? Customer perspective covers the following elements: Customer acquisition Customer retention Customer profitability Market share Customer satisfaction

20 STRATEGIC OBJECTIVES IN CUSTOMER Customer Retention Customer Profitability Customer Satisfaction Market Share Customer Acquisition Price Quality Service Availability Brand

21 INTERNAL PROCESS PERSPECTIVE This perspective reflects the processes in key business that should be optimized in order to meet the needs of the customers. There are four main themes in this perspective, namely: Operations Management Process Customer Management Process Innovation Process Regulatory and Social Process

22 STRATEGIC OBJECTIVES IN INTERNAL PROCESS Operations Management Processes Customer Management Processes Innovation Processes Regulatory and Social Processes Processes that produce and deliver products and services Processes that enhance customer value Processes that create new products and services Processes that improve communities and the environment Supply Selection New Ideas Environment Production Acquisition R&D Portfolio Safety & Health Distribution Retention Design/ Develop Employment Growth Launch Community

23 LEARNING & GROWTH PERSPECTIVE This perspective reflects the capability that a company should have, namely: Human Capital Organization Capital Information Capital This perspective shows us that good human resource development system, organizational system and information system forms a solid foundation for improving company performance.

24 STRATEGIC OBJECTIVES IN LEARNING & GROWTH Human Capital Organization Capital Information Capital Skills Knowledge Attitude Culture Leadership Organization Development Systems Database Networks

25 STRATEGY MAP TEMPLATE The following slide displays the strategy map template comprising of four perspectives: financial, customer, internal business process, and learning & growth.

26 STRATEGY MAP TEMPLATE Enhance Long-term Shareholder Value Improve Cost Efficiency Increase Revenue Growth Financial Build High Performance Products Expand Market Share Enhance Brand Image Customer Internal Process Achieve Operational Excellence Drive Demand through Customer Relation Management Manage Dramatic Growth through Innovation Implement Good Environmental Policy Learning & Growth Develop Strategic Competencies Build Learning Culture Expand Capabilities with Technology

27 IDENTIFYING KEY PERFORMANCE INDICATORS (KPI)

28 KEY PERFORMANCE INDICATORS (KPI) Vision Mission and Values Strategy KPI = Measurement or indicator that provides information on how far we have succeeded in achieving the strategic objectives Strategic Objectives Finance Customer Internal Business Process HR Development Key Performance Indicators Key Performance Indicators Key Performance Indicators

29 KPI GUIDELINES The measure of success must show clear, specific and measurable performance indicators. The measure of success should be declared explicitly and in detail so that it is clear what is being measured. Costs to identify and monitor the measure of success should not exceed the value that will be known from the measurement.

30 KPI GUIDELINES Relevant to the Strategic Objective Controllable Does KPI have a linkage with the strategic objectives? Are the KPI achievements still under control? Actionable Can any action be taken to improve the performance? Simple Is the KPI easy to explain? Credible Is the KPI not easy to manipulate?

31 KPI FAMILY DIMENSION Productivity Measures employee output (units/ transactions/ dollars), the uptime levels and how employees use their time (sales-to-assets ratio, dollar revenue from new customers, sales pipeline). Quality Measures the ability to meet and/or exceed the requirements and expectations of the customer (customer complaints, percent returns, DPMO -- defects per million opportunities).

32 KPI FAMILY DIMENSION Profitability Measures the overall effectiveness of the management organization in generating profits (profit contribution by segment/customer, margin spreads). Timeliness Measures the point in time (day/week/ month) when management and employee tasks are completed (on-time delivery, percent of late orders).

33 KPI FAMILY DIMENSION Process Efficiency Measures how effectively the management organization incorporates quality control, Six Sigma and best practices to streamline operational processes (yield percentage, process uptime, capacity utilization). Resource Utilization Measures how effectively the management organization leverages existing business resources such as assets, bricks and mortar, investments (sales per total assets, sales per channel, win rate).

34 KPI FAMILY DIMENSION Cost Savings Measures how successfully the management organization achieves economies of scale and scope of work with its people, staff and practices to control operational and overhead costs (cost per unit, inventory turns, cost of goods). Growth Measures the ability of the management organization to maintain competitive economic position in the growth of the economy and industry (market share, customer acquisition/retention, account penetration).

35 KPI CATEGORY DIMENSION The actual raw data value as measured (e.g., sales volume). Direct The comparison of the changes in performance of one value relative to the same value at a different time, geography, etc. (e.g., percentage change in sales vs. last year). Percent

36 KPI CATEGORY DIMENSION The comparison of one value relative to another to provide a benchmark for comparison of performance (e.g., average sales per day). Simple Ratio A combination of several separate measures added together that result in an overall indicator of performance (e.g.,(company sales growth)/(industry sales growth) for a specific geography). Index

37 KPI CATEGORY DIMENSION The addition of the weighted averages of several similar measures that result in an overall composite indicator of performance (e.g., customer satisfaction composite is mixture of results from surveys, focus groups and product returns). Composite Average Multiple measures such as mean, variance, standard deviation and variance that capture the spread and distribution of the performance measures (e.g., sales distribution by demographics, geography, channel). Statistics

38

39 STRATEGY MAP FOR CORPORATE FUNCTIONS (HR, IT, FINANCE AND MARKETING)

40 INTEGRATION BETWEEN CORPORATE AND DIVISION/DEPARTMENT Vision Mission Strategy Corporate Scorecard Division Scorecard The Division Scorecard is built by referring to the corporate scorecard

41 CORPORATE AND DIVISION SCORECARD Financial Corporate Finance Corporate Marketing Customer Production Supply Chain Internal Process Learning& Growth R & D Corporate HR Info Technology

42 CORPORATE AND DIVISION SCORECARD Division Scorecard is formulated by looking at the four perspectives in Corporate Scorecard. As shown in the previous slides, the learning & growth perspective provides guidelines for developing scorecard at the Human Resource and IT divisions, while the internal process perspective provides guidelines for developing scorecard at the supply chain division or R&D.

43 CORPORATE AND DIVISION SCORECARD Sample from GE Lighting Business Group Level of Organization Financial Customer Internal Process Learning & Growth Corporate Scorecard Increase profit margin Improve customer Increase inventory turns Increase level of satisfaction level Improve internal process employee competency Division Scorecard Optimize cost of production Improve customer Increase inventory turns Increase level of Reduce inventory levels satisfaction level Improve internal process employee competency Plant Scorecard Optimize cost of production Increase percent of Increase inventory turns Number of "on the Increase yields ratio on time delivery Reduce number of defects job training" delivered Increase labor productivity Reduce customer per million Number of performance Reduce inventory levels complaints per million Improve quality incoming coaching session materials Maintain optimum equipment speed Frontline Employee Reduce waste Reduce equipment downtime Number of "on the Scorecard Reduce overtime Reduce number of poor job training" attended Increase production rates solders Number of performance Reduce number of cracked coaching session bulbs attended The above example shows how the scorecard at corporate level is cascaded to division level, and further to plant level and employee level.

44 DIVISION STRATEGY MAP TEMPLATE The strategy map for HR Division, Information Technology Division, Finance Division, and Marketing Division are presented in the following slides.

45 HR STRATEGY MAP TEMPLATE Drive Long term Shareholder Value Financial Optimize HR Efficiency Enhance People & Organizational Effectiveness Create Positive Work Environment Provide Quality HR Service Provide High Performance People Customer HR Internal Process Achieve HR Process Excellence Build Strategic Employee Competencies Drive Organizational Performance Learning & Growth Develop Strategic & Functional HR Competencies Enhance Technology for HR Create Climate for HR Action

46 IT STRATEGY MAP TEMPLATE Drive Long term Shareholder Value Financial Optimize IT Efficiency Enhance IT Impact on Enterprise Outcome Customer Deliver Consistent, High Quality IT Service Provide Business Units with Innovative IT Solutions IT Internal Process Maintain a Reliable IT Infrastructure Develop Effective Decision Support System Propose and Deliver Transformational Applications Learning & Growth Develop Strategic & Functional IT Competencies Enhance IT Tools that Enhance the IT Function Promote Customer-focused Culture

47 FINANCE STRATEGY MAP TEMPLATE Drive Long term Shareholder Value Financial Optimize Financial Efficiency Enhance Finance Effectiveness on Enterprise Outcome Customer Deliver Responsive & Efficient Finance Operations Provide Clear & Reliable Required Disclosure Finance Internal Process Achieve Finance Process Excellence Develop Financial Information to Improve Decision Making Ensure Compliance with Regulatory Requirements Learning & Growth Develop Strategic & Functional Finance Competencies Use Technology to Improve Financial Information Delivery Promote Customer-focused Culture

48 MARKETING STRATEGY MAP TEMPLATE Drive Long term Shareholder Value Financial Optimize Marketing Efficiency Increase Sales Revenue Customer Create Satisfied and Loyal Customers Enhance Brand Image Internal Process Develop Effective Customer Relation Management Develop Innovative Marketing Communication Program Develop Marketing Business Intelligence Accelerate New Product Development Ideas Learning & Growth Develop Strategic & Functional Marketing Competencies Enhance Technology for Marketing Foster Creative Thinking & Innovative Solutions

49 REFERENCES 1. Robert Kaplan and David Norton, Strategy Map : Converting Intangible Assets into Tangible Outcomes, HBS Press 2. Robert Kaplan and David Norton, Alignment : Using the Balanced Scorecard to Create Corporate Synergies, HBS Press

50 COMPETENCY-BASED PERFORMANCE MANAGEMENT

51 INDIVIDUAL PERFORMANCE ELEMENT Individual Performance elements has two main categories: 1. Performance Results: Hard or quantitative aspects of performance (result) 2. Competencies: It represents soft or qualitative aspects of performance (process)

52 INDIVIDUAL PERFORMANCE ELEMENT 1. Performance Results Score Overall Score 2. Competencies Score Will determine the employee s career movement, and also the reward to be earned

53 ELEMENT # 1 : PERFORMANCE RESULTS No. Main Performance Target Target to be Achieved 1 Conduct an assessment of the All employees submit their performance assessment form employee's performance on time 2 Improve the system for Target : completed 100 % performance assessment in November Conduct training activities Target : to conduct 6 training modules in one year 4 Carry out on the job training Target : 90 % of the total employees activities who attend the training experience an increase in skill and knowledge Target should be measurable and specific

54 ELEMENT # 2 : COMPETENCIES Competency : Collaboration Basic Intermediate Advanced Expert Actively listens, and clarifies understanding where required, in order to learn from others. Actively listens, and clarifies understanding where required, in order to learn from others. Actively listens, and clarifies understanding where required, in order to learn from others. Actively listens, and clarifies understanding where required, in order to learn from others. Empathise with audience and formulates messages accordingly. Empathise with audience and formulates messages accordingly. Empathise with audience and formulates messages accordingly. Empathise with audience and formulates messages accordingly. Shares resources and information. Shares resources and information. Shares resources and information. Shares resources and information. Responds promptly to other team members needs. Balances complementary strengths in teams and seeks diverse contributions and perspectives. Actively builds internal and external networks. Builds internal and external networks and uses them to efficiently to create value. Involves teams in decisions that effect them. Uses cross functional teams to draw upon skills and knowledge throughout the organization. Uses cross functional teams to draw upon skills and knowledge throughout the organization. Encourages co-operation rather than competition within the team and with key stakeholders. Builds and maintains relationships across The company. Drives and leads key relationship groups across The company. Manages alliance relationships through complex issues such as points of competing interest. Ensures events and systems, eg IT, for collaboration are in place and used. Draws upon the full range of relationships (internal, external, cross The company) at critical points in marketing and negotiations.

55 ASSESSING COMPETENCY THROUGH ASSESSMENT CENTER Assessment Center Characteristics: A standardized evaluation of behavior based on multiple inputs. Multiple trained observers and techniques are used. Judgments about behaviors are made, in major part, from specifically developed assessment simulations. These judgments are pooled in a meeting among the assessors or by a statistical integration process

56 TYPES OF TEST IN ASSESSMENT CENTER In-Basket Exercise Role Simulation In-trays or in-baskets involve working from the contents of a manager s in-tray, which typically consists of letters, memos and background information. You may be asked to deal with paperwork and make decisions, balancing the volume of work against a tight schedule. In a role play, you are given a particular role to assume for a certain task. The task will involve dealing with a role player in a certain way, and there will be an assessor watching the role play.

57 TYPES OF TEST IN ASSESSMENT CENTER Presentation You may be required to make a formal presentation to a number of assessors. In some cases this will mean preparing a presentation in advance on a given topic. In other cases, you may be asked to interpret and analyse given information, and present a case to support a decision. Fact-Finding Exercise In a fact-finding exercise, you may be asked to reach a decision starting from only partial knowledge. Your task is to decide what additional information you need to make the decision, and sometimes also to question the assessor to obtain this information.

58 TYPES OF TEST IN ASSESSMENT CENTER Group Discussion Group exercises are timed discussions, where a group of participants work together to tackle a work-related problem. Sometimes you are given a particular role within a team, for example sales manager or personnel manager. Other times there will be no roles allocated. You are observed by assessors, who are not looking for right or wrong answers, but for how you interact with your colleagues in the team.

59 COMPETENCY ASSESSMENT AND RATING Results of Observation Through the Assessment Center Competency Score

60 RECOMMENDED FURTHER READINGS 1. Paul Green, Building Robust Competency, John Wiley and Sons 2. David Dubois, Competency-based HR Management, Black Publishing

61 MONITORING KPIs and KRAs USING THE BSC STRATEGIC MAP DASHBOARD

62 Mission: F0: Top Financial Objective (Tab F0_1, Financial Vision Statement F2: Financial Objective 2 Strategic Theme 1 BSC Report as of _ F1: Financial Objective 1 Navigation: Click on ovals to view objective measures F3: Financial Objective 3 Strategic Theme 2 Strategic Theme 3 Strategic Theme 4 Customer C1: Customer Objective 1 C2: Customer Objective 2 C4: Customer Objective 4. C3: Customer Objective 3 P7: Process Objective P4: Process Objective P8: Process Objective People Internal Processes People statement P3: Process Objective 3 P2: Process Objective L1: Learning/People Objective P5: Process Objective L2: Learning / People Objective P6: Process Objective P1: Process Objective L3: Learning / People Objective P11: Process Objective L4: Learning / People Objective P9: Process Objective P10: Process Objective L5: Learning / People Objective