Transcript Performance Management & Measures – Professor Lin

Relevance Regained?
Performance Management in Shared Service Centres
School of Business and Economics – Research project funded by CIMA
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Relevance Lost, Johnson & Kaplan - 1987
• Described a number of cases where changes in organisational
form and business practices had resulted in innovations in
performance management & measurement.
• Emerging theme - performance management systems must
‘be consistent with the technology of the organization,
its product strategy, and its organizational structure’
(J&K, 1987 pg. 261)
• These ideas were extended by Kaplan & Norton into a
framework for performance management…
The Balanced Scorecard (1992).
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25 years on – relevance regained?
• Globalisation, technology and economic pressures are driving organisational
change
• Proactive performance management is increasingly important and underlying
organisational structures are changing
• Leading-edge companies are adopting the Shared Service model
to drive performance improvement
How is performance managed in Shared Service Centres?
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The Kaplan & Norton view
Objectives
Measures
Mechanisms: Balanced Scorecard & Strategy Maps
“Measurement is as fundamental to managers as it was for scientists”
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SSM as a ‘new’ organisational form
Head Office
Business
unit 1
Shared service centre structure
Business
unit 3
Business
unit 2
Head Office
Service
departments
Operating
units
Service
departments
Operating
units
Service
department
Operating
units
Business unit 1
Business unit 2
Business unit 3
Operating units
Operating units
Operating units
Conventional Divisional structure
(support services embedded)
Shared
service centre
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Why Shared Service Centres?
• Growing in popularity
• Classic management problems
– Internal resource allocation/transfer pricing
– Overhead allocation
– Measuring performance in service functions
• SSC’s potential to cut across the hierarchy
• The place where strategic alignment happens
• Specific issues of people management (engagement)
SSC’s - ‘new’ organisational form driven by customers is a catalyst for change,
maintains service levels and forces ongoing mutual adjustment
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…. the challenge is still implementation!
Our matrix structure has not worked very well, so we have changed it
to (guess what?) a new matrix structure. This and group underperformance is forcing the pace for performance improvement.
Senior Manager in one of the UK’s largest companies, May 2011
Like the 19th century African cartographers, we actually know less
about what happens inside companies than we did 40 years ago.
To remedy this knowledge gap, more business school scholars,
particularly in accounting, need to shift away from coastline studies,
conducted on computer terminals in their offices, and begin to explore
the interior of leading-edge company practices.
Kaplan, Harvard Business Review, May 2011
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The Case Companies
Key Findings
• Shared Service Centres present an opportunity for organisations to
reconfigure their processes to deliver both improved customer service and significant
cost saving
Clearly articulated strategies communicated through
• formal management presentations;
• information located on the company intranet; and
• prominent visual displays in the workspace.
Strategies included:
• process excellence;
• standardisation; and
• continuous improvement.
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Continuous improvement
“Every single person in the [SSC] has got a continuous improvement
objective of at least one. They must come up with one continuous
improvement objective that generates 14 hours worth of savings
during this year.”
Rolls-Royce PLC
“I think the best way to answer that is to say that the world is
changing, rapidly in some aspects and we use an array of
measures in a flexible manner to deliver a coherent strategic
response.”
Royal Dutch Shell PLC
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Benchmarking and networking
“…. the best thing about going out to other service centres is that
you see their weaknesses as well”.
Rolls-Royce PLC
“… what we’ve also done is look at best practice across the industry
as to where we’d want to get to after transformation and we have an
undertaking that we’ll try to get to those levels.”
MyCSP
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Leadership
“It’s an environment of trust”.
Rolls-Royce PLC
“... one thing I truly believe in is [that] shared services is
predominantly a people business. The processes are not operated
by systems but people.”
RCUK Shared Services Centre Ltd
.
“I don’t think anybody is embarrassed to go to S…. And say ‘This is a
problem. I’d like to do that better.” we do take it for granted that we can
actually speak our minds.”
MyCSP
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Performance management as a set of relationships between
performance measures, people and processes
Clearly important
World class Hackett measures
cost per £ billion turnover
cost per employee
Performance Measures
Managing employee’s
beliefs and organisational
identity
Processes
Need for continuous
improvement demands
“a change in mind-set and a
change in the way you work”
People
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The Performance Management Mix
Managing through the people
Managing by the numbers
Leadership
Communication
Empowerment
Measures
Shared
Service
Centre
Requisite
variety
Benchmarking
Case Background
Company Values
FSS Vision & Operating model
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Network Rail established in 2002 to manage
Britain’s rail network.
The company owns, maintains and
operates;
•
20,000 miles of track
• 8,200 commercial properties
• 18 major stations
• 2,500 other stations of which
several are leased or part-leased to
train operators
• 90 maintenance depots
• 40,000 bridges and tunnel,
• 9,000 level crossings, and
• connections to more than 1,000
freight terminals
(The Hackett Group, 2011; Network Rail,
2011).
The company:
spends £14million per day on
operating, maintaining and
regenerating the rail network
Has 35,000 employees
Revenue £5,712 million in 2011, £5,408
million from franchised track access
and grant income, £244 million
from property rental income, and
43 million from freight income
(Network Rail, 2011).
Franchised track access income is
invoiced to Train operating
companies on the basis of
agreements finalised with the
Department for Transport.
Network Rail is regulated by the Office of Rail Regulation (ORR) and is subject to detailed
operating requirements which are set out in “Control Period Delivery Plans”, the latest of which
(number 4) covers a five year period from 2009 to 2014.
There are also periodic reviews, including the recent Department for Transport and ORR
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commissioned value of money study chaired by Sir Ray McNulty.
Network Rail Values…
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FSS Vision & Operating Model…
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Process Measures
Cycle time reduction
Cash
• Efficiency
• Effectiveness
World Class FSS
with
Engaged Staff
Compliance
• SLAs and quality
Customer Service
• Business Partnering
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Cash
Cycle time reduction
• Treat it wisely
• Lower transactional cost
• Decrease corporate costs
• Improve cash flow
• Do it in time
• Reduce defects
• Eliminate waste (Lean & 6σ)
• Achieve improvements
Compliance
Customer service
• Follow the rules
• Get it right
• Be vigilant and aware
• Learn from mistakes
• Provide the service they require
• Build trust meet expectations
• Understand customers’ needs
• Succeed by doing, not just talking
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Analysis: Does it Work?
• Benchmarking processes
– “Q12” an employee engagement survey administered throughout the
company – FSS scores more highly than the Network Rail average on
16 of the 17 items (average > 4 on a 1-5 scale).
– Investors in People – Bronze status in February 2011 and Silver status
in September 2011
– Hackett classed Network Rail FSC as “world class” (2011)
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How does it work?
• The World Class Board
• Signal Stations
• Leadership
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The World Class Board
•
•
•
•
•
•
The vision
The operating model – the 4Cs
Projects
Benchmarks
Funding targets
Visitors letters
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Signal Stations
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Tentative Conclusions
• One way to achieve control and strategic alignment is through
the strategy-performance measurement – information flow –
rewards model
• In the case of Network Rail the FSS reports hundreds of KPIs
and the role these play in strategic alignment is not at all
clear.
• What is clear is the significance of the alignment of belief
systems and organisational identities achieved with the “4Cs”
mantra
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The Performance Management Mix
Managing through the people
Managing by the numbers
Leadership
Communication
Empowerment
Measures
Shared
Service
Centre
Requisite
variety
Benchmarking