Transcript High Performance Management Program

Performance
Management Program
Measure and Improve Organizational
Performance
Ahmad Saleem, FCA
0300 8471640
[email protected]
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What is Performance
Measurement?
Performance Measurement is the
comparison of actual
measurement with the
expected, specified or desired
measurement
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Measurement
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Slide 1 of 2
What is Measurement?
Measurement is recording the quantitative attributes of any activity, event, output,
equipment, person, organization or anything – which has any quantitative recordable
attributes
Measurement is a process of obtaining the magnitude of quantity in any unit.
Measurements can be accurate or may be judgmental
Accurate
– Length, distance, time, weight, money, profit earned, patient treated, units
manufactured, houses constructed etc.
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Judgmental
– Comfort, Feeling, Satisfaction, Taste, Smell – He is not very happy even he got first
position – here we are talking about feeling of someone, the taste of the food is not
good of any particular restaurant – may be someone likes that taste – Chocolate and
Cheese many persons like the taste many dislike – however we can scale these 0 - 10
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We do lot of measurement in all our life almost on daily basis – watching our
weights, time taken for some process, efforts required to perform any job, etc.
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Measurement
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Slide 2 of 2
Measurement can be categorized as follow:
– Fixed
– Variable
– Judgmental
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Fixed:
– The distance between two cities
– Engine Capacity – for vehicle
– Vehicle dimensions
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Variable:
– Fuel Consumption
– Tyres Consumption
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Judgmental
– Comfort level – Hotels, Cars, Airlines
– Taste of Food – Restaurants
– Entertainment – movies, dramas, talk shows
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Performance
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We can determine performance of any activity, which is measureable
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If anything is not measurable, we cannot judge its performance and that's cannot be
improved – for a student if the examination result is only pass and fail – we cannot force
student to improve more than passing the exams
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We can improve only those activities, which are measureable
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Performance is comparison of measurement of actual facts with some pre-determined or
desired results or facts
– The performance of my car is not good – expected more mileage, more comfort
– He is not performing well in his monthly exams – expecting A+ grades but he is getting
lower grades
– The performance of ABC Textile Mills is not good – mainly measurement in Profits or
quality of products
– The performance of XYZ Textile Mills is excellent – very high profits
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Performance Management
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Once we have determined the Performance of any activity then it is decided that
whether there is need for improvement or its present performance is satisfactory
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When we take steps for the improvement of Performance, that series of actions and
steps is called “Performance Management”.
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Through Performance Management Program we can establish the procedure
through which measurements can be improved.
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For this, we need to identify the areas where improvement can be made – set the
standards for each area for the improvement, note down the present measurement
and periodically measure readings to observe the improvement
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For this presentation
purpose, we will discuss
the Performance
Management of
Organizations, where
achievement of their
Objectives is the main
measurement.
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Organization’s Objectives
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Commercial Organizations
– Profitability
– Expansion
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Social Organizations
– Providing social services
– Collecting Donations
– Helping others
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Commercial + Social – Hospitals
– Providing health services
– Earning to sustain
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Strategy towards Performance Management
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Establish the Potential Performance Level
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Measure the Present Performance level
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Establish areas where performance can be improved
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Gaps – how much and reasoning
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Establish how much improvement can be made
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Set Goals and Targets for improvement
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Measure improvement periodically
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Why Performance Management
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We do need High Performance Management Program for the following main
reasons:
– Long term Survival and higher return on investments
– Achievement of the Objectives in efficient and effective manners
– Less waste and lower operational cost
– A competitive advantage and higher sales
– Better financial results, high profits, income and wages
– Reducing Top Management pressure and tension
– Better motivation and teamwork among employees
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Critical Factors for High Performance
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Strategic Direction
Business Plan
Core Activities for Business Plan – Departmental Profile
Organizational Culture – Attitude, Values and Discipline
Setting Targets and Key Performance Indicators – For Departments, Employees and Machinery
Resource Management – Commonly 4Ms
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Man Power (Human Resource)
Material (Stocks)
Machinery (Fixed Assets)
Money (Funds)
Energy
Knowledge
Time
Costing, Contribution Margin and Breakeven Analysis
Budgeting
Systems, SOPs, Controls and Policies
Knowledge Management
Role of IT
Role of Accounts Department
Risk Management
Performance Measurement
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Strategic Directions & Management
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Strategic Management is defined as the set of decisions and actions that result in
formation and implementation of plans to achieve a Company’s objectives. It
comprises nine critical tasks.
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Formulate the company’s mission, purpose, philosophy and goals
Conduct an analysis that reflects the Company’s internal conditions and capabilities.
Assess the Company’s external environment.
Analyze the Company’s options by matching its resources with the external
environment
Identify the most desirable option by evaluating the each option in the light of
Company’s mission
Select a set of long-term objectives and grand strategies that will achieve the most
desirable options
Develop annual objectives and short-term strategies that are compatible with the long
term objectives and grand strategies
Implement the strategies choices by means of budgeted resources allocations in which
the matching the tasks, people, structures, technologies and reward system
Evaluate the success of the strategic process as a input for future decision making
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Strategic Directions
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Strategic planning is for long-term – ranging from 3 – 5 years
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It establishes the major scope of working for the Organization
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Any mid term and short terms planning are based on the Strategic Directions
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What normally includes in Strategic Directions:
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– Size of the setup, products types, target market, potential buyers, marketing strategies, logistics
strategies, expansion plan, human resource, financing etc.
Examples:
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Credit Cards – Alfalah Credit Cards, Citi etc.
Telecommunication – Telenor , Mobilink
Food - Domino Pizza, Pizza Hut
Airlines – Aero Asia, Air Blue, Western
Textile Unit - Spinning Unit – Special Counts
Weaving Units – Special Fabrics
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Business Plan
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Business Plan is the overall plan for the Organization, which ties all the
Organizational functions together
Assessing the potential of the Organization
Assessment of the present position
Set overall Goals for the Organization
Setting Departmental Goals
Identify the Capability Gaps
Prepare complete Business Plan – taking into consideration all above-mentioned
factors
Creating overall plans for all departments
Monitoring the plan on regular intervals
Making necessary adjustments – when required
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Core Activities - Departments
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For the execution of Business Plan, the Organization is required to do certain activities – the
grouping of same type of activities will form the Departments
In general departments:
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Sales & Marketing
Production & Production Planning
Purchases
Stores
Accounts & Finance
Costing & Budgeting
Administration and HR
Establish the core activities and objectives of the Departments:
– For example, by establishing IT department, we expect that the emails should be
running smoothly, no viruses, web site should be functional, networking among all
computers should be operational, server should not be down
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Departmental Profile
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Departmental Job Description
Tasks
Key Result Areas, Key Performance Areas and Key Performance Indicators
Human Resource required – budget in numbers and value
Head of Department
Processes involved in the department
Activities and monetary budget
Documents and Reports
Information and Knowledge
Software related requirement
MIS & EIS (Management Information System and Executive Information System)
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Setting Targets and Responsibilities
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Based on the Business Plan departmental targets and responsibilities will be
established
The targets should be (SMART) Specific, Measurable, Achievable, Relevant /
Result Oriented and Time Based
Key Result Areas – General Areas of outcome and output for which the
departments’ role is responsible.
Key Performance Areas – These are the areas within the Department where an
individual or group is responsible / accountable for the results
Key Performance Indicators – are the measurable indicators which determine the
performance level
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KRAs, KPAs and KPIs
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Key Result Areas
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KRA – 1 – Recruitment / Selection
KRA – 2 – Workplace Management
KRA – 3 – Reward Management
KRA – 4 – Safety and Health
Key Performance Areas – KRA 2
– KPA – 2.1 – Labor turnover
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Key Performance Indicators – KPA 2.1
– Reduce the labor turnover by 20%
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Organizational Culture for Performance
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While we are in the process setting goals and targets, it is also important to create
the right environment for employees to perform
In particularly Pakistan, the Organizational Culture is one of the main reason for low
productivity and profitability
We can establish the following reasons:
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Authority
Responsibility
Empowerment
Trust
No Interference
Result oriented or Instructions oriented approach
Giving ownership to employees and taking results from them
Respect
Reward
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Resource Management
• The Major resource for any Organization:
– Human Resource
– Fixed Assets
– Stocks
– Funds
– Energy
– Time
– Knowledge
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Fixed Assets
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Fixed Assets consumes major part of capital:
– Necessary to establish
• Productive Assets
• Non – Productive Assets
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Ratio between these two categories (Productive and non-productive assets)
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Between Productive Assets
– Main Productive Assets
– Production Support Assets
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Return on Assets should be calculated on all types of Assets to get more
meaningful results
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Stocks
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Stocks and materials are the critical requirement of almost all industrial based units
and take major part of current assets
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The value of stocks have direct impact on the working capital
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The excessive stocks lead to:
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Higher wastage due to obsolete and old items
Higher blockage of finances
Excessive carrying cost
Lower usability of old items
Should be rightly stocked and physically controlled
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Funds
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Funds are always considered as blood of the Organization
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Mostly organizations unable to perform due to excessive bleeding
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Owners try to save organizations through injecting additional funds but mostly no efforts
are made to stop excessive spending and controlling activities
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Additional funding is arranged through expensive arrangements putting additional
burden on already low performing organization
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From the beginning, strict considerations on the fund management
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Prepare Periodic Fund Statements observing the actual and projected
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Monthly and Annually prepare Projected Fund Positions
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Energy
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With reference to present scenario of energy cost world wide, it is very important
that the energy cost should be controlled and monitored.
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Energy cost can be reduced by creating an attitude towards saving the energy +
installing right equipment
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Strict monitoring of energy consumption
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Time
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Organizations have resources and every resource is available for certain time period
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It is important that time limits should be set for the performance of all the resources
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In the manufacturing process the performance time is very important as that will increase
efficiency and reduce production cost
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Knowledge
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For the performance of particular activities of any organization a certain amount of
knowledge is always required – Textile, Cement, Banking, Hospitals, Lawyers, Chartered
Accountant – every industrial sector needs knowledge to perform
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Establish what type of knowledge is required and who will be responsible
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How knowledge will be up dated?
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With the better knowledge the performance will be better
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Application of the knowledge is important – whether a person is capable to apply his/her
knowledge when required
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Human Resource
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Most Important Resource – The employees should be capable to perform, having required
capabilities and willingness to take responsibility.
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Human Resource is the most important Resource for any Organization as this is the resource,
which controls and utilize all other resources of the Organization.
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Hire persons with right capabilities required to perform particular job
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Provide right resources
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Provide right environment
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Provide education and training
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Have Job Analysis and Job Descriptions in writing and accepted by the Employees
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This will change the mindset and attitude of the employees towards his/her responsibilities
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Regular follow up of the Performance – non-performances should be handled immediately
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Always discuss events – not personalities
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Reward properly
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Costing, Contribution Margin and Breakeven
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Costing
– The process of identifying and evaluating the Production Cost. Costing is accumulation
of total expenditure for producing a product
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Contribution Margin
– Contribution is the difference between Sales Price and its direct variable cost of the unit
– the Contribution Margin helps in determining the minimum sales targets and guidance
as how profits can be increased
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Breakeven Analysis
– Based on the working of Contribution Margin, we can compute breakeven analysis.
Breakeven is the stage of the Business – where organization is in balanced state – not
earning any profit neither having any loss
– Breakeven Analysis can be prepared of multiple types – Cash Breakeven – whether any
particular equipment or product is generating enough cash, which is required to pay
liabilities relating to that equipment or product
– Simple Breakeven – simple calculation of operational profit
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Budgeting
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Why we need Budgeting?
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Slide 1 of 2
Planning – a good planning tool – for systematic and logical planning
Co-ordination – helps coordinating the activities of the Organization
Communication – better communication among different teams and departments
Motivation – Motivation for Managers to try and achieve Organizational goals
Control – controlling activities by measuring progress against the original plan
Evaluation – the evaluation of the persons and departments can be made more easily
What type of Budgets?
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Production Budgets
Expense Budgets
Marketing Budgets
Sales Budgets
Purchase Budgets
CAPEX – Capital Expenditure Budgets
Human Resource Budget
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Budgeting
Slide 2 of 2
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Budget should be strongly integrated – independents budgets cannot be successful
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In budget preparations – involve all the persons relating to those activities – their input will
be very valuable and if they are part of preparation they will take the ownership
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The budgets purely based on any past period results may lead to lower performance
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Keep budgets flexible for changes – however make changes only when justified
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Learn from the past budgets – if any past budget was a failure or a success story – try to
learn its reasons
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Process
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A “Process” is a combination of multiple activities. Activities are trigger by some
event. A process has a starting point and an ending point – normally ending point of
one process is the starting point of another “Process”. A Process also has some
input and a complete output, which is the input of next process.
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An Organization needs multiple processes to complete its operational activities
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For example: For Inventory Department, following will be the processes:
– Receipt of Material – Inspection – Receipt by Stores – Stacking – Issuance – Recording –
Returns – Re-ordering
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Parts of Processes – Activities, Systems, SOPs, Controls and Policies
Controlling the processing is important – number of activities, cost etc.
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Systems, SOPs, Controls and Policies
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Systems
– A pre-defined way of doing some activity is called system. In system, all possible
activities are worked and a procedure is prepared as how the activities will be
performed by anyone in event of happening of any transaction.
– Step wise explanation as how activities will be performed
– We also mention certain documents, forms and register or record keeping tools to
maintain the data processed in that particular transaction or activity.
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System Example:
– For Inventory Receipt:
• On receipt of materials from suppliers, the Gate keeper will check the supporting
Documents
• If documents are correct, the Gate Keeper will enter the Document number in the
register and also make entry in the computer system and prepares “Gate Inward
Pass”
• After the making entry in the relevant record, the material will be placed for
inspection
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Systems, SOPs, Controls and Policies
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Controls
– We normally place controls in order to avoid any risk being present in the transaction
/activity either by nature of the transaction or otherwise
– Controls means that matters being handled according to one’s desire without his/her
presence there.
– Controls can be established through:
• Authorization – Documents – Reconciliations – Physical Monitoring – Budgets –
Access Control
– Example:
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• In case of Inventory receipt procedure, we need to have control that no unauthorized material enter in the premises – so a control has been placed with
the Gate Keeper that he will ensure that material is accompanied with the
Authorized Document.
Policies
– A deliberate plan of action to guide decisions in different situations
– Example:
• In case of Inventory Receipt, we need a policy statement that in the event of excess
receipt of material what action gate keeper should take
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Knowledge Management
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Knowledge Management relates to every type of information and record needs to
be maintained:
We can divide knowledge Management in the following categories:
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Data
Documents and Forms
Reports
Information
Knowledge
Data
– Data is the raw facts, attributes of any transaction or activities, normally relates to one
single transaction and maintained and recorded on certain documents and forms
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Documents and Forms
– Documents and different forms are used to record the data related to activities and
transactions. There can be multiple types of documents used to record the basic data
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Knowledge Management
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Reports
– A report normally represents the compiled and consolidated data taken for a particular
time period. Reports are used to communicate information formed by the compilation
of data
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Information – IN Formation
– Information is anything that someone is capable of perceiving. This can be written
communication, spoken communication, art, music, signals
– Information is not necessarily in the form of report
– Reports normally source of information
– Information normally relates to particular state of facts at a particular time
– Minimum and Maximum stocks level of inventory is Information
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Knowledge
– Conversion of information in to actionable process is called knowledge. Often
information is being carried out by different persons but different persons take different
action according to their knowledge regarding that information.
– Minimum and Maximum levels may be computed by differently based on the
knowledge of the person preparing the information
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Role of IT
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Information Technology plays critical role in Performance Management, however its role is
on monitoring and managing side.
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Basic factors and systems needs be established by the Management and Users and then
we can use Information Technology for better monitoring and compliance of our desired
systems
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Through use of IT, we can get accurate reports and information necessary to make correct,
timely and relevant decisions.
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Poor design or development of IT can creates serious impact on the Organizational
performance
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Role of Accounts Department
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ONE OF MOST IMPORTANT role in Performance Management
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The role of Accounts Department is one of the most important and critical as almost every
transaction has the financial impact and passed through the Accounts Department
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The Accounts Department plays the role of COCKPIT for the Business – The Cockpit
provides the pilots all the control and information, similarly the Accounts Department is in
position to provide all the controls and information to the Top Management.
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If Accounts Department fails to implement the desired control and in providing the required
information, the Organization starts losing its track.
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The implementation of controls, deployment of checks and balances is the key responsibility
of Accounts Department
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Role of Accounts Department
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The Accounts Department should try to consider following while checking every
transaction:
– Justification
– Authorization
– Relevance
– Reasonableness
– Support Record and Documents
– Physical Execution
– As per Systems, Rules, Policies
– Budgeted
– For the purpose of Organization
– Required and related Information
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Risk Management
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There are certain risk to the Organization in relation to different activities performed,
which may also have impact on the Organization’s working. These are different
than the operational risks. (At Strategic level)
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The Organization should make sure that all possible risks and threats have been
properly addressed and someone must be responsible to take care of these risks.
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The risks should be identified and preventive measures should be taken:
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Examples:
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Risk from Competition – continuous improvement is answer
Theft of critical data and information – IT should take special care
Sudden change in foreign currency rates – limited and controlled exposure
Micro Soft – new companies, new products
Boeing – Airbus
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Performance Measurement
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After establishing all the systems and parameters in place, now it is required that
Performances should be measured and Analyzed on regular basis.
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The System should be like this, that the performance of department “A” should be checked
by department “B”, and departments B’s performance will be checked by department “C” and
department “C”s performance should be checked by department “A”.
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The system should be monitored on regular basis – consistency is very important
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A separate department may be helpful, who should be responsible for compliance of all
activities necessary to maintain Performance of the Organization.
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Most Important Factors
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Human Resource
Attitude, Culture and Discipline of the Organization
Accounts Department
Strategic Planning and Directions
Fund Management
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Belief – We can do that
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Thank You
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