6965541 performance management doc

8/4/2019 6965541 Performance Management Doc

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Mind boggling changes, technological revolution,fierce competition. Perform or Perish ,survival of thefittest -- survival instinct -And like the story of the

two men on a safari, in order to survive you willhave to die trying. While walking through the jungle,they came upon a hungry tiger, when one of themstarted putting on his running shoes. How is thisgoing to help? We cant outrun the tiger.asked the

other. The first man replied: Idont have to outrunthe tiger, I only have to outrun you.

Organizations redefining their strategies--performance appraisal to performance managementto performance culturein which every member of theorganization knows the goals & consistently makeefforts to achieves high performance


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Behaviorism in performancePerformance=skill + will

OrIndividual performance = Ability x Motivation xOrganizational Support + or Chance Factors?

Iccha (desire, motivation), Gyan, (knowledge)(Know how), Kriya, (action, to achievement).

Work is sublimeto do nothing is to be nothingkarma is dharma dharma of each person tocontribute to the larger society in excess of whatshe consumes out of its resources. We can work

to destroy ourselves, or to improve our lot. -Understand the intrinsic meaning of work canguide us to better ways of controlling anddirecting this powerhouse of human energy.


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Work- as life

Economic : Gainful, productive work performed tomeet the economic needs of a person or her

family.Cultural : Functions, such as the rituals of birth,marriage and death, death, performed as moralduty in the course of ones various life- passages.

Psychosocial : Interpersonal and interfamilialinteractions in ones role as member of a socialunit.

Physical : All movements from birth to death thatthe human body engages in.

Peter Drucker and three stonecutter .Will to work, to achieve, to contribute, to seekrecognition

Help enhance self- esteem of the worker.


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What is performanceBehavior+ Outcome achievement, accomplishment at work being,

(Chance, favors the prepared mind) doing(Ideas are funny little things. They wont workunless you do.) relating (role network vertical, horizontal or otherwise.)

inputthroughput output (exceeds the valueof output?)feedback

Output or result dimension;

Input dimension;

Time dimensions;Focus dimension;

Quality dimension; and

Cost dimension.


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Performance means both behavior &result, behavior emanates theperformanceperformance management is creating

culture in which organizational & individuallearning are a continuous process integration of learning & work Normal vs excellent performance - Better than

the best- outstanding/ extraordinaryperformance-- Bench Marking,record breaking,

Excellence is not a skill but an attitude/culture The Geeta Yogah, Karam su kaushalam


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The road to excellence is always underconstruction.

It is necessary to always surpass oneself

and this is a lifelong occupation.You got to be the first or the best ordifferent.

When better is possible, good is not goodenough.

Target for the day: 1% improvement.


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Excellence is not a destination- it is anendless road excellence seeker do notfollow the laid down path, they break new

paths & leave their trail behind-theyaccept the challenge so that they may feelthe exhilaration

Churchil-excellence seekers never, never

quit, they walk on with optimism as theirhope helps them visualize the invisible,touch the intangible & materialize theimpossible

Excellence is not through chance /freakLuck is what happens when preparationmeets opportunity PMS encouragesindividuals to anticipate opportunity &

prepare to grab it.


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Chance favors the prepared mind Fortunefavors the brave

Bench marking up gradation to match with the

bestFighting fit with six sigma

Jack Welchs directive that his GE managers couldwriggle out of Six Sigma training at the cost of losingtheir promotion only goes to show how important it is toenforce this practice from the top.

The people involved in Six Sigma execution are

Master black belts who are well versed in the rules of thegame,

Black belts (technically oriented individuals involved in theprocess of organizational change and development)

Green belts (employees who lead six sigma project teams).


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Six Sigma Fundas

Strong customer-oriented approach that relies ondata to create more efficient processes or refineexisting processes

Under the prescribed specifications, there cannot

be more than 3, 4 defects (defined as anythingthat doesnt add value to the end customer), permillion opportunities.

You can apply it to anything, from making amovie to manufacturing truck tyres

It needs the unstinted support of organizationalleaders, and emphasizes teamwork and lifelongevolution of practices and processes.


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Performance Management?

PfM is another way of envisioning the totality of amanagers function. It views the managerial functionholistically

Performance management is the process of creating a workenvironment of setting in which people are enabled to thebest of their abilities.In a traditional system, performance tends to be evaluatedand looked at only in the short run and for immediateresults. Organisations need to understand that for

sustained performance, it has to nurture a creative,motivated and committed workforce, and for thatemployees performance has to be planned, analysed,developed and appraised continuously rather than beingconstricted to annual reviews and evaluations.

P M S is concerned with creating a culture in whichindividual learning & development are continuous processIt provide means for integration or learning and work sothat every one learns form success & challenges inherent inday to day activities


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The desire to enhance performanceis making ever greater demands on

the knowledge & skill of the workforce & on people, who carry a muchgreater responsibility for their ownperformance.

It is a holistic, systematic &continues management function.

It is about performance & not just

apprising. Performance & resultimportant but people equallyimportant.

High performing people are critical


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Performance Appraisal systems Focus is on performance appraisal and generation of

ratings

Emphasis is on relative evaluation of individuals.

Annual exercise-normally though periodic evaluationsare made.

Emphasis is on ratings and evaluation.

Rewards and recognition of good performance is animportant component.

Designed and monitored by the HR Department.

Ownership is mostly with the HR department.

KPAs & KRAs are used for bringing in objectivity.

Developmental needs are identified at the end of theyear on the basis of the appraisal of competency gaps.

There are review mechanisms to ensure objectivity inratings

It is a system with deadlines, meetings, input andoutput and a format.

Format driven with emphasis on the process.

Linked to promotions, rewards, training and


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Performance Management systems Focus is on performance management. Emphasis is on performance improvements of

individuals, teams and the organization.

Continuous process with quarterly performance reviewdiscussions.

Emphasis is on performance planning, analysis, review,development and improvements.

Performance rewarding may or may not be an integralpart.

Designed by HR and Line departments but monitored bythe respective departments themselves.

Ownership is with line managers, HR facilitates itsimplementation KPAs or KRAs are used as planningmechanisms.

Developmental needs are identified in the basis of thecompetency requirements for the coming year.

There are review mechanisms essentially to bringperformance improvements

It is a system with deadlines, meetings, input, outputand a format.

Process driven with emphasis on the format as an aid. Linked to performance improvements and through them

Wh t i N ?


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What is New? Move away from appraisals.

Move away from numbers to qualitativeassessment

Innovate. Process is more important thanformats

Emphasize learning and development,empowerment and growth and problem. Solving

more than assessment. Use multi ratter assessment as a supplements

Synergies with other systems

Encourage employees to own their own

performance management. Follow up actions must be taken and taken on

time. It may be training or job rotation orremoving blocks or any other things.


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PMS is change in managerial style of doing work.It is creating & nurturing performing culture.The performance culture has to be built into the management & theenterprise. Great workplaces with high performance cultures tend tofoster growth and feed an individuals need for learning and

development. Several successful companies have shown that highperformance culture is the sine qua non for attaining sustainablecompetitive advantage.

Frame work of Performance Management.Conduct Future Mapping

Create Transformational Vision, Mission and Core ValuesCraft business strategy linked to Vision

Annual corporate objectiveAnnual corporate strategy-& the other details cascade down --use ofbalance score card in Moser BaerPerformance planning

- Task analysis and/or activity analysis;- Key performance areas (KPAs);- Key result areas (KRAs);- Task & target identifications;- Activity plans/action plans; and

- Goal-setting exercises.


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If the following questions can be answered positively after theexercise, one could say that KPAs have been wellidentified:

1. Do the KPAs and targets emphasize/ indicate what themanager (appraise) is expected to do by himself (rather

than what his department, subordinates etc, are expectedto do)?2. Together, do they cover a large part of his job and include

all significant contributions expected from his role?3. Do they indicate the priority areas of work for the appraise

during the year?


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4. If all KPAs are well done, can the appraise belabeled as a good performer?

5. Are the targets set challenging and stretch thecapabilities of the appraise moderately ratherthan being routine?

6. Are they comprehensive?

7. Do they specify the standards of performanceexpected from the appraise?

8. Do they take into consideration realistically theconditions under which the appraise is expectedto function during the year?

9. Do they satisfy both the appraise and appraiser?

10. Has adequate time been spent on the processof identifying KPAs and gaining role clarity?


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2.Goals directions- if you do not know whereyou are going, any road will be OKGoal setting is a process intended to increaseefficiency & effectiveness by specifying thedesired outcomes towards which individuals,teams & organisation should workGoals includes deadline, budget, and otherstandards of behaviour and performanceGoals are quantifiable , consistent, precise,challenging, measurable, achievable, shared,time related, team work oriented.SMART S Simple M Measurable

A Agreed R Realistic T Time related


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3. Performance agreement -- performanceagreements set the direction & form thebasis of measurement, feedback,assessment in the performancemanagement system

- Defines work to be done

- The attributes required (skill +knowledge

+ attitude)- competencies required- Identified measures use to monitor reviewand access

- Corporate core values required


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Bench marking if you know your self &your enemy well, you can win thousandsof wars

Benchmarking is a tool to help youimprove your business process. Any businessprocess can be benchmarked

Benchmarking is the process ofidentifying, understanding, and adaptingoutstanding practices from organisationsanywhere in the world to help yourorganisations improve its performance

Benchmarking is a highly respectedpractice in the business world. It is an activitythat looks outward operations against thosegoals


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-performance appraisal for individual &

team- each organisation have itsown- Moser bear has one

-balance score card for organization

team and individualFinancial performance

Customers satisfaction

Internal business processesEmployees learning and growth


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The Balanced Scorecard Provides a Framework to

Translate a Strategy into Operational Terms0

To succeed financially, howshould we appear to ourshareholders?

FinancialObjective

Measures

Targets

Initiatives

Vision & corporate Strategy

1


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0

To achieveour vision,

howshould weappear toourcustomer?

Customer

Objectives

Measures

Targets

Initiatives

2

3 To satisfy ourshareholdersand customers,what businessprocesses must

we excel at?

Internal Business Process

Objectives

Measures

TargetsInitiatives


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0

To achieve

our vision,how will wesustain ourability tochange andimprove?

Learning & Growth

Objectives

Measures

Targets

Initiatives

4


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The weights assigned to different performance measures inthe balanced scorecard as used by 60 large companiessurveyed by Towers Perrin New York, is shown below:-

Developmentalresult 9%

Internalbusinessresults 12%

Customer focus19%

Financial results55%

Innovation/learning results 5%


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5. Competency Competency Mapping,

Competency Profiling, CompetencyMatching and Job Matching- at two levelsbehavioral & technical.

Competence is skill based attributes-

measures what, what people can do.?Competency is behavior basedattributes, applies on performance,measures, how, how they do it Behavior or set of behaviors' thatdescribe excellent performance inparticular work context Applied

knowledge and skill Behavioral


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Competency Model

knowledge

skill

aptitude

attitude

performance

Acquired ability or experienceneeded to fulfill responsibilities

Natural ability that prepares a person

to fulfill responsibilities

Way of thinking or Behaviorneeded to fulfill responsibilities

Informance & understandingneeded to fulfill responsibilities

attitude


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Competency caused flow chart

Input ActionOutcome

Personnelattributes& skills

Behavior Job performance


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Why Strategies Fail

17%

8%

40%

35%

75% fail because of people- lack of competency and reluctancereluctance to change.

People dont resist change, they resist change without being

changed


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In a study conducted by Mc Kensey in 340organizations worldwide on Why Strategy Fails,

only 17 percent of strategic failures were due tobad strategy and 8 percent due to other reasonssuch as September 11, War natural calamity,etc. the remaining 75 percent were due to lack ofcompetency of the people who implemented the

strategy; precisely 40 percent due to lack ofknowledge and skills and the other 35 percentdue to lack of right attitude, i.e. willingness tochange, managing feeling and emotions, etc.

People who excel at their jobs demonstrate

behavior that distinguish them from their peers.Directing these behaviors are Competencieswhich we define as underlying personalcharacteristics that differentiate outstandingperformance from average performance in a

given job, role, organization or culture.


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List of managerial competencies1. Planning ability2. Organizing ability3. Co-ordination4. Supervision5. Leadership & dynamism6. Initiative7. Resourcefulness (oral & written)8. Creativity & Imaginativeness9. Development of subordinates10. Contribution to team spirit11. Analytical abilities12. Delegation13. Public relations14. Sociability

15. Self-confidence


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16. Decision-making

17. Cooperativeness

18. Flexibility

19. Problem-solving

20. Risk taking

21. Ability to motivate subordinates

22. Conflict management

23. Communication skills

24. Perseverance

25. Hard work

26. Integrity

27. Drive

28. Empathy29. Assertiveness

30. Originality

31. Data management


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COMPETENCY MAPPING A TOOL FOR OPTIMIZING THE

HUMAN CAPITALThe term Human Capital describes the economicvalue of the organization's knowledge, skill, andcapabilities.Human Capital is intangible and hence cannot bemanaged the way organizations manage jobs,

products, technology etc.Can a round peg fit a square hole? So cant a wrongemployee in a right organizationThe organization will have to find a correct person whowill fulfill its expectations or will have to chisel and

shape up the existing employee to fit its expectations.Know the dimensions of the square hole And buy asquare peg Or chisel the round peg to fit.Successful Companies of the 21st Century will be thosewho do the best job of capturing storing and leveraging

what their employees know


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Thomas Stewart in his book Intellectual Capital:The New Wealth of Organisation says thatIntellectual Capital is the intellectual material,knowledge information, intellectual property, andexperiences that can be used to create wealth.

The term intellectual Capital represents theawareness that information is a factor ofproduction, as economists would describe it, inthe same category with land, labour, capital andenergy. In the early mid 1990s there was an

increasing awareness in the business communitythat knowledge was an important organizationalresource that needed to be nurtured, sustained,and, it possible, accounted

5 Monitoring & Mentoring performance----


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5. Monitoring & Mentoring performance----6. monitoring employees performance & mentoring their

development is the heart & soul of performancemanagement.Performance management aims at sustained effort for

a. performance improvementb. enhancement of managers competenciesc. organisational learning- differentiating leadership with leaderA leader is one who knows the way, who shows the way,who goes the way

-situational leadership (Directing, Coaching, Supporting,Delegating) - Introducing movers of human behaviors coaching & mentoring continuous search for drivers ofperformance & movers of human behavior creatingachievers - enriching performance through diversity-creating building trust- encouraging change - measuring

results-Mid term review.How can managers get extra ordinary performance fromordinary people - by effectively & systematicallymanaging performance

three basics principles of high performance-create trust,

encourage change, measure the performance, -----reinforce and reward

Some monitoring/ mentoring


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Some monitoring/ mentoring

behaviors

Manager meets employees regularly, onthe spot, during work process, facilitatechange .

Praises good performance

Sharing feeling than passing remarksDemonstrating & demanding integrity inbehavior & intent

Exacibility & availability to the employees

Correcting faults then condemningNurturing effective working throughcontinuous improvement.

6. Pygmalion effect


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6. yg7. ANNUAL Stock taking /Performance Review Discussion

and feedback- Performance review- letting employee knowwhere he stands-process of analysis of achievement anddeficiency- providing opportunity for in-depth exploration forintrospection with the mentor - reinforcement in case ofdeficiency, (T & D, counseling, coaching, mentoring etc.),appropriate reward in case of target fulfillment

Objectives 1. Helping him to realize his potential as a manager or a leader

etc.

2. Helping him to understand himself his strengths and hisweakness.3. Providing him an opportunity to acquire more insight into his

behaviour and analyze the dynamics of such behaviour.4. Helping him to have better understanding of the

environment.

5. Increasing his personal and inter-personal effectiveness bygiving him feedback about his behaviour and assisting him inanalysing his inter-personal competence.

6. Encouraging him to set goals for further improvement.

7 Encouraging him to set goals for further improvement


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7. Encouraging him to set goals for further improvement.8. Creating an empathic atmosphere to share and discuss

his tensions, conflicts, concerns and problems.9. Helping him to develop various action plans for further

improvement.

10. Helping him to review in a non-threatening way hisprogress in achieving various objectives.

Condition for performance review discussionGeneral climate of openness and mutualityGeneral helpful and empathic attitude of management

Sense of uninhibited participation by the subordinates inthe performance review processDialogic relationship in goal setting and performancereviewFocus on work-oriented behaviorFocus on work-related problems and difficulties

Avoidance of discussion on rewards and punishmentMethods of review


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-tell & sell, tell & listen, problem solving


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7. Feedback- Feedback is transmittinginformation from one part of system to another

part to do corrective action or initiate newaction. Self feedback is highly desirable featureof PMS but there is always need for managers,colloquies, inter and external customers toprovide feedbacks based on their observation

(360 feedback). Feedback is considered positivebecause it is developmental

1. build feedback in to the job

2. on the actual event

3. describe do not judge

4. refer specific behavior

5. be positive

6. suggest correction

8 C diti f ff ti f db k


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8. Conditions for effective feedbackDescriptive and not evaluativeFocused on the behaviour of the person and not on theperson himself

Data based and specific and not impressionisticReinforces positive new behaviourSuggestive and not prescriptiveContinuousMostly personal, giving data from ones own experienceNeed-based and solicitedIntended to helpFocused on modifiable behaviourSatisfies needs of both the feedback given and one whoreceives feedbackChecked and verified

Well timedContributes to mutuality and building up relationship

U h l f l d h l f l f th i l


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Unhelpful and helpful response of the appraisal1. Unhelpful

Not encouraging creative acts

Passive listeningLack of verbal responseCritical

Criticizing Pointing inconsistencies

Repeated mention of weaknesses Belittling ReprimandingDirective Prescribing

Ordering Threatening Giving no options Pointing out only one acceptable way Quoting rules and regulations

2. Helpful Appraisal


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2. Helpful AppraisalEmpathicLeveling

Rapport buildingIdentifying feelings

SupportiveRecognizingCommunicatingAvailabilityCommitting support

TrustingExploring

QuestionsReflectingSharing

ProbingClosing

SummarizingConcludingContracting for follow-up and help


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Performance Reward, Development& Recognition

The outcome of performance appraisalshould be linked to:

1. Performance linked pay.

2. Development opportunities.

3. Challenging assignments in varioustask forces in the company.


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8. Counseling and Coaching &mentoring directing people to dohas always produce inferior resultscompare to inspiring people to doan excel. While counseling helpspeople to come out of helplessness,coaching & mentoring inspirespeople to an excelCounseling is helping people tohelp themselves to achieve whatthey want to-complete acceptance,empathy, listening, sensitivity,impartiality, helping to explore hisown confusion, working outimprovement plan along with him.

C hi i t i t th t k


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Coaching is to assist others to makechanges in their work lives or toadjust to changes with view to

improving the performance-notteaching, not instructing, nottraining it is on the job to helppeople develop their skills and level

of competence, making people awareof their deficiency and encouragingthem to improve- coaching is aprocess were by one people helps

another to unlock their natural abilityto perform learn an achieve- toincrease awareness of the factorwhich deterring performance,


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to increase their scene of selfresponsibility and ownership oftheir performance, to selfcoaching to identifying & removeinternal barriers of achievement

A mentor is experienced andtrusted advisor combine fourroles- coach, teacher, sponsor(adding new challenges), devilsadvocate (unusual way oflooking at things)- role model

C l i


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Conclusion

As Sherman Roberts of Harvarduniversity puts it: The best way torun an organization is also the bestway to treat people

In the words of Edward Gibbons, anEnglish historian, The winds andwaves are always on the side of theablest navigator.

B l d S d f E h i P f


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Balanced Scorecard for Enhancing Performance

The problem is that not everything that counts can becounted, and not everything that can be counted counts.

As a manager, more often than not, most of our decisionsand the activities are guided by the impact they will haveon the bottom line. Usually, we end up measuring anorganizations performance in terms of Profit made. Nodoubt, profitability, gross revenues, return on capital, etc.are the critical,bottomlinekind of results that companiesmust deliver to survive. But if we only focus on the financialhealth of the organization, it may jeopardize our success in

the long run because financial measures are generallylagging indicators of success and financial performancedepends on a variety of past action & events on which wemay not have immediate control. They are historical. Whilethey tell us what has happened to the organization, they

may not tell us what is currently happening or be a good

I di t f f t f


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Indicator of future performance.

Another consequence of merely focusing on financialmeasures is that we lose sight of the customers who are key

to our well being. In such a scenario, we may end up takingdecisions like reducing the warranty stringent to help theorganization financially, but may hurt the long termrelationships with the customers, who may eventuallyreduce the purchases or leave altogether. Such decisions are

sufficient to turn off the customers in the longer run. Theworld over, there are hundreds of companies which are nomore talked about probably because of their obsession onlywith bottom line results. As they continued to do what theyhad been doing, very soon they realised that their

competitors have displayed them from their place ofimminence.

Instead of such a short-sighted, after the-fact view of anorganisations performance, a more comprehensive view isneeded with an equal emphasis on outcome measures (thefinancial measures or lagging indicators), measures that

Will tell us how well the company is doing now (current


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Will tell us how well the company is doing now (currentindicators) and measures of how it might do in the future(leading indicators). We cant ignore the bottom line thekey indicator of what has happened (i.e., a lagging

indicator). The balanced scorecard is just remedy for thiskind of problem.The origins of the balanced scorecard method can be tracedback to 1990, when the research arm of KPMG sponsored astudy on measuring performance in organisations. The studywas motivated by a belief that existing performancemeasurement approaches, primarily relying on financialparameters which provide information about anorganisations past result are not well suited for predicting

future performance or for implementing and controlling theorganisations strategic plan. And it is very much relevant inthe Indian context also where many big companies whichwere doing quite well financially at one point of time couldnot read the writings on the wall and as a result, they are no

more talked about. By analyzing perspectives other than the

financial one managers can better translate the


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financial one, managers can better translate theorganisations strategy into actionable objectives and bettermeasure how well the strategic plan is executing.Subsequently, in 1992, Robert S Kaplan and David Norton

introduced the balanced scorecard (BSC) for measuring anorganisations activities in terms of its vision and strategieswhich was published in the Harvard Business Review. Itgives managers a comprehensive view of the performanceof a business and have been widely adopted around theworld. In fact, the Harvard Business Review, in its 75thAnniversary issue, cites the Balanced Scorecard as beingone of the 15 most important management concepts tohave been introduced via articles in the magazine.

What is Balanced Scorecard

The Balanced Scorecard method is a strategic approach andperformance management system that enables the

organisations to translate its vision and strategy into

framework for translating an organizations vision into a set of


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performance indicators distributed among four perspectives :Financial, Customer, Internal Business Processes, and Learningand Growth. Indicators are maintained to measure an

organizations progress toward achieving its vision. Otherindicators are maintained to measure the long term drivers ofsuccess. Through this scorecard, an organization monitors bothits current performance (finances, customer satisfaction, andbusiness process results) and its efforts to improve processes,

motivate and educate employees, and enhance informationsystems its ability to learn and improve. A BalancedScorecard enables us to measure not just how we have beendoing, but also how well we are doing (currentindicatorsandcan expect to do in the future (leading indicators). This in

turn gives us a clear picture of reality.

The Balanced Scorecard is a way of:measuring organizational, business units or departments

success balancing long-term and short-term actions

balancing different measures of success


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balancing different measures of success

- Financial- Customer

- Internal Operations- Human Resource System & Development ( learning

and growth)

Four Kinds of Measures

The scorecard seeks to measure a business from thefollowing perspectives :

1. Financial perspective - Measures reflecting financialperformance, for example, number of debtors, cash flowor return on investment. The financial performance of anorganization is fundamental to its success. Even non-profitorganisations must make the books balance. Financial

figures suffer from two major drawbacks

2 Customer perspective This perspective captures the


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2. Customer perspective This perspective captures theability of the organization to provide quality goods andservices, effective delivery, and overall customer satisfactionfor both Internal & External customers. For example, time

taken to process a phone call, results of customer surveys,number of complaints or competitive rankings.

3. Business Process perspective This perspective providesdata regarding the internal business results againstmeasures that lead to financial success and satisfiedcustomers. To meet the organizational objectives andcustomers expectations, organizations must identify the keybusiness processes at which they must excel. Key processes

are monitored to ensure that outcomes are satisfactory.Internal business processes are the mechanisms throughwhich performance expectations are achieved. For example,the time spent prospecting new customers, number of unitsthat required rework or process cost.

4 Learning and Growth perspective This perspective


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4. Learning and Growth perspective This perspectivecaptures the ability of employees, information systems, andorganizational alignment to manage the business and adaptto change. Processes will only succeed if adequately skilled

and motivated employees, supplied with accurate andtimely information, are driving them. In order to meetchanging requirements and customer expectations,employees are being asked to take on dramatically newresponsibilities that may require skills, capabilities,technologies, and organizational designs that were notavailable before. It measures the companys learning curvefor example, number of employee suggestions or totalhours spent on staff training.

Objectives, Measures, Targets and Initiatives

Within each of the balanced scorecard financial customer,internal process, and learning perspectives, the

organisation must define the following:

Strategic objectives the strategy for achieving that


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Strategic objectives the strategy for achieving thatperspective.

Measures how progress for that particular objective will

be measured.

Targets the target value sought for each measure

Initiatives what will be done to facilitate reaching out thetarget.

The balanced scorecard provides an inter-connected modelfor measuring performance and revolves around four distinct

perspectives financial, customer, internal processes, andinnovation and learning. Each of these perspectives is statedin terms of the organisations objectives, performancemeasures, targets, and initiatives, and all are harnessed toimplement corporate vision and strategy.

The name also reflects the balance between the short-and


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The name also reflects the balance between the short andlong-term objectives, between financial and non-financialmeasures, between lagging and leading indicators andbetween external and internal performance perspectives.

Under the balance scorecard system, financial measures arethe outcome, but do not give a good indication of what is orwill be going on in the organization. Measures of customersatisfaction, growth and retention is the current indicator ofcompany performance, and internal operations (efficiency,speed, reducing non-value added work, minimizing qualityproblems) and human resource systems and developmentare leading indicators of company performance.

Robert S Kaplan and David P Norton the architects of thebalanced scorecard approach, recognized early that long-term improvement in overall performance was unlikely tohappen through technology only and hence placed greater

emphasis on organizational learning and growth. These, in

Turn consist of the integrated development of employees


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Turn, consist of the integrated development of employees,information, and systems capabilities.

Context and Strategy

Just as financial measures have to be put in context, sodoes measurement itself. Without a tie to a companystrategy, more importantly, as the measure of companystrategy, the balanced scorecard is useless. A mission,strategy and objectives must be defined. Measures of thatstrategy must be agreed upon to and actions need to betaken for a measurement system to be fully effective.Otherwise, it will appear as if the organisation is standing at

a crossroad but unaware of which path to take.

Purpose of the Balanced Scorecard

Kaplan and Norton found that organisations are using the

scorecard to :


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MissionWhy we Exist


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Why we Exist

Core ValuesWhat we believe in

VisionWhat we want to be

Corporate StrategyOur Game Plan

Balanced Scorecard

Implementation & Focus

Strategic InitiativesWhat we need to do

Individual Scorecard

What I need to do

Strategic Outcomes

SatisfiedShareholder DelightedCustomers EffectiveProcesses MotivatedWorkforce

The Process of Building a Balanced Scorecard


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The Process of Building a Balanced Scorecard

Kaplan and Norton suggest following four step process forbuilding a scorecard:

Define the measurement architectureSpecify strategic objectivesChoose strategic measures

Develop the implementation plan

Benefits of Balanced Scorecard

Some of the benefits include:

Translation of strategy into measurable parameters Communication of the strategy to all stakeholders Alignment of individual goals with the organisations

strategic objectives Feed-back of implementation results to the strategic

planning process

Preparing the organisation for the Change It provides for a front-end


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justification as well as a focus and integration for the continuousimprovement, re-engineering and transformation process.

Avoiding Potential Roadblocks

Lack of a well defined strategy Using only lagging measures Use of generic metrics Failure at all levels Failure to follow through completion

Balanced Scorecard for Enhancing Performance

In such constantly shifting environments, management must learn tocontinuously adapt to new strategies that can emerge from capitalizingon opportunities or countering threats. A properly constructed balancedscorecard can provide management with the ideal tool in reacting to theturbulent environment and helping the organisation to correct the courseto success.Scorecard provides managers with feedback, thus, enabling them tomonitor and adjust the implementation of their strategy even to the

extent of changing the strategy itself. In todays information age,organisations operate in very turbulent environments. Planned strategy,

though initiated with the best of intentions and with the best


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gavailable information at the time of planning may no longerbe appropriate or valid for contemporary conditions.

As companies have applied the balanced scorecard, theyhave begun to recognize that the scorecard represents afundamental change in the underlying assumptions aboutperformance measurement.

The scorecard puts strategy and vision, not control, at thecentre. It establishes goals but assumes that people willadopt whatever behaviours and take whatever actions arenecessary to arrive at those goals. The measures are

designed to pull people toward the overall vision. Senormanagers may know what the end result should be, butthey cannot tell employees exactly how to achieve thatresult, because the conditions in which employees operateare constantly changing.

This new approach to performance measurement is

consistent with the initiatives under way in many organisation


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y y g: cross-functional integration, customer supplierpartnerships, global scale, continuous improvement, andteam rather than individual accountability. By combining the

financial, customer, internal process and innovation, andorganizational learning perspectives, the balanced scorecardhelps managers understand, at least implicitly, manyinterrelationships. This understanding can help managerstranscend traditional notions about functional barriers andultimately lead to improved decision making, problem solvingand enhanced performance. The balanced scorecard keepsorganisations moving forward.

6965541 performance management doc

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