the use of hr performance management measurement in strategic business planning

www.myCNI.com.my www.OOBEY.com

THE USE OF HR PERFORMANCE MANAGEMENT IN STRATEGIC BUSINESS PLANNINGCase Studies, Concepts and Debatable Ideas

Kenny OngCNI Holdings Berhad

http://www.mycni.com.my/

http://www.oobey.com/


Content

1. Why is the right Performance Management System critical?

2. Adapting the System to the Business Model and Strategy

3. Fine-tuning Performance Management for Talent Management




1. Why is the right Performance Management System critical?




“…in the past 18 months, we have heard that profit is more important than revenue,

quality is more important that profit, people are more important than profit,

customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our

performance is inconsistent"CEO, Anonymous







Before we start…

In the old days of HR…• Average training hours per staff• % of staff attending training• # of training programs• % of training programs conducted• Training needs analysis conducted• Competency models developed• Training budget as % of payroll

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Before we start…

Moral of the story…

1. Innovation:– Business models– Products– Services

2. Market Leadership

3. Competitive differentiation

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What is the OBJECTIVE of a Performance Management System?

• What is the ultimate objective of a Performance Management System?

• ‘Performance’ – achievement, • ‘Management’ – controllable, improvement• ‘System’ – predictable outcome, autorun

Summary?• A Predictable process to Improve Controllable

Achievements




What is the OBJECTIVE?

Succession Planning (Business Continuity)

Talent Management

Differentiation

Performance Management System

Budgeting + Planning

BSC and KPIs

Strategy

Business Model

Business Strategy Execution

Talent Management




2. Adapting the System to the Business Model and Strategy

Focus on the Business Strategy and Business Direction first




What is the Business Model?

USP

Market Discipline

Profit Model

•Google

•Tata Nano




Business Model: Profit Model

Revenue

Cost

MarginCash Flow

Assets




Intro: Market Discipline

"They are the most innovative"

"Constantly renewing and creative"

"Always on the leading edge"

"A great deal!"

Excellent/attractive price

Minimal acquisition cost and hassle

Lowest overall cost of ownership

"A no-hassles firm"

Convenience and speed

Reliable product and service

"Exactly what I need"

Customized products

Personalized communications

"They're very responsive"

Preferential service and flexibility

Recommends what I need

"I'm very loyal to them"

Helps us to be a success

Product Leadership

OperationalExcellence

CustomerIntimacy

•Air Asia




Operational Excellence(low cost producer)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

Product Leadership(best product)

Customer Intimacy(best total solution)

Strategy: Market Disciplines




Operational Excellence(low cost producer)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

Product Leadership(best product)

Customer Intimacy(best total solution)


HP well-balanced portfolio, mass customization

Acer super lean cost structure, aggressive pricing

Apple powerful products, premium

pricing, limited range

Still Doing well in 2009




Operational Excellence

• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'


• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization





The McPlaybook*

Make it easy to eat• 50% drive-thru• Meals held in one

hand

Make it easy to prepare• High Turnover• Tasks simple to learn

& repeat

Make it quick• “Fast Food”• Tests new products

for Cooking Times

Make what customers want• Prowls market for new

products• Monitored field tests

*Adapted from: Businessweek , Februrary 5th 2007




Revenue

Base Retention

Share Gain Positioning Adjacent Market

New Business

Financial

Learning & Growth

Internal Process

Customers

Cost Margin

Systems Alignment with Business Model

Cash Flow Asset


Product Leadership

Customer Intimacy

Investment Strategy

Competencies Information Systems

Motivation, empowerment,

alignment

Satisfaction




Before we start…

Which comes first?

1. Strategies -> KPI?

2. KPI -> Strategies?




Before we start…

Which comes first?



•already know our priorities, aware of all strategy options available

•creating something UNIQUE, INNOVATIVE and DISRUPTIVE e.g. Air Asia

•conducting a business Turnaround e.g. MAS




Before we start…

Which comes first?



•want to find out possible strategies,

•determine our priorities first thru selection of important KPIs;

•growing through ‘normal’ business, not a Turnaround.




Wrong KPIs

“What is the moral of the story?”




KPIs and Behavior

After: “Minutes Per Resolution” of a problem

• Resolution in ONE CALL become the core goal• Reduced probability of call transfers from 45% to

18%




Sample KPIs for Each Market Discipline


• Price• Selection• Convenience• Zero Defects• Growth


• Price• Selection• Convenience• Zero Defects• Growth

Customer Intimacy

• Customer Knowledge

• Solutions Offered• Penetration• Customer Data• Customer-success

focus

Customer Intimacy

• Customer Knowledge

• Solutions Offered• Penetration• Customer Data• Customer-success

focus

Product Leadership

• Marketing• Functionality• # of Successes• # of Failures• Learn from key

users• Interdisciplinary

teams• Pipeline

Product Leadership

• Marketing• Functionality• # of Successes• # of Failures• Learn from key

users• Interdisciplinary

teams• Pipeline




• Operational Excellence• Move know-how from top performing

units to others• Benchmark against best in class• Ensure operations training for all

employees• Use disciplines like TQM for continuous

learning to reduce costs and improve quality

Strategy and Systems: Market Disciplines

*The Performance Management System should be focused on these




• Product Leadership• Reduce time to market• Commercialize new products fast• Ensure that ideas flow• Reuse what other parts of the company

have already learned• Ensure there are multiple sources of

funding







• Customer Intimacy• Capture knowledge about customers• Understand customer needs• Empower front line employees• Ensure that everyone knows the

customer• Make company knowledge available to

customers





Business Situations vs. HRM

Upturn Flat Downturn

Fight Complacency

Sharpen Edge

Keep Momentum

Conquer

‘Change’ mgmt

Reduce Fat

Continuity

Everyone Happy

Innovation

Acquire

Profits

Build momentum

Sales

Cash Flow

Talent Mgmt

Innovation/R&D

Early wins

Slow Down HR Costs

Top Talent focus

Sales, Sales, Sales

Increase attrition

Motivation






Fight Complacency

Sharpen Edge

Keep Momentum

Conquer

‘Change’ mgmt

Reduce Fat

Continuity

Everyone Happy

Innovation

Acquire

Profits

Build momentum

Sales

Cash Flow

Talent Mgmt

Stack R&D

Early wins

Slow Down HR Costs

Top Talent focus

Stack Sales

Increase attrition

Motivation

•Projects•Job Ads•Communication•F/L Manager Com.•Middle Management•Involvement (survey, suggestions)•Realistic Goals•Controllable KPIs (customer satisfaction, production)






Fight Complacency

Sharpen Edge

Keep Momentum

Conquer

‘Change’ mgmt

Reduce Fat

Continuity

Everyone Happy

Innovation

Acquire

Profits

Build momentum

Sales

Cash Flow

Talent Mgmt

Stack R&D

Early wins

Slow Down HR Costs

Top Talent focus

Stack Sales

Increase attrition

Many times, you need a different CEO/Leader/Management Team

for each business situation




3. Fine-tuning Performance Management for Talent Management




Talent Management

1. A Talent for others does not mean a Talent for you

2. ‘Talent’ has to be defined in the context of the Business Model




Performance Management and Talent Management

• Talent Management Processes

PhilosophyTraining Needs, Competencies

Differentiation, Targeting

Improvement, Progress

Rewards, Recognition

Development

Evaluation

Selection

Motivation




Targeting: Identify and Attract

Group I

(Talent Pool)

Group II

( Potential)

Group III

( Performance)

Group IV

(Counseling)

2 3 4 5

23

45

PE

RF

OR

MA

NC

E

POTENTIAL• Identify




How we de-motivate our own Talent Pool

Complaints about Performance Management Systems

• Bias• Different Standards• Surprise• Subjective• No linkage• No differentiation• Secretive• No follow up• No control• No support




Systems Problem…

Complaints about Performance Management Systems

• Different Standards• Surprise• Subjective• No linkage• No differentiation• No support

*The rest are ‘people’ problems… to be dealt with in another time






Customer Intimacy

Customer Intimacy

Product Leadership

Product Leadership

Organization, jobs,skills

Management systems

Information and systems

Culture, values,norms

Business Model vs. Talent & Performance Management





•Central authority, low level of empowerment•High skills at the core of the organization

•Disciplined Teamwork•Process, product- driven•Conformance, 'one size fits all' mindset

• Integrated, low cost transaction systems•The system is the process

•Command and control•Quality management


•Central authority, low level of empowerment•High skills at the core of the organization

•Disciplined Teamwork•Process, product- driven•Conformance, 'one size fits all' mindset

• Integrated, low cost transaction systems•The system is the process

•Command and control•Quality management

Organization, jobs, skills

Management systems








Management systems



Product Leadership

•Ad hoc, organic and cellular•High skills abound in loose-knit structures

•Concept, future-driven•Experimentation and 'out of the box' mindset

•Person-to-person communications systems•Technologies enabling cooperation

•Rewarding individuals' innovative capacity•Risk and exposure management•Product Life Cycle profitability

Product Leadership

•Ad hoc, organic and cellular•High skills abound in loose-knit structures

•Concept, future-driven•Experimentation and 'out of the box' mindset

•Person-to-person communications systems•Technologies enabling cooperation

•Rewarding individuals' innovative capacity•Risk and exposure management•Product Life Cycle profitability






Management systems



Customer Intimacy

•Empowerment close to point of customer contact•High skills in the field and front-line

•Customer-driven•Variation and 'have it your way' mindset

•Strong customer databases, linking internal and external information

•Strong analytical tools

•Customer equity measures like life time value•Satisfaction and share management•Focus on ‘Share of Wallet’

Customer Intimacy

•Empowerment close to point of customer contact•High skills in the field and front-line

•Customer-driven•Variation and 'have it your way' mindset

•Strong customer databases, linking internal and external information

•Strong analytical tools

•Customer equity measures like life time value•Satisfaction and share management•Focus on ‘Share of Wallet’





Revenue

Base Retention

Share Gain Positioning Adjacent Market

New Business

Financial

Learning & Growth

Internal Process

Customers

Cost Margin


Cash Flow Asset


Product Leadership

Customer Intimacy

Investment Strategy

Competencies Information Systems

Motivation, empowerment,

alignment

Satisfaction




Performance Support: 4-Wheels Model

Philosophies

Corporate

ObjectivePerformance Objectives

StructureResources

Leadership

Person




Curse of the Bell Curve

‘A’ Staff

‘B’ Staff

‘D’ Staff

‘E’ Staff

‘C’ Staff







Eight Things To Do

1. Get the Business Model and Strategy right

2. Link System to Strategy (e.g. BSC)

3. Simplify KPIs and Processes to Business Model

4. Clarify the System Philosophy to employees

5. Strengthen Performance Management System

6. Redirect Funds ($$)

7. Brainwash your Appraisers (especially new ones)

8. Support performance with 4-wheels



Thank You.

soft copy of slides: http://totallyunrelatedrandomanddebatable.

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