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Performance ManagementImportant Information Performance management is a strategic tool used to promote an effective organization. It ensures that individual employees efforts are focused on the priorities and strategies set out in the corporate and departmental business plans. It directs efforts towards effectiveness and away from merely being busy. The success of employees depends on a clear performance management process, which recognizes the accomplishments and supports the professional development of Nova Scotias public service employees. There are two distinct, but similar, performance management processes in the Nova Scotia Government: one for MCP employees and one for BU/AS employees. If you have questions regarding your performance management responsibilities or what type of performance management process you fall under, contact your manager or OD&E Senior Consultant at the Nova Scotia Public Service Commission.

The Performance Management Cycle

Performance Management Resources View by Activity View Employee Type (BU/AS/MCP) Tips & Tricks

Performance Management ResponsibilitiesManagers ensure that each employee knows what is expected in terms of performance and professional development. They manage towards successful outcomes for both the employee and the organization. Managers are responsible for coaching employees and giving feedback based upon goals set at the beginning of the performance cycle. As well, together, managers and employees review progress periodically throughout the year and formally at the end of the cycle. Employees are responsible for their own performance, are in charge of their own career development and should take the initiative to be successful. The performance management process helps them do this by linking the business plan with their individual responsibilities and helps them focus on what needs to be done and how it needs to be done. If you need help with performance management, contact your HR representative or Karen Meins (902424-4271).

Sustained Human Capital (page 5/6)Page123456

LeadershipWe recognise leadership as a primary focus of our organisational development. Our interventions include formal executive coaching at Exco and senior management level, formal business school programmes and management training modules. In 2007 we developed an integrated training programme divided into four levels of leadership. The programme focuses on the implementation of our 2010 strategy, but with emphasis on teamwork and holistic, big-picture thinking. We also invested in executive coaching for our top 60 managers (including Exco members), positively addressing our leadership style through a 360-degree review and simulation processes.

InductionWe introduced a completely revised induction process from the beginning of 2007. All staff now begin their induction at the head office in Cape Town, where they meet the leadership, get to understand the brand, the companys values, and why our company is the best place for them to realise their aspirations.

Performance ManagementWe have a structured Performance management system that sets specific objectives and measures performance achievement while identifying development opportunities. This enables the company to develop individuals, identify potential, reward performance, improve productivity and create a performance culture.

With the rollout of our Broker Management Model Programme (BMMP) and the adoption of our new values, it became opportune to review our Performance management systems and procedures across the country. A survey was undertaken resulting in the revamp of the Performance management system and processes with emphasis placed on the training and re-skilling of staff. Performance training started in 2007 and around 70% of staff have already been trained.

Training for Brokers and IntermediariesWe provide internal training and work with our business partners through operational and product training (approximately 12 000 brokers and intermediaries participate per year). As short-term insurance products become more specialised and complex, we develop more sophisticated training tools, including an emphasis on video-based training, making use of visual examples to bring home the intentions of, and opportunities presented by, our various products.

Top 10 HR Tips For beating the recessionA survey of HR directors and business leaders by recruitment firm The MBS Group has produced what it calls 'Ten tactics for tough times'.

Those involved in the research were all at board or senior management level, within the retail, luxury, and consumer goods sectors. How useful these tactics actually are is open to debate, but they provide a useful barometer of the current thinking taking place in top firms.

Tactics For Tough Times

1. Ride the storm - preparing for difficult times but not currently planning large scale layoffs.

Leaders of consumer, retail, leisure, and luxury industries are wisely shying away from kneejerk staff cuts or talking about culls of more mature staff. This reflects an innovative and creative approach to talent that other sectors would do well to observe.

2. See upside in downturn - the best business leaders see opportunities in turmoil.

Business leaders are focusing on the future, aiming to find new opportunities and disrupt existing markets with innovation, based on consumer insights.

3. Show me the value - rapid response and appropriate price promotion are working for some.

Extreme value propositions are working well with increasingly cost-conscious consumers. In an effort to grab market share, a race downmarket is developing, to capture consumer spending power with a best-price message.

4. Pocket returns in pockets of growth - some sectors are positively booming, such as online, home entertainment and some luxury brands.

Online business continues to defy gravity. The results seem to indicate a digital divide between companies who have older business models and those who have successfully incorporated ecommerce and new technology platforms. The latter are now benefiting from this shift in consumer behaviour.

5. Refocus on emerging markets - opportunities in Asia are attracting increased attention and investment whilst Europe and the US flounder.

Many respondents indicated that they are refocusing their businesses on the significant growth opportunities in the Middle East and Asia and, to a lesser extent, Eastern Europe.

6. Keep up with customers - businesses must find a way to match or exceed customers' increasingly agile changes in behaviour.

Customers behaviour is changing faster than businesses are able to shift their strategies. Consumer loyalty is not surviving the challenge of great deals and people are defecting to (own) brands that previously they would not have considered.

7. Hang on to talent - attracting the best talent is increasingly vital, but also becoming increasingly difficult.

Business leaders are not planning for the large-scale lay-offs that happened in previous recessions. Instead, they are focusing on whether they have the skills and talent to take them through the downturn. They recognise that it will be increasingly difficult to attract the best new talent into their organisations.

8. Empower your people - business leaders are recognising the value of experience, while also ensuring that their people have the right skills and training in place to survive and prepare for the upturn.

Internally, the focus is on having the right strategies in place to retain the best people, as well as managing under-performers in a tougher way. Incentives are being adapted to reflect these changed priorities.

9. Keep up morale - maintaining workforce morale will be a decisive benefit.

Businesses reported that they are redoubling efforts to demonstrate decisive leadership via more internal communication. For example, several companies are making increasing use of face-toface communication to increase the CEOs visibility, to set the right tone and convince employees that their jobs are safe. They recognise the need to avoid the creation of a bunker mentality within their businesses and build employee confidence and trust in their leadership.

10. Engage your staff - keep staff members on your side.

A high proportion of our survey respondents recognised that full employee engagement is needed to be able to shift strategy successfully. A minority of companies cited examples of the impact that this can have.Ref:

Cost effective Hiring and Successful retention in the corporate world is very essential today. For this reason companies are working on the areas of recruitment & retention to get more insights on the same. Some of the key findings are:

. Knowing the generation Y better will improve an organisation's chances of recruiting andretaining them

. But to know them organisations must move beyond perusing documented information.The better you know your prospective candidates the better the chances of luring them. The logic is that simple. There is already a lot that organisations know about generation Yers. However, if the intention is to recruit more from this generation, the question to ask is, "What more can we learn about them?" The answer is critical to formulating an effective strategy-one that ensures a competitive edge. This week's mailer will clue in organisations and their recruiters on the characteristics and quirks of generation Yers. This information should help them realign their existing strategy to recruit successfully and retain them. Defining the 'Y' cadre Commonly referred to as "Millennials", "Echo Boomers" and "Net Generation", generation Y constitutes those who were born from 1980 to 1999 and grew up in the 1990s and 2000s. A few well-documented and work-relevant characteristics of this generation are:

. They are more ambitious than the previous generation so much that sociologists call them theoverachieving, overscheduled generation

. They like changing jobs, and earned the title "job-hoppers" . They have great expectations from their workplace as, according to research, "they desire toshape their jobs to fit their lives rather than adapt their lives to the workplace". This outlook is a huge challenge to employers.

The above-mentioned characteristics are well-documented. In fact, most organisations have already realigned their recruitment strategies around them. But there are a few other quirks that are not so well documented but can have an equally huge impact on an organisation's strategy. They are: Trait: Dependence on parents Being the products of helicopter parenting, generation Yers find it difficult to wean off parents. This generation does not think much of moving back home after college. Less rebellious than their predecessors, most of them even let their parents decide on where they will work and for whom. That this generation job-hops is a well known fact, but what is undocumented is that their job-hopping is driven by the will to learn. Encouraged by their parents' advice to learn and grow from different experiences, the generation is willing to risk job security and fantastic salaries for the thrill of learning something new. Also the fact that they can fall back on their parents makes them greater risk-takers than their predecessors. Tip: In getting the Yers to make career decisions, give them time to consult their parents. Encourage them to make those phone calls to their parents from the interview room itself. Trait: In-box management It might not appear as an advantage, but the fact that Yers choose to start their work day without a 'to-do' list actually makes them better 'prioritisers'. As a behavioural expert comments, "Baby boomers use their in-boxes and in-trays as to-do lists and go by them on a typical work day. However, Gen Y is sold on the idea of an 'empty box'". This means that what they do is not dictated by what comes into their in-box or in-tray but by what they feel is important. This gives them better control in deciding their priorities and also makes them conscious of managing their work activities based on priorities. In short, they do not work on a first-in, first-out basis but on the "most important comes first" basis.

Tip: Allow Yers the leeway to plan their day. Strict scheduling can frustrate them. Trait: Women power Yers appreciate gender equality and have little qualms about women surging ahead as earners. Generation Y women feel more empowered, go solo in making career and personal decisions, and feel less insecure at work. Another observation is that women take a back seat voluntarily when they decide to have children. Tip: Think of flexible work hours and work-at-home options for new mothers.

Trait: Team spirit Generation Yers thrive as teams. Probably the first generation to value the importance of team power, this generation appreciates how individual efforts at work multiply when combined with team efforts. So oriented are their efforts to work in teams that team-building and bonding initiatives are only reminders of what they already appreciate. Therefore, where they really need help is in developing their leadership potential. Tip: Divide everyone into work teams. Even a one-employee function or department can be integrated into a large group. Some of this information is probably already known but not accounted for as yet. However, what is essential is to be aware of these undocumented generational differences. Organisations must interpret this information to use it as a recruitment advantage.

Effectiveness of the Human Resources FunctionThe purpose of a Human Resources audit is to assess the effectiveness of the Human Resources function and to ensure regulatory compliance. The audit can be conducted by anyone with sufficient Human Resources experience. Having experience working in more than one company is a plus, as it provides the auditor with a broader perspective. There's an advantage to having the audit conducted by an external consultant. Because the external consultant has fewer biases about the organization and has less personal interest in the outcome than an employee of the company, the external consultant may be more objective.

Collect DataAssess the mission, vision, strategy, and culture of the organization, from whatever written material there is in the company (check with the department or person who handles public, customer, or shareholder relations). Collect existing data such as: 1. Hiring statistics (acceptance rate, hiring rate, hiring projections) 2. Turnover 3. Compensation and benefits philosophy and practice 4. Exit interview summaries 5. Employee complaints (discrimination, harassment, safety, other) 6. Promotion and advancement practices and trends 7. Human Resources budget and expenditures

Where possible, compare the data you collected with market data. This information will provide you with a point of view for the next phase of the audit: the interviews. If, during the interview, discrepancies arise between the data and the interviewee's answer, you can explore the reasons for the discrepancy(s). Conduct Interviews

The purpose of the interview is to collect input from the internal customer on their Human Resources needs and how those needs are being met. Begin the interview with top management. Next conduct interviews with a sample of subordinate managers including first line management. The topics to discuss during the interview include: 1. 2. 3. 4. 5. 6. 7. 8. Perceptions of the company and its goals Strengths and weaknesses of top management Employee perceptions of the company and top management Relations with subordinates Support of career goals for self and employees Major Human Resources issues Which Human Resources functions work well Which Human Resources functions need improvement

Conduct the Regulatory Compliance Audit

The following areas should be audited as part of the regulatory compliance audit: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Personnel files and recordkeeping (contain only job related information) Pay equity Job descriptions (ADA compliance) Legal postings Equal Employment Opportunity and Affirmative Action Forms (applications, internal forms, etc.) Workers' Compensation Fair Labor Standards Act Family and Medical Leave Act Legal reporting

Summarize the ResultsConsolidate the information you collected. Compare the results with market surveys. Determine which practices are good/popular/effective/competitive. Determine which practices need improvement. Recommend specific improvements referring to the results of both the Effectiveness audit and the Regulatory compliance audit. Justify the recommendations. Determine how to measure whether the improvements are successful.

Obtain Approval from senior Management

Present the preliminary results and recommendations to senior management individually. Point out how these recommendations will support their needs. Obtain their support, then present the final results and recommendations to the senior management staff for final approval.

Implement the Program

Consider implementing the program in part of the organization as a pilot program. Monitor and measure success and seek to continuously improve processes. Be prepared to modify the program if an organizational change requires it.

Effective Organizations(Organization Development)

The trend toward reducing the number of management levels in organizations is being driven by the need of organizations to increase the speed and accuracy of communication. Traditional organizations, with their many levels of management, process information slowly. Plus the information gets filtered along the way, often for political reasons which can conflict with the overall good of the organization.

Processing information quickly and accurately, then acting upon what is learned, is critical for the success of an organization. Another key item is selecting relevant information for measuring organizational performance relative to organizational goals. This can be challenging in light of today's information rich environment. (Selecting the wrong metrics, those which pull the focus of the organization away from what is most important for its ultimate success, will harm an organization). After selecting the appropriate metrics, organizational performance can be further enhanced by linking the performance results to individual or team incentives.

Performance Management is a process that can facilitate the flow of information in an organization. Performance Management includes the following:

1. A flow-down of goals beginning with the organization's strategic plan, to the annual organizational goals, to the President's or CEO's individual performance goals, on down to all employees in the organization. Thus each member of the organization can ultimately tie their individual performance goals to the organizational goals .

2. A formal feedback system in which individual performance results can ultimately flow back and influence the organization's strategic plan. Feedback must occur frequently.

3. A mutual (between the employee and manager) establishment of duties and responsibilities and criteria for measuring success. Also, performance results are mutually determined. The mutuality is what encourages the feedback.

With more than 135,000 employees working in some 80 countries worldwide, Procter & Gamble, creator of brands such as Tide, Folgers, Pringles, Charmin and Crest, has isolated the manageremployee relationship as a critical component of effective performance management. "It's the No. 1 reason why people leave a company," said Keith Lawrence, director of human resources, beauty, health and well-being at Procter & Gamble Co. "It's such an important relationship. It determines the work an individual is assigned, their future assignments, promotions, compensation, as well as the basic love, care and feeding that we get each day."

In order to enable effective manager-employee relationships, Lawrence said the process must begin with a manager's fundamental belief that a high-quality relationship with every one of his or her employees is important. Positive manager-employee relationships actually start when an employee joins the manager's team or attends the company on-boarding program. On-boarding can help the two get to know each other, identify their strengths and establish how they can work together. To set the right tone at this stage, Lawrence said the manager should have clear work plans and objectives for what will be accomplished in the first assignment. Ongoing, continuous feedback - including not only what needs improvement, but recognition of what is going well - will help reinforce the employee's contribution and build a basic feeling of trust, respect and a sense of teamwork. "We have a lot of systems to give feedback on an ongoing basis, but the most effective way to give feedback is to tailor it to the individual employee," he explained. "Some employees like to get written feedback, some like to get it in person, others like to hear all the good stuff, and you have to soft pedal the issues. It's important for the manager to know every one of their employees and deliver feedback as they like it delivered." The level of personalization and trust in this manager-employee relationship is so relevant; it can take only one incident to damage it. Saying one thing and doing another, offering inaccurate information or not fulfilling commitments related to advancement or new opportunities for growth and development are a few critical but common manager mistakes. "Fundamentally, all relationships boil down to trust," Lawrence said. "The worst thing a manager can do is make a commitment and either not deliver on it or not be honest, candid and complete with their employee. It's very hard to rebuild trust. Stephen Covey would say you need seven deposits in the emotional bank to account for one incident like that. In the trust fund, it's beyond that. A manager can really blow a relationship when they're not trustworthy or when they lack integrity." Procter & Gamble uses its annual employee survey to measure how well managers are building and sustaining employee relationships. The survey has several relationship-based questions for which answers are monitored, benchmarked and tied to manager - particularly senior managers' bonuses. "That puts teeth behind the importance of this," Lawrence said. "We also have a wide range of

tools and training available to managers and employees to help their relationship building. For example, we have a relationship-building tool kit that has an array of different exercises and approaches that both employee and manager can use to help them strengthen their respective relationship. "Last, we're leaning toward what we call strength-based relationships, and the analogy here is in a marriage, you learn to appreciate and play to each other's strengths as opposed to trying to fix the parts you don't like. The same is true here. We're trying to focus on what are the strengths that each employee and manager has and how can they respectively play to those over time and build and strengthen one another."

1. The Most Important Thing Bosses Do Is Help OTHERS Succeed:

This sounds simple, but bosses got promoted because of their personal achievements. Now, they have to shift the focus from themselves to the growth of those who report to them. In other words, it's not about YOU, boss. It's about the troops. If they do well, you should, too.

2. Managers Cannot Treat Everyone The Same:

Great bosses learn how to customize their approach to each person. Yes, they hold true to core values, but don't assume that they have to act in identical ways with each staffer. They manage people as the complex individuals they are. And that's a real skill.

3. IQ Gets Bosses Only So Far; EQ Takes Them to The Next Level:

I'm talking about emotional intelligence: the ability to be self-aware, self-managing, socially aware and adept at managing relationships. This means knowing how to read the emotions of others as well as our own, to know how to power up or power down in synch with a situation, to build trust through expertise, integrity and empathy.

4. People Fall In Love With Ideas & Solutions Of Their Own Creation:

It's faster and easier to tell people what to do; but when people come up with their own ideas, they are much more invested in them. Anyone who's ever assigned stories knows this one.

Journalists love the project they come up with more than the one that's given them. When we put our personal stamp on something, we care more about it. This applies in work assignments, negotiation and conflict resolution.

5. Coaching Is A Critical Skill:

Bosses who "fix" the work of others don't help them grow. Fixing may be faster, but has shortterm impact. Coaching takes more time but the results last. Fixing is about the product, coaching is about the person. With good coaching, the person and the product improve.

6. Staffers Must See You, Not Your Evil Twin:

What's the difference between visionary and delusional, a roll-up-my-sleeves helper and a micromanager, or between confidence and arrogance? It's often in the the way the leader communicates and the staff perceives her. Leaders can't assume their employees can read their minds. It's hard work to make your intentions clear.

7. Conflict Doesn't Get Better If It Is Ignored:

The best bosses build cultures where conflict may be inevitable among smart, creative people, but it is handled extremely well. Differences are aired, values are clear, people are held accountable, and bullies don't win.

8. Intrinsic Motivation Is The Most Powerful:

The best work gets done when people motivate themselves. That's intrinsic motivation: Internal engines like competence, choice, meaningfulness and progress. Or the joy of working with a team, or achieving something solo. Great bosses know what drives each person they lead.

9. Managing Change Is A Constant Responsibility:

Change can make people very uncomfortable, but leaders must move people in new directions, toward new opportunities. Today's newsrooms are undergoing massive changes of culture, workflow, skill sets, formats and technology. Great leaders build bridges to the future.

10. Leaders Inspire Others:

There's meaning, honor and dignity in every form of honest work. Don't fear that you will look corny by sharing a vision, a passion, or a dream. The best bosses make us feel better about ourselves, our work and our goals. Dare to inspire.

Performance Management Collaborative

The Performance Management Collaborative consists of a seven state core including Illinois (lead state), Missouri, West Virginia, New Hampshire, New York, Alaska, and Montana. Five additional partners include the Association of State and Territorial Health Officers, the National Association of County and City Health Officials, the Centers for Disease Control and Prevention, the Health Resources and Services Administration, and the Association of State and Territorial Local Health Liaison Officials.

Definition of Performance Management Performance management is the practice of actively using performance data to improve the public's health. This practice involves strategic use of performance measures and standards to establish performance targets and goals, to prioritize and allocate resources, to inform managers about needed adjustments or changes in policy or program directions to meet goals, to frame reports on the success in meeting performance goals, and to improve the quality of public health practice. Performance Management components include: Performance Standards - establishment of organizational or system performance standards, targets and goals and relevant indicators to improve public health practice Performance Measures - application and use of performance indicators and measures Reporting of Progress - documentation and reporting of progress in meeting standards and targets and sharing of such information through feedback Quality Improvement - establishment of a program or process to manage change and achieve quality improvement in public health policies, programs or infrastructure based on performance standards, measurements and reports. A Performance Management System is the continuous use of all the above practices so that they are integrated into the organization's core operations. Performance management can be carried out at multiple levels, including the program, organization, community, and state levels.Collaborative Products

The Collaborative released its third major product in March 2003, From Silos to Systems: Performance Management to Improve the Public's Health. The Silos to Systems guide explains and showcases examples of the Collaborative's four-part model for performance management, along with helpful tips for successfully implementing a performance management system. Find more Collaborative's products on the Public Health Foundation's Web site. Performance mangement case studies and learnings.

Performance managementCT enables you to achieve the goal of successfully implementing performance management, instilling preferred behaviour and rewarding high performance. It is ineffective to change behaviour, one employee at a time. With performance management methodologies we assist you to effectively increase your

employees natural ability to motivate themselves, while decreasing the de-motivators in your organisation throughout. Aligned business goals and focussed employees can result in an increase of more than 70% in efficiency. We endeavour to make performance management a practical and understandable tool for employees on all levels. The behavioural model that CT embeds in performance management follows a five- point approach:

Driving performance management will result in a long term culture change. CT will support your business in the enabling process to ensure that the performance management process receives the required buy-in and cooperation from employees and management, and will ensure that employees and management have the skills to fully implement the process and make it work. Support in this process is an active and dynamic communication strategy that will inform all stakeholders of the what, how, why, and consequences of supporting the implementation of performance management within your business. In addition to our consulting expertise, CT has a web-based performance management system that enables your business to effectively and timeously manage employees performance, by providing you with a tool to develop performance agreements that are aligned with business goals, resulting in focused and performance-related development plans for every employee. It also allows for informed decision-making through extensive and detailed reporting.


Organizational Development & Training Organizational Assessment and Gap Analysis New Manager Assimilation On Boarding Manager Boot Camp Situational Leadership Executive Coaching Mentoring Programs Team Development

Staffing & Recruitment

From strategic needs assessment, optimum hiring processes, and management skill building, we can ensure you are positioned to hire the best and brightest to meet the demands of your business Tools and metrics for time-to-fill, cost-to-fill, source-of-hire, quality-of-hire, etc. to measure results

Performance Management

Linking individual & team performance to organizational goals Strategic performance coaching packages

On Site Specialists Interim HR leadership Sexual harassment and discrimination investigations HR audit for compliance

Compensation & Benefits Salary survey participation and data analysis Administration and analysis Comprehensive benefits review and vendor management




Budgeting: Why you should consider it, How it works, and Who should contribute to make it happen.News categories: Enterprise and business strategy, Finance and accounting, Performance management and controlling, Information Technology




Daum content:

Table of Intro Why should a company consider to move Beyond Budgeting ? How does the Beyond Budgeting model work ? Who should contribute to make it happen ? The Transition Route Major success factors Summary Additional resources (updated Jan 2005)

Fixed budgets dont work today. A budget is a too static instrument and locks managers into the past - into something they thought last year that it was right. To be effective in a global economy with rapidly shifting market conditions and quick and nimble competitors, organization have to be able to adapt constantly their priorities and have to put their resources where they can create most value for customers and shareholders. In order to do that, they need the right concepts, management processes and tools concepts such as the Beyond Budgeting Management Model. The introduction of new management instruments such as the Balanced Scorecard, which help to better align the entire organization with corporate strategic objectives and to focus it on the essentials, has created the right foundation. Because if corporate strategy and the objectives are clear for all people in an organization, one can principally react faster to changing market conditions. But then the fixed budget comes into their way and prevents them from really doing the right things. Though what is often missing is a more flexible operational planning and control model. The Beyond Budgeting model wants to fill exactly this gap. Juergen H. Daum New! visit J.H.D.'s Beyond Budgeting Info Center

- including latest BB insight materials, interviews with BB pioneers etc. here an extract:| J.D.'s insight article "Beyond Budgeting" | Interview with Lennart Francke, CFO of Svenska Handelsbanken | Panel Discussion with Borealis, Nestl, and Unilever | Interview with Jeremy Hope co-founder of the Beyond Budgeting Round Table | Interview with J.D. on finance and IT |

Intro Three years ago I presented to a group of senior executives at the headquarters of a large U.S. based consumer products company with global operations the concept of Strategic Enterprise Management (SEM) a concept that ties enterprise management closer to strategy and establishes management processes that make it easier to manage trade offs in the business system and to adapt strategy, operative activities, and resource utilization plans faster to changes in a companys environment. At the same time SEM was also an emerging new software product to support these management processes (and I was the product manager at SAP for it). When I started to talk about the limitations of the traditional budget based management system, I received strong agreement from these executives: yes, the budget ties managers to the past, it does not provide them with incentives to look for new growth opportunities, and it makes the organization as a whole very inflexible. When I was talking about that every manager is sitting on his budget after it is released no possibility to adapt priorities, when the world is changing I saw just nodding heads. The most exciting thing of the SEM concept for them was, that it enables their organization to become more flexible and to react to change faster. They told me that this represent their most important objective with respect to their intentions to improve the management system of the company. And after we finished in the afternoon with the workshop on the planning processes, which was mainly targeted at the responsible person for budgeting and planning, the corporate controller stood up and asked the budgeting manager to come back until the following week with a plan for implementing the SEM concept and to define the requirements for the information systems to support it. Meanwhile many other companies I worked with followed the same route and wanted to move beyond their traditional budgeting based management system. The reason is, that fixed budgets dont work today. How can they? How can a static instrument that locks you into something you thought about last year be effective in a global economy with rapidly shifting market conditions and quick and nimble competitors? Comparing the annual budget, which is in essence last years reality, with actual revenues and expenditures on a monthly basis does not provide companies with useful information to manage their business. It merely locks them and their managers into the past. Rolling, perhaps monthly, forecasts and budgets focuses them on current and future realities. Through monthly or even event based forecasting, managers in an organization are forced to think ahead. For the company as a whole, it provides the possibility to offer realistic expectations for revenues and costs, and allows senior management to react before financial figures turn into the red. Budgets and forecasts are tools for resource allocation. Resource allocation needs to be consistent with strategy and prevailing business conditions. Companies have to manage strategy as a continuous process, so that strategy can be adaptive to changing business conditions, and resource allocation can follow suit. In this regard, they should approach strategy just as they do day-to-day operations. As they execute

strategy-setting tasks again and again on a monthly or even weekly basis, they need an appropriate strategy and corporate performance management system that allows them to do that very efficiently. While regular, ideally event driven forecasting (events that threaten to reach defined objectives and targets) represent the core building block of any performance management system beyond budgeting, it is not enough. Also the behaviour and the entire management culture has to change. Around the same time, begin of 1998, when I started with research for our SEM project at SAP, working with some innovative customers and with some of the leading experts and consultants in the US and Europe, the CAM-I Beyond Budgeting Round Table (BBRT) was founded in the UK. Their mission was to identify companies that abandoned budgeting, analyse what they did instead in steering the organization and to try to identify the principles of a new management model that will enable companies to introduce more effective management processes and steering mechanisms. In fall 2000 we met and reconciled our findings and concepts. Interestingly, there was a large overlap (if not a total match) concerning the concepts for SEM management processes and BBRT management processes. But the real differentiator was the fact, that the BBRT concept tries to deal also with the soft facts of the new management system. The biggest contribution from the BBRT and Beyond Budgeting concept and what makes it really unique is that they found that todays companies need beside more effective and flexible management processes beyond budgeting, which usually are focused on the hard facts, that is on numbers a management culture that enables managers to really perform and to develop their and their peoples capabilities. That is the reason why the Beyond Budgeting concept is consisting of two elements: a framework of 6 rules that focus on a management culture that allows frontline managers to really perform, and of 6 rules that focus on adaptive management processes that support such a management culture (see my first report about the BBRT concept from May 22, 2001). Why should a company consider to move Beyond Budgeting ? The management systems task is to institutionalize decisions through management processes on strategy adjustments, but also on adjustments of operational enterprise activities and resource utilization plans. This should enable the enterprise to continually control and optimize its short and long-term success in a dynamically changing enterprise environment. Every enterprise today is challenged by the fast change of market conditions, technologies, or customer behavior. Peter Drucker writes: One cannot manage change, one can only can be ahead of it (Peter Drucker, Management Challenges for the 21st Century, New York, 1999). Companies and organizations of all kind have to become change leaders if they want to survive in todays market environment. One specific characteristic of a change leader is, to perceive change as an opportunity. A change-leader organization is searching always for changes in its environment and disposes of the necessary Organizational Intelligence that allows it to identify quickly what changes are required internally and in their business model/system in order to respond. In addition, change leaders are also able to effectively translate the required change into action

effectively with the objective to not only maintain their actual market position but to extend it by leveraging the changes happening in their markets. And this is especially true for companies that are based on intangible assets. They are subject to a higher risk exposure, especially to the risk of changing markets. Knowledge-based assets are also often characterized by "spill over effects" where competitors detract from the use of an innovation that its investors have, by copying it. This can be partially restricted by means of patents or protection of proprietary rights, but usually not completely. This is because knowledge based assets and related products can be copied much more easily than physical assets based value creation systems, which require considerable capital investments, which not every start up is able to fund. The problem can often only be solved by use of "time-to-market", where the investors are on the market with the product faster than the competition, and where the investors rapidly increase their own market share. This requires a close link between markets and internal development activities on the one side, and with commercialization activities on the other, with the capability for fast adaptation in the case of changing markets as the key success factor. But this rule not only applies today to knowledge and R&D intensive companies like in the pharmaceutical and high tech industries. As more and more companies, also in traditional industries, rely on intangible assets, the phenomenon becomes a more common one. Enterprise management systems therefore have to be designed in a way, that they do not only support companies and their managers to monitor and optimize their performance in the area of costs and revenues, but also to enable them to recognize immediately limits to growth in their value creation system and to eliminate them, as well as to control and manage output, that is the commercialization process. What is required are management systems, which enable dynamic action and reaction and fast, nearly continuous adaptation of the business system and of business activities to market and technology changes. The budget, the budgeting based traditional management systems represents a hurdle for an enterprises success rather than a supporting tool. Traditionally, the corner stone of the management system of a company is the budget. Budgeting is the central instrument of traditional management systems. All management processes and methods are based on and aligned with it: from strategy planning through resource allocation and cost management to monthly performance measurement and rewards. The budget determines how managers behave and on what activities and objectives they focus. And the main problem today is the inflexibility of the budget based management system. These annual budgets, which are absorbing considerable management time and other resources in creating them, are fixed over the following fiscal year as soon as they are released. Through monthly actual/budget comparisons companies check, how good manages are in meeting their budgets. The main target of these managers therefore is, to not exceed their budget, because their bonus is dependent on meeting the budget. But a strategic instrument that locks managers into something they thought and found right at the end of the previous fiscal year, can not be effective in a global knowledge economy with rapidly shifting market conditions and quick and nimble competitors. The monthly actual/budget comparison,

which compares financial actuals, that is actual revenues and expenditures, with a budget that is typically already overtaken by reality only after a few weeks of the new fiscal year have passed, locks these managers in the past and in the fictive world of the budget. Companies are therefore trying to get rid of their inflexible budgets. They are moving instead to continuous rolling forecasting as part of their management processes, which enable for fast and coordinated adaptation to anticipated changes in their business environment and which also allow to balance the initiated change-management activities with continuity and short term performance. The key for it is an integrated strategy and corporate performance management process, of which the core and central process is not any more a fixed budget but a dynamic forecasting process (see figure 1).

Figure 1: Integrated strategy and corporate performance management processes (source: Juergen Daum, Intangible Assets and Value Creation, 2002)

In contrast to the monthly actual/budget comparison, rolling monthly forecasts of financial performance and for other non-financial value drivers, which are related to the different value creation processes of a company, focus managers on current and future opportunities and risks and not on the past. The forecasting process forces them to look ahead and to achieve market objectives under changing conditions, instead of focusing their attention on how they can better meet the budget. In addition, budgeting is an expensive activity: the average company invests more than 25000 person days per billion dollars of revenue in the planning and performance measurement processes; a KPMG study showed that inefficient budgeting is eating up 20 to 30 percent of senior

executives and financial managers time. But the strategic costs, the opportunity costs for companies not being able to thrive in the new knowledge and intangible based economy will probably be much larger. The CAM-I BBRT names six external factors affecting every company today and that are driving the case for change to abandon traditional budgeting and to move to the Beyond Budgeting model:Shareholders are more demanding and are only loyal to those organizations that are consistently at (or near) the top in their industry. But investors measure relative performance of companies (relative to their industry peers), rather than absolute performance. An important fact that needs to be considered when designing the Beyond Budgeting model. Talented people are increasingly scarce. They want freedom, challenge and responsibility. And they care about values and the environment. The pace of innovation is increasing and product and strategy life cycles are shrinking. To compete, firms must produce a constant stream of new solutions and strategies Prices are falling and quality is rising. Firms must be operationally excellent to compete Customers are in charge and will switch loyalties if not totally satisfied. Firms must keep close to customers and respond rapidly to their changing needs. Demands for higher standards of ethical and social responsibility. Investors and regulators are demanding more open and honest performance reporting. -

How does the Beyond Budgeting model work ? The response of companies should be according to the CAM-I BBRT to develop a new leadership vision and governance model in order to establish a new performance management climate that allows an organization to react to these external factors and changes and to move to a networked type of organization, where decision power is devolved to those, who know the business the best: to frontline managers (see figure 2). The BBRT calls this a devolutionary framework:


1. Create a performance climate based on competitive success rather than on internal politics and on the principle that managers have to meet pure internal performance commitments 2. 2. Motivate people by offering them challenge, responsibility, clear values as guidelines (instead of clear orders) and shared rewards 3. 3. Devolve performance responsibility to operating managers; give them the freedom to decide 4. 4. Empower operational managers by giving them the capability to act, by removing resource constraints (but agree on certain limiting parameters such as for example cost-income-ratio in bank) 5. 5. Organize around customer oriented teams that are accountable for profitable customer outcomes not around functions and departments that are accountable for meeting just the budget 6. 6. Support transparent and open information systems that provide one truth throughout the organization

Figure 2: The new environment is driving the case for change of a companys governance model

To make that really happen, the company needs a new way, how it manages performance, that is finance and the CFO have to come up with a new type of performance processes:


1. The goal setting process: It should be based on agreeing external benchmark based targets, not on negotiating fixed targets. This is focusing mangers on beating the competition and not on meeting the budget. If the market goes up, a manager is still challenged to do better than competitors.


2. The motivation and rewards process: It should be based on recognizing and rewarding team-based success. Today, no single person can act

alone in achieving specific targets for an organization. To reward people individually for reaching specific targets will create tension and mistrust in the organization, which is a recipe for bad performance.


3. The strategy and action planning process: It should be devolved to operating mangers and made continuous. It should not be managed centrally as an annual event. Only this way a company is able to use the know how from the people at the customer front to adapt fast and constantly to changing market needs.


4. The resource utilization process: It should be based on local access to resources (within agreed parameters), not on the basis on allocating them through annual budgets. Only this way frontline managers are able to act fast in front of threats and to realize sudden opportunities.


5. The coordination process: It should be based on making crosscompany interactions through market-like forces, not through predetermined detailed actions set down in central plans. Frontline, operative units negotiate resource and service requirements with service units and agree on certain ranges for required services (service level agreements).


6. The measurement and control process: It should provide fast, open, and distributed information for multilevel control. Information should be available to everyone, so that operational managers are able to compare their performance with the one of their colleagues and that senior managers can see what is going on and can monitor and challenge their subordinates (instead of controlling them).

Information systems are playing a crucial role in making the new concept happen. This are requirements for information systems to support the Beyond Budgeting concept as I have presented it to the BBRT (see figure 3):Flexible KPI based measurement systems that provide operational managers with timely and relevant information and decision support (Data Warehouses and OLAP data marts, Analytics, Fast Close / Business Activity Monitoring) -

Flexible resource planning, forecasting and monitoring processes require an information system that spans the organization (a planning system and forecasting system decoupled from operational systems and optimised for cross functional planning, but that can integrate data from all sources e.g. based on a data warehouse system) Flexible IT infrastructure that is able to easily integrate various systems, provide flexibility to change processes, enables user centric access and services without lousing the necessary integration (an open and flexible IS infrastructure for accounting, analytics, management process support and user interaction) -

Figure 3: Management Information Delivery Architecture (source: Juergen Daum, Intangible Assets and Value Creation, 2002)

Analytical applications that supports managers and business analysts in performance management and in communication processes around performance management provide the tools and information they need to act under the Beyond Budgeting principles. This has to include also a framework for enterprise wide planning and forecasting as well as support for processes such as activity based management (see figure 4).

Figure 4: Information Systems optimised for analytics and decision support

Who should contribute to make it happen ? Beside the business managers, two other corporate functions contribute significantly to the success of companies in the intangibles based new economy: the one of the chief financial officer (CFO) and the one of the chief information officer (CIO). CFOs are the guardians of a companys financial resource and are, as the economic conscience of the company, responsible for the economic transparency and for the Business Intelligence of the enterprise, that is for the design and usefulness of its management system. CIOs are the masters of one of the most important basis resources of intangibles based businesses: of the infrastructure for information collection, information storage, and information distribution. The CFO needs the help of the CIO, who has to provide the new information technologies and infrastructure for the new management system. The CIO needs the support of the CFO in order to be able to focus his resources and the expertise of his team on those projects that are most relevant to the economic success of the company. But not only the hard facts are a decisive factors for companies today. As the BBRT pointed out, also the soft factors, the performance management culture of a company is crucial. People related success factors might be ultimately the most important drivers of a companys performance. HR experts and people experienced with organizational change projects should therefore be part of the project team. And the guardian of the hard facts, the CFO, might change his role as well in the transformation process. The core competency of a CFO in the future, in order to create maximum value for his company, will be to understand

and monitor the economics of the value creation system of his company. This also has to include the ability to translate - together with his management team colleagues - this understanding into a concept for an appropriate management and reporting system, and to provide related services to management and investors, rather than to manage basic accounting processes and the treasury function of the company. So the traditional role of a CFO will be transformed from the role of a chief cash manager and chief accountant to the one of an agile and active Chief Value Officer (CVO), who always keeps an eye on the effectiveness of the value creation system of the company, on the efficiency of its business processes, and on its unrealized value creation potential and he is constantly pressing for its realization. The CFO will be transformed from an administrator of administrative processes to a real business partner for his management colleagues, who directly contributes to the success of the company by ensuring the necessary management transparency. Companies might start to establish business intelligence competence centres, of which the task is, to provide support for managers in understanding new business problems that require in-depth economic knowledge. This will include the collection, editing, and preparation of relevant unstructured internal and external business information that will be supplied to business managers and for example investors through the above-described web based self-services. In addition, the center will provide other services such as management consulting, training in business issues and economics (for example also in form of online webcasts), M&A services, investor relation services etc.. The staff of the centre might come from different functions: from HR, finance, strategic planning, from the operational business (see figure 5).

Figure 5: The corporate Business Intelligence Competence Centre (source: Juergen Daum, Intangible Assets and Value Creation, 2002)

The Transition Route Major success factors The move to a performance management model beyond budgeting is not an easy task. It requires an active commitment of the executive level. To get their buy in, is therefore the most important step in making it happen. A possible action plan for implementing a new performance management system beyond budgeting may therefore look like this one:Identify the problem areas with the current performance management system (e.g. through a structured survey) and actively sell the case for change and a vision for a new system to senior management Look for quick wins (by providing e.g. fast actuals, by improving access to information, by moving to continuous forecasting, by introducing new KPIs ) start small, be fast Set up a cross-functional, interdisciplinary team to steer and manage the implementation project the team can serve later as the core group of the new Business Intelligence Competence Center -

Summary Traditionally, the corner stone of the management system of a company is the budget. The budget determines how managers behave and on what activities and objectives they focus. These annual budgets, which are absorbing considerable management time and other resources in creating them, are fixed over the following fiscal year as soon as they are released. Through monthly actual/budget comparisons companies check, how good manages are in meeting their budgets. The main target of these managers therefore is, to not exceed their budget, because their bonus is dependent on meeting the budget. In todays business environment, which forces companies to constantly change and adapt to changing customer demands and markets, the budget is not the right tool anymore to manage a company and its performance. It locks managers into something they thought and found right at the end of the previous fiscal year. It can not be effective in a global knowledge economy with rapidly shifting market conditions and quick and nimble competitors. Companies are therefore looking today for performance management concepts Beyond Budgeting. They are experimenting already with KPI based reporting systems, rolling or event driven continuous forecasting etc.. But what is needed is a more comprehensive and systematic approach. A concept which is gaining increasingly mind share worldwide and which intends to provide just that, is the Beyond Budgeting concept of the CAM-I BBRT. It tries to combine the hard fact side in form of new performance management processes (typically the responsibility of finance) with the soft fact side of a new performance management climate and a devolutionary framework, where the people at the front, working with customers, get the

freedom to decide and act (typically the responsibility of the CEO and of HR). To make it happen it requires the commitment of the executive team, but the contribution of especially three corporate functions: finance (hard facts) IT (bringing the hard facts to everyone) HR (managing the change from a people perspective) Additional resources (updated Jan. 2005): Juergen Daums Beyond Budgeting Information Center New! Website of the Beyond Budgeting Round Table (BBRT)


Interview with Jeremy Hope (co-founder of the BBRT): The Origins of Beyond Budgeting and of the Beyond Budgeting Round Table (BBRT) Enterprise Management, Leadership and Business Control for Value Creation - presentation from Juergen H. Daum, held at the Executive Briefing on Performance Measurement of the Centre for Business Performance, Cranfield School of Management, 27 January 2004 in London, UK program of the briefing Beyond Budgeting on the move: report from the First Annual Beyond Budgeting Summit in London, 1-2 July 2003 Enterprise Management in the 21st Century - A Blueprint for a New Approachand the role of Information Systems Presentation held by Juergen Daum at the BBRT member's meeting, 26 June 2003in Walldorf/Germany, and held as well at the First Annual Beyond Budgeting Summit, 2nd July 2003 in London/UK program of the summit Interview with Lennart Francke, Stockholm: Managing without budgets CFO, at Svenska Svenska Handelsbanken, Handelsbanken

Presentations held by Juergen H. Daum at the Beyond Budgeting Round Table member's meetings: - Dec 07, 2000, London/UK: Strategic Enterprise Management - May 16, 2002, London/UK: Information System Requirements for Performance Management Beyond Budgeting SAPs White Paper Beyond Budgeting, which was co-authored by colleagues at SAP AG, Juergen Daum, and the Consortium for Advanced Manufacturing International (CAM-I) Beyond Budgeting Round Table Beyond Budgeting article from Jeremy Hope and Robin Fraser (the initiators and researchers behind the CAM-I BBRT concept), published in the U.S. Magazine Strategic Finance, issue October 2000

Panel discussion at the eCFO conference 2001 of the CFO Europe Magazine, Oktober 18-19, 2001 in Brussels, Belgium: "The Beyond Budgeting Management Model". Participants: Janet Kersnar, Editor-in-Chief CFO Europe Magazine; Guiseppe Biamino, manager Budgeting & Controlling at SNAM Rete Gas in Italy; Robin Fraser, Program Director CAM-I BBRT; Peter Herold, Senior Manager Deloitte Consulting UK; Juergen Daum, SAP AG. Can a company really implement the Beyond Budgeting model? This question was discussed by the participants on the panel: video (Real Player) video (Media Player) Intangible Assets and Value Creation a book from Juergen Daum, focusing on a new enterprise model and on the new management system beyond budgeting for the new knowledge and intangible assets based economy of today, comprising many examples and case studies. It describes the new environment and its consequences for businesses, the rules that can be extracted from this understanding for the design of a new management system, and it develops a framework for a new management system and describes its elements, as well as how a company can set it up and bring it to live.

Advantages of Performance Management OutsourcingAppraisals Home Advantages of Performance Management Outsourcing HR outsourcing helps the HR professionals of the organisations to concentrate on the strategic functions and processes of human resource management rather than wasting their efforts, time and money on the routine work. The major advantages of outsourcing performance management are: Outsourcing is beneficial for both the corporate organisations that use the outsourcing services as well as the consultancies that provide the service to the corporates. Apart from increasing their revenues, outsourcing provides business opportunities to the service providers, enhancing the skill set of the service providers and exposure to the different corporate experiences thereby increasing their expertise.

The Advantages of Performance Management Outsourcing accruing to the corporates are: i. ii. turning the management's focus to strategic level processes of HRM accessibility to the expert knowledge and state of the art technology

iii. iv.

freedom from red tape and adhering to strict rules and regulations optimal resource utilisation structured and fair performance management. a satisfied and, hence, highly productive employees value creation, operational flexibility and competitive advantage vii.

Therefore outsourcing helps both the organisations and the consultancies to grow and perform better.

Once a Year OverviewSelf Appraisal Performance Review - Preparation Performance Review - The Meeting How to Complete a Performance Appraisal Form Analysis for Improving Performance Active performance appraisal conversation Performance appraisal feedback Performance Consulting: Moving Beyond Training Writing performance appraisal Performance Appraisal Training How to Measure Employee Performance FAQ about Performance Appraisal

Performance Management

PDRIs model of performance management includes:

Competencies Appraisal Promotion Compensation Succession Planning

We have successfully developed and implemented numerous results-oriented performance management systems. We help organizations, managers, and employees develop performance objectives and standards that clearly communicate expectations by translating organizational goals into more specific lower level goals.

Performance Management A Leadership Priority

USAID uses strategic management processes to ensure that its program planning, management, and reporting capabilities: effectively support U.S. foreign policy are able to respond quickly to today's rapidly evolving global environment achieve and report on desired results.


The Challenge of Strategic Alignment5th January 2009A FSN & Oracle White Paper The Challenge of Strategic Alignment The role of Scorecards & Dashboards in Strategy Execution Contents Introduction Communication Is the message clear? Strategy maps and trees The challenge of alignment Technology and strategy Scorecards Dashboards Summary Introduction A strategy is by definition the starting point for corporate behavior. It expresses an organizations ambitions, sets out its chosen direction and describes the principal initiatives and projects necessary to achieve its mission. Business schools, management gurus and strategy boutiques regularly develop new approaches and methodologies for strategy formulation and all acknowledge its overwhelming importance in setting the tone for the organization and its prospects for success.

Despite its significance, aligning an organization to its strategy remains one of the most elusive and unsatisfactory areas of management endeavour. Indeed, research has shown that 85% of executive teams spend less than 1 hour per month discussing strategy and only 5% of the workforce understands strategy.(1) Executives spend days or weeks devising well-crafted strategies and then throw them over the wall to the rest of the company, hoping and praying that their vision will bear fruit.(2) Yet the notion of aligning an enterprise with its strategy is not beyond the grasp of all organizations. Take for example a football team about to play a vital competitive match. The manager sets out the strategy and each players role within it so that they understand how their actions affect other players and the delivery of the desired outcome. Decisions all along the chain of command from manager to captain and to the rest of the team are geared to delivering strategic objectives, so why is it so difficult to emulate this behaviour in a business setting? A football analogy may not be a perfect paradigm for the world of government, industry and commerce but there are useful pointers which help to distil the essential components of strategic alignment from the corporate noise that frequently obfuscates the strategic message, namely;

A clear understanding of stakeholder requirements and external influences. An unequivocal statement of strategy, with measurable objectives and clearly articulated performance measures. Systems and processes which enable the strategy to be communicated in a consistent, relevant and appropriate way to all corners of the organization. A highly trained workforce that is equipped and competent to act on the strategy. Feedback mechanisms that enable under or over performance to be identified rapidly so that remedial action can be taken to bring strategy delivery back on course.

Threading its way through all of these apparent pre-requisites for success is communication and collaboration which are the binding agents that glue the organization (the people) to the process and its enabling technology. Communication

Strategy development is a curious mixture of science and art, fact and insight, knowledge, experience and creativity. In addition, in todays complex multinational organizations it draws on the skills of management from across the enterprise and in all functional areas. After all, strategy has implications for the development of human capital, information technology, product development and financial management to name a few, as well as the use of all other assets and resources owned by a company. This in turn means that if strategy is to be delivered successfully by an organization it must be clearly articulated and communicated throughout the business. In other words, the strategy must be widely understood at all management levels so that operational plans and day to day activities are aligned with corporate goals and objectives. However, the importance of communication in the strategy process is no longer confined to management, employees and internal stakeholders. Changing attitudes to corporate governance and corporate social responsibility throughout the developed world coupled with demanding legislation to protect shareholders in many geographies, means that management are now formally accountable to a wider set of external stakeholders as well. It is now incumbent on management to ensure that strategy development and communication follows a robust and auditable process so that resources deployed in the business are strategically aligned and management actions can be justified, if required, to an external audience. Capturing such fluid requirements is a challenge. Most management teams resort to flip charts, break-out groups and facilitated meetings to drive out the thinking and record key decisions. Methodologies such as The Balanced Scorecard, Six Sigma, EVA and others can provide a helpful framework but they are largely paper based in the development phase and can be difficult to change and communicate. So they do not readily keep pace with the iterative and creative nature of strategy development.

When companies commit to a strategy and communicate This is how we win, and can align execution with corporate objectives, they begin to create a culture of performance.(3) Is the Message Clear? In large and complex heterogeneous organizations the sheer scale of the task makes it extremely difficult to view the overall strategy and check its integrity, let alone cascade it through the organization. Take for example the development of Key Performance Indicators (KPIs) measures which support the achievement of specific objectives derived from a strategy. This stage of strategy development is a demanding and often contentious process. Managers from different geographies, product lines and functional areas can have very different views on what makes an organization tick and may disagree even more on the performance measures that should be monitored, particularly where these affect remuneration policy. Often, an organization has too many performance indicators and simply achieving functional and organizational alignment of KPIs (Key Performance Indicators) can seem like a Herculean task. Old KPIs can often go unchallenged while at the same time new KPIs reflecting, say, social and environmental initiatives need to be developed. Recent research also shows that many organizations give too much prominence to internally generated KPIs controlling the controllable rather than looking outwards at threats and opportunities on the horizon which can ultimately be far more influential on performance. There is also a tendency to rely too heavily on trusted financial indicators of performance rather than less familiar non-financial indicators. However, there is a growing acceptance that concentrating purely on financial metrics may not be the best way to increase shareholder value. While financial key performance indicators will always have a prominent role in measuring performance of a business, they are widely acknowledged to be of limited value when predicting future performance. Unfortunately, traditional

financial measures such as profit, cash generated from operations, and revenues booked so called, lagging indicators, provide little insight into future prospects and outcomes. On the other hand, non-financial indicators are often tightly correlated with future financial performance. For example, measures of customer satisfaction are often linked with a propensity to buy goods and services in the future. Similarly, measures around innovation, such as the percentage of sales derived from new products inform about a companys medium to longer term prospects for success. Likewise, employee commitment gives insights into future workforce attrition and, by implication, the ability to earn revenues in the future. While these key areas of performance such as employee engagement, customer loyalty and innovation may be impossible to express in purely financial terms and can be difficult to measure, few doubt that they are critical to assessing the health of a company. There are also internal challenges around the compatibility of KPIs in one part of an organization with another. For example, the strategic decision to take market share in emerging markets with a new product may be at odds with financial key performance indicators such as increasing profit. After all, markets in developing economies are usually expensive to enter and exploit normally with lower returns. Clearly, this simplistic scenario is capable of generating conflicting organizational behaviour around the allocation of capital. But how do you identify such conflicts from a sprawling mass of information and how do you keep a strategy agile and flexible in the face of increasingly volatile markets? Strategy Maps and Trees Visualising a strategy and keeping a handle on the integrity of the links between, corporate vision, strategic objectives and the KPIs which support them is a huge challenge. Yet it is vital that the management team can view the entire performance world, define the principle objectives and tactics necessary to

deliver the strategy, assess the correct relationships and agree on the aspects of performance to measure. Creating a Strategy Tree is an excellent way to not only layout what it is you are trying to achieve, but also how you intend to achieve it. Strategy trees depict each strategic objective (what you are a trying to achieve), the related critical success factors (what you must have or be good at to achieve the objective) and ultimately the actions or initiatives related to each critical success factor (what you will do in order to achieve the critical success factors and ultimately the objective). Thinking through and illustrating this logical network enables everyone to clearly see the plan. Add to it the people, teams and departments responsible to get it done and you have a solid plan of action. Fig 1: Strategy Trees in Oracles Hyperion Performance Scorecard application depict both the objectives and how you intend to achieve them.

Strategy maps typically contain a subset of objects from the strategy tree. To create a single page view of the organizational strategy, the idea of including only objectives and their relationship to one another on the strategy map has become very popular especially with executives. Inevitably though, the development of objectives and the relationships between them can become

unwieldy and complex in a multinational organization. Maintaining a coherent view of each strategic scenario can be a huge presentational challenge using traditional paper based tools or spreadsheets. Add in a huge number of KPIs and the scale of the problem starts to become clear. It is not surprising that many strategies end up as a collection of printed PowerPoint slides, Excel spreadsheets and Word documents gathering dust on a shelf. Strategy maps, trees and related scorecards overcome this by using visualization techniques, which enable large amounts of information to be displayed on screen at one time. They enable the integrity of relationships between objectives and KPIs to be explored and confirmed during the strategy development phase and changes can be made on the fly. Once agreed upon, strategy maps become an active window on performance enabling under and over achievement to be monitored together with the consequences for the organization. Finally, they provide a platform for articulating strategy and linking it into operational plans and budgets. Fig 2: Strategy Maps in Oracles Hyperion Performance Scorecard application graphically show the key interrelationships between strategic objectives and current performance based on KPIs

The challenge of alignment The inherent agility of a strategy map is important since strategy development can no longer be viewed as a standalone activity. In a climate of constant change, the strategy has to be accessible and constantly fine tuned in response to market conditions. In other words the strategy has to be an inextricable part of a broader performance management regime which constantly tests and refines the strategy as new information comes to light. However, the thinking around strategy development and how it relates to broader performance management is still evolving as the very latest methodologies attempt to recognise more complex market dynamics, stakeholder interests and more diverse trading relationships. The traditional performance management cycle (Figure 3) which focuses on a series of linked applications or tasks no longer adequately describes the true nature of these core business processes. The newly emerging paradigm of Strategy to Success takes a more process oriented view of performance management, underscoring the real purpose of performance management with more conviction. For example, the starting point for strategy developments is re-positioned in the phrase Gain to Sustain which more aptly recognises that meeting the needs of multiple stakeholders such as employees, customers and even environmentalists is the crucial first step to creating value in ones own organization. Investigate to Invest encapsulates the market perspective and the need to understand the market dynamics affecting the business an outside-in viewpoint that has to be married up with an inside-out perspective. Fig 3: The traditional performance management cycle

The traditional performance management cycle depicted in Figure 3 above is a continuous process made up of a series of iterative steps. The strategy establishes the goals and performance measures for the organization which are built into business plans, budgets and forecasts which are monitored continuously against actuals, analysed and reported upon. The results of these analyses are then used to inform and refine the strategy which is adjusted as appropriate before the whole performance cycle starts again which is why performance management is sometimes referred to as a closed loop process. Hospitality Services Company (HSC) finds that a holistic approach to performance management pays dividends Hospitality Services Company (HSC) connects people with the worlds greatest travel and leisure possibilities by retailing travel products and providing distribution and technology solutions for the hospitality industry. In 2004 it was a sector experiencing massive change, creating a myriad of people and process issues for the business. The lack of communication regarding strategy and its execution led the CEO at the time to conclude that only 25 percent of our

strategy is effectively executed. The leadership team knew that they had to align the entire organization around a common strategy if the company was to achieve its longer term goals. The new HSC management team had set aggressive and inspirational goals but to achieve them they needed to better align strategy, initiatives, measures and rewards an integrated approach to Corporate Performance Management (CPM). The initial charter for the CPM initiative included, enhancing the traditional strategic planning process, establishing a system of sensors to accelerate identification of, and response to, emerging opportunities, coupled with planning applications that focussed on key drivers of the business. Having secured project sponsorship at the highest levels of the organization, the organization embarked on a comprehensive change program. The initial phase was to develop a strategy map for the core business units which was closely aligned with Kaplan and Nortons Balanced Scorecard framework. For each objective on the strategy map two to three key performance indicators (KPIs) were identified together with an initial target. When a list of current initiatives was associated with the strategic objectives it was found that 65 percent of discretionary spending was not core to the strategy. Steps were taken to reduce funding in this area. Operational plans were revised to make sure that they had an appropriate mix of specific metrics and targets some designed to stretch the organization. Finally, organizational alignment was embedded more deeply through the introduction of a rolling forecast that linked operational drivers to the financial results. After a period of acclimatization this provided greater insight into trends in performance, reduced the burden of traditional budgeting and delivered greater confidence in forecast outcomes. The program was hugely successful in bringing about more rapid decision making, more effective responses to performance gaps, better (strategically aligned) investment decisions and more accurate forecasting. HSCs CEO concluded Our CPM program has helped us to focus on the business as a whole and build alignment across the organization. (6)

On the other hand, Oracles leading edge Strategy to Success paradigm depicts the performance management cycle from a more meaningful process oriented view, starting with a thorough assessment of stakeholder interests. Fig 4: Oracles Strategy to Success Framework

But how does an organization communicate its strategy and imbue its workforce with the knowledge it needs to confidently take decisions knowing they are strategy compliant? How do they take the concept of Strategy to Success and bring it to life? How do they transfer the strategy from the board table to each employee and embed it in the organization? Strategy is completely useless unless the results of the strategy process, the position you choose to occupy, the way you are going to drive your company, is well understood, quite broadly. Because the number one purpose of strategy is alignment, its really to get all the people in the organization making good choices, re-enforcing each others choices because everybody is pursuing a common value proposition, a common way of gaining competitive advantage. (4) Technology and Strategy Technology is not a magic bullet that will instantly transform an organization and remedy all cultural impediments to change. There is no substitute for traditional forms of communication such as briefings, conferences, webcasts, seminars, workshops and other forms of meeting (both formal and informal) in order to communicate the strategy and make it relevant for a particular part of the

organization. Employees and their managers need to know how the strategy affects them, what they might be doing differently and how they will be measured and rewarded. Failure to recognise and embrace the cultural aspects of performance management is courting disaster. Scorecards Once the messages are broadly understood this needs to be followed up with the use of scorecard technologies. These are central to strategic alignment as they bind the users to the strategy itself, presenting them with those aspects of the strategy map (objectives and performance indicators) that are relevant to their role, department or division. They provide a method of visualising the key measures of performance, their direction (performance getting better or worse), key responsibilities and what actions are being taken. As such, scorecards make users strategically aware, with a precise understanding of how their actions or inactions affect the achievement of the strategy. Some sense of the importance of scorecard technology and how it can assist strategic alignment can be taken by considering the example of a commercial aircraft in which the passengers have access to the same information as the flight deck. Individual televisions display the aircrafts position on a map, its height, speed and displays important messages about safety and key activities. Effectively, flight crew and passengers are strategically aligned there is a common understanding of the destination, how far the journey has progressed and each persons role in helping to get there on time. Cooperating with the flight crew during on-board activities such as being seated quickly, storing their hand luggage, returning to their seats when requested and cleaning up the seating area at the end of the flight, all contribute to an on-time arrival. A safe, on-time arrival is the mutual objective for crew and passengers alike. Although this analogy is simplistic it serves to underline the essence of strategic alignment which is communication. Fujitsu Services OY uses scorecards to promote strategic alignment Fujitsu Services OY provides information technology (IT) services in Finland, assuming full responsibility for its customers IT and infrastructure and their

enterprise applications. The company, which employs 2,300 people decided to implement a scorecard system in its banking and insurance services businesses for several reasons. Prior to the implementation of the scorecard system the organizations strategy and objectives were viewed as being too abstract. There was a need to communicate the strategy to everyone simply and clearly as well as the requirement to translate strategy into operational terms. By having appropriate measures at different levels of the organization, systematising the existing scorecard process and providing data more frequently it was considered possible to more readily understand cause and effect between measures and align the organization more completely around its strategic goals. Supported by senior management, the scorecard methodology followed a tailored version of the Kaplan and Norton Balanced Scorecard framework. Fujitsu track around 20 measures but report only those that are crucial to the strategy on executive scorecards. Of the measures being tracked, 40 percent are financial, 40 percent are non-financial and 20 percent are mixed. Fujitsu executives review six to ten performance measures which are considered vital to understand the status of the overall organization. These measures are consistent with the organizations annual and longer-term goals. The system enables the same measures to be reported at the level of individual managers, divisions and major accounts and these are linked to employee reward and compensation schemes. Fujitsu believes that the scorecard system has driven performance improvement, achieved sustainable alignment throughout the organization as it has grown and supported better communication of its strategy to its employees. This enhanced understanding has resulted in more strategically aligned and rapid decision making together with a more responsive organization. (6) But scorecards are a means to an end not an end in themselves. Many organizations are littered with failed scorecarding projects because they are divorced from strategic intent. They have little purpose or relevance to the

individuals charged with using them and perhaps do not enjoy management sponsorship and support. Failures also occur because the roll-out of the project uses inappropriate technology. The scorecarding approach needs to be an integral part of the wider performance management platform so that the data required to populate the scorecard, is consistent, meaningful, accurate and available on demand. These objectives cannot be met by a series of disconnected spreadsheets no matter how appealing the initial design of the scorecard may look. However, scorecards as part of an integrated performance management platform provide an invaluable method of supporting change in the organization. The precise strategy methodology employed, for example, the Balanced Scorecard or 6-Sigma is a matter of personal choice for an organization. In general the available scorecard technologies are highly adaptable and support all of the leading scorecard methodologies. The usual way of depicting performance metrics on a scorecard is to use a grid style layout together with icons, such as colored arrows

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