Management by Performance

Below are some philosophy applied in Management by performance (MBP):-

1. Participative management at all levels from the top right to the bottom where objective,goal settings, key result areas, key performance indicators, targets and programs are discussed jointly between the supervisors and his subordinates.
2. Supervisors are made both responsible and accountable for the performance of their staff.  In the past supervisors are only responsible for their staff performance but not accountable.   They blame their staff for their poor performance.
3. Performance of Managers and supervisors are measured by the group they manage.  Only the lowest employee performance are being measured individually.  
4. Objective measures are applied in both appraisals and accountability. 
5. Performance metrics are linked and integrated horizontally and vertically.
6. Cause effect relationships are being discussed and observed for all goals. (Key Result Areas)
7. Everyone's performance in the organisation is measured and accountable.
8. MBP encourages kaizen principle where continuous improvement is built in their work culture.
9. Rewards and recognition is totally based on performance
10. In USA, performance management has been enacted as a law.  Failure to comply is a crime.
11. MBP is more strategic and more quantitative and adopting best practices. 

           Copyright:  Arriffin Mansor 012-2786282

________________________________________________________________________

Management by Performance

1.      MBP is a system of management that seeks excellence by planning and measuring efficiency and performance of all key activities and by all job holders in the organization.

2.      With full participation at performance planning and evaluation stage, the management and staff would be a committed team to ensure its success and sustainability.

a.      Team building and Synergy

b.      Coordination and Consistency  

c.       Learning and competency building

3.      MBP is based on the simple obvious concept that unless you know what result you want to achieve you would never get there.  For that purpose, the following are envisaged:

a.      Use the ROE chart model and business planning.

                                                              *   Where the total input, output and outcome model shown

b.      Use the recorded performance standards in the organization

c.       Apply the globally accepted excellent model.

4.      If a manager wanted to get to a set of defined results, it must:

a.      Know his current performance level.

b.      He must know his strengths and weaknesses

c.       He must be able to adopt and develop appropriate strategies, best practices and innovation.

d.      The strategies should be coordinated and linked through a strategic map.

e.      To focus on the critical performance gaps and success factors.

5.    The set goals of the CEO are cascaded to all in the organization.  Delegation done through the budgetary system ensures coordination, consistency and efficiency throughout the organization.

6.    The MBP concept sets out to achieve its goal through a process which could be summarized as follows

a.      Identify the company SWOT by conducting performance comparative analysis with a best company within the industry.

b.      Identify the performance gaps and thereafter rank them based on criticality.

c.       Solve leakages and bleeds through immediate stop gap measures.

                                                              i.      Performance solutions such as wrong strategies

                                                            ii.      Lack of motivation or authority

                                                          iii.      Lack of competency

                                                           iv.      Lack of coordination and consistency

d.      Develop and adopt strategies based on the accepted SWOT and market conditions.

e.      Initially design an acceptable business model where strategies are put in place.

f.        Put the business into the ROE model for the final acceptable check.

g.      Otherwise go back to step 1.

7.      All job holder must have his performance scorecard where the following records are being kept:-

a.      Official Record of the job holder

                                                              i.      Purpose of the job.

                                                            ii.      Position in the organization

                                                          iii.      Size of job

                                                           iv.      Limits of authority

b.      Performance records of the job holder

                                                              i.      Key Result Areas

                                                            ii.      Performance Target

                                                          iii.      Key Performance Indicators

                                                           iv.      Performance problems and opportunities

8.    Performance targets are usually measured in SMART

9.      The value chains or processes in the business are compared against industry to identify critical improvement where necessary.

10.  Means of measuring efficiency and performance could be as follows:-

a.      Both Financial and Non-financial data

b.      Output input Ratios

c.       Dynamic output input ratios

11.  Performance records keep the following:-

a.      Performance gaps between targets and actuals.

b.      Highest Performance achievements by the job holder

12.  Improvement Strategies

a.      Performance problems and opportunities

                                                              i.      When negative gaps widen and impacted the bottom line performance.

                                                            ii.      Exploit positive performance by breaking through the markets.

b.      Justify improvement change

                                                              i.      ROE calculation

                                                            ii.      IRR for cash flows projections

c.       Approach

                                                              i.      Cost reduction should be given priority

                                                            ii.      Worker initiatives

                                                          iii.      Expected outcome measured

                                                           iv.      Output input measure

d.      Conclusion

13. Performance planning meeting

a.      Goal setting for the next period.

b.      How much gaps to close.

c.       Key result areas and key performance indicators

d.      Best Practices and innovation to be adopted.

e.      Strategic mapping

f.        Administrative changes

                                                              i.      Authority

                                                            ii.      Resources

14. Performance Appraisal

a.      Prior to review meeting

                                                              i.      Gaps are calculated

                                                            ii.      True performance are measured

                                                          iii.      Root cause analysis

                                                           iv.      Suggested Performance solutions

b.      Appraisal meeting

                                                              i.      Quantitative and qualitative Performance targets

                                                            ii.      Agree on the performance problems and opportunities

                                                          iii.      Agree on the performance solutions

                                                           iv.      Further action

15.  Staff Annual performance appraisal

a.      The purpose

                                                              i.      Reward performance based on the value of performance gains.

                                                            ii.      Promotion opportunity for the competent

                                                          iii.      Identifying critical Training needs

b.      Conduct of appraisal meetings

                                                              i.      Joint and objective analysis of performance

                                                            ii.      Has the target set been achieved?

                                                          iii.      The root cause of the problem and the solutions

                                                           iv.      Discuss the changes required

                                                             v.      Gain their commitment and ownership

c.       Follow up by the manager to all the relevant departmental heads:--

                                                              i.      HR dept

                                                            ii.      Finance dept

                                                          iii.      Marketing dept

                                                           iv.      Production

16.  The benefits of MBP

a.      The emphasis of management is now widened to include efficiency and performance measures.

                                                              i.      All Managers must be able to measure and evaluate key activities under his responsibility.

                                                            ii.      He must link his activities and that of his team and with that of the organization.

                                                          iii.      The Manager must measure his own performance and that of his subordinates.

                                                           iv.      He must identify and apply the industry best practices to his organization.

arriffin@gmail.com    6012-2786282

What is performance?

Performance is the end result from work inputs and processes, measured in outputs divided by inputs.

The emphasis in this management approach is on the outcome rather than on the input or process which has been dominant in the traditional management.

Some 40 years ago, Peter Drucker highlighted the importance of  management by objective or MBO.  It stressed on having clear objective on whatever job or work that you do.  Although this task appeared to be simple, yet on closer examination this failure of having a properly defined objective has been the major contributor to most corporations'  failure.

We solve this problem today by adopting the SMART Goals, where your objectives should be specific, measurable, achievable, realistic and time bound.

Often, objective statement is stated in a generic terms such as "I want to maximise profits"  Although the statement is clear but it is still not specific.  Work target should be stated on performance basis i.e in using key performance indicator or KPI.

In maximising profits,  a return on equity or ROE is the most acceptable and appropriate performance indicator for a business entity..   Although the emphasis is performance, efficiency in inputs and processes should drive the entity towards the targeted defined performance.

What is not performance?
Inputs are not performance.  Nor are processes.  Number of hours worked are inputs.  Sales figures are  outputs but yet they are not performance.  Performance is normally the end results of a business activity.  Sales profitability could be the performance of the sales department.

In business, the ultimate goal is always the return on equity which is the key performance measure to the shareholders.

Copyright :   Arriffin Mansor 012-2786282

Letter to NST on the adoption of 360 by the government

Dear Mr Editor,

New Strait Times

360 performance appraisal is inconsistent

It was a bad decision to introduce 360 as the staff performance appraisal method  by the Malaysian government..  Definitely not after Key Peformance Indicators and Key Result Areas has been adopted and practiced. 

With 360 appraisal, performance appraisal goes back to the old subjective opinions of the appraisers.  All the disadvantages of judgemental assessment would come into play.  Some of them are helo and negative effects, central tendency and confrontation avoidance.  Assessors are prone to be influenced by initial impressions and recent performance.  To make matters worst, subordinates views are now taken into consideration by this model.  What is the value of the subordinates appraisal who definitely lacks the competency to evaluate his boss performance?

Being performance orientated government, appraisal should be on the output or outcome based results.  It is more objective devoid of cronism and favouritism..  If ministers are evaluated through their Key Performance indicators,  staff appraisals should be using the same tool. .  Performance measure facilitate benchmarkings which are useful in promotion, recognition and intervention purposes.

I suggest the Malaysain government should reconsider its decision.

Thank you.

Dr Arriffin Mansor

ABM Consult

012-2786282

arriffin@gmail.com

True Performance Gap Analysis

Variance or gap analysis which are either positive or negative are being normally applied in most business evaluation or appraisal processes.

The variance gaps could be broken down into sub-variance analysis:  broken down analysis to explain the causes of the gaps.  This is also called the performance network analysis.

The output input analysis is much deeper and better root cause analysis where true efficiency and performance are measured within  the dynamic of two performance periods.

The excel program could be used for the above purposes.

Graph could illustrate and distinguish true performance where output contributed by the increase of volume inputs are identified and eliminated.

The following performance areas could be measured by the output input analysis.

1. Corporate objective (CEO objective)
2. Functional departments 
• marketing
• production 
• purchasing
• HR
• Finance
3. costs, volume, profit model
4. working capital
5. fixed capital
6. Cash flow Projection
7. Financing Performance

Trainees shall bring back templates and models of performance metrics.

Through dynamic analysis, the impact caused by volume would be removed or ignored.  Thus only true performance shall be measured.

	STEPS	TOOLS	PURPOSES
1	Performance diagnosis	Gap and bench markings	Identify SWOT
2	Market Target	Market mapping	Identify market opportunity
3	Goals	Efficiency and Performance	Measures
4	Key Result Areas	Root cause analysis	Performance problems and solutions
5	Key Performance Indicator	A set of indicators	To measure performance of a job holder, section or department or business
6	Performance Measures	Output/input ratio, Non-ratio and non-finance	Measure all economic activities
7	Performance gaps	Graphic dimensional, illustration	To show by drawings the impact on output by inputs
8	Strategic Management	Strategic Map	Coordinated and integrated Strategies
9	Profitable Model	Cost, volume, profit analysis	Simulate profits with key variables
10	Business objective/goal	Return on Equity Chart	To check
11	Capital employed	Working and fixed capital	Strategic and best practices
12	Funding	Equity + Loans = Capital	A healthy capital structure
13	Expected Results of the plans	Financial Statements	To show the outcome/results
14	Healthy check on plans	Ratios	A balanced healthy outcome
		Tel 012-2786282	©arriffin@gmail.com