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Preface xi
Acknowledgements xiii
Introduction xv
1. Performance and the Role of Measurement 1
1.1 Introduction 1
1.2 What is good performance? 1
1.3 Whose perspective? 1
1.4 Making comparisons 2
1.5 Present success and future sustainability 3
1.6 How is performance delivered? 3
1.7 The roles of a performance measurement system 5
1.8 The focus of measurement 7
1.9 The role of management and leadership 9
1.10 In summary 10
Further reading 10
2. Practical Tools for Measuring Performance 13
2.1 Introduction 13
2.2 Elements of a performance measurement system 13
2.3 The Balanced Scorecard 15
2.4 The Performance Prism 19
2.5 Objectives and success maps 20
2.6 Designing measures 24
2.7 Summary 30
Further reading 31
3. Designing the System 33
3.1 Introduction 33
3.2 A four phase life cycle 33
3.3 Design 34
3.4 How is this done in practice? 34
3.5 The debate 35
3.6 Developing the success map 37
3.7 Developing the measures 39
3.8 The next stage 40
Further reading 40
4. Managing Implementation 41
4.1 Introduction 41
4.2 Phases of implementation 41
4.3 Why does implementation succeed or fail? 41
4.4 Hurdles and blockers 45
4.5 Steps to successful implementation 46
4.6 Conclusion 48
Further reading 48
5. Assessing and Managing Change 51
5.1 Introduction 51
5.2 Change in context 51
5.3 Assessing resistance to change 53
5.4 Return on management 54
5.5 Assessing likelihood of implementation 55
5.6 Conclusion 58
Further reading 58
6. Target Setting 59
6.1 Introduction 59
6.2 Why do you set targets? 59
6.3 Ten common problems 60
6.4 The target setting wheel 62
6.5 Closing remark 65
Further reading 65
7. Linking Rewards to Performance 67
7.1 Introduction 67
7.2 Pitfalls 67
7.3 Linking rewards to performance 71
7.4 Examples 75
7.5 Summary 78
Further reading 78
8. Managing with Measures - Statistical Process Control 81
8.1 Introduction 81
8.2 Variation and our reaction 81
8.3 Statistical process control 83
8.4 Performance and performance improvement 91
Further reading 92
9. Using Measures - Performance Reviews 93
9.1 Introduction 93
9.2 The Performance planning value chain 93
9.3 Performance reviews 99
Further reading 104
10. Using Measures to Manage - Challenging Strategy 105
10.1 Introduction 105
10.2 Company examples 105
10.3 Testing success maps in practice 109
10.4 Testing in theory and practice 113
10.5 Behavioural issues 117
10.6 Conclusion 118
Further reading 118
11. Keeping Your Measurement Process up to Date 119
11.1 Introduction 119
11.2 Keeping the process up to date 119
11.3 When do you update targets? 119
11.4 Revising measures 122
11.5 Reviewing the measures in line with your success map 123
11.6 Reflecting on your strategy 124
11.7 Challenging strategy 125
11.8 Overcoming barriers to updating your system 126
11.9 Summary 133
Further reading 133
12. Measuring Performance of People 135
12.1 Introduction 135
12.2 Essential elements for high performance 135
12.3 Measuring employee satisfaction and engagement 136
12.4 Performance appraisals 141
12.5 HR performance measures 145
12.6 Acting on results 147
Further reading and sources of information 147
13. Measuring Customers 149
13.1 Introduction 149
13.2 What are you measuring? 149
13.3 Using customer feedback 157
13.4 Summary 160
Further reading 161
14. Measuring Process Performance 163
14.1 Introduction 163
14.2 A process framework 163
14.3 Process measurement 164
14.4 Key process measures 165
14.5 Summary 169
Further reading 169
15. Measuring Competence and Resource Development 171
15.1 Introduction 171
15.2 Defining terms 171
15.3 Why measure resource and competence development? 172
15.4 A framework for displaying the relationship between 176
resources and competences
15.5 Conclusion 183
Further reading 184
16. Measuring Financial Performance 185
16.1 Introduction 185
16.2 A shareholder perspective 186
16.3 Key shareholder ratios 189
16.4 Accounting ratios 191
16.5 Management ratios 194
16.6 Conclusion 196
Further reading 196
17. Measuring Sustainability 197
17.1 Introduction 197
17.2 What are 'sustainability' and 'corporate responsibility'? 197
17.3 What are the benefits? 199
17.4 Building sustainability into your business 201
17.5 Conclusion 206
Further reading and sources of information 206
18. Creating a Culture of High Performance 209
18.1 Introduction 209
18.2 Creating the right environment 209
18.3 Creating the right culture 210
18.4 Recruiting the right people 212
18.5 What motivates? 214
18.6 Dealing with underperformers 215
18.7 Understanding your influence 216
18.8 Direction setting and engagement 217
18.9 Communication 218
18.10 Conclusion 219
Further reading 219
19. Leadership Vignettes 221
19.1 Introduction 221
19.2 Paul Woodward - Chief Executive, Sue Ryder Care 221
19.3 PY Gerbeau - Chief Executive, X-Leisure 223
19.4 Richard Boot OBE - IRC Global Executive Search Partners 225
19.5 David Child 227
19.6 Baroness Sally Greengross 229
19.7 Charles Carter 231
19.8 Nigel Bond - CEO, Domino Printing Sciences 232
19.9 Mark Lever - CEO, National Autistic Society 236
19.10 Mike Ophield 239
19.11 Andy Wood - Chief Executive, Adnams plc 242
20. Bringing It All Together 245
20.1 Introduction 245
20.2 Performance measurement 245
20.3 Performance management 246
20.4 Performance leadership 248
Further reading 251
Index 253
Chapter 1
Performance and the Role of Measurement
1.1 INTRODUCTION
In this chapter we will look at what good performance is and at the factors that combine to create good corporate performance. We will also set out what a good measurement process can do for your organisation, not only to help you track your progress but also to help you encourage and maintain better performance. You need to recognise that performance measurement is a tool to be used by management and we end this chapter by reflecting what good leaders need to do to ensure that the tool is used effectively in taking the organisation forward.
1.2 WHAT IS GOOD PERFORMANCE?
The answer to this question is simple – it is about achieving your objectives. Of course that is not the whole picture; it is far more complex than that. Objectives themselves do not remain constant; they usually change over time. The world moves on and if you do not keep reviewing what you are doing you will have a problem. How you achieve your objectives is also important – you may be successful in the short term at the expense of success in the longer term. Before launching into setting up a performance measurement system it is worth reflecting on the nature of good performance.
1.3 WHOSE PERSPECTIVE?
Any benchmark of business performance will depend on the definition of success for that business. In turn, the definition of success will depend on the view of particular groups of stakeholders.
Let us take an airline as an example. Someone going on holiday will be happy when there is plenty of room beside them because the next seat is empty, they are offered another portion of lunch because there is extra food on board and the cabin crew have plenty of time for individual attention. The airline’s customer service manager may also be delighted with performance because there have been many emails praising the service. The airline’s CEO, on the other hand, will probably be dissatisfied with performance because there are too many empty seats, money is being wasted on catering and the cabins are overstaffed, all of which contribute to unsatisfactory financial performance. Shareholders will be dissatisfied because they see a poor return on their investment.
Therefore, the definition of success and ‘good’ performance depends on perspective and that will vary within different sections of the organisation and according to the stakeholder group.
It is essential for employees, at the very least, to have a clear consensus, understanding of and commitment to the overall goals of the organisation. Once they understand the goals, they need to know what success looks like. When there is a clear sense of purpose at the top of the organisation, divisional, departmental and individual goals and measures can be fitted underneath the overall organisational goals so they contribute towards achieving them. There will, of course, always be conflicting requirements, as you can see from the example above, but a balance has to be struck and conflicts have to be resolved or at least acknowledged. Achieving clarity and commitment to overall goals of the organisation requires strong leadership.
1.4 MAKING COMPARISONS
Performance is not absolute; it can only be relative. Your company’s profitability has to be judged against peers in your industry sector and against your previous years’ results. So you need to consider performance relative to external comparisons and to internal benchmarks.
From an internal perspective, employees need to know what is expected of them. Quite simply: are they expected to process 10 claims an hour or 20? If the company receives 100 customer complaints in a year is that good or bad? It is also important to know whether progress is being made. Is your performance improving? (That applies both to the individual and to the overall company performance.) It is impossible to determine this if you do not have some form of consistent measurement process. Taking this a step further, it is important to know why you are not making progress because that could be the result of external factors such as a new competitor taking your market share rather than a failure of your employees to do their work.
A measure of performance is meaningless on its own. It makes sense only when viewed against either a standard, a previous measure or another comparable measure. Thus, a figure of, say, 6.5 for May means nothing, but when April’s figure was 10.5 and March, February and January were 11.5, 13 and 14 you are beginning to establish a trend. If you also discover your biggest competitor is measuring the same activity and their figures are 20, 23, 24, 25 and 26 you may be able to deduce something about your business and/or your market.
From an external perspective investors need to know how well the company is doing and what the expectations are for the future. External reporting is a subject of its own and does not form part of this book. However, the way an organisation (business or not-for-profit) looks to the outside world is important for its success. Stakeholders of any type (investors, employees, customers) need to have confidence in the organisation with which they have dealings and external reporting of performance is the mechanism for doing this.
1.5 PRESENT SUCCESS AND FUTURE SUSTAINABILITY
Factors contributing to performance (such as customer service and financial outcome in the example above) can be linked both positively and negatively. In the airline example, passengers may be delighted with the service they receive as a result of the empty seats on the aircraft and that may encourage them to book again with the same airline. This will lead to a perception of success in the short term as passenger numbers increase, but over time passengers will probably see a decline in service as seats fill up and they will start to book elsewhere. If the airline is not charging enough to cover the additional costs of the ‘deluxe’ service or attempting to secure loyalty among its passengers, it will ultimately face financial disaster.
It is interesting to note that sustainability and durability may come from factors that are not always apparent in short term performance indicators. In their book Built to Last: Successful Habits of Visionary Companies, James Collins and Jerry Porras spent six years researching business success. They identified 18 ‘visionary’ companies and examined what was special about them. What they found surprised even the authors. They deduced that success did not come from having great products and charismatic leaders but more from a dedicated devotion to a ‘core ideology’ or identity and a highly active indoctrination of employees into commitment to the company. These are not short term performance indicators.
No business is invincible. Names of once-successful businesses that are no more trip from the tongue – Rover, Enron, Arthur Anderson, Woolworths. Even if in their later stages they were flagging, at some point they were regarded as models of success. Success in present performance is important and is an indicator of future performance, but it may be fleeting unless the senior team is giving sufficient thought to the future. It is too easy to be motivated by current success and to do more of the same, spending all the time focusing on the needs of the present. Building indicators of future potential is an essential element in measuring and managing performance.
In establishing what good performance is, you must know what success looks like to different stakeholder groups, how your performance compares with other organisations and against internal benchmarks and whether today’s performance is sustainable into the future.
We will turn now to how you create good performance.
1.6 HOW IS PERFORMANCE DELIVERED?
The performance of a business is delivered through a mixture of people doing their best to achieve the right ‘things’, supported by effective processes and sufficient resources.
Getting people to work harder does raise performance levels and we will look at how you measure people’s performance in more detail in Chapter 12. But there is a limit to how much harder people can work and high levels of intensive work of any type are rarely sustainable over time. Therefore, in a labour intensive business, while it is obviously important to ensure people are working to their full potential, if you go over the threshold of what is sustainable, performance will inevitably decline after an initial period of improvement. The other perspective on this is whether people are being forced to work harder or want to work harder. When people are forced to work harder they naturally resist and find ways around the system. However, if people engage in their task or in the aspiration of the organisation, then you achieve a better outcome.
Working harder can be simply the exertion of more effort. However, even from the origins of scientific management in the late nineteenth and early twentieth century (the work of Frederick Taylor), it was conceded that emphasis should be put on doing things better. Taylor’s idea was that there was one best way for a worker to do a job. Workers should be given the right tools and then trained in the right approach. Once this happened, a rate could be set for the work that an individual could achieve over a normal day at a rate that was sustainable in the longer term. There is much to be said for the basic concepts of Taylor’s scientific management, but it does suggest a very mechanistic conceptualisation of the organisation, and very few jobs these days are that...
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