Performance Appraisal

Term Report

Submitted to:

Syed Jahangir Ali

Submitted by: Kinza Khalid Sehrish Rizvi Zehra Roofi Zeeshan Khan

Table of Contents
Continental Biscuits Limited..............................................................................................4 1 Companys Background....................................................................................................4 1.1 Companys Vision.....................................................................................................5 1.2 Companys Mission...................................................................................................5 1.3 Companys Strategy...................................................................................................5 1.3.1 Innovations as a part of Growth Strategy...........................................................5 1.4 Companys Management Team.................................................................................6 2 Human Resource at CBL..................................................................................................7 2.1 Employability.............................................................................................................7 2.2 Diversity.....................................................................................................................7 2.3 Health and Safety.......................................................................................................9 3 About Human Resource Director......................................................................................9 3.1 Recruitment Method at Continental Biscuits...........................................................10 3.1.1 Person Specification..........................................................................................10 3.1.2 Company Recruitment Method.........................................................................11 3.1.3 Internal Sources................................................................................................11 3.1.4 Internal Job Posting...........................................................................................11 3.1.5 External Sources...............................................................................................12 3.2 Selection Process at Continental Biscuits Limited..................................................12 4 Performance Management System.................................................................................14 4.1 Why do you need a Performance Management System?.........................................14 4.2 What do you mean by Performance Management System?....................................14 4.3 What is wrong with your existing system?..............................................................15 4.4 What objective does performance management seek to achieve? ..........................16 4.4.1 PM focuses on results rather than behaviours and activities............................17 4.4.2 Aligns organizational activities and processes to the goals of the organization ....................................................................................................................................17 4.4.3 Cultivates a system-wide, long-term view of the organization ........................17 4.4.4 Produces meaningful measurements ................................................................18 4.4.5 Other Benefits of Performance Management System:......................................18 4.5 What are your concerns About Performance Management?...................................19 4.6 What does a Performance Management System involve?.......................................19 4.6.1 The process:......................................................................................................19 4.6.2 Define Performance:.........................................................................................20 4.6.3 Facilitate Performance:.....................................................................................21 4.6.4 Encourage Performance:...................................................................................21 4.7 How does it work?...................................................................................................21 4.7.1 Setting Departmental Objectives......................................................................21 4.7.2 Communicating employee performance expectations......................................22 4.7.3 Maintaining ongoing performance dialogue.....................................................22 4.7.4 Conducting annual performance appraisals......................................................22 4.7.5 Addressing poor performance...........................................................................23 Performance Appraisal Report on Continental Biscuits Page 2

4.7.6 Supporting Employee Development.................................................................23 5 Balanced Scorecard (BSC).............................................................................................25 5.1 Background:.............................................................................................................25 5.2 Balanced Scorecard The Basic Philosophy...........................................................26 5.3 Balanced Scorecard BSC - The idea in brief...........................................................26 5.4 The idea in practice..................................................................................................27 5.4.1 Translating the vision........................................................................................27 5.4.2 Communicating and linking..............................................................................28 5.4.3 Business planning.............................................................................................28 5.4.4 Feedback and learning......................................................................................28 5.5 The Balanced Scorecard Measures That Drive Performance................................29 5.6 Benefits of implementing BSC................................................................................30 5.7 Creating the BSC model - How to implement?.......................................................30 5.8 Cascading the scorecard...........................................................................................32 5.9 Balanced Scorecard: The Process............................................................................32

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Continental Biscuits Limited 1 Companys Background

Incorporated in 1984, the success story of LU in Pakistan began with the initiative of Hasan Ali Khan (the founder of Continental Biscuits), who signed a joint venture agreement with Generale Biscuits, the global manufacturers of the LU range, which was subsequently acquired by the Danone Group. Expansive investments were made including the import of technology and professional expertise from abroad. The first undertaking was to set up a factory and establish distribution centers in the country with the ultimate objective of commencing operations and marketing our products in Pakistan. CBL thus started its' operations in the country since September 1986 with an initial strength of 200 employees. The company first introduced its' innovative brands - TUC, Prince and Candi which proved to be an instant success. With global merger of Generale Biscuit and the Danone Group, a more comprehensive range of products and technical know-how became available to CBL. The company at present has an outstanding portfolio, under its power brands of TUC, Prince, Tiger and Candi. These brands have an array of products that falls into the category of plain biscuits, cream variants, crackers and ingredients based.

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1.1 Companys Vision

Company vision is continued expansion in the biscuits manufacturing and marketing for not only meeting the local demand but to prepare for WTO and SAFTA by becoming capable of meeting the regional demand.

1.2 Companys Mission

Throughout the world, to ensure that people can grow, live better and thrive to be full by providing them daily with better food, a greater variety of tastes and healthier pleasure." The purpose of this Mission is to guide and to inspire, rather than to distinguish us. What does distinguish us is the way in which we fulfill this Mission.

1.3 Companys Strategy

CBL's strategy is to be a leader in the biscuit business driving longterm sustainability and delivering sustainable performance for the company, environment and the community. This includes delivering consistently on our promise to consumers, serving our customers, developing and engaging actively with our employees, delivering superior financial results to our shareholders and minimizing our impact on the environment and interacting constructively with the communities in in which we operate.

1.3.1

Innovations as a part of Growth Strategy

CBL's corporate philosophy is innovation, of products, strategies and packaging. This passion with innovation has led CBL to introduce the finest brands from the Danone portfolio in Pakistan. Performance Appraisal Report on Continental Biscuits Page 5

Prince: Pakistan's premium range of sandwich biscuits is known for its

soft, creamy fillings. Consumers can select from a variety of flavors: chocolate, coconut, strawberry, banana, vanilla, pineapple and prince power milk.

TUC: In the cracker segment, CBL reigns number 1 with TUC and TUC
50/50. TUC-one of the first brands to be launched by CBL still stands as the number 1 cracker. Loved for its light and crispy texture, TUC is enjoyed by all. With toppings or on its own, TUC is a great snack.

Candi: One of the most innovative brands launched by CBL, the only
brown sugar biscuit in Pakistan; Candi: is, loved for its sweet taste and crunchy texture.

Gala: Is, full of the natural goodness of milk and eggs. A wonderful
aroma, unique design and great taste are what set this brand apart from the rest.

Zeera Plus: Fresh and tasty biscuits with the special taste of zeera. Wah: The unique sugar glazed biscuit in a bite size.

1.4 Companys Management Team

Our company is managed by the Board of Directors and the Corporate Executive Committee. The Board is comprised of executive and non-executive directors from CBL and Kraft Foods, who are responsible for our corporate governance and ultimately accountable for the company strategy, objectives and performance. The Company Chairman of the Board and Managing Director is responsible for the management of the business and is assisted by the Corporate Executive Committee. Each member of the executive

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committee is responsible for a specific part of the business as well as the overall organizational performance.

2 Human Resource at CBL

Our best ideas come from our best assets Our People.

2.1 Employability
In the current economic context where jobs change quickly, job security and lifetime employment are no longer guaranteed. On the other hand, companies may provide employment security which means outside through constant taking the development of their skills, initiatives to organization. knowledge and create greater employability for their employees, both within and We at CBL believe in providing employment security to our employees experience. This development enables our employees to take informed decisions and thus contribute to increased learning. We believe in empowering our employees to their fullest extent thus diminishing the barrier between managers and employees which reaffirms concretely that they a have a role to play in the performance of the company.

2.2 Diversity
Our commitment to diversity includes a range of initiatives that help our employees work in an open, flexible and creative environment. We actively encourage individuals to be themselves and use all of their talents for the benefit of themselves and others. Some of our diversity initiatives are as follows: Mentoring: Our employees are continuously learning being associated with experienced colleagues in their respective fields. Mentoring not only helps them develop professionally through means of constant feedback Performance Appraisal Report on Continental Biscuits Page 7

on performance, but also motivates them to perform better, which eventually helps us develop and retain potential employees. Training & Development: We provide our employees with an environment that fosters learning and development, which enables them to realize their potential. CBL has a fully-fledged training function which focuses on international and local training, to on-the-job ensure training (OJT) of and in-house training technical, programmes development functional,

managerial and soft skills. The company has recently taken initiatives to develop a self-study and e-learning culture for the employees thus adding more prospects for employee development. Talent Management/Succession Planning Programs: Talent management and development is of high priority at CBL. The talent management programme commences by attracting the right person for the position and ends at identifying the successor for each key position in the organization. Our performance management system enables us to identify potential employees who could be developed for future leadership positions, through an integrated system of training and development and reward management. Recruitment of Females and Minorities: We foster diversity through a variety of profiles, working across functions, through which we nurture creativity, vitality and productivity that directly contributes to our sustainable growth. Our desire is for a diverse and inclusive workforce regardless of language, nationality, work-style, learning style, culture, ethnicity, job level, gender, skills, life experiences, physical abilities, thinking style and marital or family status. A leading example of diversity is that 70% of employees currently employed at CBL are females.

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2.3 Health and Safety

Employee safety is a value at CBL. We are committed to providing a safe and healthy work environment, preventing accidents. Employees are accountable for observing the safety and health rules and practices that apply to their jobs. They are expected to take precautions necessary to protect themselves and their co-workers, including immediate reporting of accidents, injuries and unsafe practices or conditions. Employees also are expected to report to work free from the influence of any substance that could prevent or impair them from performing their jobs safely and effectively.

3 About Human Resource Director

Col. (Retd.) Fazale Naeem - HR & Technical Director: Col. Fazale Naeem is an engineer by profession and has served in the Pakistan Army for nearly twenty years. After retirement as Lt. Col. in 1978, he worked for organizations in the private sector. He joined Continental Biscuits Ltd. as Factory Manager at Sukkur in 1992 and was later promoted as the H.R. & Technical Director of the company based at the Head Office in Karachi; all the HR activity is done my Col. (Retd) Fazale Naeem. The Role of Human Resource in Continental Biscuits: Continental Biscuits strategic Principals and a major goal are of profit maximization and maximizing market share. They have HR policies regarding strategic fit and strategic plan like business level strategy. To measure the HR functions effectiveness and efficiency, LU focuses on organization learning and employee productivity and use HR scorecard in evaluating employee performance. However, the company does not have any advanced Human Resource Information System (HRIS) for employees database. Performance Appraisal Report on Continental Biscuits Page 9

Recruitment

and

selection,

and

performance

appraisal

get

consideration and are incorporated in job analysis information, whereas organization chart process chart are also important and used in the promotion of employee. LU has the system of job enrichment and job rotation for the employees; it reviews job description after every one year (for some particular job it could be two years). Forecasting techniques for future vacant position in LU is usually done through trend analysis. LU basically depends over centralized recruitment system rather than decentralized, the most suitable recruitment media is advertisement in newspaper and selection device to choose the new employee are general mental ability test, integrity test structure interview. Succession planning for filling the key position is present in the modern world i.e. the world of internet provides CBL an advantage of internet recruiting like cost effectiveness visibility and target only qualified respondent. General economic condition and ratio analysis they have to forecast the supply of out side candidates. The method of interview is structured sequential and based on situational job related questions.

3.1 Recruitment Method at Continental Biscuits

3.1.1 Person Specification

Whenever a vacancy is created for a particular job, a job description is prepared with theconsultation of the department. Department Head gives all the requirements of the job.All this information is used to prepare the essential requirements to be included in thepress advertisement. The information is not documented; it is just a verbal discussion.

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3.1.2

Company Recruitment Method

The Company uses Company-self Recruitment method and also the outside agency recruitment method for new employees. Because CBL is a huge organization with a lot of employees, outsourcing of recruitment is essential and very important for efficient and effective performance of organization goals and objectives. Also, in order to provide opportunity to individuals from all walks of life, it is very important that continental biscuits provide equal opportunity toeveryone, also to those who cannot be reached directly.

3.1.3

Internal Sources

Continental Biscuits follow internal source of hiring when the work related activity for the particular job vacancy is at a higher level and requires a high level of familiarity with the current operations and functions that the organization follows. External hiring would be a second option because those chosen internally already know the organization and can perform better and as quickly as possible that saves time and cost on getting familiar with the company The Management provides growth and career diversity employees across the company for open positions at various levels / job grades. Job openings within the organization are announced periodically on the intranet and internal job boards for existing employees as and when required necessary.

3.1.4

Internal Job Posting

The goal to ensure that all employees are made aware of and have the opportunity to apply for open positions either before or concurrent with the Company's consideration of external candidates for employment. The following factors are informed about to employees as criteria for internal hiring: 1. Eligibility Performance Appraisal Report on Continental Biscuits Page 11

2. Job Criteria

3.1.5

External Sources

The second option that CBL follows is the external source. It uses two of its features: the referral approach and the external search approach which includes, press advertisements, and e-recruitment. The main reason for referral approach is to find competent and self devoting employees to carry forward the company goal of profit maximization and growth strategy. If there are any referrals, then those applicants are given priority but they also have to go through the whole procedure, like submitting CV, initial interview and final interview. However, if CEO asks HR to hire a particular applicant on his referral, then the particular employee is hired without going through the whole process.

3.2 Selection Process at Continental Biscuits Limited

The Selection criteria of the continental biscuit states that after pre screening process they use to call the candidate who come up with their required criteria. They call the candidate after reviewing their CV, before taking interview in front of committee. Committee comprises of departmental head, HR Director, HR manager and sometimes CEO is also involved. In some cases there is direct hiring departmental heads are not involved.

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Basically in interview they check various things regarding personality, passions (regarding job), consistency, communication, general knowledge and educational skills.

Then they calculate total score if he fulfills 70 percent of their required skill than they short list that candidate and call him for second interview on that day or next according to their need/schedule.

In second interview they ask the person some general question regarding company and then ask him for salary and then negotiate with him accordingly

Calculate the final status point. Hire the person.

This is the general practice which continental biscuits are using in hiring efficient employee for them.

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4 Performance Management System

4.1 Why do you need a Performance Management System?
Organizations need to grow and expand in order to remain competitive. For this purpose they need to identify, retain and develop high caliber human resource. The traditional performance appraisal system is an exercise carried out in every organization with the objective to achieve this purpose. However in recent years organizations have far from being successful in achieving this aim through performance appraisals ever wondered why? Unfortunately, the concept of performance management means something very specific, and much too narrow, to many managers. They tend to equate it with performance appraisal an exercise typically done once a year to identify and discuss job-relevant strengths and weaknesses of individuals or work teams. What is missing is timely and continuous feedback about individual performance, and ultimately its linkage to the organizational goals.

4.2 What do you mean by Performance Management System?

Lets start from what is traditionally being practiced in all organizations - performance appraisal system. In this system, supervisors meet with their subordinates once a year to discuss their performance against objectives set at the beginning of the year. Far from being a dialogue, it is a monologue where the supervisor gives feedback on performance lapses and the meeting ends mostly with a not-too-satisfied Performance Appraisal Report on Continental Biscuits Page 14

employee. Subsequently, all is forgotten about this appraisal until the following year and the same exercise is repeated. Performance appraisal is a necessary, but far from sufficient, part of the performance management system. The latter is a continuous process of improvement overtime, and it demands daily, not annual attention. Performance management requires willingness and a commitment to focus on improving performance at the level of the individual or team every day. It is a holistic process bringing together activities that contribute to effective management of individuals and teams in order to achieve higher levels of organizational performance.

4.3 What is wrong with your existing system?

As already indicated in my covering e-mail, CBL did not have a performance management system but a performance appraisal system in practice, which according to my knowledge came to a cessation during the last two years. Even when fully operational, it only had a few identified individual objectives which were not necessarily aligned to organizational strategies. Moreover, people responsible in appraising employees were either not trained to implement it properly or did not understand the efficacy of managing the system effectively. Without disclosing the identity, I would like to quote a recent episode, when we needed to have a dialogue with one of our brand managers, due to comments written on his/her performance appraisal that was contradictory in nature. An incident akin to this can only happen when performance appraisal is used more as a tool rather than a part of an effective performance management system.

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For this reason, I must admit that I need top management commitment and support to make my suggested performance management system effective in this organization.

4.4 What objective does performance management seek to achieve?

Performance management seeks to identify, sustain and continuously improve performance, at individual, departmental and organizational levels and tend to develop high potential human resource. It brings together many elements that make a successful practice of people management, succession planning and in particular learning and development. Performance management is about establishing a culture in which individuals and groups take responsibility for the continuous improvement of business processes and of their own skills, behaviour and contributions. It is about sharing expectations. Managers can clarify what they expect from individuals and teams; likewise individuals and teams can communicate their expectations of how they should be managed and what resources will be required to do their jobs effectively. It follows, that performance management is about interrelationships and about improving the quality of relationships - between managers and individuals, between managers and teams, between members of teams and so on, and is therefore a joint process. It is also about planning - defining expectations expressed as objectives and in business plans and about measurement. The old dictum is 'If you can't measure it, you can't manage it'. It should apply to all employees, not just managers, and to teams as Performance Appraisal Report on Continental Biscuits Page 16

much as individuals. It is a continuous process, not a one-off event. Last but not the least, it is holistic and should pervade every aspect of running an organization. Key Benefits of Performance Management:

4.4.1

PM focuses on results rather than behaviours

and activities
A common misconception among supervisors is that behaviours and activities are the same as results. Thus an employee may appear extremely busy, but not be contributing at all toward the goals of the organization.

4.4.2 Aligns organizational activities and processes to the goals of the organization
PM identifies organizational goals, results needed to achieve those goals, measures of effectiveness or efficiency (outcomes) toward the goals, and means (drivers) to achieve the goals. the organization. This chain of measurements is examined to ensure alignment with overall results of

4.4.3

Cultivates a system-wide, long-term view of the

organization
An effective performance improvement process must follow a systembased approach while looking at outcomes and drivers. For example, laying off people will likely produce short-term profits. However, the organization may eventually experience reduced productivity, resulting in long-term profit loss.

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4.4.4

Produces meaningful measurements

They are useful in benchmarking, or setting standards for comparison with best practices in other organizations. They provide consistent basis for comparison during internal change and improvement efforts. They help ensure equitable and fair treatment to employees based on performance.

4.4.5 Other Benefits of Performance Management System:

Depersonalizes issues: Supervisors focus on behaviours and results, rather than personalities. Helps ensure equitable treatment of employees because appraisals are based on results. Optimizes operations in the organization because goals and results are more closely aligned. Cultivates a change in perspective from activities to results. Performance reviews are focused on contributions to the organizational goals, e.g. forms include the question What organizational goal were contributed to and how? Supports ongoing communication, feedback and dialogue about organizational goals. Also supports communication between employee and supervisor. Provokes focus on the needs of customers, whether internal or external. Produces specificity in commitments and resources. Redirects attention from bottom-up approaches to top-down approaches.

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4.5 What are your concerns About Performance Management?

Typical concerns expressed about performance management are that it seems extraordinarily difficult and often unreliable to measure phenomena as complex as performance. Since organizations are rapidly changing, thus results and measures quickly become obsolete. Translating human desires and interactions to measurements is impersonal and even heavy handed.

4.6 What does a Performance Management System involve?

A process for communicating employee performance

expectations Maintaining ongoing performance dialogue, and conducting annual performance appraisals A procedure for addressing employee performance that falls below expectations A procedure for encouraging and facilitating employee development Training in managing performance and administering the system

4.6.1

The process:

The broad process of performance management requires us to do three things well: 1. 2. Define performance Facilitate performance Page 19

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3.

Encourage performance

4.6.2
expected

Define Performance:
of them, and that they stay focused on effective

Performance definition ensures that individuals or teams know what is performance. This is done by paying careful attention to three key elements: goals, measures, and assessment. Goal setting has a proven track record of success in improving performance in a variety of settings and cultures. Goals direct attention to the specific performance in question and mobilize effort to accomplish higher levels of performance. Setting specific, challenging goals clarifies precisely what is expected of an individual and leads to high levels of performance. Moreover, mere presence of goals is not sufficient. One must also be able to measure the extent to which goals have been accomplished. For e.g., a production goal of producing 30,000 tons per month is not enough. Measures such as, wastage reduced to 10% per 30,000 tons are more tangible. In defining performance, the third requirement is assessment. This is where performance appraisal comes in. Regular assessment of progress toward goals keeps the employee focused. Therefore, to define performance properly, one must do three things well: set goals, decide how to measure accomplishment, and provide regular assessments of progress.

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4.6.3

Facilitate Performance:

A commitment to managing for maximum performance requires performance facilitation that is, to eliminate roadblocks to successful performance. Another is to provide adequate resources to get a job done right and on time. Delays in receiving information, ineffective work methods, all lead to obstacles. Having eliminated roadblocks to successful performance, the next step is to provide adequate resources capital, material and human resources. A final aspect of performance facilitation is the careful selection of employees. People who are ill-suited to jobs (both by temperament or training) often leads to reduced productivity.

4.6.4

Encourage Performance:

To encourage performance, especially repeated good performance, it is important to provide a sufficient amount of rewards that employees really value, in a timely and fair manner

4.7 How does it work?

4.7.1

Setting Departmental Objectives

Before the exercise on performance appraisal can begin, supervisors and managers need to ponder and decide what are the aims and objectives of their respective departments in alignment with the organizational mission and values. Getting this part right is important as it will align departmental efforts in accordance with organizational strategies and organizational development initiatives and serve as a baseline against which individuals objectives will be set. It will be useful to define the metrics against which these objectives will be measured and benchmarks against which progress will be assessed. Performance Appraisal Report on Continental Biscuits Page 21

4.7.2

Communicating employee performance

expectations
Supervisors shall meet with their employees, establish expectations regarding their employees performance, specify how employees actual performance will be measured and their success determined, and impart to them an understanding of how meeting these expectations will contribute to the achievement of the organizations mission. The goals should be S.M.A.R.T. (Specific, Measureable, Achievable, Realistic, and Time-related.). Based on departmental metrics, employees should be clarified as to how their different goals will be measured and against what standards performance will be appraised.

4.7.3

Maintaining ongoing performance dialogue

Progress toward meeting expectations shall be

Employees shall be responsible for meeting their performance expectations. measured, and discussed throughout the year. When expectations change during the course of the year, supervisors shall communicate these changes and modify work plans as necessary. Modifications shall be signed and dated by both the supervisor and the employee.

4.7.4

Conducting annual performance appraisals

At the end of the year, supervisors shall evaluate employees performance during the past year compared to their performance expectations. They shall use verifiable information collected and Performance Appraisal Report on Continental Biscuits Page 22

documented throughout the cycle to determine the extent to which actual performance has met the expectations defined in the work plan. Prior to discussing a completed performance appraisal (that is, an appraisal containing ratings and descriptions of actual performance) with an employee, a supervisor shall review the appraisal with the next-level manager to ensure that ratings are appropriate and consistent. Supervisors shall discuss the appraisals with their employees. Both supervisor and employee shall sign and date the completed performance appraisal indicating that the

4.7.5

Addressing poor performance

When an employees performance falls below expectations at any time during the performance cycle, the supervisor shall document the performance deficiency and take actions, including (if appropriate) disciplinary action, to assure that performance expectations will be met within a reasonable period of time.

4.7.6

Supporting Employee Development

Many employees may express interest in growing in their current positions or in furthering their careers in other business functions. Supervisors shall work with them to identify strengths and weaknesses and, if appropriate, to help them prepare an individual development plan. Individual development plans may specify how employees can more fully apply their strengths in their current positions, build up areas of weakness, enhance their performance in their current positions, or develop the skills and experience they will need for Performance Appraisal Report on Continental Biscuits Page 23

possible future assignments. This includes defining a developmental plan for the employee.

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5 Balanced Scorecard (BSC)

5.1 Background:
One of the hot trends in management today is the balanced scorecard. Though empirical research and many success stories show that strategic measurement can work wonders, there are also many cases where scorecards simply did not work. The most balanced perspective is that these tools work well, when they are well implemented. This is a quote from a US consulting company, which identifies BSC as a tool for measurement. On the contrary, BSC is a framework or what can be best characterized as a strategic management system that claims to incorporate all quantitative and abstract measures of true importance to the enterprise. It provides managers with the instrumentation they need to navigate to future competitive success. It is a performance planning and measurement framework, with similar principles as Management by Objectives, which helps focus managers attention on strategic issues and the management of the implementation of strategy. Traditional models for measuring performance are constrained by departmental boundaries, which encourage unit managers to be concerned only with their portion of a process that may span multiple work groups or units within the institution. Allowing the budget process to drive performance measures does not take into account the critical outside perspectives of customers and stakeholders as well as the dimensions of performance that are meaningful to them, such as time, Performance Appraisal Report on Continental Biscuits Page 25

cost and quality of service. Finally, there is no opportunity to tie individual performance objectives and performance evaluation processes to institutional performance. Having realized the shortcomings of traditional management control system, Kaplan and Norton designed the BSC as a result of a one year research project with 12 companies. Since its introduction, the balanced scorecard has been awarded a prize by the American Accounting Association as the best theoretical contribution in 1997 and its industry and academic attention placed it alongside such as Activity based costing and Total Quality Management.

5.2 Balanced Scorecard The Basic Philosophy

The basic philosophy of the balanced scorecard is that people will focus on what you measure more because it shows you care about it than because of financial incentives. Most organization, when you look at their actual behaviours rather than their words, focus on a few financial measures, but that doesnt help them to improve their results, because if you tell your employees to increase shareholder value what should they do? But if you know what determines shareholder value high customer loyalty, high quality or low price products, new products, etc. then you have some ground to stand on, especially if you can work back to the key issues managers and employees should focus on.

5.3 Balanced Scorecard BSC - The idea in brief

Why do budgets often bear little direct relation to a companys longterm strategic objectives? Thats because they dont take enough into consideration. A balanced scorecard augments traditional financial measures with benchmarks for performance in three key non financial areas: Performance Appraisal Report on Continental Biscuits Page 26

a companys relationship with its customers its key internal processes its learning and growth.

When performance measures for these areas are added to the financial metrics, the result is not only a broader perspective on the companys health and activities, its also a powerful organizing framework. It is a sophisticated instrument panel for coordinating and fine-tuning a companys operations and businesses so that all activities are aligned with its strategy.

5.4 The idea in practice

The balanced scorecard relies on four processes to bind short-term activities to long term objectives:

5.4.1

Translating the vision.

By relying on measurement, the scorecard forces managers to come to agreement on the metrics they will use to operationalize their lofty visions. Example: A bank had articulated its strategy as providing superior service to targeted customers. But the process of choosing operational measures for the four areas of the scorecard made executives realize that they first needed to reconcile divergent views of who the targeted customers were and what constituted superior service.

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5.4.2
When

Communicating and linking.

a scorecard is disseminated up and down the

organizational chart, strategy becomes a tool available to everyone. As measures individual are the high-level scorecard cascades translated into objectives and down to measures yields individual business units, overarching strategic objectives and appropriate to each particular group. Tying these targets to performance, and compensation systems personal scorecards. Thus, individual employees understand how their own productivity supports the overall strategy.

5.4.3

Business planning.

Most companies have separate procedures (and sometimes units) for strategic planning and budgeting. The discipline of creating a balanced scorecard, forces companies to integrate the two functions, thereby ensuring that financial budgets do indeed support strategic goals. After agreeing on performance measures for the four scorecard perspectives, companies identify the most influential drivers of the desired outcomes and then set milestones for gauging the progress they make with these drivers.

5.4.4

Feedback and learning.

By supplying a mechanism for strategic feedback and review, the balanced scorecard helps an organization foster a kind of learning often missing in companies: the ability to reflect on inferences and adjust theories about cause-and-effect relationships. Feedback about products and services, new learning about key internal processes, technological discoveries, etc., all this information can be fed into the scorecard, enabling strategic Performance Appraisal Report on Continental Biscuits Page 28

refinements to be made continually. Thus, at any point in the implementation, managers can know whether the strategy is working and if not, why.

5.5 The Balanced Scorecard Measures That Drive Performance

(Source: Kaplan and Norton 1992, Harvard Business Review) Think of the balanced scorecard as the dials and indicators in an airplane cockpit. For the complex task of navigating and flying an airplane, pilots need detailed information about many aspects of the flight. They need information about fuel, air speed, altitude, bearing, destination and other indicators that summarize the current and Performance Appraisal Report on Continental Biscuits Page 29

predicted environment. Reliance on one instrument can be fatal. Similarly, the complexity of managing an organization today requires that managers be able to view performance in several areas simultaneously. (Kaplan and Norton, 1992).

5.6 Benefits of implementing BSC

Thus, the balanced scorecard does its magic by focusing the organization on the issues which the leadership team decides are key to its success. It does this more through the process of implementing the scorecard than through the actual paper or numbers so a human solution is the key. There are other benefits stronger communication, (through the cascading and measurement tracking processes), warning of strengths and opportunities ahead (from watching key indicators), less information overload (from focusing only on the most important measures), and greater alignment (from agreement on key objectives), to name a few. However, the point of a balanced scorecard is to: Align all members of an organization around common goals and strategies Link initiatives to the strategy, making prioritization earlier Provide feedback to people of key issues notably, areas where they can have an impact Be an essential decision-making tool for everyone in the organization

5.7 Creating the BSC model - How to implement?

The first part of the process is creating a model for the scorecard. First review and clarify strategies; this often requires some facilitated arguments and discussions, so that broad disagreements can be dealt with.

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At CBL this will require the formation of organizational objectives with reference to the vision, strategies and the approved budget 2008 documents. The process should also incorporate long term strategies with reference to our recent meeting with Kraft. Ideally it will be an EXCO forum, who will also be responsible to develop and align their vision and goals with the organizational objectives. Participation of senior members will make the goals a compass for business managers and a catalyst for organization-wide intervention. The next step is agreeing on what capabilities are needed within the company to actually pursue the strategy. The above process may take one or two full day meetings. The final part of creating a model for the balanced scorecard is making the actual model. At this meeting the leadership team must agree on key goals and drivers, values, and their competitive situation. They must build the map which will be used as the basis of the scorecard not the measures themselves, but what concepts will be measured. Third, most important, they must gain personal involvement in an ownership of the process. Once this is done, one can move to the second step, which is designing and selecting measures for the scorecard. This is where the process and the paper come together. One way to do this is to assign teams to come up with appropriate measures. The measurement teams normally present their conclusions to the senior leaders, who then either use them or ask for changes or clarification. The leadership team can then identify leading and lagging indicators or measures. As with any change constant communication are essential for success. Employee surveys can be conducted to judge whether people

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understand the process and are prepared for it; and how well the scorecard is implemented in each area.

5.8 Cascading the scorecard

Once the balanced scorecard is installed at the top, where commitment is most vital to success, it is then cascaded throughout the organization, to focus departments goals with the overall company goals and finally linking it to personal goals in each department. The senior leadership needs to act as a steering group over the life of the effort, providing ongoing direction, prioritization, problem solving, encouragement and motivation for staff to participate. Incentives will also be needed to build in and different mechanisms of doing so can be a separate document for consideration and approval once we have a consensus on the implementation of balanced scorecard.

5.9 Balanced Scorecard: The Process

Putting the Balanced Scorecard to Work

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Example: CBL Vision and the Four Perspectives

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