Performance Management

by Prof. B.D. Singh IMT

Mind boggling changes, technological revolution, fierce competition. Perform or Perish ,survival of the fittest -- survival instinct -And like the story of the two men on a safari, in order to survive you will have to die trying. While walking through the jungle, they came upon a hungry tiger, when one of them started putting on his running shoes. “How is this going to help? We can’t outrun the tiger.” asked the other. The first man replied: ”I don’t have to outrun the tiger, I only have to outrun you.” Organizations redefining their strategies-performance appraisal to performance management to performance culture in which every member of the organization knows the goals & consistently make efforts to achieves high performance

Behaviorism in performance
Performance=skill + will

Or
Individual performance = Ability x Motivation x Organizational Support + or – Chance Factors? Iccha (desire, motivation), Gyan, (knowledge) (Know how), Kriya, (action, to achievement). Work is sublime—to do nothing is to be nothing— karma is dharma— dharma of each person to contribute to the larger society in excess of what she consumes out of its resources. We can work to destroy ourselves, or to improve our lot. -Understand the intrinsic meaning of work can guide us to better ways of controlling and directing this powerhouse of human energy.

“Work- as – life” Economic : Gainful, productive work performed to meet the economic needs of a person or her family. Cultural : Functions, such as the rituals of birth, marriage and death, death, performed as moral duty in the course of one’s various life- passages. Psychosocial : Interpersonal and interfamilial interactions in one’s role as member of a social unit. Physical : All movements from birth to death that the human body engages in. Peter Drucker and three stonecutter . Will to work, to achieve, to contribute, to seek recognition Help enhance self- esteem of the worker.

What is performance–Behavior+ Outcome – achievement, accomplishment at work –being, (‘Chance’, ‘favors the prepared mind’) – doing (‘Ideas are funny little things. They won’t work unless you do.) relating (role network – vertical, horizontal or otherwise.) input—throughput –output (exceeds the value of output?)–feedback Output or result dimension; Input dimension; Time dimensions; Focus dimension; Quality dimension; and Cost dimension.

Performance means both behavior & result, behavior emanates the performance performance management is creating culture in which organizational & individual learning are a continuous process – integration of learning & work
– Normal vs excellent performance - Better than the best- outstanding/ extraordinary performance-- Bench Marking,record breaking, – Excellence is not a skill but an attitude/culture – The Geeta – Yogah, Karam su kaushalam

The road to excellence is always under construction. It is necessary to always surpass oneself and this is a lifelong occupation. You got to be the first or the best or different. When better is possible, good is not good enough. Target for the day: 1% improvement.

Excellence is not a destination- it is an endless road– excellence seeker do not follow the laid down path, they break new paths & leave their trail behind-they accept the challenge so that they may feel the exhilaration Churchil- “excellence seekers never, never quit, they walk on with optimism as their hope helps them visualize the invisible, touch the intangible & materialize the impossible” Excellence is not through chance /freak Luck is what happens when preparation meets opportunity PMS encourages individuals to anticipate opportunity & prepare to grab it.

“Chance favors the prepared mind” –Fortune favors the brave Bench marking– up gradation to match with the best Fighting fit with six sigma
– Jack Welch’s directive that his GE managers could wriggle out of Six Sigma training at the cost of losing their promotion only goes to show how important it is to enforce this practice from the top. – The people involved in Six Sigma execution are
Master black belts who are well versed in the rules of the game, Black belts (technically oriented individuals involved in the process of organizational change and development) Green belts (employees who lead six sigma project teams).

Six Sigma Fundas
Strong customer-oriented approach that relies on data to create more efficient processes or refine existing processes Under the prescribed specifications, there cannot be more than 3, 4 defects (defined as anything that doesn’t add value to the end customer), per million opportunities. You can apply it to anything, from making a movie to manufacturing truck tyres It needs the unstinted support of organizational leaders, and emphasizes teamwork and lifelong evolution of practices and processes.

Excellence happens through unleashing human potential which is infinite- culture of excellence Peter And Waterman –In search of Excellence (1982) – care for customer, craze for creativity concern for people By investing in HR, your company will grow and succeed. “the ability to learn faster than your competitor may be the only sustainable competitive advantage”

Performance Management?

PfM is another way of envisioning the totality of a manager’s function. It views the managerial function holistically Performance management is the process of creating a work environment of setting in which people are enabled to the best of their abilities. In a traditional system, performance tends to be evaluated and looked at only in the short run and for immediate results. Organisations need to understand that for sustained performance, it has to nurture a creative, motivated and committed workforce, and for that employee’s performance has to be planned, analysed, developed and appraised continuously rather than being constricted to annual reviews and evaluations. P M S is concerned with creating a culture in which individual learning & development are continuous process It provide means for integration or learning and work so that every one learns form success & challenges inherent in day to day activities

The desire to enhance performance is making ever greater demands on the knowledge & skill of the work force & on people, who carry a much greater responsibility for their own performance. It is a holistic, systematic & continues management function. It is about performance & not just apprising. Performance & result important but people equally important. High performing people are critical

Performance Appraisal systems
– Focus is on performance appraisal and generation of ratings – Emphasis is on relative evaluation of individuals. – Annual exercise-normally though periodic evaluations are made. – Emphasis is on ratings and evaluation. – Rewards and recognition of good performance is an important component. – Designed and monitored by the HR Department. – Ownership is mostly with the HR department. – KPAs & KRAs are used for bringing in objectivity. – Developmental needs are identified at the end of the year on the basis of the appraisal of competency gaps. – There are review mechanisms to ensure objectivity in ratings – It is a system with deadlines, meetings, input and output and a format. – Format driven with emphasis on the process. – Linked to promotions, rewards, training and

Performance Management systems

– Focus is on performance management. – Emphasis is on performance improvements of individuals, teams and the organization. – Continuous process with quarterly performance review discussions. – Emphasis is on performance planning, analysis, review, development and improvements. – Performance rewarding may or may not be an integral part. – Designed by HR and Line departments but monitored by the respective departments themselves. – Ownership is with line managers, HR facilitates its implementation KPAs or KRAs are used as planning mechanisms. – Developmental needs are identified in the basis of the competency requirements for the coming year. – There are review mechanisms essentially to bring performance improvements – It is a system with deadlines, meetings, input, output and a format. – Process driven with emphasis on the format as an aid. – Linked to performance improvements and through them

What is New?
– Move away from appraisals. – Move away from numbers to qualitative assessment – Innovate. Process is more important than formats – Emphasize learning and development, empowerment and growth and problem. Solving more than assessment. – Use multi ratter assessment as a supplements – Synergies with other systems – Encourage employees to own their own performance management. – Follow up actions must be taken and taken on time. It may be training or job rotation or removing blocks or any other things.

PMS is change in managerial style of doing work. It is creating & nurturing performing culture. The performance culture has to be built into the management & the enterprise. Great workplaces with high performance cultures tend to foster growth and feed an individual’s need for learning and development. Several successful companies have shown that high performance culture is the sine qua non for attaining sustainable competitive advantage.

Frame work of Performance Management.
Conduct Future Mapping Create Transformational Vision, Mission and Core Values Craft business strategy linked to Vision

Annual corporate objective Annual corporate strategy-& the other details cascade down --use of balance score card in Moser Baer Performance planning Task analysis and/or activity analysis; Key performance areas (KPAs); Key result areas (KRAs); Task & target identifications; Activity plans/action plans; and Goal-setting exercises.

If the following questions can be answered positively after the exercise, one could say that KPAs have been well identified: 2. Do the KPAs and targets emphasize/ indicate what the manager (appraise) is expected to do by himself (rather than what his department, subordinates etc, are expected to do)? 3. Together, do they cover a large part of his job and include all significant contributions expected from his role? 4. Do they indicate the priority areas of work for the appraise during the year?

4. If all KPAs are well done, can the appraise be labeled as a good performer? 5. Are the targets set challenging and stretch the capabilities of the appraise moderately rather than being routine? 6. Are they comprehensive? 7. Do they specify the standards of performance expected from the appraise? 8. Do they take into consideration realistically the conditions under which the appraise is expected to function during the year? 9. Do they satisfy both the appraise and appraiser? 10. Has adequate time been spent on the process of identifying KPAs and gaining role clarity?

2.Goals — directions- if you do not know where you are going, any road will be OK– Goal setting is a process intended to increase efficiency & effectiveness by specifying the desired outcomes towards which individuals, teams & organisation should work Goals includes deadline, budget, and other standards of behaviour and performance Goals are quantifiable , consistent, precise, challenging, measurable, achievable, shared, time related, team work oriented. SMART
– – – – – S – Simple M – Measurable A – Agreed R – Realistic T – Time related

3. Performance agreement -- performance agreements set the direction & form the basis of measurement, feedback, assessment in the performance management system - Defines work to be done - The attributes required (skill +knowledge + attitude)- competencies required - Identified measures use to monitor review and access - Corporate core values required

4. Performance Measures – “If you can not measure you cannot improve” – What is not measured is not worth doing– Simple Measurements (Production, Quality, Cost, Delivery, Safety etc .– profitability gets measured on-return on investment -return on sale -return on total capital -return on book quality -net income by total assets Performance measures provide evidence of whether or not the intended result has been achieved & extend to which the job – holder has produced the result. Performance measure becomes the basis of generating feedback information.

Bench marking – “ if you know your self & your enemy well, you can win thousands of wars” – “Benchmarking is a tool to help you
improve your business process. Any business process can be benchmarked” – “Benchmarking is the process of identifying, understanding, and adapting outstanding practices from organisations anywhere in the world to help your organisations improve its performance” – “Benchmarking is a highly respected practice in the business world. It is an activity that looks outward operations against those goals”

-performance appraisal for individual & team- each organisation have its own- Moser bear has one -balance score card for organization team and individual Financial performance Customers satisfaction Internal business processes Employees learning and growth

The Balanced Scorecard Provides a Framework to
0

Translate a Strategy into Operational Terms Vision & corporate Strategy
Financial 1 To succeed financially, how should we appear to our shareholders? •Objective •Measures •Targets •Initiatives

0

2

To achieve our vision, how should we appear to our customer?

Customer •Objectives •Measures •Targets •Initiatives Internal Business Process •Objectives •Measures •Targets •Initiatives

3 To satisfy our shareholders and customers, what business processes must we excel at?

0

4

“To achieve our vision, how will we sustain our ability to change and improve?”

Learning & Growth •Objectives •Measures •Targets •Initiatives

The weights assigned to different performance measures in the balanced scorecard as used by 60 large companies surveyed by Towers Perrin New York, is shown below:-

Innovation/ learning results 5%

Developmental result 9%
Internal business results 12% Financial results 55% Customer focus 19%

5.

Competency– Competency Mapping, Competency Profiling, Competency Matching and Job Matching- at two levels behavioral & technical. Competence is skill based attributesmeasures what, what people can do.? Competency is behavior based attributes, applies on performance, measures, how, how they do it – Behavior or set of behaviors' that describe excellent performance in particular work context– Applied knowledge and skill– Behavioral application of knowledge that produce

Competency Model
performance

knowledge

Informance & understanding needed to fulfill responsibilities Acquired ability or experience needed to fulfill responsibilities Natural ability that prepares a person to fulfill responsibilities Way of thinking or Behavior needed to fulfill responsibilities

skill
aptitude

attitude attitude

Competency caused flow chart Input Action Outcome
Personnel attributes & skills Behavior Job performance

Why Strategies Fail
8%
17%

35%

40%

75% fail because of people- lack of competency and reluctance reluctance to change.
‘People don’t resist change, they resist change without being

changed’

In a study conducted by Mc Kensey in 340 organizations worldwide on “Why Strategy Fails”, only 17 percent of strategic failures were due to bad strategy and 8 percent due to other reasons such as ‘September 11, War natural calamity, etc. the remaining 75 percent were due to lack of competency of the people who implemented the strategy; precisely 40 percent due to lack of knowledge and skills and the other 35 percent due to lack of right attitude, i.e. willingness to change, managing feeling and emotions, etc. People who excel at their jobs demonstrate behavior that distinguish them from their peers. Directing these behaviors are “Competencies” which we define as underlying personal characteristics that differentiate outstanding performance from average performance in a given job, role, organization or culture.

– 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

List of managerial competencies Planning ability Organizing ability Co-ordination Supervision Leadership & dynamism Initiative Resourcefulness (oral & written) Creativity & Imaginativeness Development of subordinates Contribution to team spirit Analytical abilities Delegation Public relations Sociability Self-confidence

16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31.

Decision-making Cooperativeness Flexibility Problem-solving Risk –taking Ability to motivate subordinates Conflict management Communication skills Perseverance Hard work Integrity Drive Empathy Assertiveness Originality Data management

– –

Competency for high achiever
4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. –

Threshold competency – minimum, essential for every manager but that does not distinguish Differentiating competency – superior from average performers Personal drive (achievement motivation) Analytical power Strategic thinking Creative thinking (ability to innovate) Divisiveness Commercial judgment Decision making Team management & leadership Interpersonal relationships Ability to communicate Ability to adopt & cope with changes & pressure Impact on result Creativity & innovativeness– Creativity is more than just inspiration. It is perspiration and hard work too… many of us believe that creativity is a gift given to only chosen few. Nothing can be further from the truth. All of us are creative in our own little way. Creativity is a route to self-fulfillment and satisfaction.

COMPETENCY MAPPING –A TOOL FOR OPTIMIZING THE HUMAN CAPITAL The term “Human Capital” describes the economic value of the organization's knowledge, skill, and capabilities. Human Capital is intangible and hence cannot be managed the way organizations manage jobs, products, technology etc. “Can a round peg fit a square hole? So can’t a wrong employee in a right organization” The organization will have to find a correct person who will fulfill its expectations or will have to chisel and shape up the existing employee to fit its expectations. “Know the dimensions of the square hole And buy a square peg Or chisel the round peg to fit.” “Successful Companies of the 21st Century will be those who do the best job of capturing storing and leveraging what their employees know”

Thomas Stewart in his book “Intellectual Capital: The New Wealth of Organisation” says that Intellectual Capital is the intellectual material, knowledge information, intellectual property, and experiences that can be used to create wealth. The term ‘intellectual Capital’ represents the awareness that information is a factor of production, as economists would describe it, in the same category with land, labour, capital and energy. In the early mid 1990s there was an increasing awareness in the business community that knowledge was an important organizational resource that needed to be nurtured, sustained, and, it possible, accounted

Monitoring & Mentoring performance---monitoring employees performance & mentoring their development is the heart & soul of performance management. Performance management aims at sustained effort for – a. performance improvement b. enhancement of managers competencies c. organisational learning - differentiating leadership with leader A leader is one who knows the way, who shows the way, who goes the way -situational leadership (Directing, Coaching, Supporting, Delegating) - Introducing movers of human behaviors – coaching & mentoring – continuous search for drivers of performance & movers of human behavior – creating achievers - enriching performance through diversitycreating building trust- encouraging change - measuring results -Mid term review. How can managers get extra ordinary performance from ordinary people - by effectively & systematically managing performance – three basics principles of high performance-create trust, encourage change, measure the performance, -----

Some monitoring/ mentoring behaviors
Manager meets employees regularly, on the spot, during work process, facilitate change . Praises good performance Sharing feeling than passing remarks Demonstrating & demanding integrity in behavior & intent Exacibility & availability to the employees Correcting faults then condemning Nurturing effective working through continuous improvement.

6.

Pygmalion effect ANNUAL Stock taking /Performance Review Discussion and feedback- Performance review- letting employee know where he stands-process of analysis of achievement and deficiency- providing opportunity for in-depth exploration for introspection with the mentor - reinforcement in case of deficiency, (T & D, counseling, coaching, mentoring etc.), appropriate reward in case of target fulfillment

1. 2. 3. 4. 5. 6.

Objectives –

Helping him to realize his potential as a manager or a leader etc. Helping him to understand himself –his strengths and his weakness. Providing him an opportunity to acquire more insight into his behaviour and analyze the dynamics of such behaviour. Helping him to have better understanding of the environment. Increasing his personal and inter-personal effectiveness by giving him feedback about his behaviour and assisting him in analysing his inter-personal competence. Encouraging him to set goals for further improvement.

7. 2. 3. 4.

Condition for performance review discussion

Encouraging him to set goals for further improvement. Creating an empathic atmosphere to share and discuss his tensions, conflicts, concerns and problems. Helping him to develop various action plans for further improvement. Helping him to review in a non-threatening way his progress in achieving various objectives. General climate of openness and mutuality General helpful and empathic attitude of management Sense of uninhibited participation by the subordinates in the performance review process Dialogic relationship in goal setting and performance review Focus on work-oriented behavior Focus on work-related problems and difficulties Avoidance of discussion on rewards and punishment

Methods of review

-tell & sell, tell & listen, problem solving

• • • • • •

FeedbackFeedback is transmitting information from one part of system to another part to do corrective action or initiate new action. Self feedback is highly desirable feature of PMS but there is always need for managers, colloquies, inter and external customers to provide feedbacks based on their observation (360 feedback). Feedback is considered positive because it is developmental – build feedback in to the job on the actual event describe do not judge refer specific behavior be positive suggest correction

8. Conditions for effective feedback Descriptive and not evaluative Focused on the behaviour of the person and not on the person himself Data based and specific and not impressionistic Reinforces positive new behaviour Suggestive and not prescriptive Continuous Mostly personal, giving data from one’s own experience Need-based and solicited Intended to help Focused on modifiable behaviour Satisfies needs of both the feedback given and one who receives feedback Checked and verified Well timed Contributes to mutuality and building up relationship

Unhelpful and helpful response of the appraisal • Unhelpful Not encouraging creative acts Passive listening Lack of verbal response Critical
– Criticizing – Pointing inconsistencies – Repeated mention of weaknesses – Belittling – Reprimanding Directive – Prescribing – Ordering – Threatening – Giving no options – Pointing out only one acceptable way – Quoting rules and regulations

2. Helpful Appraisal Empathic Leveling Rapport building Identifying feelings Supportive Recognizing Communicating Availability Committing support Trusting Exploring Questions Reflecting Sharing Probing Closing Summarizing Concluding Contracting for follow-up and help

Performance Reward, Development & Recognition The outcome of performance appraisal should be linked to:  Performance linked pay.  Development opportunities.  Challenging assignments in various task forces in the company.

Counseling and Coaching & mentoring –directing people to do has always produce inferior results compare to inspiring people to do an excel. While counseling helps people to come out of helplessness, coaching & mentoring inspires people to an excel Counseling is helping people to help themselves to achieve what they want to-complete acceptance, empathy, listening, sensitivity, impartiality, helping to explore his own confusion, working out improvement plan along with him.

Coaching is to assist others to make changes in their work lives or to adjust to changes with view to improving the performance-not teaching, not instructing, not training it is on the job to help people develop their skills and level of competence, making people aware of their deficiency and encouraging them to improve- coaching is a process were by one people helps another to unlock their natural ability to perform learn an achieve- to increase awareness of the factor which deterring performance,

to increase their scene of self responsibility and ownership of their performance, to self coaching to identifying & remove internal barriers of achievement A mentor is experienced and trusted advisor – combine four roles- coach, teacher, sponsor (adding new challenges), devils advocate (unusual way of looking at things)- role model

Conclusion
As Sherman Roberts of Harvard university puts it: “The best way to run an organization is also the best way to treat people” In the words of Edward Gibbons, an English historian, “The winds and waves are always on the side of the ablest navigator.”

Balanced Scorecard for Enhancing Performance
“ The problem is that not everything that counts can be counted, and not everything that can be counted counts.” As a manager, more often than not, most of our decisions and the activities are guided by the impact they will have on the bottom line. Usually, we end up measuring an organization’s performance in terms of Profit made. No doubt, profitability, gross revenues, return on capital, etc. are the critical, “bottom line” kind of results that companies must deliver to survive. But if we only focus on the financial health of the organization, it may jeopardize our success in the long run because financial measures are generally “lagging indicators” of success and financial performance depends on a variety of past action & events on which we may not have immediate control. They are historical. While they tell us what has happened to the organization, they may not tell us what is currently happening or be a good

Indicator of future performance. Another consequence of merely focusing on financial measures is that we lose sight of the customers who are key to our well being. In such a scenario, we may end up taking decisions like reducing the warranty stringent to help the organization financially, but may hurt the long term relationships with the customers, who may eventually reduce the purchases or leave altogether. Such decisions are sufficient to turn – off the customers in the longer run. The world over, there are hundreds of companies which are no more talked about probably because of their obsession only with bottom line results. As they continued to do what they had been doing, very soon they realised that their competitors have displayed them from their place of imminence. Instead of such a short-sighted, after the-fact view of an organisation’s performance, a more comprehensive view is needed with an equal emphasis on outcome measures (the financial measures or lagging indicators), measures that

Will tell us how well the company is doing now (current indicators) and measures of how it might do in the future (leading indicators). We can’t ignore the bottom line – the key indicator of what has happened (i.e., a “ lagging indicator”). The balanced scorecard is just remedy for this kind of problem. The origins of the balanced scorecard method can be traced back to 1990, when the research arm of KPMG sponsored a study on measuring performance in organisations. The study was motivated by a belief that existing performance measurement approaches, primarily relying on financial parameters which provide information about an organisation’s past result are not well suited for predicting future performance or for implementing and controlling the organisation’s strategic plan. And it is very much relevant in the Indian context also where many big companies which were doing quite well financially at one point of time could not read the writings on the wall and as a result, they are no more talked about. By analyzing perspectives other than the

financial one, managers can better translate the organisation’s strategy into actionable objectives and better measure how well the strategic plan is executing. Subsequently, in 1992, Robert S Kaplan and David Norton introduced the balanced scorecard (BSC) for measuring an organisation’s activities in terms of its vision and strategies which was published in the Harvard Business Review. It gives managers a comprehensive view of the performance of a business and have been widely adopted around the world. In fact, the Harvard Business Review, in its 75th Anniversary issue, cites the Balanced Scorecard as being one of the 15 most important management concepts to have been introduced via articles in the magazine. What is Balanced Scorecard The Balanced Scorecard method is a strategic approach and performance management system that enables the organisations to translate its vision and strategy into

framework for translating an organization’s vision into a set of performance indicators distributed among four perspectives : Financial, Customer, Internal Business Processes, and Learning and Growth. Indicators are maintained to measure an organization’s progress toward achieving its vision. Other indicators are maintained to measure the long term drivers of success. Through this scorecard, an organization monitors both its current performance (finances, customer satisfaction, and business process results) and its efforts to improve processes, motivate and educate employees, and enhance information systems – its ability to learn and improve. A Balanced Scorecard enables us to measure not just how we have been doing, but also how well we are doing (“current indicators” and can expect to do in the future (“leading indicators”). This in turn gives us a clear picture of reality. The Balanced Scorecard is a way of: measuring organizational, business unit’s or department’s success • balancing long-term and short-term actions

balancing different measures of success Financial Customer Internal Operations Human Resource System & Development ( learning and growth)

Four Kinds of Measures The scorecard seeks to measure a business from the following perspectives : 13.Financial perspective Measures reflecting financial performance, for example, number of debtors, cash flow or return on investment. The financial performance of an organization is fundamental to its success. Even non-profit organisations must make the books balance. Financial figures suffer from two major drawbacks

2. Customer perspective – This perspective captures the ability of the organization to provide quality goods and services, effective delivery, and overall customer satisfaction for both Internal & External customers. For example, time taken to process a phone call, results of customer surveys, number of complaints or competitive rankings. 3. Business Process perspective – This perspective provides data regarding the internal business results against measures that lead to financial success and satisfied customers. To meet the organizational objectives and customers expectations, organizations must identify the key business processes at which they must excel. Key processes are monitored to ensure that outcomes are satisfactory. Internal business processes are the mechanisms through which performance expectations are achieved. For example, the time spent prospecting new customers, number of units that required rework or process cost.

4. Learning and Growth perspective – This perspective captures the ability of employees, information systems, and organizational alignment to manage the business and adapt to change. Processes will only succeed if adequately skilled and motivated employees, supplied with accurate and timely information, are driving them. In order to meet changing requirements and customer expectations, employees are being asked to take on dramatically new responsibilities that may require skills, capabilities, technologies, and organizational designs that were not available before. It measures the company’s learning curve for example, number of employee suggestions or total hours spent on staff training. Objectives, Measures, Targets and Initiatives Within each of the balanced scorecard financial customer, internal process, and learning perspectives, the organisation must define the following:

• Strategic objectives – the strategy for achieving that perspective. • Measures – how progress for that particular objective will be measured. • Targets – the target value sought for each measure • Initiatives – what will be done to facilitate reaching out the target. The balanced scorecard provides an inter-connected model for measuring performance and revolves around four distinct perspectives – financial, customer, internal processes, and innovation and learning. Each of these perspectives is stated in terms of the organisation’s objectives, performance measures, targets, and initiatives, and all are harnessed to implement corporate vision and strategy.

The name also reflects the balance between the short-and long-term objectives, between financial and non-financial measures, between lagging and leading indicators and between external and internal performance perspectives. Under the balance scorecard system, financial measures are the outcome, but do not give a good indication of what is or will be going on in the organization. Measures of customer satisfaction, growth and retention is the current indicator of company performance, and internal operations (efficiency, speed, reducing non-value added work, minimizing quality problems) and human resource systems and development are leading indicators of company performance. Robert S Kaplan and David P Norton the architects of the balanced scorecard approach, recognized early that longterm improvement in overall performance was unlikely to happen through technology only and hence placed greater emphasis on organizational learning and growth. These, in

Turn, consist of the integrated development of employees, information, and systems capabilities. Context and Strategy Just as financial measures have to be put in context, so does measurement itself. Without a tie to a company strategy, more importantly, as the measure of company strategy, the balanced scorecard is useless. A mission, strategy and objectives must be defined. Measures of that strategy must be agreed upon to and actions need to be taken for a measurement system to be fully effective. Otherwise, it will appear as if the organisation is standing at a crossroad but unaware of which path to take. Purpose of the Balanced Scorecard Kaplan and Norton found that organisations are using the scorecard to :

• • • •

Clarify and update strategy Communicate strategy throughout the company Align unit and individual goals with strategy Link strategic objectives to long term targets and annual budgets • Identify and align strategic initiatives • Conduct periodic performance reviews to learn about and improve strategy.

Mission Why we Exist Core Values What we believe in Vision What we want to be Corporate Strategy Our Game Plan Balanced Scorecard Implementation & Focus Strategic Initiatives What we need to do Individual Scorecard What I need to do

Strategic Outcomes Satisfied Shareholder Delighted Customers Effective Processes Motivated Workforce

•The Process of Building a Balanced Scorecard
•Kaplan and Norton suggest following four step process for building a scorecard: • Define the measurement architecture •Specify strategic objectives •Choose strategic measures •Develop the implementation plan •Benefits of Balanced Scorecard •Some of the benefits include: • Translation of strategy into measurable parameters • Communication of the strategy to all stakeholders • Alignment of individual goals with the organisation’s strategic objectives • Feed-back of implementation results to the strategic planning process

• Preparing the organisation for the Change – It provides for a front-end justification as well as a focus and integration for the continuous improvement, re-engineering and transformation process. Avoiding Potential Roadblocks • • • • • Lack of a well defined strategy Using only lagging measures Use of generic metrics Failure at all levels Failure to follow through completion

Balanced Scorecard for Enhancing Performance In such constantly shifting environments, management must learn to continuously adapt to new strategies that can emerge from capitalizing on opportunities or countering threats. A properly constructed balanced scorecard can provide management with the ideal tool in reacting to the turbulent environment and helping the organisation to correct the course to success. Scorecard provides managers with feedback, thus, enabling them to monitor and adjust the implementation of their strategy – even to the extent of changing the strategy itself. In today’s information age, organisations operate in very turbulent environments. Planned strategy,

though initiated with the best of intentions and with the best available information at the time of planning may no longer be appropriate or valid for contemporary conditions. As companies have applied the balanced scorecard, they have begun to recognize that the scorecard represents a fundamental change in the underlying assumptions about performance measurement. The scorecard puts strategy and vision, not control, at the centre. It establishes goals but assumes that people will adopt whatever behaviours and take whatever actions are necessary to arrive at those goals. The measures are designed to pull people toward the overall vision. Senor managers may know what the end result should be, but they cannot tell employees exactly how to achieve that result, because the conditions in which employees operate are constantly changing. This new approach to performance measurement is

consistent with the initiatives under way in many organisation : cross-functional integration, customer supplier partnerships, global scale, continuous improvement, and team rather than individual accountability. By combining the financial, customer, internal process and innovation, and organizational learning perspectives, the balanced scorecard helps managers understand, at least implicitly, many interrelationships. This understanding can help managers transcend traditional notions about functional barriers and ultimately lead to improved decision making, problem solving and enhanced performance. The balanced scorecard keeps organisations moving forward.

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