Financed bySupported byImplemented in cooperation with Evaluation and Monitoring.

Financed by Supported by Implemented in cooperation with

Evaluation and Monitoring


Controlling - Function of managementPerformance measurement systemPerformance PlanBasic Steps in a Performance AppraisalOrganizational Performance Management System -

Balanced ScorecardSelecting measurementsLinking measures to strategy Changing the Plan As Necessary During Implementation

Outline


Controlling- Function of Management

• Controlling is an integral part of strategic management • It turns planned decisions and objectives into standards of

performance• Compares what was planned with what was done or achieved• Method of directing employees’ activates • Control is necessary to keep track of deviations from planned

expenditures and performance


Frequent changes in the company’s environment, and issues predicting them

Attempts to avoid bigger disturbances and problems in the business

Emergence of opportunities and threats that should be addressed

It supplies management with important information necessary for corrective actions or new ideas

It can serve to motivate employees by connecting rewards and punishments with results and performance

The need for adequate allocation and use of company’s limited resources.

Reasons for control


1• Determining what we are measuring

2• Defining standards of performance

3• Creating the system for measuring or monitoring

4• Comparing the achieved/ realized with planned

5• Undertaking corrective actions

The controlling process consists of:


projections and expectations in relation to objectives and effort put into achieving them

Determined in terms of expected quantity, qualitytime

In accordance with internal and external circumstances and conditions

Standards of Performance


Systems of measuring and monitoring must be defined before the implementation of the plan begins

The system should include sources of verification: procedures, techniques, and tools to gather and analyze data should be included in the management information system

Gathered data should be continuously analyzed to determine if projects are on the right track or have deviated

Systems of measuring


Determine

• extent• character• causes

Undertake corrective actions

In case of deviation

Successfulness of the control system is determined by how measurable are the foreseen activities


Validity of data

Timeliness

Cost-benefit ratio of the systems operations

Ease of use and understanding

Efficiency of exerting corrective actions

Parameters of the quality of control are:


Quality management systems build responsibility of staff and managers in performing tasks and reducing the need for traditional product quality methods.

In this system is it up to everyone to pay attention to their own deviations or underperformance and react by correcting their own actions

Quality Management System


Administrative v. Technical

Internal v. External

Preventative v. Corrective

Financial

Strategic v. Tactical v. Operational

Types of Control


Advantages Three Basic Types of Control/Evaluation:

Ex-AnteInterimEx-Post

Timing vs. methodologies used

Monitoring and Evaluating

Monitoring and evaluating are just as important as identifying strategic

issues/ goals.


The focus is on effectivenessdoing the right things the right way to get results.

The overall goal is to ensure the organization and all its subsystems are working together in an optimum fashion

Performance management brings a focus on overall results, measuring results, focused and ongoing feedback about results, and development plans to improve results

Performance Measurement System


The organization

Departments

Processes

Programs

Products or services

Projects

Teams or groups

Performance management includes

Performance measurement aligns organizational activities and provides the goals of the organization

It cultivates a systems-based approach while looking at outcomes and drivers, favoring the long-term views of the organization


Organizational

Process

Individual

Levels of performance


1• Identification and prioritization of desired results

2• Establishing means to measure progress towards the results

3• Setting standards for assessing how well results were achieved

4• Tracking and measuring progress

5• Exchanging ongoing feedback among those participants

working to achieve results

6• Periodically reviewing progress

7• Reinforcing activities that achieve results and intervening to

improve progress where needed

Process


1• Review organizational goals

2• Specify desired results

3• Ensure the desired results directly contribute to the organization’s results

4• Weigh and prioritize results

5

• Identify first level measures to evaluate if and how well the desired results were achieved

6• Identify more specific measures for each first-level measure if necessary

7• Identify standards for how well the desired results were achieved

8• Document a performance plan

9• Conduct on going observations and measurements

10

• Exchange ongoing feedback about performance

11

• Conduct a performance review

12

• If performance meets standards give rewards, if not plan to address the performance gap.

Steps for implementation of the Performance Plan


Basic Steps:Conduct ongoing observations and measurements to track performanceExchange ongoing feedback about performanceConduct a performance appraisal/ review

If performance does not meet the plan then update it to address the gap, create a performance development plan.

A performance development plan clearly conveys:How the conclusion was made that there was adequate performanceWhat actions are being taken and by whomWhen performance will be reviewed again and how

Performance Appraisal


Comprehensive approaches to improve organizational performance and include regular reoccurring activities to establish goals and monitor progress towards them.

Balanced Scorecard- a framework, methodology, analytical technique, and management system.

Organizational Performance Management System


The balanced scorecard can be used for management and strategic control

• Regulation of operational entities or performance processes• Favor use of benchmark or comparative data• Occasionally simulation or modeling for calibrating measures• Support cross operational units comparison • Outcomes at this level are clearly defined

Management:

• Monitoring to ensure the strategic choices are the right ones• The extent to which the activities planned to achieve them have been

undertaken • Outcomes at this level are uncertain and difficult to predict

Strategic:


Questions for selecting measurements:Where do I focus my performance efforts in the organization?How do I identify which organizational results to measure?How do I know what measures to make to evaluate results?What about measures after I’ve made efforts to improve performance?

In Balanced Scorecard the areas of measurement (perspective) are:Customer scorecardFinancial scorecard Internal business process scorecardKnowledge, education and growth scorecard

We define and measure implementation of strategic objectives in each of the 4 perspectives.

Selecting Measurements


Customer measures identify value propositions companies will have to deliver to targeted customers and market segments.

The value propositions are the lead indicators/ performance drivers. Core customer outcome measures are generic and need to be customized to target groups.Market shareCustomer acquisitionCustomer retentionCustomer satisfaction Customer profitability

Measurements of value proposition consist of three groups: product/service attributes, customer relationships, and image/reputation

Measures of Customers’ Satisfaction and Performance Requirements


Financial objectives represent the goal to provide superior returns based on the capital invested in the unit and translates to lower level objectives relating to profitability, asset returns and revenue enhancement.

The guiding concept is that the long-term goal is to generate financial returns to investors. All strategies should enable businesses to achieve this goal.

Financial Objective ThemesRevenue growth and mixCost reduction/ productivity improvement Asset utilization and investment strategyRisk Management

Financial Requirements and Performance


Revenue Growth and MixSales growth rateMarket share for targeted regions, markets, and customersOther measures depend on the objective

Cost Reduction and Productivity Improvement Increased revenue productivityRevenue per employeeReduced unit costs Improved channel mixReduced operating expenses

Asset Utilization/ Investment StrategyObjective: Increase revenue and reduce costs. Measure: return-on

capital employed and investment

Measures of Financial Objectives


Internal-process value chain is made up of innovation processes, operations process, and post-sale services.

Measures in terms of cost, quality, throughput, and time Innovation Processes: measured from research and product

development perspectives Operations Processes: from receipt of order to deliver;

efficiency, consistency, timely deliveries. Post-Sale services (warranty and repairs) - focus on time,

quality, and cost metrics

Measuring Internal Business Processes


Measurement categoriesemployee capabilities, information systems capabilities, motivation,empowerment, and alignment

Employee capabilitiesproductivity, retention, a satisfaction index

Measuring Organizational Learning and Growth


Information capabilities strategic information coverage ratio,percentage of processes with real-time quality, cycle time and cost feedback available,access to information about customers

Organizational climate for motivation and initiative suggestions made by employees compared with number

implemented,rates of improvements made, individual and organizational alignment, team performance


Translating strategies into operational terms In order to promote alignment companies must create synergies among

various business units and functions by setting a consistent messageBasic steps for turning strategic deployment into a continual process

Link strategies to budgetCall on management to hold regular review of the strategies during

their meetings and reviewsDevelop a process for learning and adapting strategies

Three principles that enable measures to be linked to strategy are:The cause-and-effect relationshipOutcome and performance driversLinkages to financials

Linking Measures to Strategy

Financed bySupported byImplemented in cooperation with Evaluation and Monitoring.

Documents

Transcript of Financed bySupported byImplemented in cooperation with Evaluation and Monitoring.