Introduction of Performance Management

1. Enterprise performance
Management
 Course Code :302 Semester-III
 Course Type : Generic Core (GC)
 Maximum Marks : 100 (50+20+30)
 Credits : 3
 Books
1. Management Control Systems- Anthony & Govindrajan, 12th
Edition
2. Management Control in Non-profit org. by Robert Anthony &
David Young, 7th edition
3. Financial Management- Prasanna Chandra

2. Chapters to be Studied
Unit
No.
Sub-
Unit No.
Contents Number of
Sessions
1 1.1 Performance Management
1.2 Performance Evaluation Parameters (Financial)
1.3 Performance Evaluation Parameters (Non-Financial)
1.4 Measuring SBU-Level Performance
2 2.1 Capital Expenditure Control
2.2 Tools & Techniques of Capital Expenditure Control
3 3.1 Performance Evaluation Parameters for Banks
3.2 Performance Evaluation Parameters for Retail
4 4.1 Performance Evaluation Parameters for Projects
4.2 Performance Evaluation Parameters for Non-profit
5 5.1 Audit Function as a performance Measurement tool

3. What is an Enterprise?
• A business or company, firm, (commercial)
undertaking, venture, organization, operation,
industry, corporation, establishment, house,
shop, office, bureau, agency, franchise,
practice, partnership, consortium,
cooperatives, conglomerate, group, syndicate
that earns money.
• It simply another name of business.

4. What is Performance?
• Key words here are “actual” and “intended”.
• Return of Accomplishments and failures.
• Role of setting up near and long term goals.

5. WHAT IS MANAGEMENT ?
• F.W. Taylor - “Art of knowing what you want to do and
then seeing that it is done the best and cheapest way”.
• Henry Fayol – “To Manage is to forecast, to plan, to
organise, to command, to co-ordinate and to control”.
• Peter F. Drucker –”Management is work and as such it
has its own skills, its own tools and its own
techniques”.
• “Management is the art of getting things done
through and with people”.

6. Management Process
• Planning
– Goals and standards
– Rules and procedures
– Plans and forecasting.
• Organizing
– Tasks
– Departments
– Delegating
– Authority and communication
– Coordinating

7. • Staffing
– Hiring
– Recruiting
– Selecting
– Performance standards
– Compensation
– Evaluating performance
– Counseling
– Training and developing
• Leading
– Getting the job done
– Morale
– Motivation
• Controlling
– Setting standards
– Comparing actual performance to standards
– Corrective action

8. What is Performance Management?
• Performance management is the foundation of any
organization that has a vision and knows where they want to
be in the near and long term future.
• Performance management is the gauge that lets you know
whether or not you are reaching strategic goals and which
areas within your service delivery needs improvement.
• Performance management also justifies whether or not your
organization is getting its return on investments.
• Most important, performance management establishes a
culture of high performance where the entire organization
is synergistic towards reaching organizational objectives.

9. What is Performance Management?
 By definition, performance management is the systematic
process by which an organization involves its employees and all
stakeholders in the development and implementation of a plan
to improve organizational effectiveness and reach organizational
objectives.
 In 1883 Lord Kelvin, a leading physicist of the early 19th century
wrote:
“I often say that when you can measure what you are speaking
about, and express it in numbers, you know something about
it; but when you cannot measure it, when you cannot express it
in numbers, your knowledge is of a unsatisfactory kind; it
may be the beginning of knowledge, but you have to be
scarcely in your thoughts get advanced to the state of Science,
whatever the matter may be.”

10. What is Performance Management?
• Performance Management focuses on all areas that
determine the success of an enterprise, including:
– Employees
– Departments / Divisions
– Processes
– Finance
– Programs (e.g. implementing organizational policies)
– Products / Services
– Projects
– Business Units / Teams

11. What is Performance Management?
• In a nutshell, we implement performance management so that we
can quantify in numbers how effective we are at what we do.
Below is a list of additional advantages of implementing/re-
establishing performance management in your organization.
– Gains visibility into project execution and effectiveness
– Analysis of process strengths and weaknesses
– Metrics provide inputs for future estimations and planning
– Metrics identify the areas for improvements
– Metrics can be used to eliminate problem areas and root causes
– Establishes a continuous improvement culture across the
company
– Helps management and employees make well-informed and
decisions
– Measures at the enterprise, divisional, systems, program,
project and employee levels

12. Performance Management Steps
variability
• Various authors propose various steps for performance
management. The typical performance management
process includes some or all of the following steps,
whether in performance management of organizations,
subsystems, processes, etc.
• Note that how the steps are carried out can vary widely,
depending on the focus of the performance efforts and
who is in-charge of carrying it out.

13. Performance Management Common
staircase
1. Review organizational goals to associate preferred
organizational results in terms of units of performance,
that is, quantity, quality, cost or timeliness (note that the
result itself is therefore a measure)
2. Specify desired results for the domain as guidance,
focus on results needed by other domains (e.g.,
products or services need by internal or external
customers)
3. Ensure the domain's desired results directly
contribute to the organization's results

14. Performance Management
4. Weight, or prioritize, the domain's desired results
5. Identify first-level measures to evaluate if and how well
the domain's desired results were achieved
6. Identify more specific measures for each first-level
measure if necessary
7. Identify standards for evaluating how well the desired
results were achieved (e.g., "below expectations", "meets
expectations" and "exceeds expectations")
8. Document a performance plan - including desired results,
measures and standards
9. Conduct ongoing observations and measurements to track
performance

15. Performance Management
10. Exchange ongoing feedback about performance
11. Conduct a performance appraisal (sometimes called
performance review)
12. If performance meets the desired performance standard,
then reward for performance (the nature of the reward
depends on the domain)
13. If performance does not meet the desired performance
standards, then develop or update a performance
development plan to address the performance gap
14. Repeat steps 9 to 13 until performance is acceptable,
standards are changed, the domain is replaced,
management decides to do nothing, etc.

16. Performance Management
The management process of discovering, defining, and implementing
business activities that will result in value enhanced future of the
organization.
Business Strategy
Business Processes
A Business process is a collection of
linked business activities that enable
to deliver goods, services,
information or money.
Performance
management system
Stakeholders value
propositions

17. Need & Importance of PM
• Performance management starts with a work
plan that identifies for the employee what is to
be accomplished, and how.
• The plan is followed up with informal, ongoing
monitoring and feedback on his progress towards
the objectives set in the plan.
• At the end of the performance period-usually a
year-the manager and employee meet to
summarize the accomplishments and challenges
of the past year, and document the discussion
using a performance management form.

18. Need & Importance of PM
• Implementation of business strategies requires
employees be given guidance, support, authority,
and resources needed to accomplish action plans
and performance objectives. Yet for many
organizations, there is a tremendous gap
between reality and vision of the organization.
• It is task of the management to organize,
motivate, equip, and direct rather ordinary
people to perform at their higher possible levels.

19. Need & Importance of PM
• In today’s complex, turbulent, and dynamic business
environment, where goals, circumstances, organizational
structure, staffing, and activities are constantly changing,
managers play an especially important role in helping
employees understand what is expected of them (i.e., setting
performance criteria), helping them meet these expectations
successfully, evaluating performance providing feedback, and
providing meaningful recognition and rewards.
• All the individuals are born with an intrinsic motivation, self-
esteem, dignity, and an eagerness to learn, and experience
and research indicates that present system of performance
appraisal system wipes that all out.
• Therefore, performance management assumes utmost
importance.

20. Uses & Objectives Of Performance Management
System
Objectives
of
perform.
Mgt. sys.
Human
Resource
Planning
Recruit.
&
selection
Personn
-el
Decisio
ns
Career
planning
& dev.
Feedback ,
motivation
&
developme
nt.
Training
& dev.
Compen
sation &
reward.
Internal
employee
relation

21. Strategy Linkages with Performance
Strategy
Organization
Structure
Management /
operational
Control
Culture
Human
Resource
Management
Performance
Implementation Mechanisms

22. The Concept of Strategy
• Strategy: is the plan which integrates an
organizations major goals, policies and action
sequences into a cohesive whole.
• Strategy describes the general direction in which
an organization plans to move to attain its goals.
• Every well-managed organization has one or
more strategies,
• A firm develops its strategies by matching its
capabilities with industrial opportunities.

23. The Concept of Strategy
• According to Kenneth R Andrews,
“Strategy is a process by which senior
executives evaluate company's strengths and
weaknesses in light of the opportunities
and threats present in the environment, and
decide on a product market that fits the
company's distinctive competencies with
environmental opportunities.”

24. Strategic Planning
• Strategic planning is a process to Describe
organization’s destination, to Assess barriers
and Select approaches for moving forward.
• Strategic Planning: Goal- Allocate resources
to provide organization with competitive
advantage

25. Strategic Planning Purpose
• Help to define the organization’s identity
• Help organization to prepare for the future
• Enhance ability to adapt to environmental change
• Provide focus and allow for better allocation of
resources
• Produce an organizational culture of cooperation
• Allow for the consideration of new options and
opportunities
• Provide employees with information to direct daily
activities

26. Strategy Formulation
Environmental
AnalysisCompetitor
Customer
Supplier
Regulatory
Social/Political
Technology know-how
Manufacturing know-how
Marketing Know-how
Distribution know-how
Logistics know-how
Internal Analysis
Opportunities
and treats
Identifying
opportunities
Strengths and
Weaknesses
Identifying Core
Competencies
Fix internal competencies
with external opportunities
Firms Strategies

27. Strategic Planning : Overview
1. Environmental Analysis
2. Mission
3. Vision
4. Goals
5. Strategies

28. Environmental Analysis
Identifies external and internal trends
• To understand broad industry issues
• To make decisions using “big picture” context

29. External trends
• Opportunities:
–environmental characteristics that can help
the organization succeed
• Threats:
–environmental characteristics that can
prevent the organization from being
successful

30. External trends – Factors to Consider
• Economic
• Political/Legal
• Social
• Technological
• Competitors
• Customers
• Suppliers

31. Internal trends
• Strengths:
–internal characteristics that the
organization can use for its advantage
• Weaknesses:
–internal characteristics that can hinder the
success of the organization

32. Internal trends – Factors to Consider
• Organizational structure
• Organizational culture
• Politics
• Processes
• Size

33. Gap Analysis
Analyzes:
External environment
(opportunities and threats)
vis-à-vis
Internal environment
(strengths and weaknesses)

34. Gap analysis determines:
Opportunity + Strength = Leverage
Opportunity + Weakness = Constraint
Threat + Strength = Vulnerability
Threat + Weakness = Problem

35. Control- Basic Concepts
• Control:
– E.g. Car-accelerator-Steering Wheel-Brake Pedal
• The purpose of control is to ensure that an
organization meets desired objectives and
that individual members behave in a manner
consistent with organizational objectives.

36. Control- Basic Concepts
• Any control system has four important
elements. They are a detector or sensor, an
assessor, an effector and a communications
network, as can be seen in Figure 1
Detector: Information
about what is
happening
Control Device
Entity being
controlled
Assessor: comparison
with standard
Effector: Behavior
alteration if needed

37. Control- Basic Concepts
• The process of control usually involves four
important steps. They are:
1. Identifying the goals or objectives,
2. Implementing the programs or policies,
3. Measuring and comparing outcomes against
targets, and
4. Analyzing whether the achieved targets are in
accordance with the goals or objectives.

38. Control- Basic Concepts
• The control process in any organization can be
undertaken at three levels. These are:
1. the strategic level,
2. the management level, and
3. the operational level.
• Each type of control occurs primarily at one of
the three distinct levels of the organizational
hierarchy.

39. Control- Basic Concepts
• Strategic control deals primarily with the
broad questions, expression of the
organization’s purpose, and other issues that
impact the organization's long-term survival.
• Strategic control also deals with issues
relating to general company objectives and
the implementation and monitoring of
progress.

40. Control- Basic Concepts
• Management control deals with effective
resource utilization, the state of competitiveness
of the unit.
• Operational control is primarily concerned with
efficiency issues. Occurring at very specific
functional or sub-departmental levels of the
organizational hierarchy, this mode of control
generally conforms to individual control models.
The time horizon of control is very short, the
benchmarks are known and well defined, and the
outcomes are tangible and easily measurable.