The Use Of HR Performance Management Measurement in Strategic Business Planning
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ABF CONFERENCE ON PERFORMANCE MEASUREMENT & KPIs IN HR FUNCTION August 2009 * Evaluate the links between systems of high performance work practices and strategic business planning * How can HR practices add value to business performance? * The best practices of HR performance management that contribute to successful business planning
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The Use Of HR Performance Management Measurement in Strategic Business Planning
- 1. THE USE OF HR PERFORMANCE MANAGEMENT IN STRATEGIC BUSINESS PLANNING Case Studies, Concepts and Debatable Ideas Kenny Ong CNI Holdings Berhad
- 3. 1. Why is the right Performance Management System critical?
- 8. What is the OBJECTIVE? Succession Planning (Business Continuity) Talent Management Differentiation Performance Management System Budgeting + Planning BSC and KPIs Strategy Business Model Business Strategy Execution Talent Management
- 9. 2. Adapting the System to the Business Model and Strategy Focus on the Business Strategy and Business Direction first
- 11. Business Model: Profit Model Revenue Cost Margin Cash Flow Assets
- 13. Strategy: Market Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)
- 14. Strategy: Market Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) HP well-balanced portfolio, mass customization Acer super lean cost structure, aggressive pricing Apple powerful products, premium pricing, limited range Still Doing well in 2009
- 17. Systems Alignment with Business Model Revenue Base Retention Share Gain Positioning Adjacent Market New Business Financial Learning & Growth Internal Process Customers Cost Margin Cash Flow Asset Operational Excellence Product Leadership Customer Intimacy Investment Strategy Competencies Information Systems Motivation, empowerment, alignment Satisfaction
- 27. Business Situations vs. HRM Upturn Flat Downturn Fight Complacency Sharpen Edge Keep Momentum Conquer ‘ Change’ mgmt Reduce Fat Continuity Everyone Happy Innovation Acquire Profits Build momentum Sales Cash Flow Talent Mgmt Innovation/R&D Early wins Slow Down HR Costs Top Talent focus Sales, Sales, Sales Increase attrition Motivation
- 29. Business Situations vs. HRM Upturn Flat Downturn Fight Complacency Sharpen Edge Keep Momentum Conquer ‘ Change’ mgmt Reduce Fat Continuity Everyone Happy Innovation Acquire Profits Build momentum Sales Cash Flow Talent Mgmt Stack R&D Early wins Slow Down HR Costs Top Talent focus Stack Sales Increase attrition Many times, you need a different CEO/Leader/Management Team for each business situation
- 30. 3. Fine-tuning Performance Management for Talent Management
- 40. Business Model vs. Talent & Performance Management Revenue Base Retention Share Gain Positioning Adjacent Market New Business Financial Learning & Growth Internal Process Customers Cost Margin Cash Flow Asset Operational Excellence Product Leadership Customer Intimacy Investment Strategy Competencies Information Systems Motivation, empowerment, alignment Satisfaction
- 41. Performance Support: 4-Wheels Model Philosophies Corporate Objective Performance Objectives Structure Resources Leadership Person
- 42. Curse of the Bell Curve ‘ A’ Staff ‘ B’ Staff ‘ D’ Staff ‘ E’ Staff ‘ C’ Staff www.myCNI.com.my www.OOBEY.com
- 44. Thank You. soft copy of slides: http://totallyunrelatedrandomanddebatable.blogspot.com/
Hinweis der Redaktion
- Focus on only three things: the ‘Why’, the ‘What’, and the ‘How’ Why is the right PM System critical for both Business and Talent Managament? What do I need to fine-tune to? How do I do that?
- Most organizations in Asia underestimate the PMS most use it to reward/punish their staff (to terminate) informal PMS (angpow) biasness and favoritisms family-owned business (who dare evaluate relatives?)
- Performance Management System is first and foremost a ‘SYSTEM’ – meaning we have Input, Process and a predictable Output Firstly. Performance means ‘Results’. Business Performance = Business Results. If your PM System is merely to reward/punish employees, you are missing the point If your PM System does no provide a predictable Output (i.e. Results), it is not a system Secondly, everything within the system must be Controllable – no excuse if performance does not happen. This means that Cause-and-Effect principles must be built into the PM System
- PMS does not equate to Performance Evaluation process entire eco-system to ensure performance PMS = Business Plan Implementation system The PM System is the only process in any organization to execute the Business Strategy. There are no other process or system that can do that. Treat it with care Why? PM System is the only thing that can link Business Strategy with the People executing it Secondly… without a strong PMS, we cannot Differentiate employees properly. If we cannot Differentiate, we cannot define and manage Talent. Link between PMS/TM/Succession Planning? Business Continuity = perpetual business performance (in Asia = Legacy) Can only be done if the right Talents are in place (bench strength) Making sure the right Talents are spotted = PMS
- Many people go around setting up PMS without clear understanding of Business Directions… (sometimes its hidden from lower management & consultants)… End up HR and Finance getting beat up by Management by now implementing PMS ‘properly’ Sometimes the Business itself is unclear, in this case, do not ‘re-structure’ the PMS – it will worsen the situation. End up, most Asian SMEs do D.I.Y PMS: Cut-and-paste Off-the-shelf
- The Business Model is made up of three components – Unique Selling Proposition, Profit Model and Market Discispline Each business is unique depending on how the Business Model is configured Each organization’s PMS has to follow the Business Model If your Business Model is wrong (or inferior), a better PMS cannot help you. Change your Business Model first Example: Google vs Yahoo USP – Simplicity, Search-focused, Free! Profit Model – Ad revenue MKt Discipline – Operational Excellence Example: Tata Nano vs. GM (Proton vs. Kia, Hyundai, Cherry) USP – Cheap (below USD2,500), no-frills Profit Model – Motorcycle (as opposed to Automobile manufacturing model)
- The Profit Model is the total interaction between fives components: revenue (how to get money), cost, margin, cash flow, and asset utilization & velocity All five components must be aligned, otherwise a business cannot survive financially A PMS must ensure that all five KPIs are accounted for and have leading KPIs attached to each of the five Example: Google, Tata Nano Local example: Courts Mammoth, Jusco (Aeon)
- How does the Customer define “Great Experience”? - It depends on their own perceptions. Problem is…this differs depending on the Customer! If you are very good in something that the Customer does not value, it will not improve the Experience. Example: Air Asia vs. Malaysia Airlines (or Ryanair vs. Luthansa) USP – Budget Profit Model – Lowest Cost, Maximum Seats Mkt Discipline – Operational Excellence
- A leading business organization can only afford to focus on ONE, at the most TWO of the disciplines If you try to accomplish all three at once, you will end up with: an average business confused employees mixed up product lines too many KPIs wasted funds To Excel – Must be a Leader in ONE of the disciplines but the other two must be at least at industry standard
- Quick slide to show that the Market Discipline approach is practical and proven
- Each Market Discipline requires different operational emphasis This means that each Market Discipline requires a different Performance Management System in order to achieve results Trying to accomplish or benchmark all three (even two) will confuse and dilute your PMS effectiveness
- Who thinks that Mc Donald’s has the best beef burger in the world? (Asian, Malaysian poll) Who sells the most beef burger in the world? Does product have anything to do with it?
- A simple Balanced Scorecard showing how all the different elements of the Business Model interact in typical well-planned PMS Reminder: if your Business Model is wrong to start with, your PMS will make things even worse. If you have a right Business Model, make sure your PMS in ‘tune’ with the Business Model (Cause-and-Effect settings)
- Strategies -> KPI? : If we already know our priorities and are aware of al the strategy options available; we are creating something UNIQUE, INNOVATIVE and DISRUPTIVE e.g. Air Asia or… conducting a business Turnaround e.g. MAS KPI -> Strategies? : If we want to find out possible strategies, and determine our priorities first thru selection of important KPIs; when we are gorwing through ‘normal’ business, not a Turnaround.
- Strategies -> KPI? : If we already know our priorities and are aware of al the strategy options available; we are creating something UNIQUE, INNOVATIVE and DISRUPTIVE e.g. Air Asia or… conducting a business Turnaround e.g. MAS KPI -> Strategies? : If we want to find out possible strategies, and determine our priorities first thru selection of important KPIs; when we are gorwing through ‘normal’ business, not a Turnaround.
- Strategies -> KPI? : If we already know our priorities and are aware of al the strategy options available; we are creating something UNIQUE, INNOVATIVE and DISRUPTIVE e.g. Air Asia or… conducting a business Turnaround e.g. MAS KPI -> Strategies? : If we want to find out possible strategies, and determine our priorities first thru selection of important KPIs; when we are gorwing through ‘normal’ business, not a Turnaround.
- Moral 2: Never forget that the goal of business is BUSINESS, not PERFORMANCE management or BSC! Do not just buy a book on ‘best practice KPIs’ and start implementing them. Understand the ‘real’ business first. E.g.
- This slide explains how you can REDUCE your organization’s KPIs by focusing on what matters most
- How does the Business Model and PMS affect Talent Management? Firstly…. TM = HRM Secondly… TM processes should be defined and maintained by people from the Talent Pool (this does not happen in Asia)
- There are many definitions of Talent. Don’t listen blindly to Consultants (especially in Asia, Malaysia) nor simply trust books nor copy MNC practices. If PMS is not linked to Business Model, you will attract and retain the WRONG talents
- John Maxwell – “You do not attract who you want. You attract who you are ” So… how does the PMS affect Talent Management? PMS creates the ‘culture’ or environment Wrong PMS = wrong culture = attract/retain wrong Talent If your PMS is not strong, all four areas of Talent Management (selection, development, evaluation, motivation) will not be effective E.g. Bell Curve, Six Sigma
- Group 1: High Potential, High Performance (Talent) Staff this category will automatically be placed in the company’s Succession Plans. Be the first priority to be considered for any promotions or upgrading exercises. Career Acceleration + Specialist Career Paths. Group 2: Average Potential, High Performance (Leadership Issues) Leadership, motivational and cultural development would be given to these staff while they perform in their current positions. Group 3: High Potential, Average Performance (Potential) Should not be given career advancement unless performance improves. Good targets for transfers or job rotations to departments that require urgent manpower. Group 4: Average Potential, Low Performance (Issues) Staff in this group should be monitored closely by HR. They should be eventually moved out of their current work function, department or even the company entirely.
- Common issues with how an organization’s PMS (or the lack of one) actually de-motivate Talents list is gathered from my consulting experience with organizations in Asia (especially SEA)
- System problems mean that if we correct the PMS, the issues should not happen. Within the control of HR and other policy makers The rest are people problems i.e. usually with the Superior. These issues are softer and much harder to resolve.
- The next four slides explain how an organization’s Business Model should affect the definition of ‘Talent’ , and the role of PMS in differentiating and highlighting them
- Different Talents are attracted and motivated by different cultures, systems and norms Your Business Model (executed through your PMS) will decide which Talents you attract and keep The right Talent will help to execute the right Business Model
- Tying it all together, once again, through a simplified BSC The Talent Management component comes under the ‘Learning & Growth’ perspective Once again: The Business Model (Financial, Customer, Process) is impacted by Talent (Learning & Growth). The right PMS should integrate all aspects clearly and effectively
- A car can only drive straight if its four wheels are aligned. A Talent can only perform IF the four-wheels impacting them are aligned “ PEOPLE” is only one part to get Performance. We focus it here, but have to note of the rest. In other words, a Talent can or cannot perform depends on the support provided This is also another reason why in managing a Talent’s performance, TRAINING and INCENTIVES (the two most popular methods, do not really work), unless support by the other factors in the 4-wheels Your Business Model will determine the contents of the four wheels In other words, Performance Management SYSTEM = 4-Wheels
- These are ten practical steps an organization can take in fine-tuning their PMS Get the Business Model right: emphasis: changing the PMS (e.g. BSC) without the proper BM in place will not work You only get better at doing the wrong things (and employees are wrongly rewarded also)