Performance management can be defined as a systematic process for improving organizational performance by developing the performance of individuals and teams. It is a means of getting better results from the organization, teams and individuals by understanding and managing performance within an agreed framework of planned goals, standards and competence requirements. Processes exist for establishing shared understanding about what is to be achieved, and for managing and developing people in a way that increases the probability that it will be achieved in the short and longer term. It is owned and driven by line management.
Other definitions
Performance management is: The development of individuals with competence and commitment, working towards the achievement of shared meaningful objectives within an organisation which supports and encourages their achievement
Performance management is managing the business
Performance management is: the process of ‘Directing and supporting employees to work as effectively and efficiently as possible in line with the needs of the organisation
Performance management is a strategic and integrated approach to delivering sustained success to organisations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors
AIMS OF PERFORMANCE MANAGEMENT
The overall aim of performance management is to establish a high-performance culture in which individuals and teams take responsibility for the continuous improvement of business processes and for their own skills and contributions within a framework provided by effective leadership. Its key purpose is to focus people on doing the right things by achieving goal clarity.
Specifically, performance management is about aligning individual objectives to organizational objectives and ensuring that individuals uphold corporate core values. It provides for expectations to be defined and agreed in terms of role responsibilities and accountabilities (expected to do), skills (expected to have) and behaviours (expected to be). The aim is to develop the capacity of people to meet and exceed expectations and to achieve their full potential to the benefit of themselves and the organization. Importantly, performance management is concerned with ensuring that the support and guidance people need to develop and improve are readily available.
The following are the aims of performance management as expressed by a variety of organizations
Empowering, motivating and rewarding employees to do their best (Armstrong World Industries).
Focusing employees' tasks on the right things and doing them right. Aligning everyone's individual goals to the goals of the organization (Eli Lilly & Co).
Proactively managing and resourcing performance against agreed accountabilities and objective
Linking job performance to the achievement of the council's medium- term corporate strategy and service plans (Leicestershire County Council).
The alignment of personal/individual objectives with team, department/divisional and corporate plans. The presentation of objectives with clearly defined goals/targets using measures, both soft and numeric. The monitoring of performance and tasking of continuous action as required (Macmillan Cancer Relief).
All individuals being clear about what they need to achieve and expected standards, and how that contributes to the overall success of the organization; receiving regular, fair, accurate feedback and coaching to stretch and motivate them to achieve their best (Marks & Spencer Financial Services).Systematic approach to organizational performance aligning individual accountabilities to organizational targets and activity (Royal Berkshire and Battle Hospitals NHS Trust).The process and behaviours by which managers manage the performance of their people to deliver a high-achieving organization (Standard Chartered Bank).Maximizing the potential of individuals and teams to benefit themselves and the organization, focusing on achievement of their objectives (West Bromwich Building Society).
Showing posts with label management. Show all posts
Showing posts with label management. Show all posts
Sunday, September 11, 2011
Decision Making
Decision Definition:
In many respects a business is a series of decisions linked by implementation. As a manager, you make decisions every day. Some are straightforward, such as determining which of your subordinates should be assigned to a particular project. Others are complex, such as selecting a new supplier. Consider these two examples:
The finance department is moving into new quarters, and Samantha, the department head, needs someone to represent finance on a companywide space-allocation team. For Samantha, this is a straightforward delegation decision: which of her subordinates will be most effective in representing her department? That person must be assertive, must know how to work effectively with others, and must understand the space requirements of the finance department. Samantha knows her people and their capabilities very well. She also knows who can take on added responsibility. So tapping George for the job is an easy decision, and he is eager to accept the assignment. There will be consequences, of course. George will have less time to carry out his regular duties, but neither he nor his manager sees this as a major problem.
Not all decisions are that easy. Some involve trade-offs, risks, and the interplay of various factors, such as the risk and cost of failure. Consider the following, more complex situation:
Precision Interiors designs and builds passenger seats and interiors for auto manufacturers in Europe and North America. To remain competitive, it must continually improve its designs and incorporate materials that improve passenger comfort and safety within cost and durability constraints. In that spirit, one of its teams has been talking with FiberFuture, a small supplier that has developed a new material called Zebutek, which resists flames, cushions impact, and absorbs road noise better than all available alternatives. “If we used Zebutek in the interior roof and door linings,” speculates one engineer,“it could give us a real advantage. It costs more than the material we’re now using, but customers would certainly recognize its value. ”
The decision to adopt the new material, however, is not simple. There are many trade-offs and risks. The engineer makes the following list:
• FiberFuture is a small, relatively new company. Will it be capable of delivering the volume of material we need? Can we count on it to deliver on schedule? Will quality be consistent?
• What will happen if FiberFuture goes out of business? We’d have to scramble to find a different supplier.
• Can our current manufacturing processes work with Zebutek, or will new equipment be needed?
• Our customers, the automakers, are struggling to hold the line on costs. Can we pass on the higher cost of this new material to them, or will they resist? Or should we absorb the additional cost and thereby gain market share?
• Our current supplier of interior materials has been a reliable and collaborative partner for many years. What will happen to that relation- ship if 20 to 30 percent of the business is shifted to FiberFuture?
• Is there some other supplier on the brink of developing a material that’s even better than Zebutek?
Business decisions are difficult when they involve uncertainty, present many alternatives, are complex, and raise interpersonal issues.
Alternative courses of action can be equally troubling when each alternative has its own uncertainties and unknowable outcomes. Complexity, too, makes decision making difficult. For example, the acquisition of another firm involves complex legal, accounting, and valuation issues. Decisions also involve interpersonal issues that are difficult to measure and assess but often determine the success or failure of the actions taken. Over the years, people have developed techniques for dealing with these difficulties, techniques that are part of a logical decision process. This chapter provides an overview of a five-step decision process.
The decision process
• Establish a context for success.
• Frame the issue properly.
• Generate alternatives.
• Evaluate the alternatives.
• Choose the alternative that appears best
In many respects a business is a series of decisions linked by implementation. As a manager, you make decisions every day. Some are straightforward, such as determining which of your subordinates should be assigned to a particular project. Others are complex, such as selecting a new supplier. Consider these two examples:
The finance department is moving into new quarters, and Samantha, the department head, needs someone to represent finance on a companywide space-allocation team. For Samantha, this is a straightforward delegation decision: which of her subordinates will be most effective in representing her department? That person must be assertive, must know how to work effectively with others, and must understand the space requirements of the finance department. Samantha knows her people and their capabilities very well. She also knows who can take on added responsibility. So tapping George for the job is an easy decision, and he is eager to accept the assignment. There will be consequences, of course. George will have less time to carry out his regular duties, but neither he nor his manager sees this as a major problem.
Not all decisions are that easy. Some involve trade-offs, risks, and the interplay of various factors, such as the risk and cost of failure. Consider the following, more complex situation:
Precision Interiors designs and builds passenger seats and interiors for auto manufacturers in Europe and North America. To remain competitive, it must continually improve its designs and incorporate materials that improve passenger comfort and safety within cost and durability constraints. In that spirit, one of its teams has been talking with FiberFuture, a small supplier that has developed a new material called Zebutek, which resists flames, cushions impact, and absorbs road noise better than all available alternatives. “If we used Zebutek in the interior roof and door linings,” speculates one engineer,“it could give us a real advantage. It costs more than the material we’re now using, but customers would certainly recognize its value. ”
The decision to adopt the new material, however, is not simple. There are many trade-offs and risks. The engineer makes the following list:
• FiberFuture is a small, relatively new company. Will it be capable of delivering the volume of material we need? Can we count on it to deliver on schedule? Will quality be consistent?
• What will happen if FiberFuture goes out of business? We’d have to scramble to find a different supplier.
• Can our current manufacturing processes work with Zebutek, or will new equipment be needed?
• Our customers, the automakers, are struggling to hold the line on costs. Can we pass on the higher cost of this new material to them, or will they resist? Or should we absorb the additional cost and thereby gain market share?
• Our current supplier of interior materials has been a reliable and collaborative partner for many years. What will happen to that relation- ship if 20 to 30 percent of the business is shifted to FiberFuture?
• Is there some other supplier on the brink of developing a material that’s even better than Zebutek?
Business decisions are difficult when they involve uncertainty, present many alternatives, are complex, and raise interpersonal issues.
Alternative courses of action can be equally troubling when each alternative has its own uncertainties and unknowable outcomes. Complexity, too, makes decision making difficult. For example, the acquisition of another firm involves complex legal, accounting, and valuation issues. Decisions also involve interpersonal issues that are difficult to measure and assess but often determine the success or failure of the actions taken. Over the years, people have developed techniques for dealing with these difficulties, techniques that are part of a logical decision process. This chapter provides an overview of a five-step decision process.
The decision process
• Establish a context for success.
• Frame the issue properly.
• Generate alternatives.
• Evaluate the alternatives.
• Choose the alternative that appears best
Management
Professional Management concepts gained importance after the Industrial revolution and it is an ever-changing field and a very wide field of business studies and practices. Management is derived from the Italian manaeggio (a riding school), originating in the Latin word for hand, manus.
Any managerial action, especially dealing with people issues, requires three separate but interrelated abilities. First, a manager must learn how to clearly identify the problem or problems, which may be different from the presenting symptoms. Second, a manager must analyze the root causes for the behaviour observed, understanding fully that those problems have origins in both the person and the situation. Finally, a manager must generate and implement actions to address a problem.
Although there is no concise formula or model for managing people, there are eight principles from which to build:
1. Leadership starts at home. Self-awareness—knowing who you are and what you value—creates a strong foundation for managerial success. Your ability to learn is just as important as your ability to lead. Find ways to learn, be open to the feedback from others, and create a work environment that fosters everyone's best. Managing and leading are collaborative activities that require learning from others.
2. Communication with employees is central to the effective manager's job. In the absence of information, people will make up their own information. What a manager takes for granted may be new information to someone underneath. And because each individual is different, the style of that communication needs to be different. Managing is a time-intensive activity: one person at a time, one interaction at a time, all over time.
3. Effective managers know their personal managerial values and philosophy. What works to motivate employees also works to motivate managers. Many successful organizations simply start with some theory Y assumptions like "People really can be great and want to win." They don't differentiate between levels of employees in terms of their motivations. They drive a sense of ownership and egalitarianism about the company throughout the organization with the result that the company can become a means to meeting the needs of all employees in a fair and even handed manner.
4. Effective managers foster an environment that brings out the best in others. Seasoned managers know that you cannot make someone change or do something. However, you can change the context to increase the probability that you will get the behaviour that you want. Think of ways to bring out the best, not the worst, in others.
5. Effective managers are willing to engage in difficult conversations about difference. They foster an environment where everyone can fulfill their potential and seek to address issues such as gender, race, sexual orientation, ethnicity, age, and language. At Inland Steel, a number of African-American employees were frustrated and thinking of leaving the firm. They worked together and found someone to be a champion of starting a conversation about diversity. As a result, the company was singled out for a national award for its attention to creating a supportive and diverse workplace.
6. Effective managers understand how groups and teams work, and they focus on creating a culture of performance through teamwork and collaboration. With most of a company's work being done in teams, managers need to be aware of team dynamics and become more facilitators of team process than team leaders.
7. Effective managers are change leaders. Today, managers are not expected to administer—to follow bureaucratic and systematic processes that mean business as usual. Managers are expected to lead change—to propose ways to make the organization more competitive and more effective and then to marshal the resources to bring about that change.
8. Effective managers take time out to learn and reflect on the job. Performance and learning are both needed for success. Unfortunately, managers can spend most of their time performing and requiring performance from others when what is really needed is some time spent reflecting and learning.
Simply put, Management involves all the activities related recruitment, selection, assimilation, development, and retention of exceptional talent and integrate talent management efforts with organizational strategy with whatever limited resources you have.
Any managerial action, especially dealing with people issues, requires three separate but interrelated abilities. First, a manager must learn how to clearly identify the problem or problems, which may be different from the presenting symptoms. Second, a manager must analyze the root causes for the behaviour observed, understanding fully that those problems have origins in both the person and the situation. Finally, a manager must generate and implement actions to address a problem.
Although there is no concise formula or model for managing people, there are eight principles from which to build:
1. Leadership starts at home. Self-awareness—knowing who you are and what you value—creates a strong foundation for managerial success. Your ability to learn is just as important as your ability to lead. Find ways to learn, be open to the feedback from others, and create a work environment that fosters everyone's best. Managing and leading are collaborative activities that require learning from others.
2. Communication with employees is central to the effective manager's job. In the absence of information, people will make up their own information. What a manager takes for granted may be new information to someone underneath. And because each individual is different, the style of that communication needs to be different. Managing is a time-intensive activity: one person at a time, one interaction at a time, all over time.
3. Effective managers know their personal managerial values and philosophy. What works to motivate employees also works to motivate managers. Many successful organizations simply start with some theory Y assumptions like "People really can be great and want to win." They don't differentiate between levels of employees in terms of their motivations. They drive a sense of ownership and egalitarianism about the company throughout the organization with the result that the company can become a means to meeting the needs of all employees in a fair and even handed manner.
4. Effective managers foster an environment that brings out the best in others. Seasoned managers know that you cannot make someone change or do something. However, you can change the context to increase the probability that you will get the behaviour that you want. Think of ways to bring out the best, not the worst, in others.
5. Effective managers are willing to engage in difficult conversations about difference. They foster an environment where everyone can fulfill their potential and seek to address issues such as gender, race, sexual orientation, ethnicity, age, and language. At Inland Steel, a number of African-American employees were frustrated and thinking of leaving the firm. They worked together and found someone to be a champion of starting a conversation about diversity. As a result, the company was singled out for a national award for its attention to creating a supportive and diverse workplace.
6. Effective managers understand how groups and teams work, and they focus on creating a culture of performance through teamwork and collaboration. With most of a company's work being done in teams, managers need to be aware of team dynamics and become more facilitators of team process than team leaders.
7. Effective managers are change leaders. Today, managers are not expected to administer—to follow bureaucratic and systematic processes that mean business as usual. Managers are expected to lead change—to propose ways to make the organization more competitive and more effective and then to marshal the resources to bring about that change.
8. Effective managers take time out to learn and reflect on the job. Performance and learning are both needed for success. Unfortunately, managers can spend most of their time performing and requiring performance from others when what is really needed is some time spent reflecting and learning.
Simply put, Management involves all the activities related recruitment, selection, assimilation, development, and retention of exceptional talent and integrate talent management efforts with organizational strategy with whatever limited resources you have.
Trend Analysis
One commonly employed comparison technique is to compare a company’s figures over time; this method is often called trend analysis. By viewing the trends of various financial variables, an analyst is able to identify:
• Trends over time with a particular variable
• The high and low point of each analyzed variable
• Whether a variable is deteriorating or improving over time
• Whether a variable is consistent over time
IMPORTANCE OF FINANCIAL STATEMENT RATIO AND TREND ANALYSIS TO VALUATION
1. Cost of capital: In the income approach, ratios and trends for the subject company can help to estimate the risk and thus appropriate discount and capitalization rates relative to broad sources of cost of capital used as a starting point. The analysis also may help to quantify prospective growth to subtract from the cost of capital to develop a capitalization rate.
2. Valuation multiples: In the market approach, ratios and trends for the subject company as compared with the guideline companies can help to estimate appropriate valuation multiples for the subject company relative to valuation multiples observed for the guideline companies.
3. Excess assets or asset deficiencies: Ratios can help to identify the extent to which a company may have excess assets or asset deficiencies for which valuation adjustments may be appropriate.
Instead of looking at single-year changes, trend analysis compares changes over a longer period of time by comparing each year with a base year. The formula for a trend analysis is:
Trend Analysis a type of horizontal analysis that looks at changes in line items compared with a base year.
Applying this formula to operating income for the same 5-year period used to illustrate horizontal analysis yields
Thus, from 20X0 (the base year) to 20X4, operating income rose 37.9 percent. Note that the average annual increase of 9.5 percent (37.9 percent / 4 years) is different from that of simply averaging the increases or decreases each year.
• Trends over time with a particular variable
• The high and low point of each analyzed variable
• Whether a variable is deteriorating or improving over time
• Whether a variable is consistent over time
IMPORTANCE OF FINANCIAL STATEMENT RATIO AND TREND ANALYSIS TO VALUATION
1. Cost of capital: In the income approach, ratios and trends for the subject company can help to estimate the risk and thus appropriate discount and capitalization rates relative to broad sources of cost of capital used as a starting point. The analysis also may help to quantify prospective growth to subtract from the cost of capital to develop a capitalization rate.
2. Valuation multiples: In the market approach, ratios and trends for the subject company as compared with the guideline companies can help to estimate appropriate valuation multiples for the subject company relative to valuation multiples observed for the guideline companies.
3. Excess assets or asset deficiencies: Ratios can help to identify the extent to which a company may have excess assets or asset deficiencies for which valuation adjustments may be appropriate.
Instead of looking at single-year changes, trend analysis compares changes over a longer period of time by comparing each year with a base year. The formula for a trend analysis is:
Trend Analysis a type of horizontal analysis that looks at changes in line items compared with a base year.
Applying this formula to operating income for the same 5-year period used to illustrate horizontal analysis yields
Thus, from 20X0 (the base year) to 20X4, operating income rose 37.9 percent. Note that the average annual increase of 9.5 percent (37.9 percent / 4 years) is different from that of simply averaging the increases or decreases each year.
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