Description
High performing organisations focus on achieving results and outcomes
THE BUILDING BLOCKS OF HIGH-PERFORMING ORGANISATIONS
Case Study, Concepts and Debatable Ideas
Kenny Ong CNI Holdings Berhad
www.myCNI.com.my
www.OOBEY.com
Intro: CNI
1. 19 years old 2. Core Business: MLM 3. Others: Contract Manufacturing, Export/Trading, eCommerce, F&B Retail 4. Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan 5. Staff force: ± 500 6. Distributors: 200,000 7. Products: Consumer Goods and Services
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How do you recognize a high-performing organization?
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“…in the past 18 months, we have heard that profit is more important than revenue, quality is more important that profit, people are more important than profit, customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our performance is inconsistent"
CEO, Anonymous
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High-Performance Companies?
1. 2. 3. 4. Business is good? People are good? Everyone is good? Mission is good?
Be very careful of your company?s definition of high-performance before you embark on anything
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Simple, selfish and debatable definition:
What is a High-Performing Organization? An organization that consistently achieves what it was created to do or what it set out to do
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High-Performing Organizations – The Building Blocks
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The Building Blocks starting from HR
Business Model BSC
KPIs
Budgeting + Planning
Performance Management System
Differentiation Talent Management Succession Planning (Business Continuity)
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The Building Blocks starting from HR
Business Model BSC
The Hardware
KPIs
Budgeting + Planning
Performance Management System
Differentiation
The Software
Talent Management Succession Planning (Business Continuity)
www.myCNI.com.my
www.OOBEY.com
Summary: Today?s presentation
1. Business Model
2. Strategy 3. Resources
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1. Building Block #1: Get the right Business Model first
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1. Wrong Business Model
• How to fail without trying
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The Roadmap to Failure
Fred Wiersema and Mike Treacy
Downpresure of Unclear Strategy
The Moment of Truth
Performance
X
Today’s performance Doom Projections Performance Freefall
Tomorrow’s actual performance
Clear Sailing
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Denial & Defense
Overdue Failure Time
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Denial and Defense
• “It?s not really good value our competitor is offering, because it doesn?t include a lot of our features.” - ABC vs Air Asia • “It?s good value but not in our preferred customer market.” - ABC vs Toyota • “Sure they?re hurting us, but with their unfair advantage, what can we do?” – ABC vs MILO • “The rules we are playing by have always worked before” – AMEX vs VISA
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The Roadmap to Failure
Fred Wiersema and Mike Treacy
Downpresure of Unclear Strategy
The Moment of Truth
Performance
X
Today’s performance Doom Projections Performance Freefall
Tomorrow’s actual performance
Clear Sailing
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Denial & Defense
Overdue Failure Time
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Ad Hoc Tactics
• Selectively hold discounts to hold business that has started to go elsewhere • Introduce new promotions, terms, conditions, and offers to confuse and cloud the market • Beef up customer service by adding people to fix messups and quicken delayed shipments • Delay capital investments and adjust accounting methods to portray quarterly financial results more favorably • Introduce “new and improved” products that are new in form, but not in substantive ways that are of consequence to purchasers • Introduce Balanced Scorecards and Performance Management Systems
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The Roadmap to Failure
Fred Wiersema and Mike Treacy
Downpresure of Unclear Strategy
The Moment of Truth
Performance
X
Today’s performance Doom Projections Performance Freefall
Tomorrow’s actual performance
Clear Sailing
www.myCNI.com.my
Denial & Defense
Overdue Failure Time
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“What is the moral of the story?”
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What is the Business Model?
USP
Profit Model
Market Discipline
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Intro: Market Discipline
• Mamak stall
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Intro: Market Discipline
Product Leadership
"They are the most innovative" "Constantly renewing and creative" "Always on the leading edge"
Customer Intimacy "Exactly what I need" Customized products Personalized communications "They're very responsive" Preferential service and flexibility Recommends what I need "I'm very loyal to them" Helps us to be a success
"A great deal!"
Operational Excellence
Excellent/attractive price Minimal acquisition cost and hassle Lowest overall cost of ownership "A no-hassles firm" Convenience and speed
Reliable product and service www.myCNI.com.my
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Intro: Market Discipline
Product/Service Attributes
Relationship
Image
* Treacy & Wiersema, The Discipline of Market Leaders, 1995 www.myCNI.com.my
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Intro: Market Discipline
Operational Excellence: Quality and selection in key categories with unbeatable prices
Product/Service Attributes Price Quality Time Selection
Relationship ? ?
Image Smart Shopper
* Treacy & Wiersema, The Discipline of Market Leaders, 1995 www.myCNI.com.my
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Intro: Market Discipline
Product Leadership: Unique products and services that push the standards
Product/Service Attributes
?
Relationship ? ?
Image Best Product
Time Brand Function
* Treacy & Wiersema, The Discipline of Market Leaders, 1995 www.myCNI.com.my
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Intro: Market Discipline
Customer Intimacy: Personal service tailored to produce results for customer and build long-term relationships
Product/Service Attributes
? ? ? ?
Relationship
Service Relations
Image Trusted Brand
* Treacy & Wiersema, The Discipline of Market Leaders, 1995 www.myCNI.com.my
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Strategy: Disciplines
Product Leadership (best product)
Operational Excellence (low cost producer)
Customer Intimacy (best total solution)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 www.myCNI.com.my
www.OOBEY.com
Summary: Today?s presentation
? Done 1. Business Model
2. Strategy 3. Resources
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2. Building Block #2: Set the Strategies
Dangers of BSC, KPIs and other evils sold by Consultants
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“…in the past 18 months, we have heard that profit is more important than revenue, quality is more important that profit, people are more important than profit, customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our performance is inconsistent"
CEO, Anonymous
www.myCNI.com.my
www.OOBEY.com
Before we start…
In the old days of HR… • Average training hours per staff • % of staff attending training • # of training programs • % of training programs conducted • Training needs analysis conducted • Competency models developed • Training budget as % of payroll
What’s wrong with this picture?
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Before we start…
Moral of the story… 1. Innovation:
– Business models – Products – Services
2. Market Leadership 3. Competitive differentiation Get the picture?
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“What is the moral of the story?”
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What is Strategic Planning?
Variables:
Research Growth
Strategic
Output:
Plans Priorities
Risks
Stakeholders Constraints SWOT Misc.
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Planning
KPIs
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Before we start…
Which comes first? 1. Strategies -> KPI? 2. KPI -> Strategies?
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Focus: Corporate Alignment
Financial “To satisfy our stakeholders, what Financial objectives must we accomplish?” Customer “Who are our target customers? What is our value proposition?” Internal Process “To satisfy our customers, in which internal business processes must we excel?"
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Learning & Growth “What capabilities and tools do our employees require to help them execute our strategy?
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Linking BSC to Strategy
Financial
Revenue Growth
Customers Base Retention Share Gain
Productivity
Market Value
Positioning
Adjacent Market
New Business
Internal Process Operational Excellence Learning & Growth Product Leadership Customer Intimacy
Investment Strategy
Competencies
Information Systems
Motivation, empowerment, alignment www.OOBEY.com
www.myCNI.com.my
Focus: Corporate Alignment
Financial Market Value Revenue Growth Productivity
Customers / Distributors
Products/ Services
Channel Strategies
Target Markets
Internal Process
Supplier & Alliances
Department Operations
External Involvement
Learning & Growth
Technology Human Resources Systems & Processes Information & Intelligence
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Example: Selection of KPIs for BSC
•Customer satisfaction ?Customer loyalty ?Market share ?Customer complaints ?Complaints resolved on first contact ?Return rates ?Response time per customer request ?Price relative to competition ?Total cost to customer ?Average duration of customer relationship ?Customers lost ?Customer retention ?Customer acquisition rates ?Percentage of revenue form new customers ?Number of customers
www.myCNI.com.my turnover ?Annual sales per
•Win rate (sales closed/sales contact) •Customer visits to the company ?Hours spent with customers ?Marketing cost as a percentage of sales ?Number of ads placed ?Number of proposals made ?Brand recognition ?Response rate ?Number of trade shows attended ?Sales volume ?Share of target customer spending ?Sales per channel ?Average customer size ?Customers per employee ?Customer service expense per customer ?Customer profitability ?Frequency (number of sales transactions)
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Example: 1st Level BSC & KPIs
Financial
Profit after Tax. Revenue. Cash-to-cash cycle. Operating cash flow Customer Complaints. Customer Acquisition Rate. Product Availability. Product Quality & Service. Renewal Annual Subscription. Distributor Rank Achievement. No. of Active Distributor. No. DC/Regional Sales. Distributor with commission Customer Database Availability. Accuracy of Forecast Planning. Continuous Improvement. Response Time to Customer Needs. Perfect Order Fulfillment. Inventory Turnover. Number of Effective Sponsoring Program. On Time Delivery. No. of Effective Training. Number of Effective A&P % of staff evaluated on Core Competency Framework. % of staff with Career Development Plans. No. of training hours completed per staff. % of staff with access to strategic information. Q12 Index. % staff evaluated on Culture alignment
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Customers / Distributors
Internal Process
Learning & Growth
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Sample: Other 1st Level KPIs across industries…
Financial Services Retail Telecommunications
•Maximize ARPU •Minimize Churn •Mutichannel customer service
•Understand customer behavior related to customer conversion, acquisition, and retention •Single view of customer •Multichannel customer experience •Personalized customer experience
Travel & Leisure •Increase customer loyalty and preference •Maximize customer revenue •Improve service quality and efficiency •Capture and close sales opportunities
•Anticipate and prevent churn despite compensation •Increase number of products per customer •Turn call center information opportunity to up-sell and cross-sell •Increase customer satisfaction and loyalty
Manufacturing •Single view of customers across supply chain •Zero-error order capture •Streamline opportunity to cash processes •Leverage investment in ERP and backoffice systems www.OOBEY.com
Hospitality •Personalized customer experience •Maximize share of wallet •Player/customer loyalty •Multichannel customer service
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Lagging and Leading KPIs
Historical, Outcome, Results, 1st Level, Usually Financial or tangible, Quarterly and Annually
Lagging
Leading
Current, Indicators, Drivers, 2nd Level onwards, usually nonfinancial or intangible, Weekly, Monthly and Quarterly
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Developing „Driver? KPIs
Customer Retention % Customer Satisfaction Index On time delivery Time to market for new products Lagging, 1st Level
Leading, 2nd Level
TNA %
Defect levels, warranty claims
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Leading, 3rd Level onwards
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What is the Objective?
„Do-or-Die? KPIs for CNI
• Revenue • ARPU • Sponsoring • Retention • Commission Plan (BDP) • Product • Corporate Image
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Strategy: Disciplines, Priorities, and KPIs
Product Leadership (best product)
Operational Excellence (low cost producer)
Customer Intimacy (best total solution)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 www.myCNI.com.my
www.OOBEY.com
The McPlaybook*
Make it easy to eat • 50% drive-thru • Meals held in one hand Make it easy to prepare • High Turnover • Tasks simple to learn & repeat
Make it quick Make what customers want • “Fast Food” • Prowls market for new products • Tests new products for Cooking Times • Monitored field tests
*Adapted from: Businessweek , Februrary 5th 2007
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Strategy: Disciplines, Priorities, and KPIs
Operational Excellence • • • • • • • • Competitive price Error free, reliable Fast (on demand) Simple Responsive Consistent information for all Transactional 'Once and Done' •
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Product Leadership • New, state of the art products or services Risk takers Meet volatile customer needs
Customer Intimacy • • • Management by Fact Easy to do business with Have it your way (customization)
• •
•
•
Fast concept-tocounter
Never satisfied obsolete own and competitors' products Learning organization
•
• •
Market segments of one
Proactive, flexible Relationship and consultative selling Cross selling
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•
Strategy: Value Disciplines
• Operational Excellence
• Move know-how from top performing units to others • Benchmark against best in class • Ensure operations training for all employees • Use disciplines like TQM for continuous learning to reduce costs and improve quality
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Strategy: Value Disciplines
• Customer Intimacy
• Capture knowledge about customers • Understand customer needs • Empower front line employees • Ensure that everyone knows the customer • Make company knowledge available to customers
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Strategy: Value Disciplines
• Product Leadership
• Reduce time to market • Commercialize new products fast • Ensure that ideas flow • Reuse what other parts of the company have already learned • Ensure there are multiple sources of funding
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Strategy: Value Disciplines
Product Leadership (best product)
Operational Excellence (low cost producer)
Customer Intimacy (best total solution)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 www.myCNI.com.my
www.OOBEY.com
Strategy: Value Disciplines
Product Leadership (best product)
Operational Excellence (low cost producer)
Customer Intimacy (best total solution)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 www.myCNI.com.my
www.OOBEY.com
Sample KPIs for Each Discipline
Operational Excellence
• • • • • Price Selection Convenience Zero Defects Growth
Product Leadership
• • • • • Marketing Functionality # of Successes # of Failures Learn from key users • Interdisciplinary teams • Pipeline
Customer Intimacy
•
• • • •
Customer Knowledge Solutions Offered Penetration Customer Data Customer-success focus
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MBO – Sources of KRAs and KPIs, Targets 1. 2. 3. 4. 5. 6. 7. Department Scorecard [E3], Employee?s Job Description, Department SOP, Department Quality Objectives, Corrective Action Requests (CAR), Preventive Action Requests (PAR), or Special Projects relevant to the employee.
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E3 – Department BSC
Financial Perspective Goals Quality Measures Targets CAPEX OPEX
Innovation
On Time Delivery
Budgeting
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Individual Performance
1.0 Key Results Area (Max 6) 2.0 Goals and Targets for Q1 3.0 4.0 Merit* Achievem ents and Efforts for Q1 5.0 Rating (Merit x Weight) 6.0 Appraiser Overall Comments / Feedback
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Summary: Today?s presentation
? Done 1. Business Model
2. Done ?Strategy 3. Resources
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3. Building Block #3: Resource Management
The art and science of allocating, aligning, and managing Resources to strategic plans
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Resource Management: Some thoughts… Two major roles of Resource Management: 1. Provide real-life CONSTRAINTS to strategic planning 2. Provide RESOURCES to realize strategic plans
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Resource Management: Some thoughts… 1. Resource Management = Performance Management 2. Performance Management = Resource Management
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Managing Performance
Month 1
Month 2-11 ?
Month 12
Performance Planning
Performance Appraisal
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• Beating a Dead Horse
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Most Common Desperate Performance Improvement methods
1. Send for more Training 2. Enforce more Incentives (positive/negative)
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Mager and Pipe
• Analyzing Performance Discrepancies
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Alignment: 4-Wheels Model
Business Person
Structure
Culture Leadership Resources
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Model
Strategic Planning
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Alignment: Framework
Culture
• • • • • • • •
Focus point Alignment Quality Innovation & Differentiation Risk taking Performance Management Corporate obsession Decision making
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Alignment: Framework
Structure
• • • • • • • • •
Org Structure Job Design C&B Policies & procedures Decision making Job fit Management Systems BSC and KPIs Decentralized & Empower
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Strategy: Framework
Leadership
• • • • • • •
Role modeling Vision/Mission/Philosophy Leadership Style Delegation & Empowerment C&B, Promotions Sense of Urgency Speak regularly about Performance
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Strategy: Framework
• • • • • • • • • • • Recognition Recruitment Training Profit sharing Values Motivation Self Efficacy Awareness Useful Competencies Career aspirations Attribution (control)
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Person
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Strategy: Framework
Enablers Resources • Technology • Equipment • Materials • Human • Intellectual Property • Partners • Property
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Funding • CAPEX • OPEX
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Alignment: 4-Wheels Model
Business Person
Structure
Culture Leadership Resources
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Model
Strategic Planning
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Each Discipline Requires Different Priorities & Resources
Organization, jobs, skills Culture, values, norms
Information and systems
Operational Excellence
Product Leadership
Customer Intimacy
Management systems
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Each Discipline Requires Different Priorities & Resources
Operational Excellence
Organization, jobs, skills Culture, values, norms •Central authority, low level of empowerment •High skills at the core of the organization •Disciplined Teamwork •Process, product- driven •Conformance, 'one size fits all' mindset •Integrated, low cost transaction systems •The system is the process •Command and control •Quality management
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Information and systems
Management systems
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Each Discipline Requires Different Priorities & Resources Product Leadership
Organization, jobs, •Ad hoc, organic and cellular skills •High skills abound in loose-knit structures
Culture, values, norms
•Concept, future-driven •Experimentation and 'out of the box' mindset •Person-to-person communications systems •Technologies enabling cooperation •Rewarding individuals' innovative capacity •Risk and exposure management •Product Life Cycle profitability
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Information and systems Management systems
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Each Discipline Requires Different Priorities & Resources
Customer Intimacy
Organization, jobs, •Empowerment close to point of customer contact skills •High skills in the field and front-line Culture, values, norms •Customer-driven •Variation and 'have it your way' mindset •Strong customer databases, linking internal and external information •Strong analytical tools
Information and systems
Management systems
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•Customer equity measures like life time value •Satisfaction and share management •Focus on ‘Share of Wallet’
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Incentive Problems
Problem with Incentives in managing performance: • Most people are confused or unsure about compensation tools • Some people misuse compensation tools
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What to Pay?
• • • • Pay for Service Pay for Job Pay for Performance Pay for Competency
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Performance and Incentives
1. Internal Equity
1. Internal Job Rates 2. Performance differentials
2. External Competitiveness
1. External Job Rates - Benchmarking 2. Demand & Supply
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What?s the Difference?
• Increment • Bonus
• Promotion
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Compa Ratio Table
Use this if your company: • Pays for Performance, and • Pays for Job rates Def: Mid-Point = Mid Point of Pay Grade
Grade E2
Min RM2,000
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MID RM2,500
Max RM3,000
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Compa Ratio Table
< 0.7 5 4 3 2 1 ?0.7 ?0.9 >0.9 1.3
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Compa Ratio Table
< 0.7 5 4 3 2 1 5% ?0.7 ?0.9 >0.9 1.3
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Compa Ratio Table
< 0.7 5 4 3 2 1 9 7 ?0.7 ?0.9 >0.9 1.3
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Compa Ratio Table
< 0.7 5 4 3 2 1 15 12 9 6 4 ?0.7 ?0.9 12 9 7 4 2 >0.9 1.3 7 3 3 0 0
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Dangers of Direct Incentives
1. 2. 3. 4. 5. 6. 7. 8. lessen internal motivation, switch to mercenary mode, do something and do not do something else, bribe and fraud culture, easier for competitors to recruit, lessen teamwork & helpful culture, less and less impact for same value, mockery of base salary and employment contract, 9. rebellion from non-incentivised staff, 10. end up incentivising everyone for everything?,
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Other Performance Review processes
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Result Planning schedule inc. BSC, Budget Quarterly Performance Appraisals EMC – sales performance QMS – non-sales performance Divisional meetings Annual Appraisals Specialized KPI committees CAR, PAR, SCAR KPI improvements Internal Audit & MSD – process problems HRM & TND – people problems Supervisor Induction – PM training Talent Management
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Employee Distinction?
< 0.7 5 4 3 2 1 9 8 7 6 5 ?0.7 ?0.9 8 7 6 5 4 >0.9 1.3 5 4 3 2 1
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Employee Distinction?
< 0.7 5 4 3 2 1 20 18 9 1 0 ?0.7 ?0.9 15 12 7 1 0 >0.9 1.3 5 3 3 0 0
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Employee Distinction
Average Rating Rating Multiply Factor Example Rating Example Increme nt
> 4.1 > 3.3 – 4.1 > 2.3 – 3.3 > 1.3 – 2.3 ? 1.3
5 4 3 2 1
2 1.2 0.75 0.5 0
4.2 3.5 2.8 1.8 1.0
8.4% 4.2% 2.1% 0.9% 0%
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Employee Distinction
• Identify
2
POTENTIAL
3
4 5
PERFORMANCE
Group II
(? Potential)
Group I
(Talent Pool)
4
5
Group IV
(Counseling)
Group III
(? Performance)
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2
3
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Curse of the Bell Curve
„A? Staff
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„B? Staff
„C? Staff
„D? Staff
„E? Staff
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More Problems….
1. 2. 3. 4. 5. 6. cost of evaluation vs. gains of evaluation defer achievements of a good year to next barely achieve so that next target is not high spread improvements over several years value reducing actions to increase performance most ratings are 4 or 5, new people are 3
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Before I forget…
• Re-train Appraisers • Train new Appraisers
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Business Situation vs. HR
Upturn
Fight Complacency Sharpen Edge Keep Momentum Conquer „Change? mgmt Reduce Fat Continuity Everyone Happy
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Flat
Innovation Acquire Profits Build momentum Talent Mgmt Stack R&D Slowdown Hiring Early wins
Downturn
Sales Cash Flow
Top Talent focus Stack Sales Increase attrition
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The Business of business is Business, not Human Resource
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Thank You.
soft copy of slides: www.totallyunrelatedrandomanddebatable. blogspot.com
doc_392952550.ppt
High performing organisations focus on achieving results and outcomes
THE BUILDING BLOCKS OF HIGH-PERFORMING ORGANISATIONS
Case Study, Concepts and Debatable Ideas
Kenny Ong CNI Holdings Berhad
www.myCNI.com.my
www.OOBEY.com
Intro: CNI
1. 19 years old 2. Core Business: MLM 3. Others: Contract Manufacturing, Export/Trading, eCommerce, F&B Retail 4. Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan 5. Staff force: ± 500 6. Distributors: 200,000 7. Products: Consumer Goods and Services
www.myCNI.com.my
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How do you recognize a high-performing organization?
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“…in the past 18 months, we have heard that profit is more important than revenue, quality is more important that profit, people are more important than profit, customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our performance is inconsistent"
CEO, Anonymous
www.myCNI.com.my
www.OOBEY.com
High-Performance Companies?
1. 2. 3. 4. Business is good? People are good? Everyone is good? Mission is good?
Be very careful of your company?s definition of high-performance before you embark on anything
www.myCNI.com.my
www.OOBEY.com
Simple, selfish and debatable definition:
What is a High-Performing Organization? An organization that consistently achieves what it was created to do or what it set out to do
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High-Performing Organizations – The Building Blocks
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The Building Blocks starting from HR
Business Model BSC
KPIs
Budgeting + Planning
Performance Management System
Differentiation Talent Management Succession Planning (Business Continuity)
www.myCNI.com.my
www.OOBEY.com
The Building Blocks starting from HR
Business Model BSC
The Hardware
KPIs
Budgeting + Planning
Performance Management System
Differentiation
The Software
Talent Management Succession Planning (Business Continuity)
www.myCNI.com.my
www.OOBEY.com
Summary: Today?s presentation
1. Business Model
2. Strategy 3. Resources
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1. Building Block #1: Get the right Business Model first
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1. Wrong Business Model
• How to fail without trying
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The Roadmap to Failure
Fred Wiersema and Mike Treacy
Downpresure of Unclear Strategy
The Moment of Truth
Performance
X
Today’s performance Doom Projections Performance Freefall
Tomorrow’s actual performance
Clear Sailing
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Denial & Defense
Overdue Failure Time
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Denial and Defense
• “It?s not really good value our competitor is offering, because it doesn?t include a lot of our features.” - ABC vs Air Asia • “It?s good value but not in our preferred customer market.” - ABC vs Toyota • “Sure they?re hurting us, but with their unfair advantage, what can we do?” – ABC vs MILO • “The rules we are playing by have always worked before” – AMEX vs VISA
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The Roadmap to Failure
Fred Wiersema and Mike Treacy
Downpresure of Unclear Strategy
The Moment of Truth
Performance
X
Today’s performance Doom Projections Performance Freefall
Tomorrow’s actual performance
Clear Sailing
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Denial & Defense
Overdue Failure Time
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Ad Hoc Tactics
• Selectively hold discounts to hold business that has started to go elsewhere • Introduce new promotions, terms, conditions, and offers to confuse and cloud the market • Beef up customer service by adding people to fix messups and quicken delayed shipments • Delay capital investments and adjust accounting methods to portray quarterly financial results more favorably • Introduce “new and improved” products that are new in form, but not in substantive ways that are of consequence to purchasers • Introduce Balanced Scorecards and Performance Management Systems
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The Roadmap to Failure
Fred Wiersema and Mike Treacy
Downpresure of Unclear Strategy
The Moment of Truth
Performance
X
Today’s performance Doom Projections Performance Freefall
Tomorrow’s actual performance
Clear Sailing
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Denial & Defense
Overdue Failure Time
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“What is the moral of the story?”
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What is the Business Model?
USP
Profit Model
Market Discipline
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Intro: Market Discipline
• Mamak stall
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Intro: Market Discipline
Product Leadership
"They are the most innovative" "Constantly renewing and creative" "Always on the leading edge"
Customer Intimacy "Exactly what I need" Customized products Personalized communications "They're very responsive" Preferential service and flexibility Recommends what I need "I'm very loyal to them" Helps us to be a success
"A great deal!"
Operational Excellence
Excellent/attractive price Minimal acquisition cost and hassle Lowest overall cost of ownership "A no-hassles firm" Convenience and speed
Reliable product and service www.myCNI.com.my
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Intro: Market Discipline
Product/Service Attributes
Relationship
Image
* Treacy & Wiersema, The Discipline of Market Leaders, 1995 www.myCNI.com.my
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Intro: Market Discipline
Operational Excellence: Quality and selection in key categories with unbeatable prices
Product/Service Attributes Price Quality Time Selection
Relationship ? ?
Image Smart Shopper
* Treacy & Wiersema, The Discipline of Market Leaders, 1995 www.myCNI.com.my
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Intro: Market Discipline
Product Leadership: Unique products and services that push the standards
Product/Service Attributes
?
Relationship ? ?
Image Best Product
Time Brand Function
* Treacy & Wiersema, The Discipline of Market Leaders, 1995 www.myCNI.com.my
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Intro: Market Discipline
Customer Intimacy: Personal service tailored to produce results for customer and build long-term relationships
Product/Service Attributes
? ? ? ?
Relationship
Service Relations
Image Trusted Brand
* Treacy & Wiersema, The Discipline of Market Leaders, 1995 www.myCNI.com.my
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Strategy: Disciplines
Product Leadership (best product)
Operational Excellence (low cost producer)
Customer Intimacy (best total solution)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 www.myCNI.com.my
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Summary: Today?s presentation
? Done 1. Business Model
2. Strategy 3. Resources
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2. Building Block #2: Set the Strategies
Dangers of BSC, KPIs and other evils sold by Consultants
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“…in the past 18 months, we have heard that profit is more important than revenue, quality is more important that profit, people are more important than profit, customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our performance is inconsistent"
CEO, Anonymous
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Before we start…
In the old days of HR… • Average training hours per staff • % of staff attending training • # of training programs • % of training programs conducted • Training needs analysis conducted • Competency models developed • Training budget as % of payroll
What’s wrong with this picture?
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Before we start…
Moral of the story… 1. Innovation:
– Business models – Products – Services
2. Market Leadership 3. Competitive differentiation Get the picture?
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“What is the moral of the story?”
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What is Strategic Planning?
Variables:
Research Growth
Strategic
Output:
Plans Priorities
Risks
Stakeholders Constraints SWOT Misc.
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Planning
KPIs
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Before we start…
Which comes first? 1. Strategies -> KPI? 2. KPI -> Strategies?
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Focus: Corporate Alignment
Financial “To satisfy our stakeholders, what Financial objectives must we accomplish?” Customer “Who are our target customers? What is our value proposition?” Internal Process “To satisfy our customers, in which internal business processes must we excel?"
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Learning & Growth “What capabilities and tools do our employees require to help them execute our strategy?
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Linking BSC to Strategy
Financial
Revenue Growth
Customers Base Retention Share Gain
Productivity
Market Value
Positioning
Adjacent Market
New Business
Internal Process Operational Excellence Learning & Growth Product Leadership Customer Intimacy
Investment Strategy
Competencies
Information Systems
Motivation, empowerment, alignment www.OOBEY.com
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Focus: Corporate Alignment
Financial Market Value Revenue Growth Productivity
Customers / Distributors
Products/ Services
Channel Strategies
Target Markets
Internal Process
Supplier & Alliances
Department Operations
External Involvement
Learning & Growth
Technology Human Resources Systems & Processes Information & Intelligence
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Example: Selection of KPIs for BSC
•Customer satisfaction ?Customer loyalty ?Market share ?Customer complaints ?Complaints resolved on first contact ?Return rates ?Response time per customer request ?Price relative to competition ?Total cost to customer ?Average duration of customer relationship ?Customers lost ?Customer retention ?Customer acquisition rates ?Percentage of revenue form new customers ?Number of customers
www.myCNI.com.my turnover ?Annual sales per
•Win rate (sales closed/sales contact) •Customer visits to the company ?Hours spent with customers ?Marketing cost as a percentage of sales ?Number of ads placed ?Number of proposals made ?Brand recognition ?Response rate ?Number of trade shows attended ?Sales volume ?Share of target customer spending ?Sales per channel ?Average customer size ?Customers per employee ?Customer service expense per customer ?Customer profitability ?Frequency (number of sales transactions)
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Example: 1st Level BSC & KPIs
Financial
Profit after Tax. Revenue. Cash-to-cash cycle. Operating cash flow Customer Complaints. Customer Acquisition Rate. Product Availability. Product Quality & Service. Renewal Annual Subscription. Distributor Rank Achievement. No. of Active Distributor. No. DC/Regional Sales. Distributor with commission Customer Database Availability. Accuracy of Forecast Planning. Continuous Improvement. Response Time to Customer Needs. Perfect Order Fulfillment. Inventory Turnover. Number of Effective Sponsoring Program. On Time Delivery. No. of Effective Training. Number of Effective A&P % of staff evaluated on Core Competency Framework. % of staff with Career Development Plans. No. of training hours completed per staff. % of staff with access to strategic information. Q12 Index. % staff evaluated on Culture alignment
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Customers / Distributors
Internal Process
Learning & Growth
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Sample: Other 1st Level KPIs across industries…
Financial Services Retail Telecommunications
•Maximize ARPU •Minimize Churn •Mutichannel customer service
•Understand customer behavior related to customer conversion, acquisition, and retention •Single view of customer •Multichannel customer experience •Personalized customer experience
Travel & Leisure •Increase customer loyalty and preference •Maximize customer revenue •Improve service quality and efficiency •Capture and close sales opportunities
•Anticipate and prevent churn despite compensation •Increase number of products per customer •Turn call center information opportunity to up-sell and cross-sell •Increase customer satisfaction and loyalty
Manufacturing •Single view of customers across supply chain •Zero-error order capture •Streamline opportunity to cash processes •Leverage investment in ERP and backoffice systems www.OOBEY.com
Hospitality •Personalized customer experience •Maximize share of wallet •Player/customer loyalty •Multichannel customer service
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Lagging and Leading KPIs
Historical, Outcome, Results, 1st Level, Usually Financial or tangible, Quarterly and Annually
Lagging
Leading
Current, Indicators, Drivers, 2nd Level onwards, usually nonfinancial or intangible, Weekly, Monthly and Quarterly
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Developing „Driver? KPIs
Customer Retention % Customer Satisfaction Index On time delivery Time to market for new products Lagging, 1st Level
Leading, 2nd Level
TNA %
Defect levels, warranty claims
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Leading, 3rd Level onwards
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What is the Objective?
„Do-or-Die? KPIs for CNI
• Revenue • ARPU • Sponsoring • Retention • Commission Plan (BDP) • Product • Corporate Image
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Strategy: Disciplines, Priorities, and KPIs
Product Leadership (best product)
Operational Excellence (low cost producer)
Customer Intimacy (best total solution)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 www.myCNI.com.my
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The McPlaybook*
Make it easy to eat • 50% drive-thru • Meals held in one hand Make it easy to prepare • High Turnover • Tasks simple to learn & repeat
Make it quick Make what customers want • “Fast Food” • Prowls market for new products • Tests new products for Cooking Times • Monitored field tests
*Adapted from: Businessweek , Februrary 5th 2007
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Strategy: Disciplines, Priorities, and KPIs
Operational Excellence • • • • • • • • Competitive price Error free, reliable Fast (on demand) Simple Responsive Consistent information for all Transactional 'Once and Done' •
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Product Leadership • New, state of the art products or services Risk takers Meet volatile customer needs
Customer Intimacy • • • Management by Fact Easy to do business with Have it your way (customization)
• •
•
•
Fast concept-tocounter
Never satisfied obsolete own and competitors' products Learning organization
•
• •
Market segments of one
Proactive, flexible Relationship and consultative selling Cross selling
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•
Strategy: Value Disciplines
• Operational Excellence
• Move know-how from top performing units to others • Benchmark against best in class • Ensure operations training for all employees • Use disciplines like TQM for continuous learning to reduce costs and improve quality
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Strategy: Value Disciplines
• Customer Intimacy
• Capture knowledge about customers • Understand customer needs • Empower front line employees • Ensure that everyone knows the customer • Make company knowledge available to customers
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Strategy: Value Disciplines
• Product Leadership
• Reduce time to market • Commercialize new products fast • Ensure that ideas flow • Reuse what other parts of the company have already learned • Ensure there are multiple sources of funding
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Strategy: Value Disciplines
Product Leadership (best product)
Operational Excellence (low cost producer)
Customer Intimacy (best total solution)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 www.myCNI.com.my
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Strategy: Value Disciplines
Product Leadership (best product)
Operational Excellence (low cost producer)
Customer Intimacy (best total solution)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 www.myCNI.com.my
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Sample KPIs for Each Discipline
Operational Excellence
• • • • • Price Selection Convenience Zero Defects Growth
Product Leadership
• • • • • Marketing Functionality # of Successes # of Failures Learn from key users • Interdisciplinary teams • Pipeline
Customer Intimacy
•
• • • •
Customer Knowledge Solutions Offered Penetration Customer Data Customer-success focus
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MBO – Sources of KRAs and KPIs, Targets 1. 2. 3. 4. 5. 6. 7. Department Scorecard [E3], Employee?s Job Description, Department SOP, Department Quality Objectives, Corrective Action Requests (CAR), Preventive Action Requests (PAR), or Special Projects relevant to the employee.
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E3 – Department BSC
Financial Perspective Goals Quality Measures Targets CAPEX OPEX
Innovation
On Time Delivery
Budgeting
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Individual Performance
1.0 Key Results Area (Max 6) 2.0 Goals and Targets for Q1 3.0 4.0 Merit* Achievem ents and Efforts for Q1 5.0 Rating (Merit x Weight) 6.0 Appraiser Overall Comments / Feedback
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Summary: Today?s presentation
? Done 1. Business Model
2. Done ?Strategy 3. Resources
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3. Building Block #3: Resource Management
The art and science of allocating, aligning, and managing Resources to strategic plans
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Resource Management: Some thoughts… Two major roles of Resource Management: 1. Provide real-life CONSTRAINTS to strategic planning 2. Provide RESOURCES to realize strategic plans
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Resource Management: Some thoughts… 1. Resource Management = Performance Management 2. Performance Management = Resource Management
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Managing Performance
Month 1
Month 2-11 ?
Month 12
Performance Planning
Performance Appraisal
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• Beating a Dead Horse
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Most Common Desperate Performance Improvement methods
1. Send for more Training 2. Enforce more Incentives (positive/negative)
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Mager and Pipe
• Analyzing Performance Discrepancies
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Alignment: 4-Wheels Model
Business Person
Structure
Culture Leadership Resources
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Model
Strategic Planning
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Alignment: Framework
Culture
• • • • • • • •
Focus point Alignment Quality Innovation & Differentiation Risk taking Performance Management Corporate obsession Decision making
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Alignment: Framework
Structure
• • • • • • • • •
Org Structure Job Design C&B Policies & procedures Decision making Job fit Management Systems BSC and KPIs Decentralized & Empower
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Strategy: Framework
Leadership
• • • • • • •
Role modeling Vision/Mission/Philosophy Leadership Style Delegation & Empowerment C&B, Promotions Sense of Urgency Speak regularly about Performance
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Strategy: Framework
• • • • • • • • • • • Recognition Recruitment Training Profit sharing Values Motivation Self Efficacy Awareness Useful Competencies Career aspirations Attribution (control)
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Person
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Strategy: Framework
Enablers Resources • Technology • Equipment • Materials • Human • Intellectual Property • Partners • Property
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Funding • CAPEX • OPEX
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Alignment: 4-Wheels Model
Business Person
Structure
Culture Leadership Resources
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Model
Strategic Planning
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Each Discipline Requires Different Priorities & Resources
Organization, jobs, skills Culture, values, norms
Information and systems
Operational Excellence
Product Leadership
Customer Intimacy
Management systems
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Each Discipline Requires Different Priorities & Resources
Operational Excellence
Organization, jobs, skills Culture, values, norms •Central authority, low level of empowerment •High skills at the core of the organization •Disciplined Teamwork •Process, product- driven •Conformance, 'one size fits all' mindset •Integrated, low cost transaction systems •The system is the process •Command and control •Quality management
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Information and systems
Management systems
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Each Discipline Requires Different Priorities & Resources Product Leadership
Organization, jobs, •Ad hoc, organic and cellular skills •High skills abound in loose-knit structures
Culture, values, norms
•Concept, future-driven •Experimentation and 'out of the box' mindset •Person-to-person communications systems •Technologies enabling cooperation •Rewarding individuals' innovative capacity •Risk and exposure management •Product Life Cycle profitability
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Information and systems Management systems
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Each Discipline Requires Different Priorities & Resources
Customer Intimacy
Organization, jobs, •Empowerment close to point of customer contact skills •High skills in the field and front-line Culture, values, norms •Customer-driven •Variation and 'have it your way' mindset •Strong customer databases, linking internal and external information •Strong analytical tools
Information and systems
Management systems
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•Customer equity measures like life time value •Satisfaction and share management •Focus on ‘Share of Wallet’
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Incentive Problems
Problem with Incentives in managing performance: • Most people are confused or unsure about compensation tools • Some people misuse compensation tools
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What to Pay?
• • • • Pay for Service Pay for Job Pay for Performance Pay for Competency
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Performance and Incentives
1. Internal Equity
1. Internal Job Rates 2. Performance differentials
2. External Competitiveness
1. External Job Rates - Benchmarking 2. Demand & Supply
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What?s the Difference?
• Increment • Bonus
• Promotion
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Compa Ratio Table
Use this if your company: • Pays for Performance, and • Pays for Job rates Def: Mid-Point = Mid Point of Pay Grade
Grade E2
Min RM2,000
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MID RM2,500
Max RM3,000
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Compa Ratio Table
< 0.7 5 4 3 2 1 ?0.7 ?0.9 >0.9 1.3
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Compa Ratio Table
< 0.7 5 4 3 2 1 5% ?0.7 ?0.9 >0.9 1.3
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Compa Ratio Table
< 0.7 5 4 3 2 1 9 7 ?0.7 ?0.9 >0.9 1.3
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Compa Ratio Table
< 0.7 5 4 3 2 1 15 12 9 6 4 ?0.7 ?0.9 12 9 7 4 2 >0.9 1.3 7 3 3 0 0
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Dangers of Direct Incentives
1. 2. 3. 4. 5. 6. 7. 8. lessen internal motivation, switch to mercenary mode, do something and do not do something else, bribe and fraud culture, easier for competitors to recruit, lessen teamwork & helpful culture, less and less impact for same value, mockery of base salary and employment contract, 9. rebellion from non-incentivised staff, 10. end up incentivising everyone for everything?,
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Other Performance Review processes
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Result Planning schedule inc. BSC, Budget Quarterly Performance Appraisals EMC – sales performance QMS – non-sales performance Divisional meetings Annual Appraisals Specialized KPI committees CAR, PAR, SCAR KPI improvements Internal Audit & MSD – process problems HRM & TND – people problems Supervisor Induction – PM training Talent Management
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Employee Distinction?
< 0.7 5 4 3 2 1 9 8 7 6 5 ?0.7 ?0.9 8 7 6 5 4 >0.9 1.3 5 4 3 2 1
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Employee Distinction?
< 0.7 5 4 3 2 1 20 18 9 1 0 ?0.7 ?0.9 15 12 7 1 0 >0.9 1.3 5 3 3 0 0
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Employee Distinction
Average Rating Rating Multiply Factor Example Rating Example Increme nt
> 4.1 > 3.3 – 4.1 > 2.3 – 3.3 > 1.3 – 2.3 ? 1.3
5 4 3 2 1
2 1.2 0.75 0.5 0
4.2 3.5 2.8 1.8 1.0
8.4% 4.2% 2.1% 0.9% 0%
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Employee Distinction
• Identify
2
POTENTIAL
3
4 5
PERFORMANCE
Group II
(? Potential)
Group I
(Talent Pool)
4
5
Group IV
(Counseling)
Group III
(? Performance)
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2
3
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Curse of the Bell Curve
„A? Staff
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„B? Staff
„C? Staff
„D? Staff
„E? Staff
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More Problems….
1. 2. 3. 4. 5. 6. cost of evaluation vs. gains of evaluation defer achievements of a good year to next barely achieve so that next target is not high spread improvements over several years value reducing actions to increase performance most ratings are 4 or 5, new people are 3
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Before I forget…
• Re-train Appraisers • Train new Appraisers
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Business Situation vs. HR
Upturn
Fight Complacency Sharpen Edge Keep Momentum Conquer „Change? mgmt Reduce Fat Continuity Everyone Happy
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Flat
Innovation Acquire Profits Build momentum Talent Mgmt Stack R&D Slowdown Hiring Early wins
Downturn
Sales Cash Flow
Top Talent focus Stack Sales Increase attrition
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The Business of business is Business, not Human Resource
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Thank You.
soft copy of slides: www.totallyunrelatedrandomanddebatable. blogspot.com
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