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Performance Management
Presentation by: Ahmad Saleem, FCAChief Consultant
Performance Management Services+92 300 847 1640
saleem@pms.com.pk
Measure and Improve Organizational Performance
S e c t i o n s O f T h i s P r e s e n t a t i o n
Section IWhat is Performance
Management
Section II
Business and its Objectives
Section III
Business Modeling
Section IVFactor for
Performance Management
Section VBusiness
PerformanceMeasurement
02
Section I
Performance
In this section we will discuss:
1. What is Performance?2. What is Measurement?3. What is Performance Measurement?4. What is Performance Management?5. Why we need Performance Management?6. Business Performance Measurement
03
What is Performance?
The accomplishment of given task/activity measured against present known standards of accuracy, completeness, cost and speed etc.
04
What is Performance Measurement?
Performance Measurement is the Comparison of Actual Measurement with Expected, Specified or
Desired Measurement
05
Noting the Quantitative Attributes
What is Measurement?
Measurement is a process of obtaining the magnitude of quantity in any unit
06
Length of a nail Distance Cost of Machinery Profit earned
Taste of Food
Measurement
Accurate and Fixed
Judgmental Variable
Fuel Consumption Tyres ConsumptionMovie
We do lot of Measurements in our Daily Life
Dieting Fuel Consumption Studies Games
08
Determining Performance
We can determine performance of any Activity, if it is Measureable.
We can only improve those activities, which are measureable
Examples
09
Performance Management
Determination - Once we have determined the Performance of any activity then it is decided that whether there is need for improvement or not
Performance Management – When we take steps for the improvement of Performance, that series of actions and steps is called “Performance Management”.
Procedure – Through Performance Management Program we can establish the procedure through which measurement results can be improved.
Identification of Areas – For this, we need to identify the areas where improvement can be made – set the standards for each area for the improvement, note down the present measurement and periodically measure readings to observe the improvement
10
Why Performance Management?
Long tern survival and higher return on Investments
Achievement of Objectives in most Efficient, Effective and Economical manners
Less wastage and lower Operational Cost
Better Financial results, Higher Profits and Salaries of Employees
A Competitive Advantage and Higher Sales
Better Motivation and Team work among Employees
Reducing Top Management Pressure and Tension
We do need Performance Management for the following reasons
Business Performance – How to determine?
Return on Investment
Sales on Fixed Assets
Contribution Margin on Sales
Positive Financial Position
Expansion
12
For the Purpose of this Presentation, we will discuss “Performance
Management Program” for Commercial Organizations
13
Section II
Business
In this section we will discuss:
1. How Business is started?2. Objectives of Business?3. What is Success?4. Roles Required
14
Why Doing Business?
Having Knowledge and Experience
Resources
Opportunity
Some Objectives
15
Objectives
Earn Profit
Growth
Success
Social Factor
16
What is Success?
Achieving Your Objectives in most Effective, Efficient and Economical manners is Success
17
Com
pany
Make Sales of Products
Manufacture Goods
Purchase Materials
Accounting Work
Arranging Funds
Administrative Issues
Software and HardwareYour Products
Roles in the Company
These are Departments of the Company 18
Section III
Business Modeling
In this section we will discuss:
1. With what we will compare?2. Potential to Perform?3. Identification of Correct Areas4. Critical Factor for Performance Management
19
Compare to?
Determine Potential to Perform
Similar Companies of same Potential
Market Analysis
Expectations
20
Potential to Perform
Based on
Resources Opportunities
Potential to Perform21
Resources
Time
Energy
Knowledge Fixed Assets
Human Resource
Funds
Materials
22
Opportunities
Market
Buying Power
Product
23
Potential to Perform
Based on
Resources Opportunities
Potential to Perform24
Identification of Correct Areas
Sales or Contribution Margin
Determining the Potential - Production
Assets Utilization
Fund Requirement
Planning
Culture25
Critical Factors in Performance Management
Information & Knowledge
Documentation
Accurate Measurement
Cross Checking of Results
Identification of Correct Areas
Applying Correct Solutions SCORING
26
Section IV
Factors for Performance Management
In this section we will discuss:
1. Measurement Methodology – Scoring 2. Factors for Performance Management3. Impact of Factors4. Factors – detailed discussion
27
Scoring is based on three Elements:
Measurement – Scoring
Knowledge
Documentation
Awareness
Example of Strategic Planning
Strategic Plan? – give marks out of 10
Documentation – available or not
Awareness – related persons aware or not
28
Your Score
Measurement – Scoring
Knowledge - 07
Documentation - 01
Awareness - 05
Multiply above three scores
07 x 01 x 05 = 35 = Score 35/10 = 3.50 %
09 x 09 x 09 = 729 =Score 729/10 = 72.9 %
Over 50% is good score
29
Factors for High Performance
• Strategic Planning and Management• Potential to Perform• Roles required for Operations• Business Plan• Departmental Profiles• Critical Success Factors• Organization’s Culture• Resource Management
• Human Resource• Materials• Fixed Assets• Funds• Time• Energy• Knowledge
• Costing, Contribution Margin &
Breakeven Analysis• Budgeting• Business Rules• Systems, Policies and SOPs• Risks & Controls• Knowledge Management• Role of IT• Role of Accounts Department
30
The impact of factors can be grouped in four categories:
Type of Impacts
Planning
Operations
Financial
Controls
31
Strategic Planning & Management
For Long Term
Establishes major scope of working
Mid and short term planning based on it
Cannot be changed easily
Based on Size, product, market etc.
Determined by Top Management
Strategic Planning and Management is defined as the set of decisions
and actions that result in formation and
implementation of plans to achieve a Company’s
objectives
32
Potential to Perform
Based on
Resources Opportunities
Potential to Perform33
Business Plan
For shorter time period
Based on the resources
Have Departmental Goals
Can be changed easily
Prepared by Senior and Middle Management
Examples
Business Plan is the overall plan for the Organization,
which ties all the Organizational functions
together
34
Departmental Profile
Roles of the Department
Objectives of the Department
Job Description of the Department
Human resource Requirement
Resources Required
Information and Knowledge to be maintained
Benchmarking
Key Performance Indicators Need to establish very clear role of each department as what they are expected to
perform, what re their objectives, resources
required and their Key Performance Indicators
35
Critical Success Factors
There are always some factors, which play very critical role in the growth and success of the Organizations, we need to determine those factors
Customer Satisfaction
Human Resource
Funds
Knowledge
Assets Utilization
Controls on MaterialExample:As customer your Critical Factor:
•On Time•Safety
36
Organization’s Culture and Behavior
This is Character of the Organization, as how it
behave in different circumstances. Change of Culture is one of the most
important Element.
Authority
Trust
No Interference
Result Oriented
Empowerment
Responsibility
Ownership
Accountability
Reward
Respect
37
Resource Management – Human Resource
Most Important Resource
Manage all other Resources
Competence
With right skills
Should know Expectations
Information & Knowledge
Training The Resource, which…
Manages all other Resources
38
How much Material is required?
Wastage and excessive Buying
Record keeping
Post Production Analysis – Price and Volume Variances
Carrying Cost
Materials
Materials and Stocks are one of the most
important element – Especially for Blocking
your Finances
39
Fixed Assets
In most of the cases, Fixed Assets are the major part of total Investment of the
Company. Watch that
Investment…..
Complete record of Fixed Assets
Differentiate between Productive and Supportive Assets
Calculate return on Assets with Sales and Contribution Margin
Record of Insurance and Warranties
Repair & Maintenance
Preventive Maintenance
Disposal of Assets
Assets Condition
40
Finances
One needs a very tight control on Finances..
It’s the single major cause of Company’s poor
Performance
Keep Financial Burden minimum
Establish accurate Financial Requirement
Look for high Material Cost and Receivables
Avail maximum benefit from Suppliers and Creditors
Never go for Capital Investment from Working Capital Facilities
Accurate projected Fund Flow Statement involving all departments and making them responsible
41
Energy
In present Scenario
One of the MOST Important Resource..
Energy Audits
Availability of Energy
Cost
Management of Energy
42
Time
24 hours are available to all…
Effective utilization makes the difference
Utilization of all resource effectively
Time in Production Processes
43
Knowledge
KnowledgeIs
Power
What type of Knowledge is required?
How to update?
Who is Responsible?
How to Apply?
44
Costing, Contribution Margin and Breakeven
Cost incurs when resources are
utilized…
Keep complete record of Costs,
Contribution Margin and Breakeven
Computation of Contribution Margin, linking with Sales and Profit
Product wise Contribution Margin
Compare return with relation to investment, time consumption etc.
Breakeven analysis, simple and based on cash return
Complete record of cost including direct and indirect cost, fixed cost etc.
45
Contribution Margin – How to improve?
Cost incurs when resources are
utilized…
Keep complete record of Costs,
Contribution Margin and Breakeven
By increasing Selling Price
By reducing material cost – change in Design
By reducing Overheads and other expenses
Create awareness in all departments
46
Budgeting
Budgeting is a process of making
best estimate regarding a future activity and then
following the initial estimate.
Involve all the departments and introduce the culture of Budgeting
People are reluctant in making budgets. Why?
Periodic Comparison of Actual data and Budgeted data
Check for reasons for variations
Budgets should be prepared for every activity
47
Budgeting
Cost incurs when resources are
utilized…
Keep complete record of Costs,
Contribution Margin and Breakeven
Production Budgets
Energy Budgets
Breakdown Budgets
Time Budgets
Wastage Budgets
Financial Budgets
48
Systems, Policies and Procedures
Performing any activity in a similar
way all the time and all users have same
understanding is called system. This
also include processes, policies &
procedure.
Ensure system for every activity
Policies should be available for all scenarios
Standard Operating Procedures – SOPs
Should be Documented
49
Risks & Controls – Risks
With every activity there are risks – Inherent, intentional, un-intentional etc.
Nature of Risk
Frequency
Impact
Responsible
50
Risks & Controls – Risks
With every activity there are risks – Inherent, intentional, un-intentional etc.
Production Risks
Planning Risks
Marketing Risks
Sales Risks
Human Resource Risks
Fixed Assets Risks
Stocks Risks
Expenses Risks
Purchasing Risks
Quality Risks
51
Risks & Controls – Controls
For prevention of Risks, you need to implement
certain Controls
Authorization
Documentation
Physical Checking
Access Controls
Reporting
Budgets
52
Controls
Preventive
Detective
Knowledge Management
Organizations need to have full information and
knowledge regarding all
related activities.
Data
Documents and Forms
Reports
Information
Knowledge
53
Knowledge Management
Documents and Forms
Data is the raw facts, attributes of any transaction or activities, normally relates to one single transaction and maintained and recorded on certain documents and forms
Documents and different forms are used to record the data related to activities and transactions. There can be multiple types of documents used to record the basic data
Data
54
Knowledge Management
Information
A report normally represents the compiled and consolidated data taken for a particular time period.
Information is anything that someone is capable of perceiving. This can be written communication, spoken communication, art, music, signals
Reports
Knowledge
Conversion of information in to actionable process is called knowledge.
55
Knowledge Management – Discussion
Production
Marketing
Sales
Fixed Assets
Operations
Purchasing
56
Role of Software
Software can play vital role in
Organizational Success – this may
include every possibility of Automation
What can be controlled?
Basic system is a MUST requirement
Objectives and Benefits
Implementation
Through Software / Automation
57
Software – Usage and Benefits
Software can play vital role in
Organizational Success – this may
include every possibility of Automation
Processing through Software
Magnetic Cards, Bar Codes etc.
Sensors, timers etc.
Programmable Logic Controllers
Usage
BenefitsAccuracy
Consistency
Speed
Control 58
Role of Accounts Department
Business Cockpit
59
MOST Important and Critical Role
Responsible for Analysis
Responsible to keep Company on track
Custodian of Systems, Policies and SOPs
Responsible for detailed Checking
Role of Accounts Department
The role of Accounts Department to keep
Organization on track and provide
full control on activities
60
Section IV
Business Measurement
In this section we will discuss:
1. What to Measurement?2. How to Measure?3. Who will Measure?
61
What to Measure?
Decide – what to measure?
Trend – What is Easy to measure?
Required – what is important?
Sales vs Contribution Margin
Employees Performance
Relevance One must know as what to measure
62
How to Measure?
One of the Most Complex part
Make best Estimate / Judgment
Expensive tools not required
Through feedback It is better to be Approximately
right than precisely wrongTake a small sample
63
Who will Measure?
Decide – who will measure?
Directly involved
Who can make judgment
Know what to measure
?Who will be
responsible to provide
measurementKnow how to measure
64
Auto System of Measurement?
Establish an Auto System
Auto recording of relevant activities
Cross Checking of information
Reconciliation
65
Checking and monitor each other
Critical Factors in Performance Management
Information & Knowledge
Documentation
Accurate Measurement
Cross Checking of Results
Identification of Correct Areas
Applying Correct Solutions SCORING
66
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