Performance Management Presentation by: Ahmad Saleem, FCA Chief Consultant Performance Management Services +92 300 847 1640 [email protected] Measure and

Performance Management

Presentation by: Ahmad Saleem, FCAChief Consultant

Performance Management Services+92 300 847 1640

[email protected]

Measure and Improve Organizational Performance

mailto:[email protected]

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


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


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


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


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


Based on



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


Applying Correct Solutions SCORING

26

Section IV

Factors for Performance Management


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


Based on



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


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?


utilized…



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


utilized…



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


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


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


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


Documentation

Accurate Measurement

Cross Checking of Results


Applying Correct Solutions SCORING

66

Thanks for your participa

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