1. Performance Management: Views from Industry
MGT Business Analytics
Villanova School of Business

2. What is Performance Management?
Performance Management is the use of metrics and indicators, both financial and non-financial, to measure, monitor, and improve organizational performance.
Performance management relates to having various metrics that firm’s can track and use to take action as needed.  These metrics might be part of a balanced scorecard, and might be presented in a dashboard.  You might be able to drill down and look at these metrics at lower levels in the organization.  Also, six sigma and lean management are often related to performance management.  

3. Famous Quotes “If you can’t measure it, you can’t manage it”
“What gets measured and rewarded gets done”
“Measurement and scorecards at the performing level were the single biggest management tool for success”

4. Performance Management Successes
Comcast: problem resolution on-time performance increased from 45% to 98%, costs down 30%
Apple: product development cycle time down 75%, costs down 45%, customer satisfaction up 25%
Amazon: order fulfillment cycle time down 60%, accuracy up 60%, operating expense down 40%, customer satisfaction up 100%
Wawa: new product introduction inventory down 25%, cycle time down 50%, unavailability down 50%

5. PERFORMANCE MANAGEMENT STEPS
Performance Planning
Performance Execution
Feedback
Consequences
Development
Cascading of Goals
Performance measures provide “line of sight” from strategy to individual job performance
Everyone knows how performance is measured and evaluated
Everyone knows what they are supposed to do -- and how to do it!
Everyone knows upstream and downstream dependencies
Measurement is fact-based, relevant, actionable
Information is standardized, visible, consistent, and timely
(DO PROGRESSIVE REVEAL!!) This slide shows the 6 steps in the Performance Enhancement Model.
1. Cascading of goals provides that vital ‘line of sight’ I spoke about earlier. From the Balanced Scorecard perspective, these goals must include functional and process goals.
Performance Planning was a broken process in many departments. In a 1997 Employee Pulse survey, less than 50% of employees said they understood how their performance was evaluated. We had a PPRD Part 1 process but it was not being used effectively.
Performance Execution is the ‘how-to’ detail. Our Best Practice Teams provide rich materials for supervisors to coach their teams.
Feedback require measurement that’s fact-based … CEP had already traveled far down this path
Consequences strengthen the link between pay and performance. While we have made progress in sales incentive and customer service incentive programs, we’re still not where we want to be in this area. This has proven to be the hardest.
In development, we have provided more tools for managers to assess performance and guide employee development, as you’ll see in a minute.
[Link between Performance Enhancement and PI model ..]
Significant component of all individuals’ pay linked to measurement
Individual and manager identify performance gaps and develop
plans to close the gaps

6. Performance Management Methods
Map/Define/Describe the work that needs improvement
Better execution of the “plan” via Leadership/Communications, i.e. “just do it”
Find and Share a “Best Practice”
Apply Lean or Six Sigma or other tools to solve problems more efficiently and effectively
Redesign the process-redesign patterns
Automate process with IT applications

7. PHI Power Delivery Process Model
PD Chief Operating Officer
Core Process
Managing Process
Plan the Business
Manage Emergency Preparedness
Manage Customer Relationships
C u s t o m e r s
Supply Customers’ Energy
Manage Revenue
Operate the System
Manage Customer System Construction
Manage System Maintenance
Manage Transmission System Construction
Regional
Operating
Centers (Dispatch)
Account
Managers
Call
Centers
Revenue Management/
Revenue Accounting
Field
Operations &
Gas Div
Engineering
Groups
Support from: HR, Strategic Support Services, Business Planning & Finance, IT,
Accounting & Finance, Safety & Environmental, Regulatory Affairs. and
Corporate Services

8. The Manage Revenue Process By the Numbers
1,921,000
Number of Customers
$5,118,780,000
Actual Billed Revenues
$161,163,000
Actual Expenses
3,695,510
Actual Calls Received
22,487,931
Actual Number of Bills Generated
18,981,460
Actual Number of Payments Received
Number of Employees
that work in the process
About 1,000

9. Manage Revenue – The Work Flow

10. Improving Process Performance
Understand nature of performance gap
Develop intervention plan
Improve execution (training, tools, attitudes, etc.)
Improve design
Modify design
Replace design
Perform process
Create process and measures
Understand customer needs and benchmark competitors
Measure process performance
Set performance target
Hammer and Company

11. The Dimensions of Process Design
Who does the work
When the work is done
Where the work is done
Whether the work is done
What inputs the work is given
What interconnections are made between the work
What intensity the work is performed with
Redesign rearranges
the value-adding tasks

12. Principles of Superior Process Design-Partial List
Organize around outcomes, not tasks (case worker example)
Look for ways that those who use the results of the process can perform some of the process (self-serve grocery checkout)
Treat geographically dispersed resources as though they were centralized (call center)
Shift from serial to parallel work steps by sharing information sooner (new customer account set-up)
Make decisions at the place where the work is done
Insert slide of inventory of processes (prior to exercise) Address Level 1-2 (Architecture, Document Mgmt, Standard Symbology)

13. Which situation suggests an execution versus redesign project?

14. Lean and Six Sigma Lean = Attack on Waste
Focuses on maximizing process velocity
Centers on separating value added activities from non- value added activities (waste) in work processes.
Provides a robust set of tools to determine the root cause and elimination of that waste.
Six Sigma = Attack on Variation
Emphasizes the need to recognize opportunities and eliminate defects from the customer perspective
Data driven
Recognizes that variation hinders our ability to reliably deliver high-quality products and services
Provides a prescriptive cultural infrastructure effective in obtaining sustainable results (DMAIC)

15. What is Lean? Motion Waiting Interruptions Searching Inspection
Purpose:
Create competitive advantage for a business by eliminating waste and adding value to everything it does.
Principles:
Specify VALUE from the Customers perspective
Identify the Value Stream and find the WASTE
Make the Value Steps FLOW
Produce what the Customer requires: PULL
Continue to Improve towards PERFECTION
Techniques:
E.g. Value Stream Mapping, Kaizen, Flow, 6S
Powered by the People
stresses engagement at all levels of the organization
Motion
Waiting
Interruptions
Searching
Inspection
Defects and variation
Setup
Inventory
Unnecessary processing
Waste
Value
Forms of Waste

16. A Process Design Success Story – National Price Increase Process
Customer
Product Management
Customer Warehouse
Marketing Specialists
Sales Reps
Contract Admin
Contract Admin Database
CSO
SPOC System
Word Processing
Revenue Accounting
Retriever
85 STEPS / HANDOFFS over
12 DIFFERENT ENTITIES
We do this…?
Work Process Approach Can Remove Waste, Improve Cycle Time, and Reduce Stress

17. Air Products Kaizen Events
Waste
Value
Work Process
Pre-Kaizen Event Milestones
Document and Verify the Scope
Analyze whether the Kaizen event is appropriate
Prepare for the Kaizen event
Day 1 - Focus the Kaizen Event
Day 2 - Evaluate the Target Work Process
Day 3 - Solve the Performance Issue
Day 4 - Improve the Target Work Process
Build a description of the work process
Do a walk through
Develop a Mission statement
Set goals
Define Do’s and Don’ts
Do Process Observations
Before Photos
Do Workplace Layout
Do Spaghetti Charting
Summarize Findings
Generate Improvement Ideas
Select Improvement Ideas
Implement improvement ideas
Measure results
Post-Observations
Communicate Activities and Results
”Seeing” and eliminating non value added…in any process, any business
Post-Kaizen Event Milestones
1. Institutionalize Improvements
2. Replicate results at other sites

18. Critical Customer Requirement
Six Sigma
Critical Customer Requirement
Average
Goal: Improve process capability and eliminate variation or defects
6s = % Yield
6s = 3.4 defects per million opportunities
Approach: Multiple problem solving approaches embedded into the DMAIC methodology
DMAIC Project Length: 2 to 6 months
Six Sigma Key Elements
Links process outputs to Critical Customer Requirements
Utilizes quantitative data to understand performance
Incrementally eliminates/reduces the causes that are preventing process excellence
the current process capability against CCR’s
Define
Measure
Control
Analyze
Improve
the problem in the business
to determine the root cause(s)
of defects in the process
the process with
Targeted solutions
the improved process
to “hold the gain” 6s

19. Work Process Example Customer Customer Service Production Logistics /
Place Order
Take Delivery
Pay Bill
Sales
Win Business
Define Reqts
Customer
Service
Set Up Account
Input Order
Send Invoice
Apply Cash
Production
Bill as speaker – reinforce cross-functional nature of processes.
In the process awareness presentation / webcast, we use this process example, which is essentially the heart of the Order-to-Cash process. We stress that SAP will impact this process in 3 key ways …
NEXT: Impact #1 – Functions are more interdependent
The first impact area is …
Commit Inventory
Load Product
Schedule Delivery
Deliver Product
Logistics /
Distribution

20. 6s
What is Six Sigma??
6 Sigma = Fewer than 3.4 defects per million opportunities
6 Sigma = % of the Process Output is within Customer Specifications
6 Sigma = Flawless Execution
Goal: Improve process capability and eliminate variation or defects
Approach: Multiple problem solving approaches embedded into the DMAIC method
Project Length: 2 to 6 months
Six Sigma “quality” vs. Lean “speed”
Links process outputs directly to Critical Customer Requirements
Utilizes quantitative data to analyze upstream variables and establish relationships with performance
Identifies and incrementally eliminates causes that are preventing process excellence
the current process capability against CCR’s
Define
Measure
Control
Analyze
Improve
the problem in the business
to determine the root cause(s)
of defects in the process
the process with
Targeted solutions
the improved process
to “hold the gain”

21. DMAIC - Incremental Improvement to an Existing Process

22. Lean Six Sigma Six Sigma Lean Methods
Scientific Method
QFD
Pull Scheduling
Process Mapping
Hypothesis Testing
Pareto Charts
Fishbone Diagrams
Set-up Reduction
TPM
Run Charts
SPC Charts
Regression Analysis
Brainstorming
Error Proofing
Continuous Flow
Design of Experiments
Project Management
Source:
Six Sigma: Reduce Process Variation by Eliminating Defects
Lean Methods: Increase Process Velocity by Eliminating Waste

23. Level 3 Process “Find and Win Customers”
Inputs Market model Offerings Business objectives
Outputs Valid and viable customers
Process Steps 1 2 3 4 5 6 7
Identify Opportunities
Develop Relationship
Review Requirements and Engage Organization
Develop and Submit Proposal
Obtain Commitment
Establish or Modify Customer Account
Process Contract Information
Outputs to Next Process Step
leads / sales target list
prioritized list of qualified leads
decision to offer or not
proposal in hands of customer
agreement to do business
approved customer account
contract data input to ERP
Process defined and agreed to at a high level
Inputs, Outputs and Steps well defined
The “Steps” become the Opportunity Pipeline
The Steps in the Opportunity Pipeline become the agreed on Enterprise Sales stages!
The Enterprise Sales stages correlate to the Enterprise Leading Indicators
The Opportunity Pipeline and Leading Indicators then gives an indication for areas to improve…Example: “Shorten Sales Cycle”
relationship
confirmed customer requirements
configured offering
Move Data to ERP
Needs
Assess
Leads
Qualify
Proposal
Close P
Neg.

24. Leading Metrics in Sales and Marketing
% Leads Becoming Prospects
Revenue Potential from Prospects
Revenue potential in pipeline
A) By Salesperson
B) By Segment
Number of Customer Touches
A) By Segment B) by Time Period
Sales Cycle Time on New Opportunities
Won/loss % on new opportunities
% Contract renewals

25. Sample Dashboard
Goal – The goal is essentially a long term target (3 years). The primary reason for displaying the goal is perspective. By displaying the Value (current progress), Target (Fiscal Year Objective) and Goal (3 Year Objective) a complete picture is presented of progress against current year target along with relationship to where the business, function, process is striving to be.
Target – Targets are the Fiscal Year objective. Targets are established at the actionable level, where the KPI is measured and reported. Because of this targets can vary by region and business. Note: The targets will not display decimal values. If provided as a decimal what is displayed will be rounded up/down according to common practice. Also, while there is nothing preventing setting a negative target we do not anticipate this will occur. (if this happens how will you know it’s a negative number)
Value – This is the performance for scorecard period. This number can contain one decimal place and is stored as an integer (no currency). Values are entered at the actionable level for the KPI – Country, Business, Enterprise, Person.
Trend – The relationship between consecutive reporting periods within the same fiscal year. Trends are displayed as upward sloping, downward sloping, or flat. Note: There must be at least a 1% change in the value (between consecutive reporting periods within the same fiscal year) for the trend to change. Also, there must be a value to compare to in order to generate a trend arrow. If there are no values in consecutive reporting periods then no trend arrow will be presented. It is important that you keep in mind that for some KPI’s increasing is “bad” and decreasing is “good”. This logic has been included in the Dashboard design so the trend arrows respond correctly.
Status – The status is a visual indicator of performance (current value) to target based on the sensitivity bands. There is a one-to-one relationship between KPI’s and sensitivity bands. The sensitivity bands are applied universally to all countries, businesses, individuals. Note: A grey status bubble indicates that no target has been set for this measure on this scorecard. Since the status is a visual depiction of performance versus target a target must be established to obtain a status indicator. Also, if no value has been entered then no status bubble will be depicted and therefore no KPI Chart will be available.
Printing – By default the Scorecard will print in portrait orientation. If landscape is desired then you must change the orientation during the printing process.

26. “Visibility” of Metric Performance
Scorecard (cross-business comparisons)
Metrics Report (trends and commentary)
Visibility to sales manager and sales rep-e.g terms, and cycle time to close contracts—linked to AP Corporate Univ training
A/R every DSO day is $25MM—10 days reduction
Roles- Global Measure Owner-Analyst, data provider
Key Measures Link (BW or Excel details)

27. Human Performance Model
Optimal or
Desired
Performance
Causes
Skills
Knowledge
Teamwork
Goals/KPI’s
Environment
Motivation
Tools
Solutions
Training
Leadership/
Communications
Performance Management
Compensation
Tools
Processes
Evaluation and
Measurement
Change
Management
Measure
Business
Challenges,
Goals, and
Strategies
Performance
Needs
Actual
Performance

28. PERFORMANCE MANAGEMENT STEPS
Performance Planning
Performance Execution
Feedback
Consequences
Development
Cascading of Goals
Performance measures provide “line of sight” from strategy to individual job performance
Everyone knows how performance is measured and evaluated
Everyone knows what they are supposed to do -- and how to do it!
Everyone knows upstream and downstream dependencies
Measurement is fact-based, relevant, actionable
Information is standardized, visible, consistent, and timely
(DO PROGRESSIVE REVEAL!!) This slide shows the 6 steps in the Performance Enhancement Model.
1. Cascading of goals provides that vital ‘line of sight’ I spoke about earlier. From the Balanced Scorecard perspective, these goals must include functional and process goals.
Performance Planning was a broken process in many departments. In a 1997 Employee Pulse survey, less than 50% of employees said they understood how their performance was evaluated. We had a PPRD Part 1 process but it was not being used effectively.
Performance Execution is the ‘how-to’ detail. Our Best Practice Teams provide rich materials for supervisors to coach their teams.
Feedback require measurement that’s fact-based … CEP had already traveled far down this path
Consequences strengthen the link between pay and performance. While we have made progress in sales incentive and customer service incentive programs, we’re still not where we want to be in this area. This has proven to be the hardest.
In development, we have provided more tools for managers to assess performance and guide employee development, as you’ll see in a minute.
[Link between Performance Enhancement and PI model ..]
Significant component of all individuals’ pay linked to measurement
Individual and manager identify performance gaps and develop
plans to close the gaps

29. Performance Management Methods
Map/Define the work that needs improvement
Better execution of the “plan” via Leadership/Communications, i.e. “just do it”
Find and Share a “Best Practice”
Apply Lean or Six Sigma or other tools to solve problems more efficiently and effectively
Redesign the process-redesign patterns
Automate process with IT applications

30. Thank You & Good Luck Managing Your Performance in
MGT Business Analytics
Villanova School of Business