Sharing Session on Organizational Performance Jakarta, 3 September 2013

Why organizational performance? September 2013Sharing Session Organizational Performance 2 In today's climate of extreme external environment uncertainty, organizations are not likely to thrive with anything less than a highly focused measurement system To answer the inevitable "How are we doing?" an organization must have measures in place to ensure performance improvements are actually materializing Best practices organizations use measures to communicate goals to staff, to identify early warning signals of problems, and to decide what corrective actions are needed By providing timely and comprehensive performance information, managers may pinpoint the root cause of problems more quickly, set standards and targets, and better assess strategic value and effectiveness Along these lines, forward thinking leaders establish performance measurement as a dynamic system, poised to transform their organization into a lean, more customer-responsive operation

What are best practices organizations doing on organizational performance? September 2013Sharing Session Organizational Performance 3 Summary... 1.Reinforce strategic clarity for the performance measurement mission 2.Mobilize the people drivers behind the numbers 3.Extract a comprehensive evaluation of business performance through a balanced scorecard 4.Build support for performance measurement through customized, ongoing communications 5.Strenghten ongoing high performance through frequent recognition and rewards 6.Integrate performance measurement, planning, budgeting, and financial consolidation processes to achieve successful strategy implementation 7.Leverage technology to facilitate continuous performance reporting Source: Global Best Practices (globalbestpractices.pwc.com)

Typical framework September 2013Sharing Session Organizational Performance 4 Vision and Mission Strategic Assessment Strategy Map Balanced ScorecardStrategic Initiatives Implementation Monitor and Adjust

Typical BSC implementation steps September 2013Sharing Session Organizational Performance 5 Balanced Scorecard Typical Implementation Steps 1.Clearly define the organization’s strategic goals. Ensure they: (a) are easy to measure, (b) reflect present and future operational climate, and (c) are based on input from customers, employees, shareholders, and senior management. 2.Assign a cross-functional team with members from various departments to review all existing measures and identify the metrics they believe are most important to the organization's success. 3.Tailor measures to meet the organization's mission and goals. Measures should reflect financial and nonfinancial categories such as customers, employees, internal business processes, or learning and growth. 4.Standardize the detail and reporting frequency. Develop a style sheet of common terminology to ensure more precise collection, analysis, and delivery of data. 5.Write the scorecard based on the agreed-upon metrics and their definition. Set ambitious targets that all employees can accept and buy into. 6.Educate employees on how the new set of performance measures aligns with the organization's goals. Explain their role in making the new scorecards successful and link reward to scorecard goals. 7.Cascade the scorecard to all business units, customizing content and reinforcing strategic intent. 8.Regularly monitor how well metrics reflect the organization’s present and future strategy. Source: Global Best Practices (globalbestpractices.pwc.com)

Sample of outcome and actitvity measures September 2013Sharing Session Organizational Performance 6 Key objectiveOutcome measuresActivity measures Strong cash flowCashlow positionLate fees and interest charges Payment to vendors Collection period Accurate invoice payments Number of accounts payable transactions with errors Average number of errors on invoice vouchers Number of duplicate payments and overpayments Percentage of checks processed manually The percentage of invoices that the company processes via EDI Motivated staffEmployee satisfaction as reported on survey  Number of trainings attended  Rewards compared to the market  Leaderships quality Effective supplier relationships Supplier satisfaction as reported on surveys Percentage of invoices paid on time Number of supplier inquiries Average number of days to resolve supplier requests and inquiries Increase customer loyalty Customer satisfaction as reported on surveys Product availability Product quality Service quality Responsiveness of customer service staff Lead time

Typical score card structure September 2013Sharing Session Organizational Performance 7 Organization wide scorecard Department scorecard Individual scorecard Examples: Customer satisfaction, employee satisfaction, net profit, ROI Examples: unit revenue, procurement effectiveness, training programs coordinated Examples: sales target, number of trainings attended, coaching session conducted

Importance of IT for monitoring and reporting activities September 2013Sharing Session Organizational Performance 8 IT Infrastructure

Case study (1/2) September 2013Sharing Session Organizational Performance 9 Maintain sustainable and strong financial position Increase revenue Strong cashflow Increase existing client loyalty Attract new client Strengthen thought leadership in the market Enhance brand Manage risk Manage service delivery Manage Knowledge Strengthen values Strengthen staff quality Improve sales process Finance (Firm) Client Process (Firm) People

Case study (2/2) September 2013Sharing Session Organizational Performance 10 Perspe ctive Strategic ObjectiveOutcome MeasuresOwnerActivity MeasuresOwner FirmMaintain sustainable and strong financial position Net profitBoDRecovery rate (min 60%) Deputy Director and manager Increase revenueRevenueBoDUnit revenueDeputy Director Revenue growthBoDUnit revenue growthDeputy Director Staff utilisationDeputy Director and manager Strong cash flowCash positonBoDCollection days (90 days) Deputy Director and manager Manage riskRisk management effectiveness BoDQuality review discussion BoD, Deputy Director, and manager ClientIncrease client loyaltyClient satisfactionBoDQuality of service delivery BoD, Deputy Director, and manager Number of feedback discussions with client BoD, Deputy Director, and manager PeopleStrengthen valuesValues implementation BoDLeadership qualityBoD, Deputy Director, and manager Strengthen staff qualityEmployee satisfaction BoDCoaching timeBoD, Deputy Director, and manager

September 2013Sharing Session Organizational Performance 11 Thank You