Performance Management

Important Information
Performance management is a strategic tool used to promote an effective organization. It ensures that
individual employees’ efforts are focused on the priorities and strategies set out in the corporate and
departmental business plans. It directs efforts towards effectiveness and away from merely being
busy.

The success of employees depends on a clear performance management process, which recognizes
the accomplishments and supports the professional development of Nova Scotia’s public service
employees.

There are two distinct, but similar, performance management processes in the Nova Scotia
Government: one for MCP employees and one for BU/AS employees.

If you have questions regarding your performance management responsibilities or what type of
performance management process you fall under, contact your manager or OD&E Senior Consultant
at the Nova Scotia Public Service Commission.

The Performance Management Cycle

Performance Management Resources

• View by Activity
• View Employee Type (BU/AS/MCP)
• Tips & Tricks

Performance Management Responsibilities

Managers ensure that each employee knows what is expected in terms of performance and
professional development. They manage towards successful outcomes for both the employee and the
organization. Managers are responsible for coaching employees and giving feedback based upon
goals set at the beginning of the performance cycle. As well, together, managers and employees
review progress periodically throughout the year and formally at the end of the cycle.

Employees are responsible for their own performance, are in charge of their own career development
and should take the initiative to be successful. The performance management process helps them do
this by linking the business plan with their individual responsibilities and helps them focus on what
needs to be done and how it needs to be done.

If you need help with performance management, contact your HR representative or Karen Meins (902-
424-4271).
Sustained Human Capital (page 5/6)

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Leadership
We recognise leadership as a primary focus of our organisational development. Our interventions include formal
executive coaching at Exco and senior management level, formal business school programmes and management
training modules.

In 2007 we developed an integrated training programme divided into four levels of leadership. The programme
focuses on the implementation of our 2010 strategy, but with emphasis on teamwork and holistic, big-picture
thinking. We also invested in executive coaching for our top 60 managers (including Exco members), positively
addressing our leadership style through a 360-degree review and simulation processes.

Induction
We introduced a completely revised induction process from the beginning of 2007. All staff now begin their
induction at the head office in Cape Town, where they meet the leadership, get to understand the brand, the
company’s values, and why our company is the best place for them to realise their aspirations.

Performance Management
We have a structured Performance management system that sets specific objectives and measures performance
achievement while identifying development opportunities. This enables the company to develop individuals,
identify potential, reward performance, improve productivity and create a performance culture.
With the rollout of our Broker Management Model Programme (BMMP) and the adoption of our new values, it
became opportune to review our Performance management systems and procedures across the country. A survey
was undertaken resulting in the revamp of the Performance management system and processes – with emphasis
placed on the training and re-skilling of staff. Performance training started in 2007 and around 70% of staff have
already been trained.

Training for Brokers and Intermediaries

We provide internal training and work with our business partners through operational and product training
(approximately 12 000 brokers and intermediaries participate per year). As short-term insurance products
become more specialised and complex, we develop more sophisticated training tools, including an emphasis on
video-based training, making use of visual examples to bring home the intentions of, and opportunities presented
by, our various products.
Top 10 HR Tips For beating the recession
A survey of HR directors and business leaders by recruitment firm The MBS Group has produced
what it calls 'Ten tactics for tough times'.

Those involved in the research were all at board or senior management level, within the retail,
luxury, and consumer goods sectors. How useful these tactics actually are is open to debate, but
they provide a useful barometer of the current thinking taking place in top firms.

Tactics For Tough Times

1. Ride the storm - preparing for difficult times but not currently planning large scale layoffs.

Leaders of consumer, retail, leisure, and luxury industries are wisely shying away from kneejerk
staff cuts or talking about culls of more mature staff. This reflects an innovative and creative
approach to talent that other sectors would do well to observe.
2. See upside in downturn - the best business leaders see opportunities in turmoil.

Business leaders are focusing on the future, aiming to find new opportunities and disrupt existing
markets with innovation, based on consumer insights.

3. Show me the value - rapid response and appropriate price promotion are working for some.

‘Extreme value propositions’ are working well with increasingly cost-conscious consumers. In an
effort to grab market share, a race downmarket is developing, to capture consumer spending
power with a ‘best-price’ message.

4. Pocket returns in pockets of growth - some sectors are positively booming, such as online,
home entertainment and some luxury brands.

Online business continues to defy gravity. The results seem to indicate a ‘digital divide’ between
companies who have older business models and those who have successfully incorporated e-
commerce and new technology platforms. The latter are now benefiting from this shift in
consumer behaviour.

5. Refocus on emerging markets - opportunities in Asia are attracting increased attention and
investment whilst Europe and the US flounder.

Many respondents indicated that they are refocusing their businesses on the significant growth
opportunities in the Middle East and Asia and, to a lesser extent, Eastern Europe.

6. Keep up with customers - businesses must find a way to match or exceed customers'
increasingly agile changes in behaviour.

Customers’ behaviour is changing faster than businesses are able to shift their strategies.
Consumer loyalty is not surviving the challenge of great deals and people are defecting to (own)
brands that previously they would not have considered.
7. Hang on to talent - attracting the best talent is increasingly vital, but also becoming
increasingly difficult.

Business leaders are not planning for the large-scale lay-offs that happened in previous
recessions. Instead, they are focusing on whether they have the skills and talent to take them
through the downturn. They recognise that it will be increasingly difficult to attract the best new
talent into their organisations.

8. Empower your people - business leaders are recognising the value of experience, while also
ensuring that their people have the right skills and training in place to survive and prepare for the
upturn.

Internally, the focus is on having the right strategies in place to retain the best people, as well as
managing under-performers in a tougher way. Incentives are being adapted to reflect these
changed priorities.

9. Keep up morale - maintaining workforce morale will be a decisive benefit.

Businesses reported that they are redoubling efforts to demonstrate decisive leadership via more
internal communication. For example, several companies are making increasing use of face-to-
face communication to increase the CEO’s visibility, to set the right tone and convince employees
that their jobs are safe. They recognise the need to avoid the creation of a bunker mentality within
their businesses and build employee confidence and trust in their leadership.

10. Engage your staff - keep staff members on your side.

A high proportion of our survey respondents recognised that full employee engagement is needed
to be able to shift strategy successfully. A minority of companies cited examples of the impact
that this can have.

Ref: http://www.personneltoday.com/cgi-bin/mt/mt-tb.cgi/40472

Cost effective Hiring and Successful retention in the corporate world is very essential today. For
this reason companies are working on the areas of recruitment & retention to get more insights on
the same. Some of the key findings are:
. Knowing the generation Y better will improve an organisation's chances of recruiting and
retaining them

. But to know them organisations must move beyond perusing documented information.
The better you know your prospective candidates the better the chances of luring them. The logic
is that simple. There is already a lot that organisations know about generation Yers. However, if
the intention is to recruit more from this generation, the question to ask is, "What more can we
learn about them?" The answer is critical to formulating an effective strategy-one that ensures a
competitive edge.

This week's mailer will clue in organisations and their recruiters on the characteristics and quirks
of generation Yers. This information should help them realign their existing strategy to recruit
successfully and retain them.

Defining the 'Y' cadre

Commonly referred to as "Millennials", "Echo Boomers" and "Net Generation", generation Y

constitutes those who were born from 1980 to 1999 and grew up in the 1990s and 2000s. A few
well-documented and work-relevant characteristics of this generation are:

. They are more ambitious than the previous generation so much that sociologists call them the
overachieving, overscheduled generation

. They like changing jobs, and earned the title "job-hoppers"

. They have great expectations from their workplace as, according to research, "they desire to
shape their jobs to fit their lives rather than adapt their lives to the workplace". This outlook is a
huge challenge to employers.
The above-mentioned characteristics are well-documented. In fact, most organisations have
already realigned their recruitment strategies around them. But there are a few other quirks that
are not so well documented but can have an equally huge impact on an organisation's strategy.
They are:

Trait: Dependence on parents

Being the products of helicopter parenting, generation Yers find it difficult to wean off parents.
This generation does not think much of moving back home after college. Less rebellious than
their predecessors, most of them even let their parents decide on where they will work and for
whom. That this generation job-hops is a well known fact, but what is undocumented is that their
job-hopping is driven by the will to learn. Encouraged by their parents' advice to learn and grow
from different experiences, the generation is willing to risk job security and fantastic salaries for
the thrill of learning something new. Also the fact that they can fall back on their parents makes
them greater risk-takers than their predecessors.

Tip: In getting the Yers to make career decisions, give them time to consult their parents.
Encourage them to make those phone calls to their parents from the interview room itself.

Trait: In-box management

It might not appear as an advantage, but the fact that Yers choose to start their work day without
a 'to-do' list actually makes them better 'prioritisers'. As a behavioural expert comments, "Baby
boomers use their in-boxes and in-trays as to-do lists and go by them on a typical work day.
However, Gen Y is sold on the idea of an 'empty box'". This means that what they do is not
dictated by what comes into their in-box or in-tray but by what they feel is important. This gives
them better control in deciding their priorities and also makes them conscious of managing their
work activities based on priorities. In short, they do not work on a first-in, first-out basis but on the
"most important comes first" basis.
Tip: Allow Yers the leeway to plan their day. Strict scheduling can frustrate them.

Trait: Women power

Yers appreciate gender equality and have little qualms about women surging ahead as earners.
Generation Y women feel more empowered, go solo in making career and personal decisions,
and feel less insecure at work. Another observation is that women take a back seat voluntarily
when they decide to have children.

Tip: Think of flexible work hours and work-at-home options for new mothers.

Trait: Team spirit

Generation Yers thrive as teams. Probably the first generation to value the importance of team
power, this generation appreciates how individual efforts at work multiply when combined with
team efforts. So oriented are their efforts to work in teams that team-building and bonding
initiatives are only reminders of what they already appreciate. Therefore, where they really need
help is in developing their leadership potential.

Tip: Divide everyone into work teams. Even a one-employee function or department can be
integrated into a large group.

Some of this information is probably already known but not accounted for as yet. However, what
is essential is to be aware of these undocumented generational differences. Organisations must
interpret this information to use it as a recruitment advantage.

Effectiveness of the Human Resources Function

The purpose of a Human Resources audit is to assess the effectiveness of the Human Resources
function and to ensure regulatory compliance. The audit can be conducted by anyone with
sufficient Human Resources experience. Having experience working in more than one company
is a plus, as it provides the auditor with a broader perspective. There's an advantage to having
the audit conducted by an external consultant. Because the external consultant has fewer biases
about the organization and has less personal interest in the outcome than an employee of the
company, the external consultant may be more objective.

Collect Data
Assess the mission, vision, strategy, and culture of the organization, from whatever written
material there is in the company (check with the department or person who handles public,
customer, or shareholder relations). Collect existing data such as:
1. Hiring statistics (acceptance rate, hiring rate, hiring projections)
2. Turnover
3. Compensation and benefits philosophy and practice
4. Exit interview summaries
5. Employee complaints (discrimination, harassment, safety, other)
6. Promotion and advancement practices and trends
7. Human Resources budget and expenditures
Where possible, compare the data you collected with market data. This information will provide
you with a point of view for the next phase of the audit: the interviews. If, during the interview,
discrepancies arise between the data and the interviewee's answer, you can explore the reasons
for the discrepancy(s).

Conduct Interviews

The purpose of the interview is to collect input from the internal customer on their Human
Resources needs and how those needs are being met. Begin the interview with top management.
Next conduct interviews with a sample of subordinate managers including first line management.
The topics to discuss during the interview include:

1. Perceptions of the company and its goals

2. Strengths and weaknesses of top management
3. Employee perceptions of the company and top management
4. Relations with subordinates
5. Support of career goals for self and employees
6. Major Human Resources issues
7. Which Human Resources functions work well
8. Which Human Resources functions need improvement

Conduct the Regulatory Compliance Audit

The following areas should be audited as part of the regulatory compliance audit:

1. Personnel files and recordkeeping (contain only job related information)

2. Pay equity
3. Job descriptions (ADA compliance)
4. Legal postings
5. Equal Employment Opportunity and Affirmative Action
6. Forms (applications, internal forms, etc.)
7. Workers' Compensation
8. Fair Labor Standards Act
9. Family and Medical Leave Act
10. Legal reporting

Summarize the Results

Consolidate the information you collected. Compare the results with market surveys. Determine
which practices are good/popular/effective/competitive. Determine which practices need
improvement. Recommend specific improvements referring to the results of both the
Effectiveness audit and the Regulatory compliance audit. Justify the recommendations.
Determine how to measure whether the improvements are successful.
Obtain Approval from senior Management

Present the preliminary results and recommendations to senior management individually. Point
out how these recommendations will support their needs. Obtain their support, then present the
final results and recommendations to the senior management staff for final approval.

Implement the Program

Consider implementing the program in part of the organization as a pilot program. Monitor and
measure success and seek to continuously improve processes. Be prepared to modify the
program if an organizational change requires it.

Effective Organizations(Organization Development)

The trend toward reducing the number of management levels in organizations is being driven by
the need of organizations to increase the speed and accuracy of communication. Traditional
organizations, with their many levels of management, process information slowly. Plus the
information gets filtered along the way, often for political reasons which can conflict with the
overall good of the organization.

Processing information quickly and accurately, then acting upon what is learned, is critical for
the success of an organization. Another key item is selecting relevant information for measuring
organizational performance relative to organizational goals. This can be challenging in light of
today's information rich environment. (Selecting the wrong metrics, those which pull the focus of
the organization away from what is most important for its ultimate success, will harm an
organization). After selecting the appropriate metrics, organizational performance can be further
enhanced by linking the performance results to individual or team incentives.
Performance Management is a process that can facilitate the flow of information in an
organization. Performance Management includes the following:

1. A flow-down of goals beginning with the organization's strategic plan, to the annual
organizational goals, to the President's or CEO's individual performance goals, on down
to all employees in the organization. Thus each member of the organization can
ultimately tie their individual performance goals to the organizational goals .

2. A formal feedback system in which individual performance results can ultimately flow
back and influence the organization's strategic plan. Feedback must occur frequently.

3. A mutual (between the employee and manager) establishment of duties and

responsibilities and criteria for measuring success. Also, performance results are
mutually determined. The mutuality is what encourages the feedback.

With more than 135,000 employees working in some 80 countries worldwide, Procter & Gamble,
creator of brands such as Tide, Folgers, Pringles, Charmin and Crest, has isolated the manager-
employee relationship as a critical component of effective performance management.

"It's the No. 1 reason why people leave a company," said Keith Lawrence, director of human
resources, beauty, health and well-being at Procter & Gamble Co. "It's such an important
relationship. It determines the work an individual is assigned, their future assignments,
promotions, compensation, as well as the basic love, care and feeding that we get each day."
In order to enable effective manager-employee relationships, Lawrence said the process must
begin with a manager's fundamental belief that a high-quality relationship with every one of his or
her employees is important.

Positive manager-employee relationships actually start when an employee joins the manager's
team or attends the company on-boarding program. On-boarding can help the two get to know
each other, identify their strengths and establish how they can work together.

To set the right tone at this stage, Lawrence said the manager should have clear work plans and
objectives for what will be accomplished in the first assignment.

Ongoing, continuous feedback - including not only what needs improvement, but recognition of
what is going well - will help reinforce the employee's contribution and build a basic feeling of
trust, respect and a sense of teamwork.

"We have a lot of systems to give feedback on an ongoing basis, but the most effective way to
give feedback is to tailor it to the individual employee," he explained. "Some employees like to get
written feedback, some like to get it in person, others like to hear all the good stuff, and you have
to soft pedal the issues. It's important for the manager to know every one of their employees and
deliver feedback as they like it delivered."

The level of personalization and trust in this manager-employee relationship is so relevant; it can
take only one incident to damage it. Saying one thing and doing another, offering inaccurate
information or not fulfilling commitments related to advancement or new opportunities for growth
and development are a few critical but common manager mistakes.

"Fundamentally, all relationships boil down to trust," Lawrence said. "The worst thing a manager
can do is make a commitment and either not deliver on it or not be honest, candid and complete
with their employee. It's very hard to rebuild trust. Stephen Covey would say you need seven
deposits in the emotional bank to account for one incident like that. In the trust fund, it's beyond
that. A manager can really blow a relationship when they're not trustworthy or when they lack
integrity."

Procter & Gamble uses its annual employee survey to measure how well managers are building
and sustaining employee relationships. The survey has several relationship-based questions for
which answers are monitored, benchmarked and tied to manager - particularly senior managers' -
bonuses.

"That puts teeth behind the importance of this," Lawrence said. "We also have a wide range of
tools and training available to managers and employees to help their relationship building. For
example, we have a relationship-building tool kit that has an array of different exercises and
approaches that both employee and manager can use to help them strengthen their respective
relationship.

"Last, we're leaning toward what we call strength-based relationships, and the analogy here is in
a marriage, you learn to appreciate and play to each other's strengths as opposed to trying to fix
the parts you don't like. The same is true here. We're trying to focus on what are the strengths
that each employee and manager has and how can they respectively play to those over time and
build and strengthen one another."

1. The Most Important Thing Bosses Do Is Help OTHERS Succeed:

This sounds simple, but bosses got promoted because of their personal achievements. Now, they
have to shift the focus from themselves to the growth of those who report to them. In other words,
it's not about YOU, boss. It's about the troops. If they do well, you should, too.

2. Managers Cannot Treat Everyone The Same:

Great bosses learn how to customize their approach to each person. Yes, they hold true to core
values, but don't assume that they have to act in identical ways with each staffer. They manage
people as the complex individuals they are. And that's a real skill.

3. IQ Gets Bosses Only So Far; EQ Takes Them to The Next Level:

I'm talking about emotional intelligence: the ability to be self-aware, self-managing, socially aware
and adept at managing relationships. This means knowing how to read the emotions of others as
well as our own, to know how to power up or power down in synch with a situation, to build trust
through expertise, integrity and empathy.

4. People Fall In Love With Ideas & Solutions Of Their Own Creation:

It's faster and easier to tell people what to do; but when people come up with their own ideas,
they are much more invested in them. Anyone who's ever assigned stories knows this one.
Journalists love the project they come up with more than the one that's given them. When we put
our personal stamp on something, we care more about it. This applies in work assignments,
negotiation and conflict resolution.

5. Coaching Is A Critical Skill:

Bosses who "fix" the work of others don't help them grow. Fixing may be faster, but has short-
term impact. Coaching takes more time but the results last. Fixing is about the product, coaching
is about the person. With good coaching, the person and the product improve.

6. Staffers Must See You, Not Your Evil Twin:

What's the difference between visionary and delusional, a roll-up-my-sleeves helper and a
micromanager, or between confidence and arrogance? It's often in the the way the leader
communicates and the staff perceives her. Leaders can't assume their employees can read their
minds. It's hard work to make your intentions clear.

7. Conflict Doesn't Get Better If It Is Ignored:

The best bosses build cultures where conflict may be inevitable among smart, creative people,
but it is handled extremely well. Differences are aired, values are clear, people are held
accountable, and bullies don't win.

8. Intrinsic Motivation Is The Most Powerful:

The best work gets done when people motivate themselves. That's intrinsic motivation: Internal
engines like competence, choice, meaningfulness and progress. Or the joy of working with a
team, or achieving something solo. Great bosses know what drives each person they lead.

9. Managing Change Is A Constant Responsibility:

Change can make people very uncomfortable, but leaders must move people in new directions,
toward new opportunities. Today's newsrooms are undergoing massive changes of culture,
workflow, skill sets, formats and technology. Great leaders build bridges to the future.

10. Leaders Inspire Others:

There's meaning, honor and dignity in every form of honest work. Don't fear that you will look
corny by sharing a vision, a passion, or a dream. The best bosses make us feel better about
ourselves, our work and our goals. Dare to inspire.

Performance Management Collaborative

The Performance Management Collaborative consists of a seven state core
including Illinois (lead state), Missouri, West Virginia, New Hampshire, New York,
Alaska, and Montana. Five additional partners include the Association of State
and Territorial Health Officers, the National Association of County and City
Health Officials, the Centers for Disease Control and Prevention, the Health
Resources and Services Administration, and the Association of State and
Territorial Local Health Liaison Officials.
Definition of Performance Management

Performance management is the practice of actively using performance data to

improve the public's health. This practice involves strategic use of performance
measures and standards to establish performance targets and goals, to prioritize
and allocate resources, to inform managers about needed adjustments or
changes in policy or program directions to meet goals, to frame reports on the
success in meeting performance goals, and to improve the quality of public
health practice.

Performance Management components include:

Performance Standards - establishment of organizational or system

performance standards, targets and goals and relevant indicators to improve
public health practice

Performance Measures - application and use of performance indicators and

measures

Reporting of Progress - documentation and reporting of progress in meeting

standards and targets and sharing of such information through feedback

Quality Improvement - establishment of a program or process to manage

change and achieve quality improvement in public health policies, programs or
infrastructure based on performance standards, measurements and reports.

A Performance Management System is the continuous use of all the above

practices so that they are integrated into the organization's core operations.
Performance management can be carried out at multiple levels, including the
program, organization, community, and state levels.

Collaborative Products
The Collaborative released its third
major product in March 2003, From
Silos to Systems: Performance
Management to Improve the Public's
Health.

The Silos to Systems guide explains

and showcases examples of the
Collaborative's four-part model for
performance management, along with
helpful tips for successfully
implementing a performance
management system.

Find more Collaborative's products on

the Public Health Foundation's Web
site.

Performance mangement case studies

and learnings.

Performance management
CT enables you to achieve the goal of successfully implementing performance management, instilling
preferred behaviour and rewarding high performance. It is ineffective to change behaviour, one employee at
a time. With performance management methodologies we assist you to effectively increase your
employees’ natural ability to motivate themselves, while decreasing the de-motivators in your organisation
throughout.

Aligned business goals and focussed employees can result in an increase of more than 70% in efficiency.
We endeavour to make performance management a practical and understandable tool for employees on all
levels. The behavioural model that CT embeds in performance management follows a five- point approach:

Driving performance management will result in a long term culture change. CT will support your business in
the enabling process to ensure that the performance management process receives the required buy-in and
cooperation from employees and management, and will ensure that employees and management have the
skills to fully implement the process and make it work. Support in this process is an active and dynamic
communication strategy that will inform all stakeholders of the “what”, “how”, why”, and consequences of
supporting the implementation of performance management within your business.

In addition to our consulting expertise, CT has a web-based performance management system that enables
your business to effectively and timeously manage employees’ performance, by providing you with a tool to
develop performance agreements that are aligned with business goals, resulting in focused and
performance-related development plans for every employee. It also allows for informed decision-making
through extensive and detailed reporting.

Competencies
Organizational Development & Training

• Organizational Assessment and Gap Analysis

• New Manager Assimilation
• On Boarding
• Manager Boot Camp
• Situational Leadership
• Executive Coaching
• Mentoring Programs
• Team Development

Staffing & Recruitment

• From strategic needs assessment, optimum hiring processes, and management skill building, we
can ensure you are positioned to hire the best and brightest to meet the demands of your business
• Tools and metrics for time-to-fill, cost-to-fill, source-of-hire, quality-of-hire, etc. to measure results
Performance Management

• Linking individual & team performance to organizational goals

• Strategic performance coaching packages

On Site Specialists

• Interim HR leadership
• Sexual harassment and discrimination investigations
• HR audit for compliance

Compensation & Benefits

• Salary survey participation and data analysis

• Administration and analysis
• Comprehensive benefits review and vendor management
Performance Management Beyond
Budgeting: Why you should consider it,
How it works, and Who should contribute
to make it happen.
News categories: Enterprise and business strategy, Finance and accounting, Performance management
and controlling, Information Technology

by Juergen H. Daum

Table of content:
Intro
Why should a company consider to move Beyond Budgeting ?
How does the Beyond Budgeting model work ?
Who should contribute to make it happen ?
The Transition Route – Major success factors
Summary
Additional resources (updated Jan 2005)

“Fixed budgets don’t work today. A budget is a too

static instrument and locks managers into the past
- into something they thought last year that it was
right. To be effective in a global economy with
rapidly shifting market conditions and quick and
nimble competitors, organization have to be able to
adapt constantly their priorities and have to put
their resources where they can create most value for customers
and shareholders. In order to do that, they need the right
concepts, management processes and tools – concepts such as
the Beyond Budgeting Management Model. The introduction of
new management instruments such as the Balanced Scorecard,
which help to better align the entire organization with corporate
strategic objectives and to focus it on the essentials, has created
the right foundation. Because if corporate strategy and the
objectives are clear for all people in an organization, one can
principally react faster to changing market conditions. But then
the fixed budget comes into their way and prevents them from
really doing the right things. Though what is often missing is a
more flexible operational planning and control model. The Beyond
Budgeting model wants to fill exactly this gap.”
Juergen H. Daum

New! - visit J.H.D.'s Beyond Budgeting Info Center

- including latest BB insight materials, interviews with BB pioneers
etc. - here an extract:
| J.D.'s insight article "Beyond Budgeting" | Interview with Lennart Francke, CFO of Svenska
Handelsbanken | Panel Discussion with Borealis, Nestlé, and Unilever | Interview with Jeremy Hope
– co-founder of the Beyond Budgeting Round Table | Interview with J.D. on finance and IT |

Intro

Three years ago I presented to a group of senior executives at the

headquarters of a large U.S. based consumer products company with
global operations the concept of “Strategic Enterprise Management” (SEM)
– a concept that ties enterprise management closer to strategy and
establishes management processes that make it easier to manage trade
offs in the business system and to adapt strategy, operative activities, and
resource utilization plans faster to changes in a company’s environment. At
the same time SEM was also an emerging new software product to support
these management processes (and I was the product manager at SAP for
it). When I started to talk about the limitations of the traditional budget
based management system, I received strong agreement from these
executives: yes, the budget ties managers to the past, it does not provide
them with incentives to look for new growth opportunities, and it makes the
organization as a whole very inflexible. When I was talking about that
“every manager is sitting on his budget after it is released – no possibility to
adapt priorities, when the world is changing” – I saw just nodding heads.
The most exciting thing of the SEM concept for them was, that it enables
their organization to become more flexible and to react to change faster.
They told me that this represent their most important objective with respect
to their intentions to improve the management system of the company. And
after we finished in the afternoon with the workshop on the planning
processes, which was mainly targeted at the responsible person for
budgeting and planning, the corporate controller stood up and asked the
budgeting manager to come back until the following week with a plan for
implementing the SEM concept and to define the requirements for the
information systems to support it.

Meanwhile many other companies I worked with followed the same route
and wanted to move beyond their traditional budgeting based management
system. The reason is, that fixed budgets don’t work today. How can
they? How can a static instrument that locks you into something you
thought about last year be effective in a global economy with rapidly
shifting market conditions and quick and nimble competitors? Comparing
the “annual budget”, which is in essence last year’s reality, with actual
revenues and expenditures on a monthly basis does not provide
companies with useful information to manage their business. It merely
locks them and their managers into the past. Rolling, perhaps monthly,
forecasts and budgets focuses them on current and future realities.
Through monthly or even event based forecasting, managers in an
organization are forced to think ahead. For the company as a whole, it
provides the possibility to offer realistic expectations for revenues and
costs, and allows senior management to react before financial figures turn
into the red. Budgets and forecasts are tools for resource allocation.
Resource allocation needs to be consistent with strategy and prevailing
business conditions. Companies have to manage strategy as a continuous
process, so that strategy can be adaptive to changing business conditions,
and resource allocation can follow suit. In this regard, they should
approach strategy just as they do day-to-day operations. As they execute
strategy-setting tasks again and again on a monthly or even weekly basis,
they need an appropriate strategy and corporate performance
management system that allows them to do that very efficiently.

While regular, ideally event driven forecasting (events that threaten to

reach defined objectives and targets) represent the core building block of
any performance management system “beyond budgeting”, it is not
enough. Also the behaviour and the entire management culture has to
change.

Around the same time, begin of 1998, when I started with research for our
SEM project at SAP, working with some innovative customers and with
some of the leading experts and consultants in the US and Europe, the
CAM-I Beyond Budgeting Round Table (BBRT) was founded in the UK.
Their mission was to identify companies that abandoned budgeting,
analyse what they did instead in steering the organization and to try to
identify the principles of a new management model that will enable
companies to introduce more effective management processes and
steering mechanisms. In fall 2000 we met and reconciled our findings and
concepts. Interestingly, there was a large overlap (if not a total match)
concerning the concepts for SEM management processes and BBRT
management processes. But the real differentiator was the fact, that the
BBRT concept tries to deal also with the soft facts of the new management
system. The biggest contribution from the BBRT and Beyond Budgeting
concept and what makes it really unique is that they found that today’s
companies need – beside more effective and flexible management
processes “beyond budgeting”, which usually are focused on the “hard
facts”, that is on numbers – a management culture that enables managers
to really perform and to develop their and their people’s capabilities. That is
the reason why the Beyond Budgeting concept is consisting of two
elements: a framework of 6 rules that focus on a management culture that
allows frontline managers to really perform, and of 6 rules that focus on
adaptive management processes that support such a management culture
(see my first report about the BBRT concept from May 22, 2001).

Why should a company consider to move Beyond Budgeting ?

The management system’s task is to institutionalize decisions through

management processes on strategy adjustments, but also on adjustments
of operational enterprise activities and resource utilization plans. This
should enable the enterprise to continually control and optimize its short
and long-term success in a dynamically changing enterprise environment.

Every enterprise today is challenged by the fast change of market

conditions, technologies, or customer behavior. Peter Drucker writes: “One
cannot manage change, one can only can be ahead of it” (Peter Drucker,
Management Challenges for the 21st Century, New York, 1999).
Companies and organizations of all kind have to become change leaders if
they want to survive in today’s market environment. One specific
characteristic of a change leader is, to perceive change as an opportunity.
A change-leader organization is searching always for changes in its
environment and disposes of the necessary “Organizational Intelligence”
that allows it to identify quickly what changes are required internally and in
their business model/system in order to respond. In addition, change
leaders are also able to effectively translate the required change into action
effectively with the objective to not only maintain their actual market
position but to extend it by leveraging the changes happening in their
markets.

And this is especially true for companies that are based on intangible
assets. They are subject to a higher risk exposure, especially to the risk of
changing markets. Knowledge-based assets are also often characterized
by "spill over effects" where competitors detract from the use of an
innovation that its investors have, by copying it. This can be partially
restricted by means of patents or protection of proprietary rights, but
usually not completely. This is because knowledge based assets and
related products can be copied much more easily than physical assets
based value creation systems, which require considerable capital
investments, which not every start up is able to fund. The problem can
often only be solved by use of "time-to-market", where the investors are on
the market with the product faster than the competition, and where the
investors rapidly increase their own market share. This requires a close link
between markets and internal development activities on the one side, and
with commercialization activities on the other, with the capability for fast
adaptation in the case of changing markets as the key success factor.

But this rule not only applies today to knowledge and R&D intensive
companies like in the pharmaceutical and high tech industries. As more
and more companies, also in traditional industries, rely on intangible
assets, the phenomenon becomes a more common one. Enterprise
management systems therefore have to be designed in a way, that they do
not only support companies and their managers to monitor and optimize
their performance in the area of costs and revenues, but also to enable
them to recognize immediately limits to growth in their value creation
system and to eliminate them, as well as to control and manage output,
that is the commercialization process. What is required are management
systems, which enable dynamic action and reaction and fast, nearly
continuous adaptation of the business system and of business activities to
market and technology changes. The budget, the budgeting based
traditional management systems represents a hurdle for an enterprise’s
success rather than a supporting tool.

Traditionally, the corner stone of the management system of a company is

the budget. Budgeting is the central instrument of traditional management
systems. All management processes and methods are based on and
aligned with it: from strategy planning through resource allocation and cost
management to monthly performance measurement and rewards. The
budget determines how managers behave and on what activities and
objectives they focus. And the main problem today is the inflexibility of the
budget based management system. These annual budgets, which are
absorbing considerable management time and other resources in creating
them, are fixed over the following fiscal year as soon as they are released.
Through monthly actual/budget comparisons companies check, how good
manages are in meeting their budgets. The main target of these managers
therefore is, to not exceed their budget, because their bonus is dependent
on meeting the budget.

But a strategic instrument that locks managers into something they thought
and found right at the end of the previous fiscal year, can not be effective in
a global knowledge economy with rapidly shifting market conditions and
quick and nimble competitors. The monthly actual/budget comparison,
which compares financial actuals, that is actual revenues and expenditures,
with a budget that is typically already overtaken by reality only after a few
weeks of the new fiscal year have passed, locks these managers in the
past and in the fictive world of the budget.
Companies are therefore trying to get rid of their inflexible budgets. They
are moving instead to continuous rolling forecasting as part of their
management processes, which enable for fast and coordinated adaptation
to anticipated changes in their business environment and which also allow
to balance the initiated change-management activities with continuity and
short term performance.

The key for it is an integrated strategy and corporate performance

management process, of which the core and central process is not any
more a fixed budget but a dynamic forecasting process (see figure 1).

Figure 1: Integrated strategy and corporate performance management processes

(source: Juergen Daum, Intangible Assets and Value Creation, 2002)

In contrast to the monthly actual/budget comparison, rolling monthly

forecasts of financial performance and for other non-financial value drivers,
which are related to the different value creation processes of a company,
focus managers on current and future opportunities and risks and not on
the past. The forecasting process forces them to look ahead and to achieve
market objectives under changing conditions, instead of focusing their
attention on how they can better meet the budget.

In addition, budgeting is an expensive activity: the average company

invests more than 25000 person days per billion dollars of revenue in the
planning and performance measurement processes; a KPMG study
showed that inefficient budgeting is eating up 20 to 30 percent of senior
 executives’ and financial manager’s time. But the strategic costs, the
opportunity costs for companies not being able to thrive in the new
knowledge and intangible based economy will probably be much larger.

The CAM-I BBRT names six external factors affecting every company today
and that are driving the case for change to abandon traditional budgeting
and to move to the Beyond Budgeting model:

- - Shareholders are more demanding and are only loyal to those

organizations that are consistently at (or near) the top in their industry. But investors
measure relative performance of companies (relative to their industry peers), rather
than absolute performance. An important fact that needs to be considered when
designing the Beyond Budgeting model.
- - Talented people are increasingly scarce. They want freedom,
challenge and responsibility. And they care about values and the environment.
- - The pace of innovation is increasing and product and strategy life
cycles are shrinking. To compete, firms must produce a constant stream of new
solutions and strategies
- - Prices are falling and quality is rising. Firms must be operationally
excellent to compete
- - Customers are in charge and will switch loyalties if not totally
satisfied. Firms must keep close to customers and respond rapidly to their changing
needs.
- - Demands for higher standards of ethical and social responsibility.
Investors and regulators are demanding more open and honest performance
reporting.

How does the Beyond Budgeting model work ?

The response of companies should be – according to the CAM-I BBRT – to

develop a new leadership vision and governance model in order to
establish a new performance management climate that allows an
organization to react to these external factors and changes and to move to
a networked type of organization, where decision power is devolved to
those, who know the business the best: to frontline managers (see figure
2). The BBRT calls this a devolutionary framework:

1. 1. Create a performance climate based on competitive success –

rather than on internal politics and on the principle that managers have to meet pure
internal performance commitments
2. 2. Motivate people by offering them challenge, responsibility, clear
values as guidelines (instead of clear orders) and shared rewards
3. 3. Devolve performance responsibility to operating managers; give
them the freedom to decide
4. 4. Empower operational managers by giving them the capability to
act, by removing resource constraints (but agree on certain limiting parameters such
as for example “cost-income-ratio” in bank)
5. 5. Organize around customer oriented teams that are accountable for
profitable customer outcomes – not around functions and departments that are
accountable for meeting just the budget
6. 6. Support transparent and open information systems that provide
“one truth” throughout the organization
 Figure 2: The new environment is driving the case for change of a company’s
governance model

To make that really happen, the company needs a new way, how it
manages performance, that is finance and the CFO have to come up with a
new type of performance processes:

1. 1. The goal setting process: It should be based on agreeing external

benchmark based targets, not on negotiating fixed targets. This is focusing mangers
on beating the competition and not on meeting the budget. If the market goes up, a
manager is still challenged to do better than competitors.

2. 2. The motivation and rewards process: It should be based on

recognizing and rewarding team-based success. Today, no single person can act
alone in achieving specific targets for an organization. To reward people individually
for reaching specific targets will create tension and mistrust in the organization, which
is a recipe for bad performance.

3. 3. The strategy and action planning process: It should be devolved to

operating mangers and made continuous. It should not be managed centrally as an
annual event. Only this way a company is able to use the know how from the people
at the customer front to adapt fast and constantly to changing market needs.

4. 4. The resource utilization process: It should be based on local

access to resources (within agreed parameters), not on the basis on allocating them
through annual budgets. Only this way frontline managers are able to act fast in front
of threats and to realize sudden opportunities.
5. 5. The coordination process: It should be based on making cross-
company interactions through “market-like” forces, not through predetermined
detailed actions set down in central plans. Frontline, operative units negotiate
resource and service requirements with service units and agree on certain ranges for
required services (service level agreements).

6. 6. The measurement and control process: It should provide fast,

open, and distributed information for multilevel control. Information should be
available to everyone, so that operational managers are able to compare their
performance with the one of their colleagues and that senior managers can see what
is going on and can monitor and challenge their subordinates (instead of controlling
them).

Information systems are playing a crucial role in making the new concept
happen. This are requirements for information systems to support the
Beyond Budgeting concept as I have presented it to the BBRT (see figure
3):

- - Flexible KPI based measurement systems that provide

operational managers with timely and relevant information and decision support (Data
Warehouses and OLAP data marts, Analytics, Fast Close / Business Activity
Monitoring)
- - Flexible resource planning, forecasting and monitoring
processes require an information system that spans the organization (a planning
system and forecasting system decoupled from operational systems and optimised
for cross functional planning, but that can integrate data from all sources – e.g.
based on a data warehouse system)

- - Flexible IT infrastructure that is able to easily integrate various

systems, provide flexibility to change processes, enables user centric access and
services without lousing the necessary integration (an open and flexible IS
infrastructure for accounting, analytics, management process support and user
interaction)

Figure 3: Management Information Delivery Architecture (source: Juergen Daum,

Intangible Assets and Value Creation, 2002)

Analytical applications that supports managers and business analysts in

performance management and in communication processes around
performance management provide the tools and information they need to
act under the Beyond Budgeting principles. This has to include also a
framework for enterprise wide planning and forecasting as well as support
for processes such as activity based management (see figure 4).
Figure 4: Information Systems optimised for analytics and decision support

Who should contribute to make it happen ?

Beside the business managers, two other corporate functions contribute

significantly to the success of companies in the intangibles based new
economy: the one of the chief financial officer (CFO) and the one of the
chief information officer (CIO). CFOs are the guardians of a company’s
financial resource and are, as the economic conscience of the company,
responsible for the economic transparency and for the “Business
Intelligence” of the enterprise, that is for the design and usefulness of its
management system. CIO’s are the masters of one of the most important
basis resources of intangibles based businesses: of the infrastructure for
information collection, information storage, and information distribution. The
CFO needs the help of the CIO, who has to provide the new information
technologies and infrastructure for the new management system. The CIO
needs the support of the CFO in order to be able to focus his resources and
the expertise of his team on those projects that are most relevant to the
economic success of the company.

But not only the “hard facts” are a decisive factors for companies today. As
the BBRT pointed out, also the soft factors, the performance management
culture of a company is crucial. People related success factors might be
ultimately the most important drivers of a company’s performance. HR
experts and people experienced with organizational change projects should
therefore be part of the project team.

And the guardian of the hard facts, the CFO, might change his role as well
in the transformation process. The core competency of a CFO in the future,
in order to create maximum value for his company, will be to understand
and monitor the economics of the value creation system of his company.
This also has to include the ability to translate - together with his
management team colleagues - this understanding into a concept for an
appropriate management and reporting system, and to provide related
services to management and investors, rather than to manage basic
accounting processes and the treasury function of the company. So the
traditional role of a CFO will be transformed from the role of a “chief cash
manager and chief accountant” to the one of an agile and active Chief Value
Officer (CVO), who always keeps an eye on the effectiveness of the value
creation system of the company, on the efficiency of its business processes,
and on its unrealized value creation potential and he is constantly pressing
for its realization. The CFO will be transformed from an administrator of
administrative processes to a real business partner for his management
colleagues, who directly contributes to the success of the company by
ensuring the necessary management transparency.

Companies might start to establish business intelligence competence

centres, of which the task is, to provide support for managers in
understanding new business problems that require in-depth economic
knowledge. This will include the collection, editing, and preparation of
relevant unstructured internal and external business information that will be
supplied to business managers and for example investors through the
above-described web based self-services. In addition, the center will
provide other services such as management consulting, training in business
issues and economics (for example also in form of online webcasts), M&A
services, investor relation services etc.. The staff of the centre might come
from different functions: from HR, finance, strategic planning, from the
operational business … (see figure 5).
 Figure 5: The corporate Business Intelligence Competence Centre (source: Juergen
Daum, Intangible Assets and Value Creation, 2002)

The Transition Route – Major success factors

The move to a performance management model “beyond budgeting” is not

an easy task. It requires an active commitment of the executive level. To get
their buy in, is therefore the most important step in making it happen. A
possible action plan for implementing a new performance management
system beyond budgeting may therefore look like this one:

- - Identify the problem areas with the current performance

management system (e.g. through a structured survey) and actively sell the case for
change and a vision for a new system to senior management

- - Look for quick wins (by providing e.g. fast actuals, by improving
access to information, by moving to continuous forecasting, by introducing new KPI’s
…) – start small, be fast

- - Set up a cross-functional, interdisciplinary team to steer and

manage the implementation project – the team can serve later as the core group of
the new Business Intelligence Competence Center

Summary

Traditionally, the corner stone of the management system of a company is

the budget. The budget determines how managers behave and on what
activities and objectives they focus. These annual budgets, which are
absorbing considerable management time and other resources in creating
them, are fixed over the following fiscal year as soon as they are released.
Through monthly actual/budget comparisons companies check, how good
manages are in meeting their budgets. The main target of these managers
therefore is, to not exceed their budget, because their bonus is dependent
on meeting the budget.

In today’s business environment, which forces companies to constantly

change and adapt to changing customer demands and markets, the budget
is not the right tool anymore to manage a company and its performance. It
locks managers into something they thought and found right at the end of
the previous fiscal year. It can not be effective in a global knowledge
economy with rapidly shifting market conditions and quick and nimble
competitors.

Companies are therefore looking today for performance management

concepts “Beyond Budgeting”. They are experimenting already with KPI
based reporting systems, rolling or event driven continuous forecasting etc..
But what is needed is a more comprehensive and systematic approach. A
concept which is gaining increasingly mind share worldwide and which
intends to provide just that, is the Beyond Budgeting concept of the CAM-I
BBRT. It tries to combine the hard fact side in form of new performance
management processes (typically the responsibility of finance) with the soft
fact side of a new performance management climate and a “devolutionary
framework”, where the people at the front, working with customers, get the
 freedom to decide and act (typically the responsibility of the CEO and of
HR).

To make it happen it requires the commitment of the executive team, but

the contribution of especially three corporate functions:
- - finance (hard facts)
- - IT (bringing the hard facts to everyone)
- - HR (managing the change from a people perspective)

Additional resources (updated Jan. 2005):

Juergen Daum’s Beyond Budgeting Information Center New!

Website of the Beyond Budgeting Round Table (BBRT)

Interview with Jeremy Hope (co-founder of the BBRT):

The Origins of Beyond Budgeting and of the Beyond Budgeting Round
Table (BBRT)

Enterprise Management, Leadership and Business Control for Value

Creation
- presentation from Juergen H. Daum, held at the Executive Briefing on
Performance Measurement of the Centre for
Business Performance, Cranfield School of Management, 27 January 2004
in London, UK program of the briefing

Beyond Budgeting on the move: report from the First Annual Beyond
Budgeting Summit in London, 1-2 July 2003

Enterprise Management in the 21st Century - A Blueprint for a New

Approachand the role of Information Systems Presentation held by
Juergen Daum at the BBRT member's meeting, 26 June 2003in
Walldorf/Germany, and held as well at the First Annual
Beyond Budgeting Summit, 2nd July 2003 in London/UK program of the
summit

Interview with Lennart Francke, CFO, Svenska Handelsbanken,

Stockholm:
Managing without budgets at Svenska Handelsbanken

Presentations held by Juergen H. Daum at the Beyond Budgeting Round

Table member's meetings:
- Dec 07, 2000, London/UK: Strategic Enterprise Management
- May 16, 2002, London/UK: Information System Requirements for
Performance Management Beyond Budgeting

SAP’s White Paper “Beyond Budgeting”, which was co-authored by

colleagues at SAP AG, Juergen Daum, and the Consortium for Advanced
Manufacturing International (CAM-I) Beyond Budgeting Round Table

Beyond Budgeting – article from Jeremy Hope and Robin Fraser (the
initiators and researchers behind the CAM-I BBRT concept), published in
the U.S. Magazine “Strategic Finance”, issue October 2000
 Panel discussion at the eCFO conference
2001 of the CFO Europe Magazine, Oktober
18-19, 2001 in Brussels, Belgium: "The
Beyond Budgeting Management Model".
Participants: Janet Kersnar, Editor-in-Chief
CFO Europe Magazine; Guiseppe Biamino,
manager Budgeting & Controlling at SNAM
Rete Gas in Italy; Robin Fraser, Program
Director CAM-I BBRT; Peter Herold, Senior Manager Deloitte Consulting
UK; Juergen Daum, SAP AG. Can a company really implement the Beyond
Budgeting model? This question was discussed by the participants on the
panel: »video (Real Player) »video (Media Player)

Intangible Assets and Value Creation – a book from Juergen Daum,

focusing on a new enterprise model and on the new management system
“beyond budgeting” for the new knowledge and intangible assets based
economy of today, comprising many examples and case studies. It
describes the new environment and its consequences for businesses, the
rules that can be extracted from this understanding for the design of a new
management system, and it develops a framework for a new management
system and describes its elements, as well as how a company can set it up
and bring it to live.
Advantages of Performance Management
Outsourcing

Appraisals Home » Advantages of Performance Management Outsourcing

HR outsourcing helps the HR professionals of the

organisations to concentrate on the strategic
functions and processes of human resource
management rather than wasting their efforts, time
and money on the routine work. The major
advantages of outsourcing performance
management are:

Outsourcing is beneficial for both the corporate

organisations that use the outsourcing services as
well as the consultancies that provide the service to
the corporates. Apart from increasing their revenues,
outsourcing provides business opportunities to
the service providers, enhancing the skill set of the
service providers and exposure to the different
corporate experiences thereby increasing their
expertise.

The Advantages of Performance Management Outsourcing accruing to the corporates are:

i. turning the management's focus to strategic level processes of HRM

ii. accessibility to the expert knowledge and state of the art technology
 iii. freedom from red tape and adhering to strict rules and regulations

iv. optimal resource utilisation

v. structured and fair performance management.

vi. a satisfied and, hence, highly productive employees

vii. value creation, operational flexibility and competitive advantage

Therefore outsourcing helps both the organisations and the consultancies to grow and perform
better.

Once a Year Overview

Self Appraisal Performance appraisal feedback

Performance Review - Preparation Performance Consulting: Moving Beyond Training

Performance Review - The Meeting Writing performance appraisal

How to Complete a Performance Appraisal Form Performance Appraisal Training

Analysis for Improving Performance How to Measure Employee Performance

Active performance appraisal conversation FAQ about Performance Appraisal

Performance Management
PDRI’s model of performance management includes:

• Competencies
• Appraisal
• Promotion
• Compensation
• Succession Planning

We have successfully developed and implemented numerous results-oriented performance management

systems. We help organizations, managers, and employees develop performance objectives and standards
that clearly communicate expectations by translating organizational goals into more specific lower level
goals.

Performance Management — A Leadership Priority

USAID uses strategic management processes to ensure that its program
planning, management, and reporting capabilities:

 effectively support U.S. foreign policy

 are able to respond quickly to today's rapidly evolving global environment
 achieve and report on desired results.

D
The Challenge of Strategic Alignment

5th January 2009

A FSN & Oracle White Paper

The Challenge of Strategic Alignment

The role of Scorecards & Dashboards in Strategy Execution

Contents

Introduction

Communication

Is the message clear?

Strategy maps and trees

The challenge of alignment

Technology and strategy

Scorecards

Dashboards

Summary

Introduction

A strategy is by definition the starting point for corporate behavior. It expresses

an organization’s ambitions, sets out its chosen direction and describes the
principal initiatives and projects necessary to achieve its mission. Business
schools, management gurus and strategy boutiques regularly develop new
approaches and methodologies for strategy formulation and all acknowledge its
overwhelming importance in setting the tone for the organization and its
prospects for success.
Despite its significance, aligning an organization to its strategy remains one of
the most elusive and unsatisfactory areas of management endeavour. Indeed,
research has shown that 85% of executive teams spend less than 1 hour per
month discussing strategy and only 5% of the workforce understands strategy.(1)

Executives spend days or weeks devising well-crafted strategies and then

throw them “over the wall” to the rest of the company, hoping and praying
that their vision will bear fruit.(2)

Yet the notion of aligning an enterprise with its strategy is not beyond the grasp
of all organizations. Take for example a football team about to play a vital
competitive match. The manager sets out the strategy and each player’s role
within it so that they understand how their actions affect other players and the
delivery of the desired outcome. Decisions all along the chain of command from
manager to captain and to the rest of the team are geared to delivering strategic
objectives, so why is it so difficult to emulate this behaviour in a business setting?

A football analogy may not be a perfect paradigm for the world of government,
industry and commerce but there are useful pointers which help to distil the
essential components of strategic alignment from the corporate ‘noise’ that
frequently obfuscates the strategic message, namely;

• A clear understanding of stakeholder requirements and external influences.

• An unequivocal statement of strategy, with measurable objectives and clearly
articulated performance measures.
• Systems and processes which enable the strategy to be communicated in a
consistent, relevant and appropriate way to all corners of the organization.
• A highly trained workforce that is equipped and competent to act on the strategy.
• Feedback mechanisms that enable under or over performance to be identified
rapidly so that remedial action can be taken to bring strategy delivery back on
course.

Threading its way through all of these apparent pre-requisites for success is
communication and collaboration which are the binding agents that ‘glue’ the
organization (the people) to the process and its enabling technology.

Communication
Strategy development is a curious mixture of science and art, fact and insight,
knowledge, experience and creativity. In addition, in today’s complex
multinational organizations it draws on the skills of management from across the
enterprise and in all functional areas. After all, strategy has implications for the
development of human capital, information technology, product development and
financial management to name a few, as well as the use of all other assets and
resources owned by a company.

This in turn means that if strategy is to be delivered successfully by an

organization it must be clearly articulated and communicated throughout the
business. In other words, the strategy must be widely understood at all
management levels so that operational plans and day to day activities are
aligned with corporate goals and objectives.

However, the importance of communication in the strategy process is no longer

confined to management, employees and internal stakeholders. Changing
attitudes to corporate governance and corporate social responsibility throughout
the developed world coupled with demanding legislation to protect shareholders
in many geographies, means that management are now formally accountable to
a wider set of external stakeholders as well. It is now incumbent on management
to ensure that strategy development and communication follows a robust and
auditable process so that resources deployed in the business are strategically
aligned and management actions can be justified, if required, to an external
audience.

Capturing such fluid requirements is a challenge. Most management teams

resort to flip charts, break-out groups and facilitated meetings to drive out the
thinking and record key decisions.

Methodologies such as The Balanced Scorecard, Six Sigma, EVA and others
can provide a helpful framework but they are largely paper based in the
development phase and can be difficult to change and communicate. So they do
not readily keep pace with the iterative and creative nature of strategy
development.
“When companies commit to a strategy and communicate ‘This is how we
win’, and can align execution with corporate objectives, they begin to
create a culture of performance.”(3)

Is the Message Clear?

In large and complex heterogeneous organizations the sheer scale of the task
makes it extremely difficult to view the overall strategy and check its integrity, let
alone cascade it through the organization. Take for example the development of
Key Performance Indicators (KPIs) – measures which support the achievement
of specific objectives derived from a strategy.

This stage of strategy development is a demanding and often contentious

process. Managers from different geographies, product lines and functional areas
can have very different views on what makes an organization ‘tick’ and may
disagree even more on the performance measures that should be monitored,
particularly where these affect remuneration policy.

Often, an organization has too many performance indicators and simply

achieving functional and organizational alignment of KPIs (Key Performance
Indicators) can seem like a Herculean task. Old KPIs can often go unchallenged
while at the same time new KPIs reflecting, say, social and environmental
initiatives need to be developed.

Recent research also shows that many organizations give too much prominence
to internally generated KPIs – controlling the controllable – rather than looking
outwards at threats and opportunities on the horizon which can ultimately be far
more influential on performance.

There is also a tendency to rely too heavily on trusted financial indicators of

performance rather than less familiar non-financial indicators. However, there is a
growing acceptance that concentrating purely on financial metrics may not be the
best way to increase shareholder value.

While financial key performance indicators will always have a prominent role in
measuring performance of a business, they are widely acknowledged to be of
limited value when predicting future performance. Unfortunately, traditional
financial measures such as “profit”, “cash generated from operations”, and
“revenues booked” so called, lagging indicators, provide little insight into future
prospects and outcomes.

On the other hand, non-financial indicators are often tightly correlated with future
financial performance. For example, measures of customer satisfaction are often
linked with a propensity to buy goods and services in the future. Similarly,
measures around innovation, such as the percentage of sales derived from new
products inform about a company’s medium to longer term prospects for
success. Likewise, employee commitment gives insights into future workforce
attrition and, by implication, the ability to earn revenues in the future.

While these key areas of performance such as employee engagement, customer

loyalty and innovation may be impossible to express in purely financial terms and
can be difficult to measure, few doubt that they are critical to assessing the
health of a company.

There are also internal challenges around the compatibility of KPI’s in one part of
an organization with another. For example, the strategic decision to take market
share in emerging markets with a new product may be at odds with financial key
performance indicators such as increasing profit. After all, markets in developing
economies are usually expensive to enter and exploit – normally with lower
returns. Clearly, this simplistic scenario is capable of generating conflicting
organizational behaviour around the allocation of capital.

But how do you identify such conflicts from a sprawling mass of information and
how do you keep a strategy agile and flexible in the face of increasingly volatile
markets?

Strategy Maps and Trees

Visualising a strategy and keeping a handle on the integrity of the links between,
corporate vision, strategic objectives and the KPIs which support them is a huge
challenge. Yet it is vital that the management team can view the entire
performance “world”, define the principle objectives and tactics necessary to
deliver the strategy, assess the correct relationships and agree on the aspects of
performance to measure.

Creating a Strategy Tree is an excellent way to not only layout what it is you are
trying to achieve, but also how you intend to achieve it. Strategy trees depict
each strategic objective (what you are a trying to achieve), the related critical
success factors (what you must have or be good at to achieve the objective) and
ultimately the actions or initiatives related to each critical success factor (what
you will do in order to achieve the critical success factors and ultimately the
objective). Thinking through and illustrating this logical network enables everyone
to clearly see the plan. Add to it the people, teams and departments responsible
to get it done and you have a solid plan of action.

Fig 1: Strategy Trees in Oracle’s Hyperion Performance Scorecard application

depict both the objectives and how you intend to achieve them.

Strategy maps typically contain a subset of objects from the strategy tree. To
create a “single page” view of the organizational strategy, the idea of including
only objectives and their relationship to one another on the strategy map has
become very popular – especially with executives. Inevitably though, the
development of objectives and the relationships between them can become
unwieldy and complex in a multinational organization. Maintaining a coherent
view of each strategic scenario can be a huge presentational challenge using
traditional paper based tools or spreadsheets. Add in a huge number of KPIs and
the scale of the problem starts to become clear. It is not surprising that many
strategies end up as a collection of printed PowerPoint slides, Excel
spreadsheets and Word documents gathering dust on a shelf.

Strategy maps, trees and related scorecards overcome this by using visualization
techniques, which enable large amounts of information to be displayed on screen
at one time. They enable the integrity of relationships between objectives and
KPIs to be explored and confirmed during the strategy development phase and
changes can be made on the fly. Once agreed upon, strategy maps become an
active window on performance enabling under and over achievement to be
monitored together with the consequences for the organization. Finally, they
provide a platform for articulating strategy and linking it into operational plans and
budgets.

Fig 2: Strategy Maps in Oracle’s Hyperion Performance Scorecard

application graphically show the key interrelationships between strategic
objectives and current performance based on KPIs
The challenge of alignment

The inherent agility of a strategy map is important since strategy development

can no longer be viewed as a standalone activity. In a climate of constant
change, the strategy has to be accessible and constantly fine tuned in response
to market conditions. In other words the strategy has to be an inextricable part of
a broader performance management regime which constantly tests and refines
the strategy as new information comes to light. However, the thinking around
strategy development and how it relates to broader performance management is
still evolving as the very latest methodologies attempt to recognise more complex
market dynamics, stakeholder interests and more diverse trading relationships.
The traditional performance management cycle (Figure 3) which focuses on a
series of linked applications or tasks no longer adequately describes the true
nature of these core business processes. The newly emerging paradigm of
“Strategy to Success” takes a more process oriented view of performance
management, underscoring the real purpose of performance management with
more conviction.

For example, the starting point for strategy developments is re-positioned in the
phrase “Gain to Sustain” – which more aptly recognises that meeting the needs
of multiple stakeholders such as employees, customers and even
environmentalists is the crucial first step to creating value in one’s own
organization. “Investigate to Invest” encapsulates the market perspective and the
need to understand the market dynamics affecting the business – an outside-in
viewpoint that has to be married up with an inside-out perspective.

Fig 3: The traditional performance management cycle

The traditional performance management cycle depicted in Figure 3 above is a
continuous process made up of a series of iterative steps. The strategy
establishes the goals and performance measures for the organization which are
built into business plans, budgets and forecasts which are monitored
continuously against actuals, analysed and reported upon. The results of these
analyses are then used to inform and refine the strategy which is adjusted as
appropriate before the whole performance cycle starts again – which is why
performance management is sometimes referred to as a closed loop process.

Hospitality Services Company (HSC) finds that a holistic approach to

performance management pays dividends

Hospitality Services Company (HSC) connects people with the world’s greatest
travel and leisure possibilities by retailing travel products and providing
distribution and technology solutions for the hospitality industry. In 2004 it was a
sector experiencing massive change, creating a myriad of people and process
issues for the business. The lack of communication regarding strategy and its
execution led the CEO at the time to conclude that “only 25 percent of our
strategy is effectively executed”. The leadership team knew that they had to align
the entire organization around a common strategy if the company was to achieve
its longer term goals.

The new HSC management team had set aggressive and inspirational goals but
to achieve them they needed to better align strategy, initiatives, measures and
rewards – an integrated approach to Corporate Performance Management
(CPM). The initial charter for the CPM initiative included, enhancing the
traditional strategic planning process, establishing a “system of sensors” to
accelerate identification of, and response to, emerging opportunities, coupled
with planning applications that focussed on key drivers of the business.

Having secured project sponsorship at the highest levels of the organization, the
organization embarked on a comprehensive change program. The initial phase
was to develop a strategy map for the core business units which was closely
aligned with Kaplan and Norton’s Balanced Scorecard framework. For each
objective on the strategy map two to three key performance indicators (KPIs)
were identified together with an initial target. When a list of current initiatives was
associated with the strategic objectives it was found that 65 percent of
discretionary spending was not core to the strategy. Steps were taken to reduce
funding in this area. Operational plans were revised to make sure that they had
an appropriate mix of specific metrics and targets – some designed to stretch the
organization.

Finally, organizational alignment was embedded more deeply through the

introduction of a rolling forecast that linked operational drivers to the financial
results. After a period of acclimatization this provided greater insight into trends
in performance, reduced the burden of traditional budgeting and delivered
greater confidence in forecast outcomes.

The program was hugely successful in bringing about more rapid decision
making, more effective responses to performance gaps, better (strategically
aligned) investment decisions and more accurate forecasting. HSC’s CEO
concluded “Our CPM program has helped us to focus on the business as a whole
and build alignment across the organization. (6)
On the other hand, Oracle’s leading edge “Strategy to Success” paradigm
depicts the performance management cycle from a more meaningful process
oriented view, starting with a thorough assessment of stakeholder interests.

Fig 4: Oracle’s Strategy to Success Framework

But how does an organization communicate its strategy and imbue its workforce
with the knowledge it needs to confidently take decisions knowing they are
strategy compliant? How do they take the concept of ‘Strategy to Success’ and
bring it to life? How do they transfer the strategy from the board table to each
employee and embed it in the organization?

“Strategy is completely useless unless the results of the strategy process,

the position you choose to occupy, the way you are going to drive your
company, is well understood, quite broadly. Because the number one
purpose of strategy is alignment, it’s really to get all the people in the
organization making good choices, re-enforcing each other’s choices
because everybody is pursuing a common value proposition, a common
way of gaining competitive advantage.” (4)

Technology and Strategy

Technology is not a ‘magic bullet’ that will instantly transform an organization and
remedy all cultural impediments to change. There is no substitute for traditional
forms of communication such as briefings, conferences, webcasts, seminars,
workshops and other forms of meeting (both formal and informal) in order to
communicate the strategy and make it relevant for a particular part of the
organization. Employees and their managers need to know how the strategy
affects them, what they might be doing differently and how they will be measured
and rewarded. Failure to recognise and embrace the cultural aspects of
performance management is courting disaster.

Scorecards

Once the messages are broadly understood this needs to be followed up with the
use of scorecard technologies. These are central to strategic alignment as they
bind the users to the strategy itself, presenting them with those aspects of the
strategy map (objectives and performance indicators) that are relevant to their
role, department or division. They provide a method of visualising the key
measures of performance, their direction (performance getting better or worse),
key responsibilities and what actions are being taken. As such, scorecards make
users strategically aware, with a precise understanding of how their actions or
inactions affect the achievement of the strategy.

Some sense of the importance of scorecard technology and how it can assist
strategic alignment can be taken by considering the example of a commercial
aircraft in which the passengers have access to the same information as the
flight deck. Individual televisions display the aircraft’s position on a map, its
height, speed and displays important messages about safety and key activities.
Effectively, flight crew and passengers are strategically aligned – there is a
common understanding of the destination, how far the journey has progressed
and each person’s role in helping to get there on time. Cooperating with the flight
crew during on-board activities such as being seated quickly, storing their hand
luggage, returning to their seats when requested and cleaning up the seating
area at the end of the flight, all contribute to an on-time arrival. A safe, on-time
arrival is the mutual objective for crew and passengers alike. Although this
analogy is simplistic it serves to underline the essence of strategic alignment -
which is communication.

Fujitsu Services OY uses scorecards to promote strategic alignment

Fujitsu Services OY provides information technology (IT) services in Finland,

assuming full responsibility for its customers’ IT and infrastructure and their
enterprise applications. The company, which employs 2,300 people decided to
implement a scorecard system in its banking and insurance services businesses
for several reasons.

Prior to the implementation of the scorecard system the organization’s strategy

and objectives were viewed as being too abstract. There was a need to
communicate the strategy to everyone simply and clearly as well as the
requirement to ‘translate’ strategy into operational terms. By having appropriate
measures at different levels of the organization, systematising the existing
scorecard process and providing data more frequently it was considered possible
to more readily understand cause and effect between measures and align the
organization more completely around its strategic goals.

Supported by senior management, the scorecard methodology followed a

tailored version of the Kaplan and Norton Balanced Scorecard framework. Fujitsu
track around 20 measures but report only those that are crucial to the strategy on
executive scorecards. Of the measures being tracked, 40 percent are financial,
40 percent are non-financial and 20 percent are mixed.

Fujitsu executives review six to ten performance measures which are considered
vital to understand the status of the overall organization. These measures are
consistent with the organization’s annual and longer-term goals. The system
enables the same measures to be reported at the level of individual managers,
divisions and major accounts and these are linked to employee reward and
compensation schemes.

Fujitsu believes that the scorecard system has driven performance improvement,
achieved sustainable alignment throughout the organization as it has grown and
supported better communication of its strategy to its employees. This enhanced
understanding has resulted in more strategically aligned and rapid decision
making together with a more responsive organization. (6)

But scorecards are a means to an end – not an end in themselves. Many

organizations are littered with failed scorecarding projects because they are
divorced from strategic intent. They have little purpose or relevance to the
individuals charged with using them and perhaps do not enjoy management
sponsorship and support.

Failures also occur because the roll-out of the project uses inappropriate
technology. The scorecarding approach needs to be an integral part of the wider
performance management platform so that the data required to populate the
scorecard, is consistent, meaningful, accurate and available on demand. These
objectives cannot be met by a series of disconnected spreadsheets no matter
how appealing the initial design of the scorecard may look.

However, scorecards as part of an integrated performance management platform

provide an invaluable method of supporting change in the organization. The
precise strategy methodology employed, for example, the ‘Balanced Scorecard’
or ‘6-Sigma’ is a matter of personal choice for an organization. In general the
available scorecard technologies are highly adaptable and support all of the
leading scorecard methodologies.

The usual way of depicting performance metrics on a scorecard is to use a grid

style layout together with icons, such as colored arrows, or other user selected
icons to denote the status of performance. Whereas the emphasis of a
dashboard is to instantly communicate performance for a limited number of
measures in an eye catching way, the scorecard is designed to promote deeper
enquiry and analysis.

The exact layout of the scorecard is usually user definable and can normally
draw on the full multidimensional capability of the underlying database. In this
way it is possible to look at different performance measures, in different time
periods and for different slices of the organizational hierarchy and other
dimensions. It is also possible to review historic performance of say, actual
against target for any given measure as a graphical display.

But performance management is about gleaning insights into future performance

and guiding decision making rather than simply looking at historic performance
through a rear-view mirror. In the first instance, the scorecard should enable
users to monitor the status of the objectives and current performance by
highlighting under or over achievement and on target performance, but the
challenge is then to determine what is driving current performance and what can
be done to deliver above target performance or bring below par performance
back on track. Scorecards typically make extensive use of threaded discussions,
annotations, and attachments to record discussions and document supporting
initiative progress.

The drill-down capability of a scorecard system enables the user to follow KPIs
down the hierarchical organizational structure revealing the performance
contribution made by business units or individuals lower down the tree. It should
also be possible to drill across the hierarchies to look at performance in different
dimensions. It is important that a scorecarding system provides visual cues,
flagging where acceptable performance at one level may be masking poor
performance lower down the structure.

Crucially, during drill down a scorecarding application should show the

interrelationship between the performance indicators and other measures such
as projects, goals and objectives and start to form a view about how performance
in one area is affecting performance in another. Also typically, data is not
refreshed frequently as most organizations to not monitor strategy on a daily
basis, but rather a quarterly, half-year or annual basis.

The insights gained through scorecards and the explicit relationship between
different performance measures derived from the strategy help to ensure that
users understand exactly how their goals support the corporate strategy and how
their decisions affect its execution. Scorecards are widely acknowledged to be
the best vehicle available for helping organizations communicate and execute on
their strategies.

Dashboards

There is no firm delineation between Dashboards and Scorecards. Both are

capable of being used in a wide variety of contexts and for example, a dashboard
can be employed on a tactical and operational level as well as a strategic level by
shifting the metrics to suit the organization at different levels of the hierarchy.
Similarly, dashboards which are generally regarded as a window on historic
performance can complement the delivery of strategy.
One main principle behind a dashboard is that it should be easy to understand so
that users have immediate visibility of the KPIs relevant to their role and function
and can assess instantly whether performance is on target or within an
acceptable range.

A dashboard is often likened to an aviator’s instrument panel or ‘head-up’ display

of key data such as altitude, fuel and compass bearing. In effect a handful of
measures tell the pilot how he is performing and, by inference, what remedial
action needs to be taken to keep the mission (operational performance) on track.
All measures on the dashboard are only relevant to the execution of the current
mission but do not indicate the importance of the mission (as would a scorecard).

Dashboards make extensive use of familiar dials and charts that colorfully
convey the status of performance at a glance, rather like the fuel gauge in a
motor vehicle. Like a strategy map, dashboards often make generous use of
color, “traffic lighting”, to denote good (green), amber (acceptable) and red (bad)
performance. The criteria that determine what constitutes good, acceptable and
bad performance are normally completely user definable. Typically, performance
bands can be established for whole companies or defined uniquely so that
individual employees can set their own personal targets within the overall
boundaries defined by the company. The exact information shown on a
performance dashboard is usually a matter of choice. An organization, for
example, can decide whether performance should be measured at the level of a
product / customer, activity or project and may choose to display KPI targets or
actual, current performance and status, i.e. below, above or on target. Similarly,
performance dials can usually be viewed for different time periods. Typically,
dashboard data is refreshed frequently to enable fast tactical adjustments and
does not include much textual explanation.

Dashboards provide an intuitive and accessible window on current performance

and are therefore highly suited to tactical decisions and managers that are
uncomfortable with tabular information and spreadsheet style grids that pervade
most information systems. The ability to view current performance at a glance
and to increase understanding of variances by navigating to underlying data
makes dashboards an invaluable aid to tactical decisions.
However, by using dashboards and scorecards in the same performance
environment an organization can encourage both strategic alignment
(scorecards) and better operational analysis (dashboards). Ultimately, both of
these can be used to inform and trim strategy as and when needed.

Summary

One of the greatest management challenges of the 21st Century is guiding large
and complex organizations towards their goals. Value creation, whether
expressed in shareholder value terms or delivery of services in the public sector
can only be assured if strategic intent flows uninterrupted from board room to
shop floor. In this way individuals feel empowered to make decisions, confident in
the knowledge that their actions are aligned with the overall goals of the
organization.

Communication is at the heart of strategy delivery. A clearly articulated message,

accompanied by succinct and relevant performance measures provides the
baseline which nurtures and supports the desired management behaviours.

Technology plays a vital role in visioning the strategy and communicating it

throughout the organization as part of a broader performance management
regime. In complex environments strategy maps help management describe the
performance framework, articulate performance measures and ensure
consistency across the enterprise while integrated scorecards popularised by
Robert S. Kaplan and David P. Norton, have proved invaluable in communicating
the essence of strategy across an enterprise in an engaging and relevant way.
Closely coupled to budgeting, planning and reporting applications, the full
panoply of modern performance management systems provide a robust platform
for sound decision making at both a tactical and strategic level.

Ultimately, for executing strategy, dashboards and scorecards are

complementary tools. Dashboards typically help you to understand and manage
tactical operations while scorecards help you to understand and manage
strategy. Great companies do not just happen by accident. Research shows that
those which are able to ride the challenge of strategic alignment create long term
greatness not just temporary success.(5)
Bibliography

• The Strategy Gap, by Michael Coveney – John Wiley & Sons 2003
• Performance Dashboards, Measuring, Monitoring and Managing Your Business,
Wayne W. Eckerson.
• Drive Business Performance, Enabling a Culture of Intelligent Execution, Bruno
Aziza & Joey Fitts
• Professor Michael E Porter, Harvard University, HBR Interview, The Five
Competitive Forces That Shape Strategy
• Details in Beyond Entrepreneurship, Turning your Business into an Enduring
Great Company, Prentice Hall. New York 1992
• Scorecard Best Practices. Raef Lawson, Toby Hatch, Denis Desroches. Copyright
2008 John Wiley & Sons. Inc. Reprinted with permission of John Wiley & Sons,
Inc.

Leading author

Gary Simon Group Publisher of FSN and Managing Editor of FSN Newswire.

Contributing authors

Toby Hatch, Consulting Solution Specialist, Oracle

Nigel Youell, Director – Product Marketing, Oracle

The authors would like to thank Hitachi Consulting Corporation for their
contribution to the HSC case study contained in the whitepaper

About FSN

FSN Publishing Limited is an independent research, news and publishing

organization catering for the needs of the finance function. The report is written
by Gary Simon, Group Publisher of FSN and Managing Editor of FSN Newswire.
He is a graduate of London University, a Chartered Accountant and a Fellow of
the British Computer Society with more than 23 years experience of
implementing management and financial reporting systems. Formerly a partner in
Deloitte for more than 16 years, he has led some of the most complex
information management assignments for global enterprises in the private and
public sector.

Oracle
Oracle is the leader in Enterprise Performance Management (EPM), unifying
Performance

Management applications and Business Intelligence (BI), supporting a broad

range of strategic, financial and operational management processes. Oracle
provides a complete and integrated system for managing and optimizing
enterprise-wide performance. This enables organizations to achieve a state of
management excellence, which provides competitive advantage and leverages
their operational investments.

Hitachi Consulting Corporation

As Hitachi Ltd.’s (NYSE: HIT) global consulting company, with operations in the
United States, Europe and Asia, Hitachi Consulting is a recognized leader in
delivering proven business and IT strategies and solutions to Global 2000
companies across many industries. With a balanced view of strategy, people,
process and technology, we work with companies to understand their unique
business needs, and to develop and implement practical business strategies and
technology solutions. For more information, call 1.877.664.0010 or visit

CGM partners with your organization to implement a system that extends beyond basic
measurement. Our methodology for performance management establishes a communication
and feedback mechanism for aligning the organization’s activities with the strategic plan.
We guide management in deploying resources towards achieving results charted out in
the strategic planning including institutionalizing the results through business process
improvement (BPI).

CGM uses three principles to conduct the business process engineering methodology. The result
is a high performing team, executing on a sound decision making process: Focused,
Consistent, and Efficient.

Our three BPI principles:

• Know Your Business - Benchmark your current business processes.

• Create an Agile Business - Apply techniques to optimize sustainable processes.
• Iterative Methodology - Effectively implement new processes and proactively report
progress.
Performance Management is the process by which an organisation sets objectives, plans,
monitors progress and takes action to maximise business results that align to its BI strategy.
It allows customers to monitor, analyse, and plan their business as well as drive alignment,
accountability, and actionable insight across the entire organisation.

Business executives can drive accountability and alignment across and up-and-down the
organisation, while information workers can monitor, analyse, and plan activities with an
integrated and collaborative solution. IT managers can drive better adoption and compliance
by enabling organisations to intuitively associate business intelligence and corporate
performance.

Microsoft® Office PerformancePoint™ Server 2007 provides all of the functionality that is
needed for performance management including scorecards, dashboards, management
reporting, analytics, planning, budgeting, forecasting, and consolidation.

The application reaches all employees, across all business functions. Decision-makers need to
drive performance by accelerating business decision making, while adapting to changing
business conditions and enforcing corporate governance. PerformancePoint Server 2007 allows
the organisation to build reliable plans faster and execute against them by aligning and driving
accountability across business operations.
Performance Management Courses
Successfully managing people creates business success.

Specific skills and approaches are required to achieve this performance and yet
“Performance Management” is a phrase often reserved for team members performing
badly or the annual review. In fact, Performance Management is a powerful and effective
toolkit of skills that is essential to success.

Equip Learning presents a modern strategy for Managing Performance by linking the
steps required into an effective process and developing the skills and approaches
required.
The Performance Management Suite

This set of courses delivers a powerful opportunity for managers to develop Performance
Management skills.

Our core course Performance Management Toolkit provides a foundation

understanding and covers the essential skills and approaches required. This course can be
completed as a powerful stand alone module or it can be completed with other modules
from the suite to provide an in depth programme.

The remaining courses in the Performance Management Suite build on this foundation
by focussing development on specific areas.
The Performance Management Suite Courses:

REVIEW AND FEEDBACK

COACHING

OBJECTIVES AND TASK SETTING

TRAINING

RECRUITMENT

Performance Management Toolkit

This course provides a practical approach and structure for managing and improving team
performance and develops the skills and approaches required to achieve this successfully

It is a course that shows how to turn performance management into an everyday job – to
improve performance – every day
The course takes a toolkit approach, providing lots of ideas and practical help, whilst the
structure links Performance Management together in a compelling way.

A Great Start – Effective Recruitment and Training

Great performance starts with the bedrock of effective recruitment and training. Getting
this wrong will limit performance and make a manager’s job harder. Getting this right
will support good performance that is achieved sooner and with better retention.

Coaching Skills for Managers

Team members need support, encouragement, feedback and monitoring on a regular basis
in order to perform. The best teams are not the ones that are left to get on with it but the
ones who are coached to perform.

This course is designed to help managers perform in their role as Coach.

The Successful Appraisal

Appraisals often get bad press and can be viewed negatively both by managers and team
members. However, they are an essential part of effective management and offer the
potential to help, not hinder performance. This course helps you to get the most out of
them.
Performance Management gift image 1 - search ID
forn476

Performance Management gift image 2 - search ID

forn330

Performance Management gift image 3 - search ID

forn477
Performance Management gift image 4 - search ID
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Performance Management gift image 5 - search ID

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The Scottish Government

Publications
Wednesday, December 15, 2010

Defining Enabled and Empowered - It's not just what you do, but the way
that you do it.

Just as 'competent and confident' has broadened our understanding of 'training

and development', the terms enabled and empowered will help to separate out
and develop our understanding of leadership, and organisational culture and how
this influences performance and motivation.

Enabled and Empowered are best considered as two sides of the same coin.

To enable is to provide the means for a member of staff to do the job. This
means:

• Defining the task or jobs to be done;

• Defining the role of the worker;
• Defining the structures, policies and procedures;
• Getting the 'back room' supports running smoothly;
• Ensuring the worker has the necessary knowledge and skills;
• Ensuring the worker has the right tools and equipment;
• Ensuring the worker has access to appropriate resources;
• Ensuring the worker has supervision and feedback on performance;
• Ensuring fair employment and reward strategies;
• Ensuring reasonable workloads.

To empower is to give staff the freedom and authority to use their skills,
knowledge and experience to find the best way to achieve a particular task. This
includes:

• Trusting workers to exercise professional judgement and to take responsibility for

decision-making and problem-solving;
• Trusting workers to be responsible for balancing work requirements and lifestyle
commitments;
• Trusting teams to solve problems, allocate work and maximise flexibility;
• Supporting staff and helping them to learn from mistakes and misjudgements;
• Welcoming challenges to the status quo and rewarding innovation and creativity;
 • Building belonging and ownership; involving workers in service planning and
review, in organisational design and development and in decision-making.

Enabled workers can do what they have been told to do but empowered
workers do what needs to be done and reflect on how it could be done
better next time.

Enabling without empowering is likely to cause frustration. Workers may feel

reined in and constrained to 'do things by the book'. This will stifle innovation and
creativity and is likely to lead to staff performing at a level that is 'good enough'
rather than excellent. There is likely to be a 'them and us' attitude between staff
and managers and highly motivated, high-performing staff will move to
organisations that afford them greater influence and responsibility.

Empowering without enabling is dangerous. Leaving people to get on with it is

not the same as empowering them.

Enabling and Empowering the workforce is more easily achieved when the other
components have been addressed; that is when the workforce is competent and
confident, safe and healthy, and when diversity and flexibility are valued and
positively promoted.

The following story (see page 24) presents a negative scenario to highlight the
issues around enablement and empowerment and to generate a problem-solving
approach.

Empowerment is generally explained in terms of allowing employees greater

freedom, autonomy and self-control over their work, and responsibility for
decision-making. (1)

Empowering is akin to delegation but goes much further; it is not just about
delegating responsibility but also power. Empowerment can take a number of
forms. Consider the following: (2)

Empowerment through participation: for example, the delegation of decision-

making which in a traditional organisation would be the domain of management;
Empowerment through involvement: for example, when management's
concern is to gain employees' experiences, ideas and suggestions.

Empowerment through commitment: for example, through greater

commitment to the organisation's goals and through improved job satisfaction.

Empowerment through de-layering: for example, through reducing the number

of tiers of management.

Enabling and empowering individuals and teams to have greater autonomy

cannot happen in isolation. To ensure that service delivery is never
compromised, and service users' safety and wellbeing remain the priority, a
range of checks and balances are necessary. The prerequisites for effective
empowerment are: having a competent and confident workforce; having a safe
and healthy workforce; having a diverse and flexible workforce; and defining and
monitoring appropriate leadership and management styles and behaviours.

See the section on Management and Leadership for further discussion on this
topic.

A story that paints a picture

Shona, Margaret and Brian are home care workers. They are concerned that
they have little or no back-up from managers when out doing their work, and this
is not just when they are working out of office hours. They don't have mobile
phones, and they waste a lot of time going from phone box to phone box in
attempts to raise management support. They are fed up and frustrated being told
'someone will ring back' or 'ring again in 5 minutes', but don't.

They tell of being directed to new clients without any background information on
the circumstances or needs of the individual, often to find that the service user
has dementia, nursing care requirements or mental illness. They feel it is ironic
that they are left to use their own wisdom and discretion in these circumstances,
but in the normal run of things, they are not invited to contribute to care plans,
reviews or assessments. They feel they are kept on too tight a rein to deliver to
prescribed plans, within tight timescales, without any opportunity to influence
individual care packages or the way the service is delivered. Brian was told that
'confidentiality' prevented him from having access to information about service
users.

Sharon and Margaret have never had supervision or been involved in a team
meeting where they could share concerns or offer ideas for change and
improvement. Brian has had one or two sessions in the past 12 months but they
are ad hoc and used mainly to 'give' information on changes that are happening.

All three talk of going home 'with a knot in their stomach' because no one
responded to their request for advice and support. Sometimes they go home
deeply upset because a service user has died, especially if they were the one to
find them. They wish there was time to have a cup of tea and a talk with a
manager, or a colleague when this happens, but they usually just have to get on
to the next service user.

Quite often they go home feeling they haven't been able to do a good enough job
and sometimes their ears are ringing from the criticism, often anger, of service
users or their families; they feel they take the brunt of resource issues they have
no control over.

While 'making a difference' to people's lives had brought them into the service
and provided reward, many realised that they were afforded more influence over
the job, and the hours of work, at the local supermarket; and the pay was the
same.

Shona, Margaret and Brian have put together a report to demonstrate how they
would like to improve the service, and improve their working lives. Their
innovation and creativity is well matched by a realistic awareness of resource
constraints, and recognition that teamwork and partnership working could let
them make a bigger whole out of the parts. They are keen for greater delegated
responsibility as individuals, and as teams. They want to know why they can't just
get on with it.

Why can't they? What would be the barriers to allowing this team to have
more control over the workload and how it is addressed?

Just a Minute:
1. Put a mark on the following continuum to represent your own current position
or style of leadership; put another mark to represent what you consider to be the
ideal position for 21st Century Social Work and Social Care Services.

2. Where would you place your line manager and senior managers?

3. What impact might a wide variation of positions have on the effectiveness of

leadership and change management? How can this be addressed?

4. What are the barriers to greater empowerment of the workforce?

1. GOOD BEGINNINGS... AND ENDINGS

Getting off to a good start:

Enabling and empowering starts at the job design stage; the way that tasks and
responsibilities are delegated and how this particular post fits within the service
or organisation as a whole, will set the scene. The same is true of when it comes
to specifying the skills, experience and qualities of the individual required.
Developing Job Briefs and Further Particulars in addition to person specifications
and job descriptions can help to tell it like it is.

Would-be employees will be looking for language that tells them clearly what is
expected of them, and how they can use their skills and energy to best effect.
They will also be looking at how this post will reward them, provide further
development opportunities, and where it might lead them in terms of career
progression. They will want to see evidence that you value diversity and respect
their work-life balance needs.

Recruitment and safe recruitment practices:

Getting the right people in the right job is an art and a science and is worth taking
time over. It is costly in financial and human terms to get it wrong. Much has
been written about safe recruitment practices in social work and social care and
guidance on methods of selection are plentiful. Where they work closely with
operational managers, dedicated H.R. staff can do much to advise, guide and
support the process.

A safer recruitment toolkit is available from the Scottish Recruitment and

Retention Consortium. (3)

Just a Minute:

1. Are you confident that job titles, descriptions, person specifications and job
briefs truly reflect what is required of the role and the individual? When a
vacancy arises, do you check out with the team whether the post, in its current
form, is still valid - or if a different role and set of skills improve the service?

2. Are you confident that selection methods are effective and are regularly
reviewed? Are you concerned about the resource implications of doing it
thoroughly? How can you make progress?

3. Do H.R. managers and staff work well with operational managers and staff to
make the best of both sets of skills and knowledge? If not, how can you improve
this? Would you consider shadowing each other for a day or two?

diagram 2. A closer look at some Key Components of an Enabled and

Empowered Workforce
In the next sections we will consider each of these components in turn: however,
the key to success lies in keeping addressing all the components simultaneously,
a bit like spinning plates.

1. Good Beginnings and Endings: recruitment practices; induction; supervision;

continuing professional development and exit interviews

2. Rewards: everything a person gains by working

3. Workloads and Backroom Systems: behind every good front line worker there
are processes, people and equipment behind the scenes making it happen!

4. Leadership, Management and Organisational Culture: 'how we do things here'

5. Performance Management: how we know we are doing the right things well

6. Work - Life Balance: a critical factor for staff support, performance and morale.
Induction:

The quality of induction will influence the new recruit and the speed at which they
are able to become a fully operational member of the team. If it goes wrong in the
early days it can be hard to retrieve and the confidence and competence of the
new worker will suffer. It's worth the effort to get it right. Induction is a two-way
process and needs to be tailored to the needs of the individual. A policy and
procedure are clearly essential, but this just provides the framework on which to
write an individual plan. In this respect it is a bit like undertaking a person-centred
assessment and developing a care plan; it's the same and yet different for
everybody.

The starting point for induction is often the job interview itself. At the end of the
selection process there will be a great deal of information about the new recruit's
background, skills and experience, and also the areas in which they are less
competent and confident. Setting a date for a continuing professional
development session ( CPD) in the first week will enable this to be explored and
an action plan developed. It will also help the manager to allocate work and to
decide on the need for supervision and support. Knowing that areas for
development have been identified and those areas of weakness or inexperience
have been recognised, should boost the confidence of the new worker and
remove any fear about shortcomings being discovered. This is a learning
approach in action.

Supervision:

Supervision in social work is a crucial aspect of professional development and

workload management. There is already a wealth of information on this topic and
it would add little to explore it within this framework document. It is however
important to make the link between supervision and performance management
which is addressed elsewhere in this framework. One-to-one supervision is the
means of assessing individual performance and assisting future development; it
ensures that the performance of an individual worker is connected all the way up
to the strategic plan. It's a bit like Russian dolls with the individual worker at the
centre.
Exit interviews:

These tell us why people left and what they thought about the job and the
organisation. They can be very informative tools and some organisations even
encourage members to do 'mock' exit interviews as a way of finding out how
satisfied they are at work and whether the actual job still matches its description.
If the supervisory relationship has been positive the exit interview should hold no
surprises but it should provide an opportunity to reflect on the wider picture
without the pressure of day-to-day matters. There is much to be learned from
aggregating information from exit interviews and looking for common issues and
patterns. Sometimes exit interviews can get lost between the operational
manager and the H.R. department and that analysis is never undertaken.

Just a Minute:

1. Are you confident about the way you manage induction? What evidence is
there that new recruits have a good experience?

2. Are you doing exit interviews, and are you asking the right questions? Are
there arrangements in place to aggregate and analyse findings from exit
interviews and do you use this information to make changes?

3. Are there working relationships between operational managers and H.R.

teams and do you help each other to monitor and evaluate recruitment and
selection processes?

2. REWARD - EVERYTHING A PERSON GAINS BY WORKING

Reward is a complex issue; it is not just about pay. There is a wealth of research
that supports the view that for many people, money is not the main reward from
working. For some people time is more important than money and they would be
more interested in working for employers who offer more holidays and greater
flexibility on how that leave can be taken. Others will look for an employer that
will invest in their future development and will sacrifice pay for the opportunity to
undertake qualifying training. For many it is the intangible rewards that make the
difference; being valued and praised and given recognition for long service or
particular achievements.
Richard Branson pays some of the lowest salaries in the industry and yet his staff
are very talented and loyal. The company's success in its field is down to his
management philosophy where all staff feel valued and he is just as interested in
a flight stewardess's opinion as he is in his Marketing Director's. Branson
believes successful people management is about inclusion and Branson works
on making all his staff like a team where each is valued not only for fulfilling their
job remit but for contributing to the development of the business as a whole. (4)

However, there is also a considerable body of evidence that when there is a

sense of unfairness or injustice about pay it zooms to the top of the agenda and
will prevent employees from seeing the 'other' rewards that are provided.

Historically, local government has had nationally negotiated pay and conditions,
with some local flexibility. Some social workers' grades together with those of
staff working in the residential sector and nursery nurses have been determined
nationally while those of other staff have been determined locally.

Since the Single Status Agreement of 1999, almost all pay and terms and
conditions are subject to local negotiation. The intention of the Scottish Joint
Council in implementing the Agreement was to recognise local variations and to
enable each employer to design jobs and structures to suit their local
circumstances. Employers can offer reward packages that reflect the local
market and fit in with the overall pay model within that authority, as well as
addressing the pressing issue of equal pay. Some parts of the sector remain of
the view, however, that local flexibility has led to unhealthy competition amongst
authorities.

This view should be considered alongside the concept of the total reward
package. There is a whole branch of human resource management devoted to
reward management and a wealth of research on the impact of different types of
reward on performance and motivation. In many industries and work groups
reward packages can include things like bonuses, shareholding, private health
care, child care and assisted travel. In the public sector the situation is simpler,
but here too it is necessary to consider a flexible approach to reward that
recognises the diversity of the workforce and the need for people to achieve a
healthy work-life balance.

It might help to simplify the complex issue of reward if we consider three main
areas of 'gain' that employment can bring: financial security, career and status.

Just a Minute:

1. What 'rewards' are most important to you?

2. What might other members of your team consider to be most important?

3. Are you aware of any differences in attitude to working patterns and rewards
between different age groups, different work groups and roles?

4. How can you test this out? Do you think that rewards and working patterns are
flexible enough to respect the diversity of the workforce? Who determines the
reward strategy in your organisation?

table 3. What a person gains by working for a good employer

CAREER &
FINANCIAL AND
STATUS AND VALUE PERSONAL
SOCIAL REWARDS
FULFILMENT

• Continual
learning
• Pay
• Recognition • Career
• Pension
• Value progression and
diversity
• Benefits and
• Public Support
Allowances
Personal
•
Achievement
This can be achieved by: This can be achieved This can be
by: achieved by:
• personal supervision
• long service awards • sickness, paternity • CPD
• achievement awards and maternity • qualifying
• praise and thank you's allowances training
• care accolades or other sector • flexible working • career pathways
awards and family • job swaps
 friendly policies
• flexible leave
arrangements
• sabbaticals
• workplace child
• developing a positive public care or child care
profile of the service and vouchers
profession that lets people be • subsidised
proud to be part of it qualifying
• mentoring and
• developing a sense of identity training
coaching
and belonging • subsidised I.T.
• making people feel that they equipment and
• delegation
matter training
• subsidised leisure
• enabling and empowering facilities
leadership and management • free financial
advice and
guidance
• wellbeing at work

healthy workplace
•
3. WORKLOADS AND BACKROOM SYSTEMS

Workload: Having a manageable workload that allows time for a job to be well
done are high on the list of desirables listed by staff as characterising good
workplaces. In times of high demand and high vacancies it is a key factor in
people to deciding leave their posts and look elsewhere. Meeting service
demand with finite resources is a major challenge in the care services and most
people who enter through the doors know what to expect.

Quote from a home carer:

'I feel guilty that I don't have enough time to spend on each service user; I know
they would love me to stay and talk, but I just can't or I am taking someone else's
time away from them'.

Quote from a Manager:

'I know what I should be doing to be a good manager and leader; I recently did
the Leading to Deliver course and I want to implement what I have learned; my
manager is supportive and we do what we can, but there is simply not enough
time to put it into practice'.

Workload Management / Measurement Systems:

It sometimes feels like the search for the Holy Grail. Does anybody out there
have the ideal system or format? Many attempts have been made to weight
caseloads, determine the ideal number of cases, and account for the activity that
takes place but to date there is no particular model that has excelled to the point
of being promoted widely.

This does not mean that people don't know when 'enough is enough'; it's just a
matter of finding the right way to measure and quantify it.

Sorry, but this framework document is not going to provide an ideal model either.
But what it will do is see what can be learned from other sectors and try to unpick
everything that goes in to make up a workload; note, not caseload.

The actual workload, or service demand, is just part of the picture; how tasks are
delegated and the supports that are available to front line staff will influence the
amount of direct work that can be undertaken; a review of backroom roles and
responsibilities might assist.

Getting the Backroom Right:

Modern public service is centred around putting the needs of the service user
first. The intention is that services, assisted by technology and e-government, will
be smooth, seamless and joined-up at the point of delivery; the service user must
see only the swan gliding on the surface, not the frantic paddling of feet below
the water.

Could the same apply to supporting front line staff?

The drive is to increase the amount of time front line staff spend with service
users, and to reduce the bureaucracy; this means having backroom systems and
processes that are well thought-out, well resourced and fully integrated with the
overall service aims and standards.
All too often the backroom makes more demands on the front line staff than it
does to service their needs. The result is that what should be in the 'backroom'
often gets between the front line worker and the service users, whether this is in
paperwork, time wasted in sorting out logistics, time wasted finding someone to
make a decision or approve resources, or failure to provide the necessary
equipment such as mobile communication systems. The upshot is pressure on
staff, and delays for service users; sometimes it spills over into the relationship
between the two.

Just a Minute:

1. How long is it since you had a good sortout of backroom processes and
routines?

2. Is the development of new technology freeing up administrative staff to take

on more front line staff support, or logistic tasks?

3. Are there regular and robust arrangements for administrative staff to

contribute to review and planning?

Quote from a front line staff member:

'It's not the service users that wear me down, it's constantly struggling to get the
right paperwork done, to get the right decisions, to get the right resources, to get
management time to discuss and agree; and sometimes it's just the amount of
time I waste organising taxis, finding venues for meetings and contact'.

What's the Problem?

Why do these backroom problems arise?

Sometimes it's simply a resource problem, sometimes it is because there is a

clash of policies or demands; the need to meet competing personal,
organisational and service user needs presents a serious challenge. In common
with other workgroups and industries, it might just be because we don't question
why 'we keep on doing what we do in the way that we do it' so we 'always get
what we always had', despite the changes in expectation about service delivery.
Information from best value reviews where these fundamental questions were
asked, suggest that many administrative staff are equally frustrated. With modern
administration qualifications this workgroup are well positioned to be logistic
experts and to re-think the backroom operations; but all too often they were
working to outdated job descriptions that said ' team clerk' or 'clerk typist'. Some
do it anyway, without due reward and are often worried that they will be told off
for acting above themselves. Some speak of the frustration of watching busy
social workers waste time doing tasks that don't play to their strengths:

' I watched three different social workers order three separate taxis from the
same company, for the same destination within an hour; they all got different
price quotes. I would like to help, but I don't have the authority'.A team clerk

LOOKING FOR HELP:

A social worker writes to a Community Care Career Helpline:

Question:

I'm a front line worker in children and families and for the past year have found
my caseload almost unbearable. I've always got more on than I can manage and
it's really getting me down. I love the job itself and like my colleagues - the
problem is that there aren't enough of them. Despite several recruitment drives,
we never have a full team, so everyone else is in the same boat. I've tried talking
to my manager about this but she is also overworked and stressed and it always
ends up with her whingeing about her own workload. I don't want to leave but
can't carry on like this.

Answer:

Leaving is always an option but it doesn't sound like you are in the best frame of
mind to make a balanced judgement about another post or employer; you could
be jumping from the frying pan to the fire. It might be better to wait until you have
time to take leave and are in a more relaxed and objective frame of mind.

Leaving may not be the answer; in your current post you seem to have a good
team of colleagues around you and attempts are being made to recruit. Although
it may take up even more of your hard-pressed time, you could look at ways of
improving the situation in your current post. This could just pay dividends, and if
not at least you will have the satisfaction of having taken a problem-solving
approach.

1. Define the problem more clearly:Is it the caseload or the workload that is
too high? Perhaps you are spending time on tasks that could be done by
someone else? Perhaps you could review the scope (or care plans) for each
case to something that is realistically achievable.

2. Communicate the problem, and your proposed solutions, more effectively.

Talking to a stressed and busy manager, particularly if you are emotionally
charged, is not likely to be successful. Prepare a short report for your manager
outlining your findings and your suggestions for reducing the workload. Use
language that is positive and solution-focused.

3. Share it with the team.Encourage others to follow your lead, and work to
produce a well-evidenced, coherent team report. Involve your manager if
possible and avoid a 'them and us' divide. Managers need hard evidence to
present to the next management tier.

4. An alternative would be to prepare an 'exit interview' report for your next

supervision session outlining why you would want to leave this post and what
would need to change to make you stay.

diagram 3. Behind the Face to Face Contact

Regardless of the number of cases or tasks, workers need to invest in
connections and partnerships and in their own continuing professional
development. Some of the administrative tasks will also be fixed where these are
related to time management, diary planning, maintaining statistics and
employment-related correspondence.

How often is the time needed to do these 'other' tasks taken into account?
Probably rarely; if we did there would be copious material on formulas and
benchmarks.

Perhaps the time is right to try and quantify the time needed to address the
preparation time and prerequisites in a more formal structured manner.
Preparation and Prerequisites:

In addition to back room administrative requirements, front line workers have a

range of time tasks and activities to complete before they even meet a service
user. Some of these are to ensure that they remain a competent worker, others
to ensure that they are up to date on policy and procedure, others to maintain
networks and contacts, and others to prepare for working directly with individual
service users.

The following model attempts to capture all that goes on to support direct contact
between social care staff and service users: it may not directly reduce the
problem but there should be some comfort in recognising the pressures and
celebrating all that is achieved despite constraints.

4. MANAGEMENT AND LEADERSHIP

Warning! Management and Leadership are vast subjects that can only be
touched upon in this document; the intention is to challenge your thinking, help
you work out what you already know and believe, and what you need to develop
further. The approach taken and the material quoted is in keeping with the
content of the Scottish Executive's 'Leading to Deliver' programme which is
delivered in partnership with the Scottish Leadership Foundation.

Having competent and enabling managers is fundamental to staff wellbeing,

motivation and satisfaction. It's a fact; the literature, research and evidence is
weighty. When it comes to determining what makes a good manager and leader,
the pool of knowledge and evidence widens further.

A survey of more than 2000 workers across the social care workforce, at all
levels of seniority, was carried out by Community Care in October 2003. It found
that having a poor relationship with their manager was the top reason for people
leaving a job (90%) and having poor senior support and advice was the sixth top
(75%). On the positive side having a good relationship with the manager was the
third top reason for staying in a job (89%). (5)
Views gathered as part of the Supporting Front Line Staff Initiative concur with
those expressed in other surveys and research. What people want most from
their managers is:

• availability
• âšwillingness to listen
• doing what they say they will do
• responding in good time
• making decisions and not procrastinating
• telling it like it is; above and below
• being an advocate for the team
• recognising their potential
• trusting them to do a good job but not abandoning them to their own devices.

Some frequently heard comments at Supporting Front Line Staff

consultation events:

'My own line manager is fantastic, she really puts herself out to be there for me;
but she gets no support herself; if it wasn't for her I wouldn't stay'.

'I've only seen the Director in a newsletter and the only time we see other senior
managers is when something has gone wrong and we are in trouble'.

'Senior managers come on a royal visit sometimes, inviting us to meet with them;
but it feels like we are poles apart; we don't understand what they do all day, and
I am sure they don't understand what we do, or at least the daft questions they
ask suggest they don't'.

'My manager won't come out of his room and the door is usually shut; he rarely
asks how I am getting on and when I start to tell him, he just sort of glazes over
and makes 'there there' noises; it makes me so mad I could shake him and I
decide it's better not to bother'.

These examples highlight a mixture of management and leadership issues.

Defining Management and Leadership

Put most simply:

Management: is what managers do

Leadership: is how managers do it

Ask a room full of people to define leadership and expect a host of responses
including: it's a role, a status, a calling, an approach, a personality trait, a set of
skills and behaviours, a set of beliefs and way of being.

Ask them how to define management or management style and some will wax
eloquent on various theories, models and approaches; but there will also be
some head scratching, pondering and admissions that they don't really know, or
that what they do 'is natural', or they haven't had time to think about it. Some will
find it difficult to distinguish between leadership and management. Others will
provide a summary of their organisation's vision for good people management,
based on a set of standards or competencies that define desired behaviours.

Hollingsworth (6) identifies six fundamental differences between leadership and

management:

• A manager manages - a leader innovates

• A manager maintains - a leader develops
• A manager focuses on systems and structure - a leader focuses on people
• A manager relies on control - a leader inspires trust
• A manager keeps an eye on the bottom line - a leader has an eye on the horizon
• A manager does things right - a leader does the right things.

In reality leadership and management overlap and while separating them out
aids understanding, they are two sides of the same coin.

In a paper on Change and the Public Sector, the CIPD(7) suggests that the public
sector needs to undergo a fundamental shift from traditional command and
control styles of management to a high-performance model based on autonomy
and trust. Although this view was based on reliable evidence, many would argue
that leadership in modernised public services is no longer of a command and
control nature.

Which of the following, defined by Likert(8), most closely resembles the

management system where you work?
Exploitative authoritative: Decisions are imposed, motivation is usually based
on threats, there is very little teamwork or communication; responsibility is
centred at the top of the organisational hierarchy. (Low Trust)

Benevolent authoritative: There is a condescending form of leadership,

motivation is based on a system of rewards, there is only limited team work, or
communication; there is responsibility at managerial levels but not at lower levels
of the organisational hierarchy.

Consultative: Leadership involves some trust in subordinates, motivation is

based on rewards but also some involvement, there is a fair degree of teamwork
and communication takes place vertically and horizontally; responsibility for
achieving the goals of the organisation is more widely spread through the
hierarchy.

Participative: Leadership involves trust and confidence in subordinates,

motivation is based on rewards for achievement of agreed goals, there is
participation and a high degree of teamwork and communication; responsibility
for achieving the goals of the organisation is widespread throughout the
hierarchy. (High Trust)

In addition to the prevailing management system, individual managers will have

their own personal management styles and approaches. Look at the following
definitions by Watson (9) and reflect on how much these are true for you, your
colleagues and your managers.

Management as Art, Science, Magic and Politics(9)

Management as Art: Successful managers are those born with appropriate

intuition, intelligence and personality which they develop through the practice of
leadership.

Management as Science: Successful managers are those who have learned

the appropriate body of knowledge and have developed an ability to apply
acquired skills and techniques.
Management as Magic: Successful managers are those who recognise that
nobody really knows what is going on and who persuade others of their own
powers by calling up the appropriate gods and engaging in expected rituals.

Management as Politics: Successful managers are those who can work out the
unwritten laws of life in the organisational jungle and are able to play the game
so that they can win.

A successful manager is likely to be the one who can cover all these bases and
knows when it is most appropriate to use each aspect.

In the social care sector people are often promoted because they are
professionally or technically good and they have good people skills; but this does
not necessarily prepare them for the job of managing in the complex, multi-
faceted organisational structures of social care. New managers often replicate
the attitudes and behaviours of their managers, which may be no longer
appropriate.

So what is appropriate leadership for 21st Century Social Care?

Modern public service requires managers to be good at motivating, influencing,

empowering, negotiating, collaborating and maintaining effective partnerships.

The thrust of this framework document is to recognise that staff are the key to
improved services and that they should experience enabling and empowering
leadership that will maximise:

• diversity and flexibility

• confidence and competence
• wellbeing and work-life balance.

Underpinning all of these are the ten key principles about people management in
chapter three of this framework.

It is about getting the best management and leadership 'fit' for the complexity of
modern social care organisations and the way that the nature of change. It is
about leadership that connects with people at both head and heart levels,
sometimes called emotionally intelligent leadership.
There are many models and theories to choose from, some of more relevance
than others to the public sector. For our purposes here it is useful to consider two
different approaches: transformational and transactional leadership. (10)

A transformational leader aims to change the values of the organisation. This

kind of leader:

• creates a vision of the future

• inspires others by communicating this vision enthusiastically
• encourages others to think afresh and encourages them to question current ways
of doing things
• coaches people to help them be responsible for their own development and
effectiveness.

This kind of leader helps people reach an understanding of the complexity of

issues, and the means to transform their understanding and behaviour. It is about
empowering people to manage change for themselves. It's not far removed from
the notion of 'giving a man a fish and feeding him for the day, or giving him a
fishing rod so he can fish every day'.

On the other hand, more traditional 'transactional' leadership behaviour seeks to

obtain effective performance within agreed assumptions, practices and rules of
the organisation. Transactional leaders plan, organise, direct, co-ordinate, report
and budget.

Transformational Leadership is 'doing the right thing'; transactional

leadership is 'doing things right'.(11)

One of the U.K's leading thinkers on leadership in the Public Sector is Beverley
Alimo-Metcalfe. (12) She has carried out considerable research and the essence of
her thinking is that leaders encompass three broad areas:

1. Leading and Developing Others

• has a genuine concern for their wellbeing and development;

• empowers, delegates and develops potential
• accessible, approachable, in touch
• encourages questioning and critical strategic thinking.

2. Personal Qualities
 • transparency, honesty and consistency
• integrity and openness to ideas and advice
• decisive and risk-taking
• charismatic, in touch
• analytical and creative thinker.

3. Reading the Organisation

• inspirational communicator, networker and achiever

• clarifies individual and team direction, priorities and purpose
• unites through a joint vision
• creates a supportive learning and self-development environment
• manages changes sensitively and skillfully.

This and many of the other ideas and concepts have been taken from a national
'Leading to Deliver' programme funded by the Scottish Executive and attended
by managers from all sectors.

The Leading to Deliver programme covers the key aspects of leadership:

• changing self to lead

• leading for change
• leading to deliver
• leading through effective relationships.

Just a Minute:

1. How confident are you that your management and leadership style is the best
fit for the task, and to manage change? Do you have an action plan as part of
CPD?

2. How well do you score yourself against the Alimo-Metcalfe framework? How
would others score you? How would you score your own manager(s)?

3. How much time do you spend on managing tasks and how much leading
people, or planning to be an effective leader? What can you do about this?

4. Prepare a 30-second commercial in which you convince your team why you
are worthy of being their leader.

5. PERFORMANCE MANAGEMENT
Performance management means different things to different people; to some it
suggests indicators, statistics and spreadsheet; for others it is linked negatively
to performance-related pay or disciplinary proceedings. It's a pity that it often gets
bad press, because it is one of the most supportive tools in the kit bag for
supporting front line staff and managing them well.

Consultation with front line staff across Scotland as part of the Supporting Front
Line Staff Initiative revealed that staff wanted more performance management;
that is, they wanted to know how well they were doing, how they could improve,
and they wanted to be assured that what they were doing was making a
difference. In their words they wanted clear standards and expectations, they
wanted supervision and appraisal and they wanted their CPD needs to be
addressed. They also wanted to know the reasons behind changes to working
practices or services and they wanted to know if they could influence those
changes.

Sometimes in large organisations it is hard for staff to make this connection up

through many layers to the strategy level, and their satisfaction rests with the
approval and confirmation given at middle manager levels.

There are many definitions of performance management, some of them

extremely technical and daunting. The following is a commonly used, and fairly
simple definition. (13)

'The real concept of performance management is associated with an approach to

creating a shared vision of the purpose and aims of the organisation, helping
each employee understand and recognise their part in contributing to them, and
in so doing, manage and enhance the performance of the individual and the
organisation'.

This sounds like a good fit with transformational leadership, enabling and
empowering management and a commitment to diversity; the dots are joining up.

At the Scottish Executive, performance is defined in the following terms:

• Ensure that what we do is guided by our values and is relevant to the purposes of
the organisation
 • Ensure that we are all clear how to demonstrate the skills, knowledge and
behaviours that are expected of us
• Ensure that we are clear what our individual role is, and how we intend to fulfil it
• Link our job roles and individual objectives to the organisational objectives and
priorities set out in the management plan
• Ensure that all managers agree and review objectives, priorities and
developmental needs of team members
• Review performance against objectives and areas of competence to ensure that we
are making the best possible contribution to the organisation's overall aim
• Ensure that all team members receive constructive feedback in order to develop
and improve performance
• Ensure that a thorough review of training and development takes place as an
integral part of the system so that PDPs reflect both business and individual aims
• Ensure that poor performance is identified quickly and support is provided to
eliminate it. (14)

Modern performance management is an inclusive process; it's not just about

checking up on people. It is a multi-dimensional activity and the measurement
varies depending on a variety of factors. It is complex and brings in its train a
whole range of specific techniques and methodologies. There are quantitative as
well as qualitative aspects and yes this does involve gathering a host of data,
measuring it and providing detailed reports. But, as with change management
and project management, much of this work should be hidden from the average
front line worker's eye; it is a smooth backroom process. Perhaps early attempts
at improving performance management at the macro level were rather clumsy
and convoluted and put people off; a bit like over-complicated project
management methodology did for that cause.

A simple analogy is to consider performance management being like a set of

Russian dolls, each fitting in to the other, each important in itself but not complete
until it has formed a whole. It's about layering up, but also ensuring that everyone
knows what they are a part of. The measures and variables get more complex at
each level; the skill is in knowing what to measure on each of the layers, and
ensuring that these are compatible.

You have to define what you expect of performance before you can measure it;
this involves setting standards and determining indicators that will show if you are
en route to achieving them. It's about measuring results, but also the processes
and behaviours that get those results. It is also about measuring what we do
today while planning for measuring what we will be doing tomorrow.

The front line staff member needs to have supervision, both professional and
business, ongoing performance review and CPD. Appraisal is a form of annual
performance review but it too has negative connotations from the past when
perhaps it was top-down, expectations of performance were not clearly laid out,
and feedback was more subjective opinion than fact. There was a scene in a
television drama just last week that showed a worker getting nervous and
anxious about his appraisal. While changing into his best clothes he was
desperately trying to hide what he hadn't done and to think up 'clever lines' to
make up for any shortfall. This is likely to be a million miles from your experience
of appraisal, but these images are pervasive, especially if you remember that is
how it used to be.

diagram 4. The Performance - Management Cycle

This framework does not have the scope to compare and consider the most
effective individual performance methods or schemes. But a few key principles
should underpin whatever process is adopted:

Individual performance assessment is a time to reflect over a given period,

usually a year, and to assess whether the job that they have been doing still fit
with the one on the paper, what and why changes have occurred, which aspects
are more to the fore than others. It is also to consider whether skills and
experience have been adequate, and what CPD has taken place to improve
them. It is to review how this post and skill-set fits within the service plan, and to
highlight changes that may affect services. The time should be divided evenly
between looking back and looking forward. It is a process, not an event.

Performance management at individual and organisational levels share the same

process (see diagram 4).

Using an Excellence Model to manage, plan and deliver services:

A number of public service organisations find The European Foundation for

Quality Management ( EFQM) Excellence Model (see table 4) useful when
assessing current performance and planning improvements. (15) At its heart, the
model is based on the premise that learning and innovation are key to change
and improvement.

A learning organisation needs to look both beyond its organisational boundaries

and review within them. It needs to concentrate on the problems and
opportunities of changing environments, and look at new approaches and ideas
for solving problems. The model identifies:

Enablers - how we do things, and

Results - what we target, measure and achieve.

The model requires self assessment and action planning across eight criteria.

Underpinning concepts:

Leadership and Constancy of Purpose: The behaviour of leaders creates a

clarity and unity of purpose and an environment in which people can excel.

People Development and Involvement: The full potential of people is best

released through shared values and a culture of trust and empowerment which
encourages the involvement of everyone.
Continuous Learning, Innovation and Improvement: Performance is
maximised when it is based on the management and sharing of knowledge within
a culture of continuous learning, innovation and improvement.

Partnership Development: Developing mutually beneficial relationships, build

on trust, sharing of knowledge and integration with partners.

Management by Processes and Facts: Inter-related activities are understood

and systematically managed and decisions concerning current operations and
planned improvements are made using reliable information that includes
stakeholder perceptions.

Customer Focus: The customer, or service user, is the final arbiter of service
quality and provision and services are provided on the basis of meeting current
and potential service user needs.

Results Orientation: Excellence is dependent upon balancing and satisfying the

needs of all; this includes the people employed, service users, suppliers and
society in general as well as those providing the funding.

Public Responsibility: The long-term interests of the organisation and its

people are best served by adopting an ethical approach and exceeding the
expectations and regulations of the community at large.

table 4. EFQM Excellence Model

Just a Minute:
1. To what extent has a performance culture been developed in your
organisation?

2. Is it clear how individual workers' activity and achievement contributes to the

wider strategic plan?

3. Is your attitude to performance appraisal positive?

4. What are the barriers to implementing appraisal in your organisation? How

can you overcome these?

6. WORK - LIFE BALANCE: THE CRITICAL FACTOR

The concept of work-life balance underpins all good staff support and people
management.

The term is used to describe working practices that aim to support the needs of
staff in achieving a balance between their home and working lives.

When staff have greater control of their working lives and can fit in all the other
aspects of life without feeling guilty about robbing time from Peter to pay Paul,
they will have more focus and energy for the job. And, when employers are
actively supporting them to do this, staff are likely to be loyal, committed,
retained, and off sick less. Work - life balance policies should sit alongside those
promoting wellness at work and diversity.

Employers of Choice are taking a proactive approach and demonstrating how

they are working to get it right. They know it makes sense to respect the need for
a healthy balance between work and non-work activity; and that the balancing, or
tipping point, will be different for each individual according to their age and stage
of life and circumstances. While fairness and equity are paramount, individual
circumstances must be recognised.

There are legal obligations to be met by employers but the approach can be
reactive or proactive depending on the mind set and commitment of individual
workers, the organisation, and even the country.
Workers in the U.K. work longer hours than most of their European counterparts
and it's not just putting in the hours, it is also about having high workloads. A
survey, undertaken by the Chartered Institute of Personnel and Development
(2004), shows that one in five people take work home almost every day. The
survey also revealed that one in three partners of people who typically work more
than 48 hours a week feel that this has had a negative effect on personal
relationships. Technology has enabled many to be continuously accessible, but
this comes at a cost.

Work - Life balance practices are a combination of:

• Legislation
• Parenting and Carer Policies
• Flexible Working Practices.

The challenge is to join up the policy dots to make a holistic framework for people
management. There is a constant need to ensure that communication goes
beyond giving details about specific provision without capturing hearts and minds
on the intent behind pieces of legislation, regulation and practice.

Improving Work - Life Balance

Effective work-life balance requires trust between employers and employees,

particularly in the area of flexible working. It requires employers and line
managers to be committed to the basic principle that staff want to give of their
best at work and will do so in the right conditions. This takes courage and
commitment at the best of times, but managers who believe that staff will take
liberties, or cannot be trusted to regulate their hours and workload, need to do
some work on their own management style and approach first.

This is not to underplay the need for effective goal setting, performance
management, supervision and support. On the contrary, robust performance
management at organisational and individual levels is a prerequisite for trust and
empowerment to flourish.

Some nuts and bolts:

The concept of work - life balance has brought about many policy changes and
has influenced legislation. While Human Resource, or Personnel Officers will
hold the detailed knowledge, all managers should be aware of the legislation that
underpins the policy, and how this might be interpreted in a positive and
proactive way that aids staff support and retention.

Human Rights Act 2000

This takes into consideration the concept of work-life balance as it addresses the
respect for family and private life.

Equal Pay Act 1970

This states that pay should be equal for both men and women.

Race Relations Act 1974

This act ensure no discrimination of race on the basis of ethnic origin.

Sex Discrimination Act 1975

Legislates against discrimination on the ground of sex in full- and part-time

employment, training and other related matters.

Disability Discrimination Act 1995

Work-Life Balance policies must be consistent with the requirements of this act.

Working Time Regulations 1998

This has a direct impact on working practice by reducing excessively long

working hours.

Employment Relations Act 1999

This act aims to provide the balance between work and home life for the
employee. It provides employees with rights to parental leave, time off in family
emergencies and improved maternity rights.

Part-Time Workers Regulations 2000

This enables people to work part-time at all skills levels and responsibility without
discrimination.

Work-life balance provisions, much of it driven by EU directives, were

significantly extended in April 2003 to cover annual leave; working time; parental
leave; time off for dependent care; maternity leave; paternity leave; adoption
leave; right to request flexible working; and, part-time working.

Find out what these mean for you and your workers, either internally or by
following the links and references at the end of the section.

We already see a shift from people thinking about 'going to their work' to
'working'. It might seem a small shift in perspective, but is a shift that can achieve
a great deal of change. The constraints of fixed working hours and fixed work
locations might be holding back improved performance and innovation.

As E-Government gathers momentum, technology will allow more to be done

away from a fixed base. This could help resolve accommodation and travel
problems. It is recognised that in social work and social care, team work and
colleague support is essential; but there are more creative ways of bringing
people and teams together, perhaps in environments that are more conducive to
the purpose.

Good people managers recognise that the way to employee engagement and
commitment is to give people freedom and control to make choices; and they
know it will be returned. What people want and what organisations want are
usually compatible. (16)(see table 5)

Flexible Working:

Flexible working practices are a way to achieving work- life balance. This is a
term that means many different things to people. To some it means being able to
start or finish work earlier than the standard 9 - 5 day, while at the other end of
the spectrum it means having no fixed core hours and individuals and teams
allocate time to meet the needs of the service while getting the best fit with their
own circumstances.
It can also mean:

• Part-Time Working
• Job Sharing
• Working from Home
• Term Time Only Working
• Annualised Hours
• Nine-Day Fortnights
• Career Breaks
• Sabbaticals
• Study Leave
• Compressed Hours
• Mobile Working
• Job Rotation
• Secondments for career development
• Secondments for community or voluntary activity.

table 5.

People want to: Organisations want to:

Engage people and enable,

Enjoy life and work, achieve success and
encourage and reward outstanding
excel at what they do
performance

Provide enriching services tailored to

Do work they care about on their own terms
individual need

Create and express a unique professional Create and build a distinctive positive
identity as themselves image for the profession

Find the right organisation and role that Find the best people and match them
suits them best to the right roles

Use their skills, stretch themselves and Use the skills of their people to
develop new abilities in their professional improve effectiveness and to achieve
and personal lives excellent services

Make a valued and recognised contribution

Enable and reward contribution and
to organisations that understand their
support staff
lifestyle and work style needs
Flexible working is a way of managing people, not just a set of policies.
Flexible working policies can quickly become dated, or end up being just as
inflexible as the previous way of doing things. The options outlined above will suit
some of the people some of the time, and some organisations at given points in
their history. It's a fluid and dynamic activity.

The social care sector is continuing to diversify its workforce to match the
diversity of the population and integrated service delivery; recruiting from a
diverse set of skills and geographies will require a more open approach and
tolerance of different life and work styles.

The key task is to grasp the underpinning principles of good people management
and to look for ways to maximise flexibility and work-life balance, while continuing
to put service needs first. This emphasises the need for close collaboration
between H.R. staff and operational managers; by working together and sharing
knowledge and skills legislation, policy and practice can be used to best effect to
create a positive 'can do' culture.

In summary, flexible working practices enable and empower staff to give of their
best; in return they will perform well and be responsive to the need for flexible
services. Flexible working practices will promote the wellbeing of the workforce
and have a positive knock-on effect on sickness and absence. They will increase
openness and trust and give workers a sense of ownership and responsibility,
reducing 'them and us' divisions between managers and staff. This will all add to
workers' feelings of confidence and competence and will increase their
commitment and loyalty.

Effective implementation depends on commitment to all four key components of

good staff support to ensure a social care workforce that is:

• enabled and empowered

• confident and competent
• flexible and diverse
• safe and healthy.

Just a Minute:
1. How developed are flexible working practices in your organisation?

2. Are there differences in the way policy is applied in different work groups, and
is the reason for this clear?

3. Are there any conflicts between flexible working practices and service needs?
Is anyone or any group addressing this issue? If not, how could this best be
done?

Flexible working in Fife

Fife Council Social Work Services was successful in securing funding from the
DTI Partnership Fund to encourage flexible working. Pilot studies have been
successful and barriers to further development identified. Here is a quick
summary of some of the feedback: For further information contact
Alison.Carnegie@smtp5.fife.gov.uk

Teams described their findings in terms of the following benefits:

• Feeling more in control of the workload

• Improved continuity and consistency of contact with clients and relatives of
clients in residential settings
• The team are much happier
• Being able to spend more time with the children which has also reduced child care
costs
• Knowing we've got time off keeps us motivated and our spirits high, making the
job more manageable, even though we're running with a lot of vacant posts
• Being able to deal with work requiring quiet concentration outside normal office
hours, so I'm not disturbed all the time by phone calls
• Staff are generally less tired, so when they come to work they are refreshed and
work more effectively
• Morale is higher
• Staff are communicating more effectively
• There's a buzz about the place
• People are nicer to each other and work more co-operatively.

Managers were able to report the following:

• Reduced backlog of paperwork

• Cases allocated increased over the summer months, which would not normally be
expected during the holiday season
• Increased available time for supervision
 • Reduction in the use of relief staff of between 10 and 20 hours per week
• Decline in the number of simple administrative errors
• Offering an extended service between 8am and 6pm
• Reduced short-term absence.

The general comment is that, in practice, managing flexibility is not as difficult as

anticipated, as team members are cooperating with each other to manage
service requirements and individual working preferences. The following is a
typical manager response: 'Contrary to my initial feelings, this has proved to be a
very positive experience and I would not now like to see a return to the previous
working practice.'

Overcoming the barriers. Staff have identified certain barriers to working non-
standard patterns:

• Buildings being open evenings and weekends; cost implications.

• Laptop provision; increased laptop provision would make it easier for staff to
work more flexibly; cost/policy issue.
• Access to files - policy on whether files can be removed from the office needs to
be clarified.
• Impact on clerical/support staff - some staff have voiced the concern that
increased flexibility for certain categories of worker places constraints on the
flexibility of clerical/support staff. It is clearly important to involve support staff
in discussions about changed working patterns. While not everybody can have the
same flexibility (e.g home working) most could achieve some flexibility if they
want it.

Further Reading:

Work - Life Balance?

or Life - Work Balance?

In his book about the new rules of employee engagement, Mike Johnson (16)
suggests that it is time to reverse the word order and make 'Life - Work' the
priority. Why? Because he believes that work-life balance isn't working and the
emphasis is still too much on work coming first.

This is an interesting text that highlights the differences in attitude to work and
expectations of the life - work balance across the generations. In a humorous but
enlightening chapter on 'it's their lifestyle not your lifestyle that counts', he makes
a compelling argument for employers to recognise that younger employees in
particular will always put their life before your work.

Johnson's views are in keeping with the notion that employers must meet the
individual needs of employees and that one size will not fit all. He proposes, and
evidences, that different generations in the workplace have different
understandings of the employment contract and have varying expectations of
what work should give to them. While additional pay might be the most important
form of reward for one member of staff, additional time off might be the chosen
reward for another.

At different ages and stages, workers will have demands as parents, carers or
learners. Health and wellbeing will fluctuate as will demands on finances. The
task is to track and match the different situations and expectations. The balance
of giving may be greater on the employers' side this year, but reversed next. If
you don't give you may lose staff altogether; staff losses through dissatisfaction
damages both purse and reputation.

The social care sector is committed to personal care plans for its service users
that are regularly reviewed and resourced; a similar commitment to personal
employment plans should also be the ambition for workers.

Other factors that enable and empower are addressed under the most
appropriate chapters:

Working Environment: Safe and Healthy

Wellbeing at Work: Safe and Healthy

Flexible Working: Flexible and Diverse

Managing Change Effectively: Flexible and Diverse.

Footnotes
(1) Laurie J Mullins: Management and Organisational Behaviour Seventh Edition,
FT Prentice Hall 2005, ISBN 0-273-68876-6
(2) C. Lashley, in Mullins: Management and Organisational Behaviour, page 886
(3) Safer Recruitment and Selection for Staff Working in Child Care: Scottish
Recruitment and Selection Consortium, Crown Copyright 2001, ISBN
0755901797
(4) In Mullins: Management and Organisational Behaviour, page 255
(5) Community Care Workforce Survey: 30.7.04
(6) J.M. Hollingsworth 'Purpose and Values' in Mullins: Management and
Organisational Behaviour, page 284
(7) The Change Agenda: Why Central Targets Miss the Mark: Simon Caulkin
Management Editor/The Observer for CIPD 2003
(8) R. Likert, in Mullins: Management and Organisational Behaviour, page 245
(9) T.J. Watson: Management, Organisation and Employment Strategy.
Routledge Keegan & Paul 1986
(10) In Leading to Deliver: Taylor Clarke Partnership for the Scottish Executive
2003
(11) Bennis and Nanus (in Leaders: The Strategies for Taking Charge 1985), in
Leading to Deliver: Taylor Clarke Partnership for the Scottish Executive 2003
(12) Beverley Alimo-Metcalfe, in Mullins: Management and Organisational
Behaviour, page 388
(13) C. Fletcher: Appraisal: Routes to Improved Performance (1993a) London
CIPD, in Performance Management The New Realities: Armstrong and Baron,
2000 page 8
(14) Scottish Executive statement, in Managing Performance Management in
Action: Armstrong and Barron 2004 CIPD
(15) European Foundation for Quality Management EFQM Registered
Trademark 1999
(16) Mike Johnson: The New Rules of Engagement Life-Work Balance and
Employee Commitment CIPD 2004, page 6

Performance Management
The Performance Management Cycle

Overview
The goal of the Performance Management Process at DU is to ensure that
supervisors and employees understand and communicate openly about job
performance, goals and timelines, and how to help employees develop the skills
and abilities that they need to achieve performance goals and be successful at
the University.

Performance reviews for appointed staff are conducted at least annually, most
frequently in early fall. The reviews are based upon the goals and standards set
out in the Performance Evaluation and Development System (PEDS). Faculty
have a review process, but it is not currently conducted using the PEDS online
system.

The supervisor and employee have equal responsibility to contribute to the

performance review process. Both should understand the job responsibilities, job
goals, and the related standards against which actual performance will be
evaluated. The completion of the performance goal setting takes part in two
stages:

Stage One: Getting Started: Setting Duties, Goals

and Standards for Performance and
 Development
At the beginning of the review cycle (often as part of the previous year's
review) supervisors and employees define essential duties and
responsibilities, performance goals (job goals) and development goals,
and standards for measuring achievement of these goals.

The following sections of the PEDS online form should be completed in

Stage One:

1. Essential duties and responsibilities (and measurement

standards for these)
2. Job goals (and measurement standards for these)
3. Competencies
4. Development goals (and measurement standards for these)
5. Weighting of Duties, Goals and Competencies

This is done with the aid of the employee's position description, keeping in
mind departmental goals for the upcoming year.

New employees and their managers should complete performance and

development goals and standards within the first 60 days of employment.

NOTE: In the same way that setting performance goals is important, we

encourage managers and employees to set development goals that are
specific, performance-related, and aligned with departmental goals. DU
Training and Development is available to consult with managers,
individuals or unit groups to identify relevant and appropriate development
opportunities within and beyond the University. Through performance
consulting, we will also partner with you to identify performance support
needed to ensure that individual and departmental goals are achieved.

Stage Two: Reviewing Performance and

Development Goal Accomplishments
In order to provide continuous feedback on how employees are meeting or
exceeding expectations on their essential duties, and to monitor the
progress of meeting defined goals, supervisors and their employees
should meet for Quarterly Discussions. We recommend that the
 discussions take place in January, April and July each year.

Stage Three: Year-End Performance Reviews

At the end of the review cycle (often as part of the previous year's review)
supervisors and employees review the performance and development
goals, evaluating accomplishments based on the standards and timelines
that were established at the beginning of the year. The review (Stage
Three) should include completion of the following sections of the PEDS
online form:

1. Employee Self-Assessment (for essential duties, job goals and development goals
2. Evaluation of actual performance (for essential duties, job goals and
development goals)
3. Measurement rating (using the 5-point rating scale)
4. Narrative comments

NOTE: Without a completed review in PEDS, an employee will not be

eligible for a merit increase.
The Performance Management Cycle

Individual Reports
learning & development

Manage your employee training/learning easily and efficiently, with 24/7

online access.

Generate real-time reports to establish the status and

statistics of current and completed employee
learning and development activities.
The optional Learning Management Module enables you to:

 Populate a Learning & Development (L&D) Library with your company-specific

learning interventions/activities (internally or externally provided).

 Manage your employee Personal Development Plans (PDPs) online (accessible by

HR, managers and employees, according to client-defined system settings and access
privileges).

 Apart from listed learning activities, selected from the L&D Library, unique learning
activities for individuals can also be added to their PDPs, such as on-the-job coaching, job
rotation, special assignments, projects, etc.

 L&D Reports can be produced at all company levels - on demand and in real time -
to see who needs what type of training, who had undergone certain types of training, what
training is overdue, etc.

 Reports can be generated by unit/department, location, job title, employee, line

manager, target group, attainment, status, and L&D activity, or any combination of these.

 Training histories are permanently archived in the system database for easy
access at any time, and for year-round internal and external audit preparedness, and to
ensure organization-wide training/learning compliance.
The Learning Management Module is an add-on module to Performance Advantage (regular
performance appraisals) or the Smart360 (360 feedback) System/Module - independently, or
jointly, should all these modules be required by a client. However, it can also be utilized as a
standalone system in it own right.
 Performance Management / Appraisal System Design
Consultation by William Gresse
Convert your business plans and strategies into a framework of balanced
performance indicators (or KPI's). Indicators that focus you and your
people on what makes your business tick.

Performance Management (the successor of Management By Objectives or MBO)

is the essence of managing, and the primary "vehicle" for getting the desired results
through employees at all levels in the organisation. In the absence of such a system,
staff members are unclear as to the employer's expectations regarding performance
objectives and standards/targets, leading to low productivity, costly mistakes, stress,
de-motivation, and conflict. A sound Performance Management Process/System
subscribe to the crucial Principle: "What gets measured gets done".

The days of having a "one-set-of-measures-fits-all" Performance Management

System are long gone and inherently flawed. Performance objectives and measures
need to be specific to job categories and individual roles.

They should also clearly link to Organisational Strategic Goals. We subscribe to the
Balanced Scorecard KPI technology to ensure a proper balance in the types of
measures (based on four perspectives of the business) used at corporate level, and
cascaded down to the lowest position. This ensures vertical and horisontal alignment
and integration of the key performance measures throughout the organisation to
ensure optimal productivity and bottom-line results.

The Performance Management Cycle involves Four

Stages:
1. PLANNING PERFORMANCE:
Formulating Objectives, Key Performance Indicators (KPI's: Input and Output-
based), and Performance Standards (Quantitative, Qualitative, Behavioural)
and Targets for each position/employee, using a suitably designed
Performance Agreement Form.

2. MANAGING PERFORMANCE:
Performance observation, measurement, recording, feedback and coaching,
as well as managing the performance environment. This stage includes
Performance Coaching and Counselling whenever employee performance or
behaviour is not up to standard/expectation.

3. APPRAISING (REVIEWING) PERFORMANCE:

Using a suitably designed Performance Appraisal Form that facilitates the
 smooth running of appraisal interviews (See our Constructive Performance
Appraisals Workshop).

4. REWARDING PERFORMANCE:
Linking actual performance to appropriate rewards/remuneration to reinforce
excellence in performance. (We assist organisations in designing suitable
reward/incentive systems or schemes for their employees.)

GOAL SETTING THEORY SAYS:

Specific Goals/Objectives increase performance, and

challenging goals, when accepted by jobholders,
result in higher performance than easy goals

Merit Pay / Bonuses

While probably the most widely used approach to reward employees for excellent
performance, merit pay is also fraught with dangers if not applied properly.

Specific problems include perceived inequity, lack of fairness and transparency, bias,
stereotyping, subjective judgements, rating errors, favouritism, etc.

Reasons for this typically include poorly identified and formulated performance
measures, poor performance tracking and reporting, lack of performance feedback,
coaching and training, poor timing of merit rewards, poor linkage between merit pay
and actual performance, and a host of other factors.

The result is frequently conflict during Performance Appraisals. No small wonder that
both line managers and staff members generally hate Performance Appraisal time!

One thing managers will always tell you they need is to have a Performance
Appraisal System where the subjectivity regarding actual performance is largely
removed. HR and line also crave to have a system where the calculation of merit
bonuses for all staff is easily understood, perceived as being fair, and devoid of
potential unhappiness and conflict.

The "Reward-Behaviour-Performance" Link

Organisations have to be very careful in deciding what performance or behaviour they

reward, and be acutely aware of potential unintended consequences. Behavioural
psychology says that you will get what you reward, even that which you did not
foresee at the time (e.g. negative behaviour of some sort). The timing of rewards also
forms part of this equation, as do many other performance-related factors that affect
human behaviour.

We have many years experience working with these Performance Management and
Human Behaviour principles, and can assist you in the design of a Performance
Management System that addresses all the issues mentioned above - reinstating its
main purpose, namely to increase staff performance and motivation, and to impact
on the organisation's bottom line.

The MOST IMPORTANT OBJECTIVES of a well-

designed Performance Management System:
• To serve as the primary vehicle for implementing organisational goals and
strategies (cascaded from top to bottom throughout the organisation)
• To align and integrate the objectives and key performance measures (KPI/s)
of the organisation vertically and horisontally through all job categories and
levels, including management. In this way the entire system works together
in pointing towards the critical bottom line MEASURES, with bottom line
RESULTS following as a matter of course ("What gets measured gets done").
• To facilitate continuous performance improvement, organisation development
and culture change
• To achieve quality and efficiency, i.e. to meet the customer's needs as
precisely, quickly and cheaply as possible
• To ensure clarity regarding work expectations and performance standards,
reducing job holder anxiety/stress, resource wastage and conflict
• To continually enhance employee competence through the identification of
output-related training and development needs and strategies
• To reduce Line Manager reluctance and fear to do Performance Appraisals
with their staff
 • To facilitate performance-based remuneration and rewards, so employees can
see and experience a clear link between their performance and the rewards
they receive

New Zealand Herald, 4 October 2004

ON WORKPLACE STRESS:

"Industrial Psychologist Steward Forsyth pointed out that eliminating role ambiguity - giving workers
clear instructions about what was expected of them - would rid the workplace of major sources of
stress"

Not only is the existence of a sound Performance Management and Appraisal/Review

System an OPERATIONAL PREREQUISITE for achieving organisational goals, but also
a LEGAL REQUIREMENT to prove that proper/due process was followed (backed by
sound documentation) when eventually disciplining, and especially dismissing, a staff
member for persistent poor performance.

Designing Performance Management Systems from

scratch
We are specialists in designing Performance Management Systems customised to the
specific operational needs and requirements of organisations. It is done through an
in-house task force (2-5 key decision makers and specialist contributors) who are
facilitated through a needs assessment and design process to produce the eventual
system.

Upgrading Existing Systems

Your present Performance Management System may just need to be assessed and
adapted to optimise the results you wish to achieve.

Contact Us for a FREE ASSESSMENT of your present system, and a NO OBLIGATION

QUOTATION in respect of upgrading it if necessary.
Client Comments
I would like to express my appreciation on behalf of the Regency Duty Free management team for all the work
and effort you have put in to develop a Performance Management and Appraisal System for us. It is great to have
a system that has been specifically designed for our company. Our managers have found the KPIs and sales
tracking system easy to use and sales staff have commented that the monthly "on-track" coaching meetings
enable them to get regular feedback on their performance and progress, which is very positive. Our goal to
create a culture of performance within Regency has been greatly enhanced by your efforts!
Lesley Beacham - HR Manager - Regency Duty Free Stores Ltd

The Performance Measurement/Management and Appraisal System you have designed for us is the best I have
seen in all my years in retail.
Lynette Richards - National Retail Manager - Just Kids Ltd
 Performance Management System Training
It is highly recommended that line management and general staff be trained in the
correct "technical" application of their newly designed/upgraded Performance
Management/Appraisal System (e.g. the organisation's Performance Management
policy & procedures, formulating Objectives/KPI's & Performance Standards,
Performance Appraisal documentation, etc. - i.e. the "HARD" part of the system).
Half-day sessions are normally sufficient for this purpose.

Also, once a Performance Management System has been designed, it will not
automatically provide line managers with the "SOFT" interaction skills to conduct the
Performance Appraisals/Reviews effectively, or to address poor Performance or
Behaviour throughout the year. Our following training programmes address these
needs:

1. Constructive Performance Appraisals

2. Performance Coaching and Counselling
Also consider Appraisal Smart our online Performance Appraisal System
 The Performance Management System / Cycle
The Performance Management Cycle / System fits very closely with the classic
management cycle:

Performance Agreement
The performance agreement defines expectations, manager and employee work
together to define what the employee should be doing for the upcoming period.
When finished it should be clear to both manager and employee:
 What is expected in terms of knowledge, skills, behaviours and results.
 How these will be measured and communicated.
 What rewards will be forthcoming if agreed targets are achieved.
 How the role fits into the organisation as a whole.
 What level of authority the employee has in terms of carrying out the tasks.
This should be done at the start of the year and will provide the basis for
performance reviews.

Personal Development Planning

Following the Performance Agreement there may be certain areas identified that
highlight a need for additional training and development in order to achieve what has
been agreed. This would be included in a Personal Development Plan. Employees
may also wish to discuss future aspirations and what development may be required
at this stage to prepare for future roles.
This provides a forum to discuss both vertical and lateral progression and enables
the manager to know where employees ambitions lie and enable them to meet their
needs to keep them challenged and motivated.
Performance
There should be continuous dialogue, support and feedback taking place between the
manager and the employee. This is continuous and ad hoc so be informal. Only if
there have been severe lapses in performance will documentation be required.
What is important is that employees are being helped and coached to achieve their
best. If things are not going as well as hoped managers must be candid and deal
with them immediately. The worst thing a manager can do is avoid dealing with poor
performance at the time and save it till the performance review to bring it up!

Always be candid and transparent, it can sometimes be awkward and uncomfortable

bringing up poor performance but everyone suffers, the individual, the team, the
organisation, if it is not dealt with immediately.

Performance Review
If, as discussed above, there has been continuous dialogue and managers have dealt
with poor performance as it occurred, the Performance Review should contain no
surprises for the employee.
If a manager surprises an employee with anything in a Performance Review the fault
lies with the manager for not communicating effectively throughout the period.

The Performance Review should be approached in a positive way where manager and
employee are in partnership working out what has gone well in the period and
diagnosing and coming up with strategies for things that have gone not so well.

I have personally always found it helpful to have the employee actively involved in
self evaluation, generally if they have performed poorly in an area they are aware of
it and by them bringing it up they take more ownership of the problem.

Always start with positives and things that have gone well. When dealing with
problems never blame but rather focus on learning and generating solutions. Once
again the manager should be focusing on working together with the employee to
help him/her achieve targets. . . together as a team.

Diagnosing problems and coming up with solutions forms part of the upcoming
performance agreement and development plan in the next performance management
cycle. There is section specifically for performance reviews for a more in depth
coverage of the subject than dealt with here in the performance management
system
The Role of Performance Management in
Organizations
Updated: 2008-08-21

Performance management is a quickly maturing business discipline. Like its better known siblings—sales
and marketing, human resources, supply chain management, and accounting and finance—performance
management has a key role to play in improving the overall value of an organization. Wayne Eckerson of
The Data Warehouse Institute defines Performance Management as “a series of organizational processes
and applications designed to optimize the execution of business strategy.” The focus of this book (and its
complimentary volume, The Rational Guide to Monitoring and Analyzing with Microsoft Office
PerformancePoint Server 2007) is on the application side of the definition, but it is important to
understand how the organizational process works.

This article is an excerpt from The Rational Guide to Planning with Microsoft Office PerformancePoint
Server 2007, by Adrian Downes and Nick Barclay, and is property of Mann Publishing Group (978-1-
932577-42-6), copyright January 2008, all rights reserved. No part of this chapter may be reproduced,
stored in a retrieval system, or transmitted in any form or by any means—electronic, electrostatic,
mechanical, photocopying, recording, or otherwise—without the prior written permission of the publisher,
except in the case of brief quotations embodied in critical articles or reviews.

The fitness program described earlier outlines a strategy for following certain recommended exercises and
healthy habits, helping you to achieve your objectives (e.g., becoming stronger, lighter, etc.), and leading
towards your goal of becoming more fit. Throughout the program, there may be certain targets to strive
for, such as 20 more pushups a month, or completing that 20-minute treadmill run at a higher average
rate of speed. Your trainer also uses the program to record your progress from visit to visit, providing
feedback on your overall performance and determining whether you are on track towards meeting specific
objectives.

Feedback is important to us, because it helps us to further understand why we may or may not be
meeting specific targets. Feedback can also be used to modify our expectations, and to set new objectives
over the course of the program. In business, a similar process takes place:

1. Planning what we would like to happen, based on insights from analysis of trends in our industry
and events that impact our business.

2. Executing, by making decisions and taking action, based on the outcomes of planning activities.

3. Monitoring our progress towards a certain time-limited target or objective.

4. Analyzing further to understand why we may or may not be on-track to meet a specific target or
objective.

5. Forecast what we think will happen, based on what we have analyzed. Here we build one or more
scenarios to help us predict certain outcomes. These outcomes help us to confirm or refute our
choice of tactics to meet our objectives.

Figure 1.1 illustrates this process.

Figure 1.1: The Performance Management Cycle.

Similar to our fitness program, where progress is monitored and analyzed in areas such as weight loss or
number of repetitions for a given exercise, performance management involves monitoring key
performance indicators (KPIs) that measure whether an organization is meeting its objectives and
overarching strategy. A KPI in this sense is a measure defined by a business that allows for observation of
actual values, as they may emerge from line-of-business (LOB) applications and their comparison to
established targets (or budgeted values). If a KPI reveals an actual value that deviates too far from (or in
many cases, closely approaches) a pre-defined target, then further analysis is warranted. Discoveries
made during analysis should help us plan our next steps, set new (or adjust existing) expectations, and
predict what may happen based on our decisions. In larger organizations, data from multiple LOB systems
are often centralized within “a single version of the truth” business intelligence (BI) system to optimize
KPI monitoring, detailed analysis, and performance reporting. BI systems often (but not always) consist of
several layers that work together, helping businesses to:

• Integrate and refine data from a variety of applications, systems, and documents into a

centralized data mart or data warehouse.

• Analyze refined data to gain insight into current performance (monitoring KPIs), potential causes

for specific KPI variances (or deviations of actual values from target values).

• Report past, current, or forecast conditions to stakeholders.

The goal of a BI system is to ultimately help business people make better, faster decisions. Classically,
such decision-making has occurred at higher levels of an organization and been limited to a relatively
small number of individuals. However, corporate culture has changed significantly over the last decade,
and themes of transparency, accountability, and empowerment have emerged. Performance management
frameworks, like Kaplan and Norton’s Balanced Scorecard method, build on these notions by making all
steps in the cycle (illustrated in Figure 1.1) occur at executive, departmental, and operational layers of the
modern organization.
 Performance Management Cycle

Performing reviews is something that is one of the most common forms and parts
of being apart of the workforce. Throughout completing these reports, is making
sure that the employees are well aware of what positives they are adding to the
job with their work and their work ethic, and what areas as a whole they need to
work. The moment that the review is concluded, it's time to begin working and
preparing for the next years reviews by repeating the process of observing. This
process of yearly reviews in this manner is called performance management
cycle.

The reason for this process to be considered a cycle because it continues and
revolves around in a manner that involves a repetitive system that happens
yearly, and in some professional establishments, it happens quarterly. The
reviewing process is one that takes place on a continuing process is which is
used in order evaluate the employees of a company in order to make sure that
they are making the necessary improvements, which is a helping factor to help
show if a person cares about their jobs.

Evaluations is
one of the main ways in which an employer is able to decide whether or not their
employee is able to work along the guidelines of the company's standards that
have been set. Should these standards not be met, it will be viewed through
doing an evaluation where the company's standards will play as the guidelines in
which will be used to judge an employee. In most evaluations, it's common for
employees to not always get a 100% on their reviews, this is frowned upon in
most business and company establishments. From a psychological standpoint
given by many psychologists, by having no criticism of an employee could leave
them feeling stagnant and at a standstill, as though you also don't notice them. It
also has a way of showing that employers aren't holding their employees up to
the company's standards. The routinely aspect of doing evaluations is what is
better known as performance management cycle.

The performance management cycle is responsible for a series of five steps that
goes into performing an evaluation of an employee. The five steps are planning,
execution, assessment, review, and renewal. With the consideration of these five
steps, there are a certain amount of points that are assigned to each category.
With the total points that are added up, the employee receives a certain score.
This score is based upon how each employee does within each of the categories,
based upon positives and negatives that happen to come across the scoring
process. Once this score is totalled, it will then be compared to the scores from
the last evaluation. Any improvement in scores generally results in a raise of
sorts, or sometimes a bonus. In some cases, there are those who have received
a considerable raise and a promotion due to their high scores and improvement.

In the Planning section of the performance management cycle, the employer

gathers all materials that are needed for the evaluation. That includes the
evaluation form for the current reviews, and those that from the past reviews.
From there, the employer is responsible for discussing any questions that they
have about the assessment process, scoring, or anything else that play an
important or non-important role in the matter. Next, a review of the standards of
the company are reviewed, which is always good for both employer and
employee.
In the Execution process of the performance management cycle is the moment in
which the review actually begins. This is the time in which the employer will begin
to discuss and review everything from the last evaluation. From this, the
employer will begin to discuss and go through exactly what will happen during
the evaluation, and discuss what they have noticed on the positive scale of the
employees performance. The employer will pull all of what they have observed
from their past experiences since the last review of the employee and begin
discussing what they've noticed, and how that is a positive impact for both the
company and themselves as a person. While talking about their performance,
and what they have positively seen, they also discuss how that plays a major part

within the company.

The Assessment of the performance management cycle is the portion of

evaluation where both the employer and employee have the opportunity to
discuss the performance on an overall level. This is where any questions and/or
concerns can be brought to light. On both levels, the employee has the
opportunity to discuss how they feel about the company, any problems that they
have had, or anything that they feel would improve their working ethic, or even
improve the company as a whole. Through this discussion, the employer will
have the chance to entertain such notions, and even begin the process of
implementing any plans or solutions that can be put to work in the effort of
helping the employee to further themselves within the company, especially if they
have an interest in gaining a promotion.

The Review portion of the performance management cycle involves the

processing of the entire evaluation, and then there is a discussion of the why the
particular points were given. This is also the time in which the employer will
discuss any problem areas in which they have noticed within the employee. This
could include timeliness to work, dress code problems, completing work, how
they get along with other employees, their work ethic, how they handle their job,
etc. All of these factors, though may seem small to a degree, all play a role in
being scored, and each point can mean the different between getting a
promotion, a raise, and/or a bonus, and in some cases, people getting fired.

The Renewal of the performance management cycle is a simple process in which

the employer has the employee sign a sheet of paper that states that they have
discussed the employees review one on one, and that they are aware of their
assessed score and understand why they have received the score that they have
gotten.

Many business work with a performance management cycle in order to help them
understand and keep a watchful eye on their employees. Through these efforts,
they are able to conduct a business and company that upholds the standards
and levels in which the foundation is made of.
Performance Reporting Under Outcomes &
Outputs
This advice on performance reporting under the outcomes and outputs framework has been
updated following the publication of 2001-2002 departmental and agency annual reports. It
includes some good practice examples.

1. Policy & purpose

The Government has promulgated a set of Performance Management Principles that identify the
main features of good practice in performance reporting and management for purposes internal
and external to its agencies. There is a requirement that performance reporting within portfolios
be reviewed against these principles at least every three years. Various aspects of the
Performance Management Principles are discussed further below.

All Australian Government agencies are required to publish performance information in key
accountability documents such as Portfolio Budget Statements and annual reports. Performance
information should be published for the following major components of the outcomes and outputs
framework:

• Outcomes: these require indicators of effectiveness, in terms of the contribution of the

relevant departmental outputs and administered items to the achievement of the
outcome;
• Outputs: require indicators of efficiency - the price, quantity and quality of the final output.
• Administered items: require indicators relating to the achievement of the objectives of the
administered item, be it grants, transfers or benefit payments (for example). The requisite
performance information for administered items is often indicated in the associated
legislation, policy statements or inter-governmental agreement controlling the item. Most
Government programmes are administered items.

The following discussion outlines the purpose of performance information under the outcomes
and outputs framework, linking it to other common performance management approaches such
as business planning and the balanced scorecard approach.

1.1 Purpose of performance information

Performance information is evidence about performance that is collected and used

systematically. It can be collected at many levels depending on the purpose and the structure of
each agency.
The internal uses of such information include providing timely feedback on the performance of
outputs and administered items so that action can be taken during the budget year to ensure that
the expectations of the government and agency can be met. Measures aligned with personal
performance agreements can also be used to provide feedback to staff on their contribution to the
management of outputs and administered items. Generally, an alignment between an agency´s
organisational structure and it´s outcomes and outputs structure is recommended. Experience
has shown there are definite advantages in aligning an agency's administrative or financial
control structure with its outputs or outcome streams, but there will be a few agencies where this
is not practical or cost effective.

Externally, the purpose of performance information is to assist stakeholders and management to

draw well-informed conclusions about performance from what is provided in the published
documentation, and provide a sound contribution towards decision-making. In this context, a top-
level strategic overview is essential. External reporting is generally less frequent and less detailed
than that for internal purposes. Before a budget year commences, it external reporting focuses on
foreshadowing the desired or expected performance for that year in the agency´s Portfolio Budget
Statements. When the same budget year is over, the reporting of actual performance for that year
occurs through annual reports. Candour in disclosure, and action on performance information (for
example, redesigning a process or output where necessary) will add to an agency´s credibility.

This process should be carried out in a transparent way, so that those to whom agencies and
governments are accountable can make informed judgements. As stated above, agencies are
required to identify their planned performance in their budget documentation (Portfolio Budget
Statements and Additional Estimates Statements) and to report on their actual performance in
their annual reports.

Guidance on these accountability documents is available on the web sites of the Department of
Finance and Administration (in relation to PBS and PAES requirements for all agencies and for
annual reporting for Commonwealth Authorities and Companies Act bodies) and Department of
Prime Minister and Cabinet (in relation to requirements for departmental annual reports).

2. Design issues
This section addresses the design issues in developing performance information under the
outcomes and outputs framework.

2.1 Performance information & behaviours

Poorly designed or specified performance indicators can result in unintended consequences if the
behaviours they encourage are not carefully considered. There is a risk that managers may feel
obliged to generate output that is tailored to an artificial or inappropriate target (for example, a
specific number of ministerial briefs) or change the nature of their work to make the numbers
'right' (for example, breaking up or amalgamating supplier contracts). It is therefore important to
keep this possibility in mind when designing performance indicators. It is also important to stress
the inter-relationship of the indicators: meeting a quantity target at the expense of price or quality
expectations is not appropriate or desirable.

2.2 Balance & clarity

Performance information will be useful where it is pitched to provide a comprehensive and

balanced coverage of a particular outcome, output or administered item. This can be achieved
with a concise basket of performance indicators which can be understood, are well-defined, and
are cost-effective to collect, store and manage.
2.3 Targets

Performance information should provide perspective. It is most effective where current output
performance can be compared qualitatively or quantitatively against specific benchmarks, targets
or activity levels where this is appropriate. In a context of continuous improvement, it is desirable
that these be of a stretching nature (i.e. demanding significant but achievable improvement)
where possible. The extent of "stretch" should be identified explicitly. Activity levels should be
realistic.

2.4 Outcomes

Outcome performance information relates to the specific impact that an agency's outputs and
administered items have had on the community. Outcomes are often long-term or on-going in
nature, and performance information in this area must focus on effectiveness of contribution to
achieving the outcome. Outcomes information needs to achieve a balance between addressing
progress against milestones or intermediate outcomes and ultimate long-term impacts. It must
also measure the unintended impacts of agency outputs or administered items, where relevant.
According to the circumstances, outcome reporting can often be complemented by identifying the
results of performance audits, reviews or programme or output evaluations. Ultimately, ehat the
community, Parliamentarians and the Government are most interested in is results - in the
achievement of outcomes. Outcomes constitutionally provide the purpose and level at which
funds are appropriated. This is also the level at which the community views the activities of the
government.

2.5 Outputs

In addition to reporting on effectiveness in achieving outcomes, output performance information

relates to an agency´s efficiency in executing its responsibilities. Output efficiency indicators
measure the quality, quantity and price of agency products and services. The aim is to
demonstrate through a concise basket of indicators that an agency has addressed the
government's purchase requirements in a way that demonstrates overall value for money and
value for the community. For internal performance management, it is useful to identify the impact
of strategies which have been adopted during the year to achieve or improve performance, and to
recognise continuous improvement.

2.6 Administered items

In addition to reporting on the effectiveness of any administered items in achieving outcomes,

performance information for administered items will also address - where relevant - the quality,
quantity and cost associated with delivery of the item. In some cases this will include information
extracted from other jurisdictions (in the case of State or Territory outputs funded by the
Australian Government) and in some cases outputs delivered by non-government organisations
(eg. Job Network). It will also address transfer payments which meet the Government's
requirements. These are most often specified in legislation, inter-governmental agreements, other
contractual arrangements, or other expressions of Government policy.

2.7 Stability versus improvement

Agency outcomes, outputs and performance information structures can be expected to evolve
with experience to meet contemporary needs and changing policy objectives or priorities.
Performance information for any purpose is most effective where trends can be compared over
time. However, this needs to be carefully balanced against changes in needs, and the availability
of more relevant or more reliable information. Performance information should be regularly
assessed for appropriateness through systematic review and evaluation of departmental outputs
and administered items and, where necessary, review and evaluation of the Government
outcomes they support.

2.8 The performance management cycle

The outcomes and outputs framework provides the basis for agencies to develop robust
performance management systems that allow them to continuously improve the way they do
business. This gives rise to a cycle of improvement, depicted in the diagram below. The
performance management cycle has six stages:

• identify the crucial areas of performance;

• establish benchmarks for achieving the specified outcomes as effectively and efficiently
as possible;
• develop information systems to generate the appropriate data;
• report on results and interpret the information to identify areas for improvement;
• make appropriate changes to management and operations; and
• revise the relevant benchmarks accordingly (taking into account the need for continuity of
indicators over time).

Performance Management Cycle

The performance management cycle interconnects with the wider framework of the Performance
Improvement Cycle (PIC), promulgated by the Department of Finance and Administration in
March 1998. The PIC is a case-by-case approach to management review and improvement. It
aims to encourage managers to actively question the relevance of particular activities and the
need to continue with a given set of responsibilities or modes of operating. The PIC has four
stages:

Phase One: Review Government Activity;

: Should the Australian Government be involved in the activity?

: Should the activity be devolved to another level of government, privatised or discontinued?

Phase Two: Testing Cost and Effectiveness;

: What is the most efficient way for the Australian Government to be involved in the activity -
competitive tendering and contracting, benchmarking, partnering re-engineering, contracting with
another agency etc?

Phase Three: Implement Improvements;

: How will improvements be implemented most efficiently?

Phase Four: Review and Evaluation;

: How well did the improvement strategy work and is it still relevant to the current environment?
(Repeat phases one and two)

2.9 Performance information under outcomes & outputs, business planning

and the balanced scorecard

For those agencies that utilise such management tools, the outcomes and outputs framework
'maps' across two other common corporate management tools - corporate planning and balanced
scorecard - in the fashion outlined below. Each approach is concerned with aligning strategy and
operations so that they are consistent with the overall purpose of the organisation. The outcomes
and outputs approach has a strong focus on performance measurement, especially in terms of
the effectiveness of outcomes. Corporate planning helps organisations identify their key result
areas and ensure that their strengths, weaknesses, opportunities and threats are clearly identified
and dealt with in the organisation's strategies. The balanced scorecard provides a matrix to check
the consistency of performance information from all levels in the organisation within the four (or
sometimes five) perspectives of customers, internal processes, innovation and financial
performance.

Mapping outcomes & outputs to planning and balanced scorecard systems

3. Outcome information
Outcome performance indicators focus on the effectiveness of government activity in contributing
to specified outcomes. There are two types:

• those that relate to the effectiveness of government's contribution to the result, principally
through its administered items and its agencies' outputs; and
• those that relate to the overall state of the outcome.

In general, since there are limits to the effect government action has on the community, indicators
of effectiveness will form a subset of indicators of the overall state of the outcome.

3.1 Information on overall outcome result

Most outcome statements will implicitly include some suggestion of the indicators of their overall
achievement. It is desirable to specify at least one or two such indicators for each outcome as a
means of reporting on the general trends in the area targeted by the outcome.

This information is useful in describing the broad environment in which the agency is operating
and in developing and communicating policy options. Such indicators, however, should not
purport to necessarily represent the agency's contribution to the outcome. That information
should be contained in the effectiveness indicators discussed below.

3.2 Information on effectiveness

'Effectiveness' refers to the extent to which outputs and/or administered items make positive
contributions to the specified outcome. Effectiveness, then, is a function of outputs and
administered items being both appropriate and well performing. While it is possible to have an
inefficient output or administered item that is highly effective in terms of impacting upon the
desired outcome, in practice it is rare for an output that is of, for example, a high per unit cost and
low quality to also be effective in realising the desired outcome.

Effectiveness indicators will generally be derived from some characteristic of the outcome and
they should be designed to identify as clearly as possible the causal relationship between the
outputs and/or administered items and the outcome. These indicators require very careful design
and specification. They cannot be as easily characterised as output or administered item
indicators and there are few 'generic' indicators of the effectiveness of outputs and administered
items. For long-term planning and policy purposes, however, it is important that the best available
effectiveness indicators are identified and reported against. It is therefore up to agencies - in
close consultation with their ministers and stakeholders - to identify realistic, useful and relevant
effectiveness indicators to help those interested in the agency and/or the administered items the
agency manages to better understand their value in terms of specific policy outcomes.

Effectiveness indicators will generally be judged by four criteria:

(i) the degree to which they reflect the terms of the specified outcome;

(ii) the degree to which they relate to the appropriateness of the specified outputs or administered
items in contributing to the specified outcome;

(iii) the degree to which they encompass contributions to the outcome by all relevant outputs
and/or administered items; and
(iv) the degree to which they account for factors outside the direct or indirect influence or control
of the agency and/or government policy mechanisms (i.e., in relation to administered items).

None of these criteria is an absolute. There are few (if any) effectiveness indicators which will
always entirely reveal the appropriateness of the output or administered item as well as measure
all its contributions - and only its contributions - to the outcome. The intention, however, is to
come as close as possible to this ideal.

3.3 Effectiveness information & outcome and output structures

The process of designing indicators of effectiveness can be a useful tool for checking the
appropriateness of the overall framework supporting a given outcome and the outputs and
administered items designed to achieve it. If, for example, an output is not well specified, it may
well prove difficult to identify robust and reliable indicators of its contribution to the outcome.
Similarly, if the outcome itself is too general or couched in inappropriate language, then it may not
be possible to establish effectiveness criteria that demonstrate the link between an output or
administered item (even if the contributing aspects are well specified in their own terms) and the
outcome.

The design process for outcomes, outputs and effectiveness indicators and efficiency indicators
(and inputs, activities and processes, for that matter) should therefore be iterative, with
opportunities to cross-check the fit and alignment of each element of the structure with the others.
This learning is iterative and adjustments to inputs, processes or even outputs often occurs over
time. This maximises the opportunity for an optimal system to be established.

Within the limits imposed by available resources and time, as well as various extraneous factors,
agencies are responsible for establishing an outcome and output structure (including relevant
performance indicators) that is as close to optimal as possible. Once a structure has been
established, however, there is a need to counterbalance the potential gains in refining it with the
risk of diminishing year-on-year comparisons of performance and results.

3.4 Attach effectiveness indicators to outcomes

Effectiveness indicators should reflect the terms of the outcome as much as possible. This allows
for the combined effects of the outputs and administered items to be measured and reported.

In practice, some effectiveness indicators will arise from a specific output or administered item.
This may occur where there is a clear one-to-one causal relationship between the outcome and
the output or where the optimal means of identifying the achievement of the outcome is through
reporting on the separate effects of the various outputs and/or administered items.

Under a slightly different scenario, while one output or administered item may make an
appropriately effective contribution to one aspect of an outcome, it may conceivably detract from
the realisation of another aspect of the same outcome. This can happen, for example, where the
outcome is aimed at striking a balance between competing objectives (for example, economic
growth and environmental sustainability). In these cases it is also best to report on effectiveness
at the outcome level to account for the differing influences of the relevant outputs and/or
administered items.

3.5 Coverage of outcome indicators & accounting for extraneous factors

Most government agencies operate in environments that are complex systems of interconnected
factors. Some of these the agency can influence, some it cannot. Even within an agency's scope
of operations, there can be competing goals or objectives. As a consequence, many outputs and
administered items are necessarily constrained by:

• the intrinsic limitations of the agency in terms of its regulatory or policy scope and its
resourcing; and/or
• the need to balance different objectives.

Under these circumstances, it is important that the effectiveness indicators in combination reflect
these different interests. As far as possible, they should also take account of factors that are
beyond the direct or indirect control or influence of the agency, whether these are factors arising
from the work of different levels of government, other agencies within the Australian Government
or the wider national or global economy. Where it is not possible to 'quarantine' the indicators in
this way, the narrative surrounding them should make clear that the agency is aware of the
imperfect match between the indicators and the relationship between the outputs and the
outcome. A frank, well-based assessment of the agency´s contribution is likely to be respected by
readers of annual reports.

The public reporting of effectiveness indicators ought to give Parliament and stakeholders a good
indication of how well specific outputs or administered items are, or are not, contributing towards
the achievement of an outcome. They should also give a general indication of the overall state of
the outcome itself. In this way, both the appropriateness of government outputs or programmes
are measured against what they were designed to achieve, and the general state of the outcome
area in the community is also monitored.

In some cases, intermediate outcomes (ie. performance information intermediate to the

achievement of the desired outcome) may be utilised to offer trend or percentage data or other
reliable proxies to illustrate the impact agencies are achieving. For example, the achievement of a
particular target or milestone that relates strongly to the government's policy objectives, as
specified in the outcome statement, would help indicate the effectiveness of government action.

Some agencies may also wish to highlight in their outcome reporting any significant impacts on
the outcome (positive or negative) that are due to major external factors, where relevant -
especially where it impacts upon the effectiveness of the agency.

3.6 How many outcome indicators?

As a general rule, the effectiveness indicators should cover the disparate aspects specified in the
outcome. For example, if the outcome identifies efficient as well as fair results for the target
group, then it would be desirable to specify at least one indicator for each of these qualities.
Some outcomes, however, operate at such a high level and imply such a wide range of actual or
potential interests to be addressed (for example, the Treasury portfolio has responsibilities that
cover the entire national economy), that it may be necessary to concentrate effectiveness
information on those aspects that are most pertinent from an accountability and policy point of
view. In general, less than two effectiveness indicators for an outcome is unlikely to provide
interested parties with enough data to make judgements about the contributions of the
departmental outputs and/or the administered items. More than six, however, may confuse the
issue by including data that is of diminished relevance to the outcome and/or the outputs and
administered items.

3.7 Independent data collection

Wherever possible, data for effectiveness indicators should come from public or at least
independent sources. It may be necessary from time to time to commission specific research or
analysis of statistical or other data to generate the required measures. It is important for probity
and public confidence reasons that the agency not be solely responsible for gathering,
maintaining and interpreting the data used in assessing the effectiveness of its own outputs.

4. Output information
Output indicators provide information on the productivity and therefore efficiency of a given output
in terms of the combined and interdependent effects of its price, quantity and quality. Each of
these three characteristics has an impact on the other, and the mix between them will often be
determined by the balance between the government´s requirements for a certain standard of
service or quality of product, and the amount it is willing to fund an agency to produce this.

Output Performance: A Balance Between Quality, Quantity & Price

The following sections discuss price, quantity and quality separately, but their mutual dependence
should always be borne in mind when designing, measuring and especially interpreting
performance information. An output can only be determined to be efficient when the combined
impact of all three characteristics are taken into account. Lastly, agencies should keep in mind
that an efficient output is not always an effective output. Indeed, it is possible for an output to
perform to a very high level-including in terms of its quality aspects - while its impact on the
outcome is negligible or even detrimental. This circumstance will most often arise when the
output is not an appropriate or optimal response to the demands of the specified outcome.

4.1 Quality

Quality indicators relate to the specific, immediate characteristics of an output that are not
encompassed by price or quantity. Measuring the `quality´ characteristic of an output is not
concerned with the degree and nature of the output's contribution to the specified outcome. Be
careful not to confuse measures of an output's quality characteristics with measures of its
effectiveness on the desired outcome.

The qualitative aspects of an output can be elusive to define, measure and interpret. Quality
indicators can relate to tangible, objective criteria (e.g., timeliness, coverage, accuracy,
conformity to specifications) and less tangible, interpretive data (such as client satisfaction, peer
review or public perception/profile). These aspects will often also have the greatest relevance to
those immediately affected by the output and, to a lesser extent, to accountability bodies such as
parliamentary committees. It is therefore important that quality indicators:
 • measure those aspects of the output that are most pertinent to clients, customers or
stakeholders;
• include both tangible, objective indicators as well as subjective, qualitative information;
and
• are kept to a minimum number, as it is possible to overload both the user of the
information and the agency's capacity to gather and interpret relevant data.

Generally speaking, then, an output would need to have at least two and perhaps up to four or
five indicators of quality. Less than two would probably not encompass both the objective and
subjective information required, while more than around five would usually either confuse the
issue or generate costs in data collection and interpretation that would outweigh the benefits.

4.2 Quantity

In many circumstances, the measurement of quantity is a straightforward matter. This is

especially so where the activity in question is a reasonably homogeneous administrative or
service function. Examples might include the processing of veterans' benefit claims (where the
unit of measurement is the number of claims) or the administration of a grants scheme (where the
unit of measurement is the number of grant applications).

Public sector organisations, however, often generate outputs that are not so homogeneous.
Policy development and advice is perhaps the most ubiquitous example, but there are others,
including: research and development; capabilities or reserves of various types (for example,
defence); foreign relations and diplomacy; and regulation. These cases are often analogous to
private sector arrangements whereby a client might be paying for a capacity (for example, fast-
turnaround legal advice to a specific standard of expertise) rather than one off (for example,
drafting a contract) or serial activities where demand is known in advance (for example,
processing monthly accounts).

Where there is a relative lack of homogeneity, it is important to select a quantity indicator that will
make the most sense when read in conjunction with the price and quality indicators. To build on
the example of policy development and advice, a minister may not see the number of policy briefs
prepared as being an appropriate metric against which to cast information about the quality or
price of an agency's policy advice outputs. This is particularly so if the number of briefs is used as
a performance target. More important, and more relevant to the attendant quality and price
indicators, would be information about the capacity of the agency's policy areas. This might be
measured in terms of officer hours applied to policy work, for example.

4.3 Price

Price refers to the market value of a good or product. This characteristic is largely influenced by
the cost of production, distribution and supply (i.e. the inputs), but it can also be determined by
demand and the extent to which there is an alternative supply, and what government is willing to
pay. Price is therefore the point of balance between the cost of production, the price of
alternatives, the quality and quantity to be produced of the chosen output, and the amount the
government is willing to pay.

Where an agency seeks a change in funding it needs to comply with the Budget process
operational rules as promulgated annually. Further information on costing, pricing and accounting
practices can be found at Finance's web based service Accounting and Budgeting Information.

4.4 Demand is not the same as performance

There is a tendency for some agencies to designate as 'performance indicators' factors that are
actually measures of demand (for example, number of client phone calls received or number of
ministerial briefs called for) rather than performance. This is most common in the area of quantity
indicators (for example, client queries, number of ministerial briefings). The relationship between
these factors and agency performance can sometimes be marginal at best. While demand data is
often of considerable interest in itself, it is not necessarily an indication of agency performance,
especially when read in conjunction with quality indicators. Having a 100% client satisfaction
rating, for example, is of diminished relevance if that rating is only among the 50% of clients
whose phone calls are actually answered.

4.5 Cross-output indicators

Some agencies find that some indicators derive from factors that cut across outputs. This
happens particularly where the outputs are oriented towards the same outcome. On occasion this
may be the result of poor specification of the output, or poor design of the data collection
arrangements. Sometimes, however, it may be unavoidable. Customer satisfaction measures, for
example, often reflect customers' perceptions of the performance of the agency as a whole,
rather than individual programmes or outputs. Under these circumstances, it is reasonable to
retain such indicators but to identify their cross-output character in the explanation of the
indicators or results. Where possible, some apportionment of the respective contributions of the
outputs to the performance indicator result should be provided, even if in general terms (for
example, by noting that a percentage of responses were from customers who had made no use
of a particular output, while another percentage might have used only that particular output).

4.6 Extraneous factors and output delivery

Agencies are generally recommended to report on just the quantity, quality and price of their
outputs. There may at times be extraneous factors that affect delivery of an output through one of
the three key class of indicators (quantity, quality or price), thereby affecting that agency´s record
of efficient performance. It is often not possible, or not even necessary, to account for all
extraneous factors that may contribute to or detract from an efficient output. If an outside effect is
particularly pertinent to an outputs performance, an agency may want to explain and quantify that
impact. Agencies should not report on a factor of marginal relevance to the output.

External factors are generally considered more important where they effect achievement of an
outcome, rather than production of individual outputs.

4.7 How many output indicators?

Efficiency is usually best measured by a concise basket of inter-related performance indicators. It

can be just as misleading to have too many efficiency indicators as too few, especially if the
selected indicators are of marginal relevance, validity or utility. In general, efficiency indicators
used for external reporting purposes should be a subset of those generated for internal
management purposes. One indicator each for quantity and price should normally be sufficient,
while quality measures often require at least two indicators (covering subjective information such
as client satisfaction and more objective information such as performance to specifications). More
than four quality indicators for an output may confuse or frustrate the reader while adding little to
their level of understanding of the output.

4.8 Management information systems for output indicators

Generating information for performance measurement is not cost-free. It is therefore important to

consider management information factors when designing indicators. Where possible, the
information used should emerge as a natural byproduct of the agency's normal functions and
information needs. Many agencies, however, have found that robust and reliable data for output
management calls for enhancement of their information and accounting systems, especially in
using such tools as activity based costing (ABC) and benchmarking. Much of the information
used in output performance indicators must be aggregated up from the level of activities and
processes, and allocating overhead and shared resource costs may demand sophisticated
mapping of activities and processes. [example]

4.9 Allocation of overheads and shared resources

Overheads and other shared resources are allocated across departmental outputs. The criteria by
which this distribution takes place vary from case to case. It is important, however, that where
such costs are distributed other than on the basis of direct cost drivers (for example, rates of
actual computer usage), the criteria used should relate as closely to 'true' cost drivers as possible
(for example, staff numbers for personnel functions, number of telephone, fax and data
connections for telecommunications).

5. Administered items information

Performance information for administered items generally arise from the specific circumstances
and characteristics of the items themselves. It is often implicit in the relevant legislation or policy
documentation what the key performance characteristics should be. A further source of such
information would be the terms and conditions attached to grants and the performance criteria
stipulated in inter-governmental agreements relating to transfers to the state and territory
governments.

Where possible and appropriate, indicators of quantity, quality and cost should be identified. The
test of appropriateness should be whether the proposed performance information regime will
serve to enhance management decision-making, policy development and public accountability.

6. Examples of good practice

Agencies have taken various approaches to performance reporting under the flexibility allowed by
the outcomes and outputs framework. This is consistent with the devolution of responsibility to
agency heads and the different responsibilities and needs of agencies.

The agency annual reports for 1999-00 were the first to be published under this framework.
These reported against the outcomes, outputs and performance indicators that were identified in
the 1999-00 Portfolio Budget Statements. There have been two further complete cycles, with the
following discussion centered on the 2001-02 annual reports. The following are presented as
examples of good practice. As in most matters concerning performance reporting, they will
include features capable of further improvement.

(a) outcomes reporting

The Department of Education, Science and Training (DEST) identifies in its 2001-02 Portfolio
Budget Statements (PBS) a range of measures, including forecasts, for each outcome (eg
Outcome 1 pp.37-44). These are often independently collected measures, adding to the credibility
of the reporting. They are discussed within the annual report, providing trend data where
available (eg. Outcome 1 pp.24-29).
The Department of Family and Community Services (FaCS) identifies a comprehensive suite of
effectiveness indicators. The strength of the FaCS reporting lies in its analysis/explanation of
each indicator's results in the annual report. For example, effectiveness indicators for Outcome 1
(Stronger families) are identified in the 2001-02 PBS (pp.63-80) and the general approach of
these is explained at pages 38-39. The indicators are discussed in the 2001-02 annual report
(pp.24-32 in volume 2). There are also a set of environmental indicators providing a broader
focus.

(b) outputs reporting

FaCS reporting at output level is also comprehensive, with those for outputs under Outcome 1
identified at pages 63-80 in the 2001-02 PBS under the quality, quantity and price labels; most
with targets identified. Activity levels and achievements against quantity and quality/timeliness
targets are well presented in the annual report (pp.24-86 of volume 2) for Outcome 1, although
this is interspersed with the effectiveness information mentioned above.

The Australian Trade Commission reported consistently in its 2001-02 annual report against
output indicators and targets identified in the 2001-02 PBS. For example, the output measures
and targets for Outcome 2 are identified in the PBS (p.77) and the end-year results for all
outcomes and outputs are summarised at page 9 of the annual report with full output details at
Appendix A (pp.114-115).

(c) administered items reporting

DEST's output groups are structured against the department´s administered items, reflecting the
fact that these represent over 98% of the department's appropriation. DEST's administered item
measures in the 2001-02 PBS are often accompanied by targets (eg Outcome Group 2.1 pp.65-
65). Reporting in the 2001-02 annual report discusses these measures in sequence showing
original targets and results (eg Output Group 2.1 pp.179-180).

(d) strong linkages between 2001-02 Portfolio Budget Statements and

annual reports

One feature of the outcomes and outputs framework is that appropriations are now aligned with
reporting, through common outcome statements for the Appropriation Bills, Budget and Budget-
Related Papers, and annual reports. This did not occur previously. Another feature of the
framework is that a `clear read´ is now possible between planned performance in Portfolio Budget
Statements and actual performance for the same year as recorded in the corresponding annual
reports. The reporting of most Commonwealth agencies has achieved improved focus through
this approach. Two examples are provided below.

The Department of Finance and Administration identifies performance indicators and targets in its
PBS for outcomes and outputs. It identifies the same indicators in its annual report, together with
the performance result. It quantifies results against indicators, and often specifically notes where
effectiveness and quality indicators have been achieved, surpassed or not met. Quantity
indicators show forecast and actual values in the annual report, enabling the reader to make an
easy comparison. For example, see Outcome One in the 2001-02 PBS (pp.38-39) and the 2001-
02 Annual Report (pp.23-27).

The Department of Immigration and Multicultural Affairs identifies performance indicators and
targets in its Portfolio Budget Statements (PBS) for outputs but not targets for outcomes. It
reproduces the same information in its annual report, adding a result column. For instance, see
outcome related information under Outcome One in the 2001-02 PBS (pp.37-38) and the 2001-02
Annual Report (pp. 63-65). Output and administered item information has the benefit of target
information with most PBS indicators (pp.38-45), against which performance is reported in the
annual report (pp.66-77).

Purpose | How to use this program | The university's expectations regarding performance
management | Definition | Objectives | Principles of developing a performance
management plan | Supervisor's responsibility | Available resources

Purpose
The purpose of this program is to provide supervisors with a resource to help them
implement a performance management plan. While the University does not dictate a
specific plan, all supervisors are expected to do some form of performance management
consistent with the following guidelines.

Note: Supervisors on campuses with an established performance management program

should follow and use campus-specific procedures and forms. Consult the campus Human
Resources office for details and clarification.

How to use this program

This program is divided into three sections: Introduction, Cycle, and Summary. If you are
not familiar with the concept and principles of performance management, first familiarize
yourself with all of the content in this Introduction. Then, go through the steps of the
Cycle in sequence (starting with "Determine Major Job Duties") and conclude with the
Summary. If you are familiar with Performance Management, feel free to go directly to a
section to obtain specific information based on your needs. At any time you can look for a
term using the search function. Also check out the information under the "Forms" section.

The university's expectations regarding performance management

One of the most important functions of managers and supervisors is to effectively
manage resources, and one of the most important resources they have is the staff they
supervise. Managing them (and consequently their performance) begins with designing
the jobs – determining what duties are important to include in a job, what the
qualifications are to fulfill those duties and what level of performance is needed to meet
the mission of the department. Performance management continues with the filling of the
job with the best candidate, the training of the new hire and the continuous coaching to
clarify expectations.
Management of performance is important to being a good supervisor and clarification of
expectations and performance feedback is also important to those they supervise.
Consequently, all supervisors are expected to participate in a performance management
program with their staff. Certain employee groups have specific policies and guidelines
for applying the principles of performance management; therefore, supervisors will want
to consult the appropriate policy manual. Following are two examples:

• Performance Management policy for Professional and Non-union Service and

Support Staff university wide
• Performance Appraisal policy for Support Staff at Bloomington and Northwest

Definition
Performance management is an ongoing, continuous process of communicating and
clarifying job responsibilities, priorities and performance expectations in order to ensure
mutual understanding between supervisor and employee. It is a philosophy which values
and encourages employee development through a style of management which provides
frequent feedback and fosters teamwork. It emphasizes communication and focuses on
adding value to the organization by promoting improved job performance and
encouraging skill development. Performance Management involves clarifying the job
duties, defining performance standards, and documenting, evaluating and discussing
performance with each employee.

Objectives
The objectives of Performance Management are to:

1. Increase two-way communication between supervisors and employees

2. Clarify mission, goals, responsibilities, priorities and expectations
3. Identify and resolve performance problems
4. Recognize quality performance
5. Provide a basis for administrative decisions such as promotions, succession and
strategic planning, and pay for performance.
Principles of developing a performance management plan
Development of a performance management plan should be consistent with the following
principles:

1. Performance management is considered a process, not an event. It follows good

management practice in which continual coaching, feedback and communication
are integral to success.
2. The Performance Management Plan is primarily a communication tool to ensure
mutual understanding of work responsibilities, priorities and performance
expectations.
3. Elements for discussion and evaluation should be job specific – not generalized
personality traits. The major duties and responsibilities of the specific job
should be defined and communicated as the first step in the process.
4. Performance standards for each major duty/ responsibility should be defined
and communicated.
5. Employee involvement is encouraged in identifying major duties and defining
performance standards.
6. Professional development should be an important component of the plan.
7. The formal evaluation period should be long enough to allow for full performance
and to establish a history such that evaluations are fair and meaningful. One year
is a common evaluation period.
8. Documentation of performance will occur as often as needed to record the
continuum of dialogue between supervisor and employee.
9. If formal ratings are included, they should reflect the incumbent's actual
performance in relation to the performance standard for that major duty.
10. The supervisor should be evaluated on the successful administration of the plan
and ongoing performance management responsibilities.
11. Training for supervisors and employees is encouraged and will be provided by
University Human Resource Services.
12. The Performance Management Plan should be consistent with federal and state
laws which address non-discrimination.

Supervisor's responsibilities
The supervisor's responsibilities are to:

1. Communicate and clarify major job duties, priorities and expectations.

2. Establish and communicate performance standards.
3. Monitor employees' performance through observation, discussion, etc.
4. Document good and unacceptable performance.
5. Provide continuous coaching and constructive feedback in a timely manner.
6. Hold performance discussions (at least annually).
7. Correct poor performance and reinforce good performance.
8. Help employees to develop skills and abilities for improved performance.
9. Provide necessary information, resources and opportunity to allow
accomplishment of key results.

Available resources
Employee and Organizational Development, University Human Resource Services, is
available to provide consultation with supervisors interested in developing a Performance
Management Plan. Individual and/or group training on all aspects of Performance
Management is provided upon request.

Are you in control of this performance management cycle? Do you know which levers
can be pulled to manage performance in year? Are you able to continuously improve
the quality of your forecasting and budgeting by the appropriate use of variance
analysis?

Do you have the necessary internal control system in place to ensure that no nasty
surprises come out of the woodwork? How good is your risk management and
corporate governance?

Good practice is to be confident that your financial statements are complete, accurate
and valid, that your assets are adequately safeguarded and that your operations are
as efficient and effective as possible.

Good practice performance management and internal control

Key Benefits
Identification of levers that can be pulled to manage performance in year.
Good practice internal control system to manage risks.
Reliable management information.

Capabilities
Prepared the year end financial statements to US Generally Accepted Accounting Principles (GAAP)
for a US golf company. A prerequisite was the ability to work in French.
Implemented and managed effective internal management control systems for a biotech company.
Restored the management accounting and reporting of a multinational company division to a
professional standard thus enabling the reintroduction of sector cost control.

Performance Management

Talent management has never been easier with the availability of performance
management software. Talent2’s Learning Management System (LMS) is a
proven choice to simplify your performance management processes and track
your employees’ performance plans against your business objectives.

The advantages of the Talent2 LMS performance management software are

clear:

• Effective record keeping delivers a transparent audit trail for employees and
managers
• Automation saves time with repetitive tasks and allows paperless management
• People are empowered, in turn productivity and satisfaction can improve
• Decision making is aided with relevant reports and statistics, from micro to macro
organisational views
• Ability to integrate with your learner development plan for seamless management
 • Assists with customisation of employee training plans rather than a one solution
fits all approach
• Ease of use and ability to track results encourages repeat use and involvement

You can expect a lot more from the Talent2 performance management solution:

Audit your performance reviews

• Build your own performance review templates

• Map your organisational processes into the Talent2 LMS
• Automatically assign your employee performance reviews with their manager and
set the frequency of these reviews

Eliminate the performance management paper trail

• Build your own performance management templates or tailor them for specific
groups
• Automatically schedule all employees for periodic performance reviews
• Empower your employees and managers to initiate and schedule their own
appraisals
• Empower your employees to complete an online self assessment prior to review
• Allow managers to enter comments and assessments for view by the employee or
for their own record

Centralise talent management

• Centrally manage and report on organisation-wide performance reviews

• View detailed employee reports and performance management review comments
• Produce exception reports at a group or organisational level
• Generate completion reports and statistics
• Conduct statistical analysis of employee performance against organisational goals

Complete the cycle – development plan

• Create your learner development plan

• Set job-based and personal development targets
• Identify desired business outcomes and activities
• Enable an iterative creation and approval process between your employees and
their manager

Performance Management Cycle

Customise your training plans
To complete your professional development plan and achieve a customised
curriculum, easily match courses that support your employee’s development plan
outcomes to the learner’s training plan.

The performance management solution has many applications for your business
and Talent2 the necessary expertise to deliver the outcomes you desire.
Enterprise Performance Management (EPM), also known as Corporate Performance Management
(CPM) and Business Performance Management (BPM), is a strategic approach to improving business
performance.

“Methodologies, metrics, processes, and systems used to monitor and

manage the business performance of an enterprise”
as defined by Gartner Inc. “EPM in short represents the strategic
deployment of business intelligence solutions”.

The EPM integrated solutions concept was recently conceived to define the actionable solutions that
arise when information resides in concentrated sources within an organization. For Bitam, EPM is a
top down framework consisting of 3 individual solutions: Business Intelligence, Strategic Planning
and Financial Planning. The sole purpose of these combined solutions is to align the tactics, strategy
and execution of business plans. The solutions are created on a unique platform utilizing a
multidimensional model that supports a diverse array of capabilities that power the information
through metrics, analytics, dashboards, and scorecards.

Some of the most known and adopted methodologies on performance management include: six
sigma, balanced scorecard, activity-based costing, total quality management, economic value-add,
and integrated strategic measurement. However, methodologies on their own cannot deliver results.
They fail within the organizations operational processes because of poor execution and the
unalignment of action and metrics. Bitam offers a complete suite of software tools that deliver the
benefits of implementing and measuring strategic plans correctly.

Resource Documents
Sign up on MY PAGE to receive an email alert when new content is added to this
section of the website.
In any normal business cycle, everything starts with a plan. The strategic plan
for an organization routinely outlines the activities and initiatives that will structure
the work of the organization for a specified period of time. The Central East
LHIN has purposely modified its business planning cycle and started with
engaging the people and communities within the LHIN to identify priorities and
areas for attention.

Documents contained in this

section of the website reflect
the order of the Central East
LHIN Business Planning Cycle
including Community
Engagement, Planning,
Integration, Funding,
Accountability and Performance
Management and serve as a
resource to health service
providers and the larger
community.

• Community Engagement
• Planning
• Integration
• Funding
• Accountability
• Performance

Strategic Commissioning and Performance

Management Division
We have a range of services which aim to maximise people's
independence and enable them to have as much control over
their own lives as possible. Using highly trained staff, our
services are constantly looking at ways to work in partnership
with other organisations in order to develop flexible, responsive
services that better meet the needs of the people in the
communities we serve.

Our services include:

• Strategic Commissioning
• Quality and Procurement
• Carers and Customer Engagement
• Intelligence, Improvement and Partnerships Kim Harlock
Head of Division
• Home Care

IPC framework for joint commissioning and purchasing of public care services.
Step 8 — Connect the Strategic Plan to a
Performance Management System

At this point, the strategic plan is nearing completion. However, it must be

connected to a performance management system if it is to create the
accountability necessary for success. The goal of this step is to embed the
strategic plan into the organization's performance management process. In this
way, the expected plan results can be tracked, measured, reported and
evaluated. Also, key accountabilities can be monitored so that tasks are
completed according to the quality and time requirements.

The strategic plan is cascaded down the organization by presenting the expected
contribution of each person at each level to the organization to the overall results.
Pushing the expectations down into the organization assigns responsibility to a
broad cross-section of people who then can see their connections to the
agency's outcomes.

If the organization does not have an effective performance management system,

it should develop one in connection with implementing the strategic plan. The
content and tools in this section will help your organization cascade
accountability down to the individual employee level so that all personnel
understand how to contribute to the success of the organization's strategic plan.
performance at work depend on seven factors: 1) Direction,
2) Personal Capacity, 3) Motivators, 4) Work Design, 5)
Information, 6) Performance Feedback, and 7) Resources.
This mindmap details the key components associated with
these factors.

MUNICIPAL PERFORMANCE MANAGEMENT SYSTEM

ULUNDI LOCAL MUNICIPALITY

TABLE OF CONTENT

1. BACKGROUND 3

2. PURPOSE OF A PERFORMANCE MANAGEMENT SYSTEM 3

3. MANAGEMENT STRUCTURE OF THE ULUNDI MUNICIPALITY 4

4. COMPONENTS OF THE PERFORMANCE MANAGEMENT SYSTEM 5

5. CRITICAL SUCCESS FACTORS OF A PERFORMANCE 6

MANAGEMENT SYSTEM

5.1 Focus 6

5.2 Balance 6

5.3 Stretch 6

5.4 Mobilisation 6

5.5 Latitude 6

5.6 Contracting 7

5.7 Motivation 7

5.8 Measurement 7

5.9 Appraisal 7

5.10 Feedback 7

5.11 Remuneration 7

5.12 Caring 7

5.13 Visual 7

6. THE TEN STEP ACTION PLAN TO EFFECT THE ULUNDI 8

PERFORMANCE MANAGEMENT SYSTEM

6.1 Assuming Responsibility 8

6.2 Project Team 8

6.3 Participation 8

6.4 Developing the Ulundi Performance Management System 9

6.5 Contractual Commitment and Agreements 1

3

6.6 Publication of the Performance Management System 1

3

6.7 Adoption of the System 1

3

6.8 Monitoring Framework 1

3

6.9 Performance Evaluation 1

4

6.10 Reporting on Performance 1

6

7. ACTION, ROLES, RESPONSIBILITIES AND TIMEFRAMES 1

7

8. A WORD ON RECOGNITION 1
9

8.1 Renumeration Policy Guideline 1

9

9. CONCLUSION 2
0

ANNEXURES

Annexure A Municipal Performance Management

Framework
1. BACKGROUND

The White Paper on Local Government sets out a broad vision for establishing
developmental local government, calling on municipalities to find means of
confronting the legacy of underdevelopment and poverty within their local areas.
Herein recognition is given to integrated development planning, performance
management and community participation as crucial mechanisms to achieve this.

In addition, the Municipal Systems Act requires from municipalities to develop

their own performance management systems and to set performance targets and
to monitor and review their performance based on indicators that are linked to
their Integrated Development Plan (IDP). Involving the community in setting
indicators and targets and reviewing municipal performance are explicitly
required. A critical element in the performance management process is the
publication of an annual report on achieved performance for distribution to
councillors, staff, the public and other spheres of government. This report needs
to incorporate and report on a set of general indicators prescribed nationally by
the Minister responsible for local government. Before tabling this report and
having it audited by the Auditor-General, municipalities are to conduct an internal
audit on performance.

The IDP for the Ulundi Municipality has been adopted and it has now become
crucial to develop a Performance Management System suitable to the particular
and own circumstances prevalent to the Ulundi Municipality in the quest to give
effect to this IDP and achieve its goals and objectives.

2. PURPOSE OF A PERFORMANCE MANAGEMENT SYSTEM

The purpose of a Performance Management System is to assure accountability

on the basis of a simple, effective and management tool for the Municipal
Manager and as a control tool for the Council. The Performance Management
System will assist the Municipal Manager and the Executive Managers in
meeting their goals and objectives by having in place a systematic process
designed to, articulate and measure employee performance to IDP as well as
individual (or team) standards and to help each employee reach her/his full
performance potential and IDP responsibilities. A Performance Management
System is therefore linked to both day-to-day management responsibilities as
well as IDP responsibilities, reinforcing the commitment to deliver based on a
fully integrated and publicly approved IDP.

The purpose of the IDP is to ensure that the resources available to the
municipality are directed at the delivery of projects and programmes that meet
agreed development priorities. Once a Municipality starts to implement the IDP, it
is important to check that the delivery is happening in the planned manner, that
the Municipality is using its resources most efficiently, producing the quality of
delivery envisaged and that the delivery is having the planned effect on the lives
of people living in the Municipal area,

To achieve this it is necessary to monitor and evaluate, measure and review the
performance of the Municipality against indicators and targets set in its IDP.
Performance management will thus assist the Municipality to make immediate,
appropriate changes in the delivery and management of resources, identify and
overcome major systematic blockages and guide future planning on development
objectives and resource use.

Achieving this requires the pro-active development of a Performance

Management System and undertaking an annual review of the IDP Plan.

Performance management in local government is a tool to ensure accountability,

based on the IDP, its objectives, projects and programmes, of:

• The municipality to its constituents, citizens and communities;

• The Executive Committee to the Council;
• The Administration to the Executive Committee or Executive Mayor;
• All line, functional and sectoral managers to the Executive Management
and the portfolio and standing committees; and
• All employees to the organisation.

The philosophy underlying this system can best be gained through an

understanding of the following terms, which characterise the Performance
Management System:

• Better Performance – The primary goal of the system is improved

performance by all employees that will be reflected in their overall
performance in meeting the IDP goals.
• Builds Desire – Through clearly defined performance outcomes and
expectations, shared responsibility, frequent feedback, open
communications and challenging work assignments, the system is
designed to foster a work environment where employees are internally
motivated to do their best every day and to assist their work unit to
improve its overall performance in meeting the IDP goals and objectives.
• Developmental – A key element of the system is on providing the means
for employees to learn more and perform better in their current jobs.

• Non-punitive – The system is geared to helping every employee succeed

and any employee experiencing performance problems is provided the
opportunity, means, and assistance necessary to improve their
performance.
• Positive – The primary focus of the system is on providing the tools
necessary for all employees to achieve their full performance potential.
 • Shared Responsibility – A successful performance management system
requires both input and participation by employees, supervisors, and
managers.
• Simple – Through user-friendly automation aids, training, and reference
material, the system is designed to be easily understood, accessible, and
sensitive to time requirements.

3. MANAGEMENT STRUCTURE OF THE ULUNDI MUNICIPALITY

See overleaf
The management structure of the Ulundi Municipality is indicated in the
preceding diagram. The Municipality will enter into Performance Agreements with
the Municipal Manager and the individual Executive Managers as part of this
Performance Management System and in compliance with the requirements of
the Municipal Systems Act. These Performance Agreements will be implemented
for each Executive Manager over and above the normal Employment Contracts
and will be linked directly to the Performance Management System set out in this
document.
For each of the core functions a Performance Charter will be developed, setting
out in detail the kind of activities the responsible Executive Manager responsible
need to engage in, in order to perform his/her job. These will be consolidated into
a Performance Plan per Department with this Performance Plan then becoming
the Annexure A to each individual Executive Manager’s Performance
Agreement with the Municipality (refer to Appendix A of this document for the
various proforma sheets).

4. COMPONENTS OF THE PERFORMANCE MANAGEMENT SYSTEM

The Performance Management System consists of the following components:

• Plan – The Municipal Manager and Executive Committee share the

responsibility for developing the project related and individual performance
standards. All performance standards consist of outcomes (products or
accomplishments) and expectations (measurement of outcomes in terms
of cost, quality, quantity, time, etc.).

• Monitor – The Municipal Manager and Council observe the performance of

the Executive Managers and provide feedback throughout the year, not
just at the end of the performance cycle. Executive Managers can provide
feedback on how well the Municipal Manager and the Council carry out
their performance management responsibilities.

• Develop – The Municipal Manger has an open discussion with the

Executive Managers to identify their training and other needs for improving
his or her job performance.

• Performance Summary – A narrative description of the Executive

Managers’ performance, prepared by the Municipal Manager with input
from the Executive Managers, is given to each Executive Manager in a
face-to-face meeting. A performance summary should include: an
 assessment of the Executive Manager’s effectiveness in meeting his or
her goals and objectives, any recognition received and areas of suggested
improvement.

• Recognition – The Municipal Manager and Council are encourage to

reward Executive Managers throughout the year for doing their jobs well.
Recognition may occur in a number of ways, i.e. verbal praise, cash
awards, and time-off awards.

5. CRITICAL SUCCESS FACTORS OF A PERFORMANCE MANAGEMENT

SYSTEM

The following factors are critical to the sustained success of a performance

management system and need to be applied in developing and implementing a
Performance Management System for the Ulundi Municipality:

1. Focus

The core service mission, vision, strategic objectives and values of

the organisation must be sound and understood by every
employee. The employee’s role in the mission and objectives must
be discernible and every worker must know what they must
contribute to ensure that the strategic intent is realised. Every job
must have a clear mission and set of objectives, targets and
measures, linked directly to the IDP.

2. Balance

Performance must be planned and measured to ensure balanced

performance. Focus must be on agreed internal and external
results as well as financial and non-financial results. Customer
satisfaction is a key consideration in performance planning and
measurements.

3. Stretch

Easy goals are sure to close the individual energy taps sooner that
intended. It is essential to induce individuals to set demanding
objectives and targets that require more than ordinary effort.
Conversely, targets that are clearly unobtainable for various factors
will have a demotivating effect on employees. The skill lies in
setting goals within these two parameters.
4. Mobilisation

People are mobilised through challenges such as those

fundamentally contained in objectives, standards and targets.
Continuously reviewing personal results that need to be achieved
and offering training where required sustain momentum. Using a
single set of factors that apply to all induces stagnation and
inefficient performance management.

5. Latitude

Space for self-direction and prioritisation in the context of the

overall mission of the organisation is essential as more value will be
realised by the individual. A person like to be asked for his/her
opinion, especially where it concerns tasks that they are
responsible for. Latitude allows for the development of innovative
thinking.

6. Contracting

Individuals must enter into a contract with their supervisors to

access resources and compensation.

7. Motivation

People need a continuous stream of recognition and support to stay

inspired and content with the job. Motivated employees are
productive employees.

8. Measurement

A popular saying based on the business wisdom contained in

"What gets measured gets done" holds true at all levels and for all
jobs in which an employee has to perform. The more specific and
accurate the targets and measures are, the better the value of the
contributions of employees.

9. Appraisal

It is essential to put a score or value to the achievement of the

individual and to be sure that it is contextually ranked and objective.
Criteria for appraisal should be mutually agreed upon.

10. Feedback
 Feedback induces behaviour change irrespective whether it is
positive or negative. Embargoes must be placed on personal
attacks that hurt the ego or self-concept of individuals as emotional
disengagement is guaranteed in not done.

11. Remuneration

This in the final analysis is the tangible proof that the individual’s
contribution was appreciated. Make sure that incentives for
performance are differentiated from basic remuneration. Paying for
performance is the hallmark of excellence.

12. Caring

This is the invisible compensation for loyalty and commitment.

Although these factors are critical they are neglected in the
compensation structures of business. Caring is shown through
birthday cards, flowers, kindness and small gestures to the family of
the employee.

13. Visual

All of the above are of little effect if they are kept locked in filing cabinets. The
mission, strategy, values and performance of the organisation and that of teams
and individuals should be displayed for all to see.

6. THE TEN STEP ACTION PLAN TO EFFECT THE Ulundi

PERFORMANCE MANAGEMENT SYSTEM

The following Ten Steps and sections detail the components of the Ulundi
Performance Management System and its development, whilst assigning roles,
responsibilities and timeframes required in achieving the adoption of a
Performance Management System for the Ulundi Municipality.

STEP 1

1. Assuming Responsibility

The Municipal Systems Act requires that each municipality develop

a performance management systems, to set performance targets
and to monitor and review their performance based on indicators
that are linked to the IDP. For this to be realised it is necessary for
the municipality to actually take on this responsibility. In the case of
the Ulundi Municipality it is assumed that the responsibility of
developing an appropriate Performance Management System has
been delegated to the Municipal Manager and the Executive
 Committee. This Step has therefore already been executed and
sets in motion the process of developing a fully-fledged Ulundi
Performance Management System.

Success Factors: All, i.e. Factors 5.1 – 5.13

STEP 2

2. Project Team

To facilitate the development of the Ulundi Performance Management System

and in compliance with the legislative and regulatory framework, the first and
most critical step in the process is the establishment of a project team. The
following will apply to the Performance Management System Project Team:

• Membership: The Project Team is to be constituted by Executive

Managers within the Ulundi Municipality and Councillors that are familiar
with the IDP process.
• Leadership: This should rest with the Municipal Manager.
• Responsibilities: The Project Team is responsible for overseeing the
process of developing and implementing the Performance Manager
System for Ulundi, providing guidance that is based on the goals,
objectives and policies of the IDP and principles of good governance.
• Participation: Stakeholders from the Ulundi Municipality and community
need to be identified as part of a participation process in the development
and implementation of the Ulundi Performance Management System.

Success Factors: All, i.e. Factors 5.1 – 5.13

STEP 3

1. Participation

Once the Project Team has been established, their first task would
be to set up a workshop session with (a) all employees of the
Ulundi Municipality and (b) all the Ulundi stakeholders to inform
them of what the Performance Management System would be,
what it would involve and what change it will most likely bring
about. This implies that all stakeholders will be identified and a
database set up containing all the relevant stakeholder information.
Involving the Ulundi stakeholders from the onset of the
Performance Management Process will ensure the participation of
the Ulundi communities in determining the output of the Municipality
in terms of meeting community needs.

Success Factors: 5.1 and 5.13

 STEP 4

2. Developing the Ulundi Performance Management System

This means a framework that describes and represents how the municipality’s
cycle and performance planning, monitoring, measurement, review and reporting
will happen, be organised and be managed, whilst determining the roles of
different role players, i.e.:

• Demonstrates how it will operate and be managed from the planning stage
up to the stages of performance review and reporting.
• Defines the roles and responsibilities of each role-player, including the
local community, in the functioning of the system.
• Clarifies the process of implementing the system within the framework of
the IDP process.
• Determines the frequency of reporting and the lines of accountability for
performance.
• Links the organisational performance to employee performance.
• Provides for the procedure by which the system is linked with the
municipality’s IDP processes.
• Show how any general key performance indicators (KPIs) contained in the
Municipal Planning and Performance Management Regulations, 2001, will
be incorporated into the municipality’s planning and monitoring processes.

The minimum requirements of a Performance Management System are:

• A consolidated list of development indicators for the IDP objectives.

• A tabular compilation of the output targets for all IDP projects.
• A time schedule with dates of major milestones of all projects.
• A list of performance indicators, which are, not project specific.
• An action plan including resource requirements for managing the
performance management system, including information flow, timing and
responsible actors.

The Project Team needs to plan how the process for developing this System will
be managed within the legislative framework. Specifically, they should focus on
assessing the current reality, identifying stakeholders that will participate in this
process and establishing structures to facilitate the actual development of the
System.

The Performance Management System consists of the following components:

1. Planning
The Ulundi IDP forms the basis of this component, providing the institutional
analysis and assessment of the Municipality’s capacity, ability, resources,
systems and procedures in developing and implementing a Performance
Management System. Essentially this step involves an assessment of how
planning, implementation and monitoring is happening in the Municipality and
identifying gaps in terms of planning and performance management
requirements. The development of the Performance Management System will,
amongst others, address the identified gaps.

6.4.2 Planning

The Ulundi IDP fulfils the planning stage of the Municipality’s Performance
Management System which in turn fulfils the implementation, management,
monitoring and evaluation of the IDP. This involves a seamless integration
between the IDP planning process and the Performance Management process
with the IDP outputs defining what performance is to be managed. The Municipal
Manager and Executive Committee share the responsibility for developing the
project related and individual performance standards. All performance standards
consist of outcomes (products or accomplishments) and expectations
(measurement of outcomes in terms of cost, quality, quantity, time, etc.).

The following provides a summary of what a performance plan should entail:

• A performance plan is a two-part written document between an employee

(or team) and their supervisor, describing what has to be done during the
performance cycle, how well it has to be done, and how will
accomplishment be measured. This first part of the plan is based on the
goals, objectives, projects and priorities of the Ulundi IDP as well as the
employees' position description or career level definitions, i.e. his/her day-
to-day management responsibilities and functions. The second part
identifies training, developmental work assignments, individual
development desires and/or other developmental needs proposed for/by
the employee for the upcoming cycle.
• All plans shall be developed within 30 days of the beginning of the
performance cycle.
• At an appropriate time during the performance cycle, upward feedback will
be utilised to assess supervisor/manager compliance in the development
of the plan.
• All plans shall include clearly defined outcomes and expectations, clear
linkage to organisational goals, Position essential development needs and
opportunity for personal and career developmental activities (long term
and/or short term).
• Each employee shall have a documented performance plan in place within
30 days of the beginning of the performance cycle.
• The responsibilities in performance planning include the following:
 SUPERVISOR’S RESPONSIBILITY EMPLOYEE’S RESPONSIBILITY

1. Initiate the plan based on the upcoming 1. Review previous plan and performance
work assignments of the work unit. summary.

 Assure that the plan can be linked to the next 2. Review organisational goals and their
levels' goals. individual role in accomplishing those goals.

 Effectively communicate expectations and 3. Understand what element of performance will

outcomes to employees. be measured (outcomes) and how it will be
measured (expectation).

 Identify meaningful training to assist in 4. Communicate individual developmental

accomplishing mission. training, desires, and needs prior to the
establishment of the plan.

 Implementation of the plan within 30 days of 5. Provide upward feedback regarding jointly
the start of the performance cycle. developed performance plan.

 Maintain official copy of performance plan for 6. Maintain employee's copy of

continuous feedback. performance plan for continuous
feedback.

An essential part of this performance plan is the individual learning plan. This
Plan will indicate the training and development activities required to assist an
employee in obtaining the skills and knowledge required in order to advance in
his/her career. This is of particular relevance where new competencies are
allocate to a Department, over and above the core functions, and the Executive
Manager has to be capacitated through training to maintain an agreed upon level
of performance in respect of such new competencies. It is critical that employees
not be scored negatively during the Performance Evaluation process where they
have been allocated new competencies without the opportunity to obtain the
appropriate skills and knowledge to fulfill their performance responsibilities in this
respect.

Success Factors: 5.1, 5.2, 5.3 and 5.4

6.4.3 Priority Setting

Priorities, linked to the IDP objectives that need to be achieved are set based on
the long-term vision for the Ulundi Municipality. These are based on identified
needs and what can realistically be achieved in the current term of office. These
priorities would therefore contribute significantly to the achievement of the
development vision as contained and detailed in the Ulundi IDP. Also included is
a set of internal transformation strategies, priorities and objectives which, when
achieved, would enable the delivery of services, local economic development
and the realisation of the development vision.
 Essentially priorities have already been set in terms of the adopted IDP for
Ulundi. These need to be assessed, clustered and agreed upon in order to
facilitate the development of the key performance indicators that will follow.
Focus should broadly be on:

• Infrastructure and service delivery;

• Social and economic development;
• Institutional transformation;
• Democracy and governance;
• Financial management; and
• The spatial manifestation of these elements.

All components of the IDP, whether strategies or priority areas, need to be

translated into a set of clear, concise and tangible statements of objectives that
focus on the results individual employees are expected to achieve in their job.
Such statements need to SMART.WW, i.e. Specific, Measurable, Attainable,
Realistic, Time related, Worthwhile and in Writing. In terms of this there is a
specific focus on outcome and impact and specific consideration needs to be
given to the results desired, the wording and intention of each objective and the
scope and nature of the change desired. These can then be translated into
performance deliverables, showing the steps that need to be taken in order to
achieve each key objective.

Success Factors: 5.3, 5.4 and 5.5

6.4.4 Setting Key Performance Indicators

A Project Implementation Plan is prepared for each IDP priority to be

implemented within the current financial year. Key Performance Indicators (KPIs)
are set for each of these individual Project Implementation Plans as
measurement units against which progress made in achieving the IDP goals can
be gauged. It is thus a measure that is used to provide evidence or proof of
whether or not an IDP priority project and the related IDP objectives have been
met. Such KPIs must be developed with the following in mind:

• The result must be within the control of the incumbent;

• The indicators must be objectives and observable; and
• Data must be available for measurement.

Performance or non-performance will be measured against the KPIs and are

determined in relation to what the expected outcomes are as set by the KPIs.
Various types of indicators are used to set the KPIs, i.e.:

INDICATOR DESCRIPTION SUMMARY EXAMPLE

Input Indicators Efficiency/Cost Measuring economy and The unit cost of delivering
 efficiency water to a single household
or the amount of time,
money or number of
people it took the
municipality to deliver
water to a single
household.

Output Effectiveness/Achieve Measuring whether a set of The number of percentage

Indicators Desired Results/ activities or processes
Quantity yields the desired products.
These indicators are
usually expressed in
quantitative terms, i.e. as a
number or a %.
of household that will be
connected to electricity as
a result of the
municipality’s electrification
programme.

Outcome Impact/How Affects the Measuring the quality as
Indicators Community/Quality well as the impact of the
products resulting from
achieving the overall
objectives. In terms of
impact the net effect of the
products/services on the
overall objectives is
measured.
Does the service provided
to households comply with
applicable standards or
what % reduction is
expected in the number of
houses burnt due to the
use of other sources of
energy as a result of the
electrification programme.

Composite Relationship between Combining a set of different

Indicators Indicators indicators into one index by
developing a mathematical
relationship between them.

Baseline Status Quo Showing the status quo or Level of poverty, service
Indicators current situation. delivery and infrastructure
standards.

Success Factors: 5.1, 5.2, and 5.8

6.4.5 Setting Targets

Performance targets are the planned level of performance or the milestones the
Ulundi Municipality will set for itself for each of the KPIs that has been set. These
targets are expressed in terms of quality or time and the first step towards setting
performance targets is to identify the baseline measurements, i.e. the
measurement of each indicator at the beginning of the performance period. In
identifying targets to be achieved, the following applies:

• The targets need to be realistic, measurable and be commensurate with

available resources and capacities.
• The public needs to be consulted on their needs and expectations.
 • Politicians need to give clear direction as far as the importance of the
target and how it will address the public needs are concerned.
• Targets should be informed by the development needs of communities
and the development priorities of the municipality.

Success Factors: 5.3 and 5.4

STEP 5

1. Contractual Commitment and Agreements

Individual performance in the Municipal System today is directly

linked to the implementation of a Municipality’s IDP. Once
performance targets have been set and agreed upon by the
Municipal Manager, Executive Managers and Project Team,
decision-makers must then make a contractual commitment to
achieve these targets within the agreed upon timeframes. The KPIs
and target that have been in relation thereto should be included as
Annexure A to the contractual agreement of the Executive
Managers and Municipal Manager of the Ulundi Municipality.

Success Factors: 5.6 and 5.13

STEP 6

2. Publication of the Performance Management System

Once the Ulundi Performance Management System and

Contractual Agreements have been developed, agreed upon and
signed by the Project Team, the Council and the relevant
stakeholders, the Municipality must publish this Performance
Management System in the local media for any further comment
and input. Public approval of the Ulundi Performance Management
System is critical to the success of this System as it will (a) indicate
the needs that will be addressed, without creating false
expectations and (b) confirm the Municipality’s commitment to
delivery in terms of their responsibilities

Success Factors: 5.13

STEP 7

3. Adoption of the System

A final draft of the Performance Management System must be

prepared by the Project Team, incorporating comments and input
 received as a result of the publication of this Performance
Management System. The Council should adopt the Performance
Management System for Ulundi when it is satisfied that the process
was handled in accordance with the legislative framework and
complies with the requirements of the law.

Success Factors: 5.13

STEP 8

4. Monitoring Framework

The development of the monitoring framework runs parallel to the implementation

of the Ulundi IDP and involves a process of making accurate and objective
performance observations based on the performance plan's outcomes and
expectations and providing timely feedback throughout the performance cycle to
encourage maximisation of performance. Monitoring involves the collection of
data, providing feedback, making performance observations, documenting
results and managing the overall process.

Monitoring in the context of the IDP review refers to the gathering of data into
sets of information about certain actions, events and situations throughout the
year. Three main bodies of information are important as input into the review
process.

• Implementation management information: This refers to information that

measures progress with the implementation of programmes and projects
through a series of indicators such as completion timeframes, use of
resources such as money and staff, etc.
• Information about the achievement of objectives set in the IDP: This will
have to be measured over time in terms of the indicators that have been
set to determine whether the outcomes aimed for have been achieved.
• New information: This may be generated from internal or external sources
and reflects changes to the internal or external context of the Municipal
area that impacts in the appropriateness of the IDP and include
information such as baseline data on demographics, new policy and
legislation, budget information from other spheres of government, more or
improved in-depth information about the existing situation and priority
issues, information about new developments and trends, changes in the
existing situation due to unexpected events such as natural disasters, new
investment opportunities, etc.

Information capturing will relate specifically to capturing data and information on

the activities of the different line departments and will best be done on an
individual IDP project basis. The information required and the frequency of the
data and information need to be determined for each individual IDP project and
will relate to the nature of the project, its implementation programme and the
requirements of the measurement of the KPIs.

This information needs monitoring and recording throughout the year for
consideration in the review process. The organizing of data and collation of
information is the responsibility of the Municipal Manager or IDP Manager who
has to put in place and co-ordinate a process or system for this purpose and
designate roles to appropriate persons. Such data and information also needs to
be considered appropriately in the Performance Evaluation process of the Ulundi
Performance Management System. Various tools can be used to this end, e.g. a
project information/data capture sheet, project close down report, etc.

Success Factors: 5.8, 5.9, 5.10 and 5.11

STEP 9

1. Performance Evaluation

The information gathered through the process of monitoring is assessed to

understand its relevance and implications to the priority issues, objectives,
indicators and targets. This information should in particular be focused on an
analysis and synthesis, which is relevant to the Ulundi IDP.

Performance evaluation will be provided from multiple sources and refers to the
analysis of data received from the monitoring system in order to assess
performance. The intent is to capture input from those who have had the best
opportunity to accurately observe the performance of the Municipal Manager and
Executive Managers. In all cases:

• The Municipal Manager shall provide input to the performance of the

Executive Managers, and the Council input to the performance of the
Municipal Manager.
• Executive Managers may provide self-observation to supplement the input
of the Municipal Manager.
• The Municipal Manager may receive anonymous performance
management observations from immediate subordinates.
• The Municipal Manager shall have the opportunity to provide input to the
Executive Managers regarding resources required for performance
management application.

Depending on the position, input sources might eventually include peers, other
supervisors and stakeholders. At least one of these sources would be included
as input. Conducting performance reviews, assisting in improving performance
on the basis of analysing measured performance.
 Operationally, the act of observing performance and providing feedback is an
ongoing and continuous process, occurring during normal interactions at work.
Informal sessions can occur weekly or even daily as a way of addressing
priorities and achieving outcomes. Frequency of the feedback may vary based on
the tenure of the employee or the dynamics of the position. On a formal basis,
face to face feedback between the Council, the Municipal Manager and the
Executive Managers should be provided and discussed 2 or 3 times per year.

Performance evaluation is based on a scoring system with the Performance Plan

as the point of departure. All aspects of performance are evaluated and scored
and then consolidated into the Consolidated Score Sheet (refer to Appendix A) to
provide a final performance score for each employee that is evaluated. This
methodology also closely relates to the amendment of the IDP as it will serve to
inform the review phase.

Feedback will be used by an employee to obtain a comprehensive view of

performance effectiveness. With this perspective, an employee may need to
adjust their priorities, approach, or work style to improve effectiveness.
Additionally, feedback may provide useful indicators of potential developmental
needs, resource shortcomings and requirements, inadequate policy or strategy,
to name but a few .

The responsibilities in the monitoring process involve the following:

SUPERVISOR’S RESPONSIBILITY EMPLOYEE’S RESPONSIBILITY

1. Conduct and provide ongoing 1. Conduct and provide meaningful self-

performance observations while observations to supervisor
providing meaningful feedback to
employees

 Conduct face-to-face interview with each 2. Prepare for face-to-face interviews

employee at a minimum semi-annually.

 Utilise feedback to adjust performance (as 3. Utilise feedback to adjust performance

related to Performance Management)

 If appropriate, recognise performance, 4. Provide other feedback (team, peer, customer)

through effective monitoring, in a timely manner as appropriate during performance cycle
during performance cycle.

 Provide upward feedback regarding 5. Provide upward feedback regarding

immediate supervisor’s compliance with the immediate supervisor’s compliance with
Performance Management Process the Performance Management Process

At this point it is also important to assess how performance could be improved.

Good and excellent performance need to be maintained and acknowledged in
order to meet the needs of citizens and improve their quality of life. Poor
 performance, however, needs to be specifically addressed and ways and means
designed to improve on such performance. The following table gives an
indication of the possible causes for poor performance and the strategy that
could be chosen in response to redress such poor performance:

CAUSE OF POOR PERFORMANCE RESPONSE STRATEGY

Inappropriate structure Restructuring within the organisation

Poor systems and processes Improvements to systems and processes

Lack of skills and capacity Training and sourcing additional capacity

Inappropriate organisational culture Change management and introduce and educational

programme

Absence of appropriate strategy Revision of strategy by key decision-makers

Typically, a performance evaluation procedure will include the following:

• A formal performance review occurs once a year in June, before the end
of the financial year.
• The Municipal Manager may request input from customers, i.e. people
who are able to comment on performance because they have worked
closely with such an Executive Manager, on the Executive Manager’s
performance throughout the review period.
• The Municipal Manager will prepare ratings of the Executive Manager’s
performance against objectives as a result of his/her evidence and
customer input.
• The Municipal Manager will ask the Executive Manager to prepare for
formal appraisal by rating himself/herself against the agreed objectives.
• The Municipal Manager and Executive Manager will meet to conduct a
formal performance rating and agree on final scores. In the event of a
disagreement, the Municipal Manager has the final say with regard to the
final score given.
• Initially the scoring should be recorded on the scorecard and then
transferred onto the consolidated score sheet.
• Deadline dates met or not met should be clearly marked.

• KPIs that have or have not been supplied as evidence of achieving an

objective should also be marked.
• Any reasons for non-compliance should be recorded during the review
session.
 • The Municipal Manager should make his/her own notes during the formal
review meeting and should assign a score in relation to the weighting
assigned to a specific objective.
• Only those items relevant for the review period in question should be
scored.
• The Municipal Manager and Executive Manager should prepare and agree
on an individual learning plan and set new objectives, targets,
performance indicators, weightings, dates, etc. for the following financial
year.
• Poor work performance will be dealt in terms of the incapacity procedure
as outlined in the applicable Labour Legislation.

Success Factors: 5.7, 5.8, 5.9, 5.10 and 5.11

STEP 10

1. Reporting on Performance

Reporting on performance to the Council and stakeholders in the form of a

performance summary is an annual process of documentation and discussion
between the Municipal Manager, Executive Committee and Council which is also
open for public scrutiny. This annual report is legislatively required and must be
available to the public.

The performance summary or report is a consolidation, discussion, and

acknowledgement of accomplishments and effectiveness throughout the
performance cycle. It provides an assessment of actual achievements based on
the outcomes and expectations contained in the performance plan, includes a
synopsis of formal feedback received during the performance cycle and contains
highlights of developmental activities undertaken during the period. The
performance summary represents the review of record for the performance cycle.

At a minimum, the performance summary is an annual process of documentation

and discussion between the Municipal Manager and Executive Managers and
should occur within 30 days from the end of the performance cycle.

This mechanism of reporting on the performance may be used for:

• Identifying developmental needs;

• Identifying shortcomings in resource availability, institutional capacity,
strategy, etc.;
• Determining compliance with the agreed upon performance plan;
• Analysing individual [or team] performance in terms of the IDP goals and
objectives;
• A basis for individual recognition;
• A basis for team acknowledgement and recognition; and
 • A point of consolidation of feedback from the performance cycle.

Responsibilities related to reporting on performance and the compilation of the

actual performance report or summary include:

SUPERVISOR’S RESPONSIBILITY EMPLOYEE’S RESPONSIBILITY

1. Consolidate data from entire 1. Provide meaningful input to assist

performance cycle supervisor/manager in summarising individual
accomplishments of the performance cycle

 Identify developmental needs for the 2. Identify developmental needs for the upcoming
upcoming performance cycle based on the performance cycle based on the previous cycle
results of the performance summary

 Effectively communicate summary of 3. Prepare to discuss summary of expectations

expectations and outcomes to employee and outcomes

 Prepare to initiate the next performance plan 4. Review feedback obtained during
based on the past performance cycle and performance cycle and begin to formulate
upcoming work assignments of the work unit ideas for upcoming performance plan

Success Factors: 5.11, 5.12 and 5.13

7. ACTION, ROLES, RESPONSIBILITIES AND TIMEFRAMES

The following table summarises the previously detailed 10 Steps involved in

developing a Performance Management System for the Ulundi Municipality and
allocates responsibilities and timeframes to each of these Steps:

REF. ACTION DESCRIPTION RESPONSIBILITY TIMEFRAME

6.1 Accepting • The Municipal Municipal Manager Council report

Responsibility Manager and to serve ASAP
Executive Committee Executive Committee
accept responsibility
for developing the
Performance
Management System.

• This must be done

officially and in writing.

6.2 Project Team • Establishment of Municipal Manager Simultaneous

Project Team. to report
• Led by delegated Executive Committee outlined above
official.
• Constituted by people
involved and familiar
 with the IDP process.
• Steering function.
• Reporting to the
Municipal Manager.

• Identification of
stakeholders and
establishment of
structures to facilitate
the development of the
Performance
Management System.

6.3 Participation Workshop session in the Project Team Within 2 weeks

process of managing the Supported by the of Council
change process. Executive Manager: approval initial
Corporate Services report

6.4 Develop the A framework that describes Project Team to To be initiated

Performance and represents how the submit a report to as soon as
Management municipality’s cycle and Council workshop
System performance planning, session has
monitoring, measurement, been completed
review and reporting will and feedback
happen, be organised and be interpreted
managed, whilst determining
the roles of different role
players. The following
components make up the
Performance Management
System:

• Planning - The IDP Project Team together Completed – it

fulfils the planning with Executive is assumed that
stage of performance Managers Interim IDP
management. serves this
purpose

• Priority Setting - A set Project Team together Completed – it

of priorities and with Executive is assumed that
objectives based on Managers Interim IDP
identified needs, serves this
achievable in the purpose
current term of office
and that would
contribute significantly
to the achievement of
the development
vision.

• Setting Key Project Team together 3 days per

Performance with Executive Executive
Indicators (KPIs) Managers Manager
 • Setting Targets Project Team together 3 days per
with Executive Executive
Managers Manager

6.5 Contractual Based on targets that have Project Team together Within 14 days
Commitment been set contractual with Municipal of finalisation
and agreements are finalised for Manager and and agreement
Agreements the Municipal Manager and Executive Managers of targets
Executive Managers.

6.6 Publication of The Performance Executive Manager: Within 14 days

the System Management System Corporate Services of signing of
developed and agreed upon is contractual
to be published in the local agreements
media for comment and input. and allowing 14
days for
comments and
input

6.7 Adoption of Final draft of the Performance Project Team Within 14 days
the System Management System to be after the closing
prepared, incorporating date for the
comments and input received. submission of
comment and
input

6.8 Monitoring Developing a process of: Project Team together Simultaneous

Framework with Municipal with
• Making accurate and Manager and development of
objective performance Executive Managers the
observations based on Performance
the performance plan's Management
outcomes and System
expectations.
• Providing timely
feedback throughout
the performance cycle
to encourage
employees to
maximise their
performance.

• Involving the collection

of data, documenting
results and managing
the overall process.

6.9 Performance Conducting performance Project Team together At least twice a

Evaluation reviews, assisting in improving with Municipal year, but
performance on the basis of Manager and preferably
analysing measured Executive Managers quarterly
performance.
6.10 Reporting on Reporting on performance to Project Team together Annually within
performance. the Council and stakeholders. with Municipal 30 days after
Manager and the end of the
Executive Managers performance
cycle

8. A WORD ON RECOGNITION

To maintain a high level of motivation and performance, recognition needs to be

given to employees that achieve their performance goals. This is a means of
rewarding employees for sustained outstanding performance and service and
providing incentives to continuing to do so. Recognition should be linked to
performance outcomes and employees should be recognised or rewarded for
being result-oriented and IDP-focused.

To facilitate an appropriate financial rewarding system, the Performance

Management System for Ulundi requires a Remuneration Policy to be in place.
Within this Remuneration Policy recognition needs to be made of the
Performance Management Contracts of the Municipal Manager and the
Executive Managers and the implications of these contracts on financial
resources, bonus payouts, etc. Based on the Performance Evaluation process
and the scoring in terms of this process, the Municipal Manager and Executive
Managers will receive their performance bonuses and budgetary provision would
be required.

Measures of reward and recognition that can be used include time-off, monetary,
and others types of recognition (i.e. tickets to a local event, dinner) and should be
focused on:

• The ability to recognise a team as well as an individual accomplishment;

• Achievements based on every day superior contribution as well as high
visibility projects;
• Recognition based on performance criteria, i.e. there are clear guidelines
on what it takes to be recognised;
• Monetary and non-monetary;
• Timely to the event; and
• Handled at first level of supervision.

8.1 Remuneration Policy Guidelines

The Performance Agreement’s requires that the Ulundi Municipality must have a
Remuneration Policy that sets out the link between performance and reward for
the Municipal Manager and the Managers.

It is essential that the remuneration policy is clear i.e. there must be no confusion
in the minds of the Municipal Manager and the Managers reporting to the
Municipal Manager what the remuneration policy is in relation to linking the
results of their performance to reward.

In the preparation of a remuneration policy the following aspects need to be

taken into account; namely:

• Cost of living increase;

• Merit increase; and

• Outstanding performance

The remuneration policy therefore need to link the results of the performance
review to that of the employee’s pay. The option put forward reads as follows;
namely:

The Employee receives an annual cost of living increase and a merit /

performance bonus for outstanding performance based on the result of his
/ her performance score.

The option put forward need to consider the following in the preparation of the
remuneration policy.

• There is a cost of living increase based on the affordability of the

Municipality.

• A merit increase above the cost of living increase will be awarded to

employees who obtain high performance scores. The amount awarded is
further dependent on the affordability of the Municipality.

• The performance score is obtained using the performance plan.

• Should external factors play a major role in impacting negatively on an

employee’s ability to meet the required standards of performance, it is at
the discretion of the Remuneration Committee whether or not the
employee should be entitled to a merit increase.

• The merit increase along with the annual cost of living increase will be
awarded annually at the beginning of the financial year, after the
performance appraisal.

• The amount of the merit increase will be determined by the score resulting
from the performance appraisal and will be calculated as follows:
9. CONCLUSION

Performance Management in the local municipality is a two way communication

process between the municipality and the community that is making use of
municipal services. The performance of the municipality is then measure against
specific key development priority objectives and performance indicators which
have been discussed and analysed and agreed upon during the IDP process.

The Performance Management System put forward is potentially the only area of
management that can significantly contribute to the overall municipal
performance.

Attached as Annexure A is the Municipal Performance Management Framework

for Ulundi. The framework forms an integrated part of the Integrated
Development Plan (IDP) process with specific reference to Key Performance
Areas (KPA’s ), development objectives, Key Performance Indicators (KPI"s),
targets, etc which directly feeds into the vision, objectives, strategies and
programmes/projects identified and developed.

The implementation of a Performance Management System for the Ulundi

Municipality, as outlined in this document will have the following benefits:

• An improvement of Departmental performance in many key areas

including stakeholder satisfaction, reduction of procurement lead-times,
 on-time delivery, employee satisfaction and cost efficiency of all
operations;
• The delivery of IDP projects and programmes with an evaluation of
effectiveness and efficiency in this regard;
• Input into the review of the Ulundi IDP;
• An improved relationship between the Municipal Manager, Executive
Committee, Ulundi Council and Council officials – one built on mutual
respect and co-operation;
• An assessment process that is uniformly well-received, particularly by
stakeholders who are pleased that their needs and expectations are being
addressed;
• The development of useful information for management; and
• The creation of an environment that encourages continuous improvement.