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Plans Must Be Rooted in Past Performance

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Performance planning is not developed in a void, nor is it based upon unsubstantiated estimates of budgets, performance and plans. Effective leadership demands plans be based upon past performance and results. By successfully implementing such plans, leaders can stimulate their subordinates to exceed normal performance expectations.

It is surprising how many managers develop annual plans and budgets without accounting for previous years’ performance and the realistic capabilities of their operational unit. Plans that lack these important elements are typically ineffective as roadmaps for achieving high output from an organizational unit.

Effective leaders understand that in order to move their unit forward, they must look at what has worked in the past and then build upon those successes. They also take proactive measures to eliminate any apparent failures and weaknesses.

This process is important for leaders to understand if they wish to motivate their subordinates to reach higher levels of achievement. Plans are not a worthless set of documents to be viewed only once or twice a year: they outline significant milestones and detail what the unit needs to do to effectively operate throughout the year. Leaders understand that performance plans lay out the path for attaining their goals and objectives.

The importance of proper planning cannot be emphasized enough: if it is to be effective and realistic, it must be focused upon prior performance of the leader’s organizational unit. Therefore, a formal review must be conducted in the following three critical areas:

Operational Performance

A formal review in this area is normally conducted on two levels simultaneously: operational and leadership. The operational review compares the organizational unit’s performance with the stated goals and objectives passed down by senior management. The leadership review compares the organizational unit’s performance with the leader’s expectations. While both levels review the same information, the leadership review is conducted from the leader’s perspective of how he or she can motivate the unit to exceed expectations.

The process of a formal review begins with a superficial selection of areas that need further examination. Particular attention needs to be paid to what did and did not work during the past year. This is where leaders can begin to develop strategies to build upon their unit’s successes and eliminate or correct any failures/weaknesses.

Leaders next need to rate the actual performance of all aspects of their organizational unit, including personnel, tasks, assignments, roles, resources and so forth. At this point, any required changes and adjustments should be noted for inclusion in future performance plans.

A final review of operational performance needs to explore the impact and affect of new trends, changes in economic conditions, and uncontrollable events on the operational unit. A thorough examination should note exactly what occurred, how it impacted the leader’s unit and how the unit responded. Any lessons learned from these experiences should also be included in future plans.

Resource Utilization

A formal resource utilization review should be conducted to determine if the leader and the organizational unit maximized their use of available resources. Typically, this review determines if the unit effectually used personnel, machinery, equipment, time, schedules and financial resources.

Leaders need to analyze the operational or production capacity of their organizational unit. This can be conducted from several perspectives, such as production, operations or administration, depending upon the responsibilities of the unit. A resource utilization review pinpoints any bottlenecks or problems that occurred in these areas.

Next, leaders must determine the causes of bottlenecks and problems, which can include inadequate scheduling or insufficient human or financial resources. The findings should be detailed and included in future planning activities.

Financial Performance

The last step in this review analyzes the unit’s financial performance. First, leaders determine how well their organizational unit worked within its budget. They will often discover problem areas that can be more deeply examined during the performance planning process.

An additional review should be conducted to look at the profitability of the organizational unit, including potential ways for it to cut costs and improve productivity. These findings should also be detailed and noted for further examination as well as inclusion in future performance plans.

If you are seeking proven expertise and best practices in performance planning to train or educate your employees to solve problems and improve their performance in this area, refer to Planning to Maximize Performance: Pinpoint Leadership Skill Development Training Series. Click here to learn more.

Related:

Six Key Benefits of Performance Management

Five Critical Steps to Maximize Performance

Measure What Needs to Be Measured

Timothy F. Bednarz, Ph.D. | Author | Publisher | Majorium Business Press
Author of Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It (Finalist – 2011 Foreword Reviews‘ Book of the Year)
Linkedin | Facebook | Twitter | Web| Blog | Catalog |800.654.4935 | 715.342.1018

Copyright © 2014 Timothy F. Bednarz, All Rights Reserved

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Measure What Needs to Be Measured

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Performance plans are action plans, not static documents. Effective performance plans must detail the specific actions leaders and employees must follow to accomplish the goals and objectives set within it. Leaders understand that without meaningful performance standards, measuring and evaluating individual performance becomes difficult if not impossible. Once the plan is implemented, meaningful performance standards allow leaders to modify and adapt their plans to actual conditions.

Leaders must use solid standards to monitor and evaluate all aspects of performance. Any measurement used should determine and create an action both on the part of the employee being evaluated and on the part of the leader performing the evaluation.

There is a natural tendency for a leader to focus his or her activities on more prominent areas that will be highlighted and spotlighted, yet every element of the performance plan must be fully addressed.

It should be noted that any standard a leader creates will direct, limit and change the behavior and performance of their employees. This is important for leaders to understand because what and how they choose to evaluate can have either a positive or negative effect on the performance of their organizational unit.

A common pitfall in establishing performance standards is overdoing them. It burdens all involved with excessive factors and controls. Leaders know that to be effective, they need to set performance standards that are relevant and meaningful. It is far better to have fewer meaningful standards than to establish many useless ones. When applied, these standards will present a true picture of the performance of their organizational unit at any given point in time. Four areas to focus on in creating meaningful performance standards are:

What to Measure

The specific elements that need to be measured will vary by organizational unit. Typically, performance standards are set around productivity and profitability. Most leaders establish performance standards by setting specific performance expectations. Examples include:

  • Progress is evaluated by the reaching of specific milestones linked to individual goals and objectives.
  • Profitability is evaluated against the budgets established for each activity.
  • Efficiency is evaluated by the resource utilization within the organizational unit.

Each organizational unit has key factors that determine their success. Leaders identify these factors as indicators of performance and look for trigger points that are early indicators of the success or failure of these factors. For instance, if a leader is managing a manufacturing unit, he or she may focus on projected orders as a key indicator of their unit’s future activities. While a production supervisor may not be interested in these future indicators, a leader looks beyond the immediate horizon to maximize the efficiency of their unit.

How to Benchmark

Once leaders know what they want to evaluate, they need to benchmark each critical measurement. This establishes degrees of confidence and reliability in their numbers. They review these statistics over a meaningful period of time to establish a benchmark of past performance in each area. The longer a leader reviews the past performance of a specific area, the higher the degree of confidence and reliability he or she establishes.

Once key performance standards are benchmarked, leaders establish “triggering events” that result in taking immediate action. Since the benchmarked statistic is the standard, a triggering event can be predetermined. This event or “flag” occurs when performance rises above or falls below a specific percentage of the benchmarked standard. This provides leaders an early warning system to proactively deal with performance problems before they get out of hand.

How Frequently to Measure

Leaders are careful not to overburden themselves with needless information. They use performance standards as a means to keep their finger on the pulse of their unit’s performance. They can easily determine the frequency for receiving reports of their unit’s performance. Some statistics are meaningful on a daily basis, some hourly, and still others only when reported over prolonged periods of time.

What Measurements Indicate

Key performance standards need to inform leaders of the overall performance of their organizational unit. Specific measurements can trigger corrective actions, while others indicate the progress of the unit against performance plan goals and objectives. Effectively utilized, solid performance standards lead and direct the leader’s actions to fine-tune his or her unit’s performance. The right balance of key standards points the way to improved overall performance and productivity.

Excerpt: Planning to Maximize Performance: Pinpoint Leadership Skill Development Training Series (Majorium Business Press, Stevens Point, WI, 2011) $ 16.95 USD

Related:

Five Critical Steps to Maximize Performance

Execution: Six Action Steps

Performance Plans Create Results and Maximizes Performance

Objectives Allow Managers to Focus on Obtaining Results

Timothy F. Bednarz, Ph.D. | Author | Publisher | Majorium Business Press
Author of Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It (Finalist – 2011 Foreword Reviews‘ Book of the Year)
Linkedin | Facebook | Twitter | Web| Blog | Catalog |800.654.4935 | 715.342.1018

Copyright © 2013 Timothy F. Bednarz, All Rights Reserved

Five Critical Steps to Maximize Performance

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The application of performance management aligns all employees with the overall goals of the company. This enables each employee to understand both their role in the organization and how their efforts contribute to its success, as well as to work toward the mutual accomplishment of those goals.

The manager has an important role to play in the formation of a performance management program for his or her people. Goals must be clarified and clearly communicated, and the behaviors of the individual employees must be aligned in order to achieve the desired outcomes.

This is important for managers to appreciate as performance management demands not only time and patience to properly implement, but superior communication skills to close the informational gaps between the desires of senior management as expressed in their plans and the actual behaviors and efforts exhibited by employees.

Managers will find that once they are able to effectively close these gaps and clearly communicate established company goals to their people and align their behaviors accordingly, their programs will work very efficiently to produce a more productive unit.

The role of the manager in performance management is to clearly communicate the company’s goals, align their individual employees’ behavior with them and monitor performance. This includes:

Clarifying Goals

Research has shown that differences in overall performance among individual employees are directly proportional to the level of internal clarity in which goals and objectives are presented to them. This is because when goals are communicated and clarified, employees have a clear understanding of what needs to be done and how to do it, and they are unified in the pursuit of that goal.

Limit Priorities

Many managers can either get strategic goals intermingled with more tactical operational goals or have entirely too many “top priorities.” This blurs their focus and leads to a lack of clarity. It is the manager’s responsibility to narrow the focus of their priorities and limit their number to as little as five. They should also see that individual employees do the same thing. This assures that all are focused and crisp in their execution. Additionally, too many priorities scatters the individual efforts of the unit or department in a variety of unmanageable directions, ensuring that goals and desired outcomes will not be achieved.

Execution

Good execution only happens when an employee’s behavior is aligned with the company’s goals. Many managers fail to align their people with company objectives because they don’t know how to talk to them about change and poor performance. Additionally, many managers won’t align their employees because they find it uncomfortable to challenge them and give them candid feedback or don’t realize that successful execution will never happen without ongoing performance dialogue.

When employees understand how their work fits into overall company goals, they will appreciate how they need to align themselves with these efforts and make the appropriate adjustments in behavior. These changes in execution are not possible without performance feedback from the manager.

Communicating Clearly

Quite often the only feedback many employees receive over the course of the year is regarding how they are performing against their stated sales goals. It is important for managers to create the linkages between the individual employee and the company so that he or she can see not only how they fit in but also how their efforts are contributing to the company’s overall success.

Numerous studies have shown that when employees clearly understand how they fit into the organization and see how their efforts contribute to the company’s success, they are substantially more motivated and productive.

Managers should open up the channels of communication to their people—who oftentimes feel isolated from the company to begin with—in order to build a sense of community so that they can see how their efforts are part of the company’s overall success.

Proper Acknowledgment of Progress Toward Goals

Managers must ensure that they encourage employee behaviors that are consistent with the company’s goals. Employees’ behavior is easily modified by a change in how their efforts are acknowledged. They will do what produces the most recognition and positive reinforcement.

Excerpt: Performance Management: The Pinpoint Management Skill Development Training Series (Majorium Business Press, Stevens Point, WI 2011) $ 18.95 USD

Related:

Five Critical Steps to Maximize Performance

Execution: Six Action Steps

Performance Plans Create Results and Maximizes Performance

Objectives Allow Managers to Focus on Obtaining Results

For Additional Information the Author Recommends the Following Books:

Performance Management: The Pinpoint Management Skill Development Training Series

Planning to Maximize Performance: Pinpoint Leadership Skill Development Training Series

Maximizing Financial Performance: Pinpoint Leadership Skill Development Training Series

Improving Workplace Interaction: Pinpoint Leadership Skill Development Training Series

Timothy F. Bednarz, Ph.D. | Author | Publisher | Majorium Business Press
Author of Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It (Finalist – 2011 Foreword Reviews‘ Book of the Year)
Linkedin | Facebook | Twitter | Web| Blog | Catalog |800.654.4935 | 715.342.1018

Copyright © 2013 Timothy F. Bednarz, All Rights Reserved

Performance Indicators Provide Feedback and Insight into All Levels of Leadership

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Key performance indicators or metrics allow organizations to create a common reporting system and language that leaders on all levels can understand and use in their decision-making. However, performance measurement decisions deliver key information and data that triggers specific decisions and actions at different levels of the organization.

Performance-based measurement systems provide feedback and insight into all levels of leadership within the organization. Local leaders make decisions based upon trigger points and triggered events as well as overall performance of their organizational units.

On the other hand, senior managers must take a strategic perspective that links the performance of all organizational units into feedback related to the entire organization’s performance; their decisions are global and focus on the sustainability of the entire organization.

It is important for leaders on all levels to understand the links between local performance and the entire organization. Key performance indicators and metrics trigger decisions on multiple levels. Lower trigger points may cause lower levels to react and make decisions and changes based upon the organizational unit in a specific location.

Senior leadership will have trigger points at higher levels that concern the performance of the entire organization, compelling them to make decisions and changes based upon the feedback they receive. While the perspectives may be different at various levels of leadership, the use of key performance indicators and metrics allows all leaders to make the decisions that are their responsibility.

Decisions can be tactical on a local operational level and strategic at a higher leadership level. The decisions are linked in that the strategic decisions will impact tactical decisions, but tactical may not affect strategic. Strategic decisions typically provide leaders with the boundaries and parameters that they must work within.

Leaders at all levels must understand that all decisions impact the organization. Daily decisions may not appear to be connected to the major areas discussed in this section, but, ultimately, all decisions made are based in one of these key areas.

Quality of Execution of Organizational Strategies

The availability of performance measurement systems and key performance indicators provides leaders on all levels of the organization with the decision making tools to measure the quality of the strategy that drives the organization.

Financial indicators are lagging indicators, while non-financial indicators provide leaders with a balanced view of what is happening. Metrics provide leaders with specific questions to facilitate the organization’s ability to make tough decisions and quickly seize opportunities as well as to evaluate how well it adapts to changing technologies and markets.

Improvement of Non-Financial Performance

Non-financial metrics linked with more traditional financial ones provide leaders with the information to make timely decisions that impact their unit’s performance and the entire organization’s ability to adapt. Triggered events and predetermined trigger points provide pivotal moments for leaders to make key performance decisions. These events can be established on both strategic and tactical levels with individual leaders responsible for making specific decisions within the organization.

Value Creation

More companies are using value creation indexes that focus on the relationship between non-financial performance and the organization’s market value. The establishment of a value creation index provides leaders with key insights by establishing direct links between the two areas of focus. Research has shown that a reliance on non-financial performance leads to more accurate forecasts and valuation. Typically the value creation drivers are:

  • Innovation
  • Quality
  • Customers
  • Management
  • Alliances
  • Technology
  • Brand
  • Employees
  • Environment

While value creation is defined and utilized by senior leadership within the organization, its metrics that measure non-financial performance are driven into the organization and become part of the suite of performance measurement tools used by leaders on all levels.

Research has shown that intangible elements such as innovation, alliance, management and employees are the key players in producing the organization’s value. Within the durable and non-durable manufacturing environment, improvement in key value drivers results in higher market values. These are the indicators that allow organizations to measure and predict future performance.

Efficient Resource Allocation

The balanced use of performance measurement systems that evaluate both financial and non-financial performance metrics allow leaders to efficiently allocate the use of scarce resources throughout the organization. Decisions that effectively manage resource allocation allow organizations to sustain their performance and profitability.

While local leadership on the tactical level makes decisions on the use and application of resources, senior leadership on the strategic level is able to ensure that resources are used in ways that benefit the entire organization. The use of performance measurement metrics allows leaders on all levels to evaluate effectiveness and make decisions regarding future performance.

Excerpt: Maximizing Financial Performance: Pinpoint Leadership Skill Development Training Series (Majorium Business Press, Stevens Point, WI 2011) $ 16.95 USD

Related:

Performance Management Must Begin With the Manage

Attaining Organizational Results Requires Visionary Thinking and Planning on Multiple Levels

Performance Plans Create Results and Maximizes Performance

Measure What Needs to Be Measured

For Additional Information the Author Recommends the Following Books:

Performance Management: The Pinpoint Management Skill Development Training Series

Planning to Maximize Performance: Pinpoint Leadership Skill Development Training Series

Strengthening Leadership Performance: Pinpoint Leadership Skill Development Training Series

Timothy F. Bednarz, Ph.D. | Author | Publisher | Majorium Business Press
Author of Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It (Finalist – 2011 Foreword Reviews‘ Book of the Year)
Linkedin | Facebook | Twitter | Web| Blog | Catalog |800.654.4935 | 715.342.1018

Copyright © 2013 Timothy F. Bednarz, All Rights Reserved

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