Performance Evaluation • Evaluating, measuring, and rewarding performance are among management’s most difficult tasks • There needs to be a tradeoff between short and long-term performance • The measures used to evaluate performance need to tie into management’s strategy - they often don’t • example: producing handouts for students versus controlling copier costs
Other Thoughts on Performance Evaluation • To put it as simply as possible - YOU GET THE BEHAVIOR YOU REWARD! • The people being evaluated should be aware of the measurements being used and have input into what the measures are as well as at what level they should be set • People should have the ability to succeed under the system • Feedback should be given in a timely and useful manner • A significant number of incentive plans fail!
Performance Evaluation and ABM • Such a system would have as part of its measurement system estimates of NVA activities and tying such activities back to particular measures • An example would be cutting out the waste generated and captured through the material efficiency variance • By focusing on and eliminating NVA, management can then focus on value-added activities
Strategy and Performance Measurement • New strategies and competitive realities demand new measurement systems • Need for a broader set of measures than just financial figures (quality, market share, etc.) • Traditional accounting system based performance measures are obsolete, and sometimes harmful • There is a focus on short-term earnings, often to the detriment of long term value enhancement • Triggers for change • Quality movement • Customer focus • Benchmarking • Information Technology
Incentive Plans(from “Why Incentive Plans Cannot Work,” HBR, Sept/Oct. 1993) • Rewards are only good at temporary compliance • People who expect to receive a reward for completing a task do not perform as well as those who expect no reward at all, particularly in more cognizant activities • Pay is not the primary motivator (it ranks about fifth) • Rewards punish, they are manipulative and controlling • Rewards rupture relationships (teams) • Rewards ignore reasons • Rewards discourage risk-taking; people will focus on measures, not achieving excellence • Rewards undermine interest (intrinsic motivation)
Star Performers • Bell Labs • Expert Model • Core skills and strategies • Taking initiative, technical competence • Self-management • Networking • Leadership • Teamwork effectiveness • Followership • Perspective • Organizational savvy • Show and tell • Results showed increased productivity • Spots problems, high quality work on time, keeps boss informed, pleases customers, works across organizational boundaries, focuses on competition, understands management decisions
Team Based Performance • Traditional measurement systems undermine the team approach • Measurement system should help achieve two functions • Getting functional areas to provide experts to teams when they need it • Getting people from different functional areas on a team to speak a common language • Principles of team based measurement: • Purpose should be to help team, not for management to gauge its progress • Empowered teams must take the lead in designing its owm measurement system • Measures must track cross-functional processes • Teams should adopt only a handful of measures • Ties in with balanced scorecard