Performance Management

Harry Kogetsidis

School of Business

Lecture’s topics

• What is performance management?
• What are the basic steps of the

performance management process?

• What are the basic types of approaches to

performance improvement?

Organisational Performance

Organisational performance

is the

accumulated

results of all the organisation’s work

processes

and activities.

Performance Management

Performance management

is the process of

measuring, monitoring and improving

organisational

performance.

Performance Management

Performance management

is the process of

measuring, monitoring and

improving

organisational

performance.

Operations managers are judged not only on how
they achieve a smooth running of the company’s
operations but also on how they

improve

the

performance of the company’s operations function.

A performance monitoring

example

Volume of sales in November: 975 units.

Average monthly volume of sales: 1000 units.

standard

performance

A performance monitoring

example

Volume of sales in November: 975 units.

Average monthly volume of sales: 1000

units.

Variation

= 1000-975 = 25 units.

Action: Do nothing (variation acceptable).

A performance monitoring

example

Volume of sales in November: 800 units.

Average monthly volume of sales: 1000 units.

Variation

= 1000-800 = 200 units.

Action: Identify cause of variation and correct

performance.

Performance management process

The performance management process

involves

four basic steps.

Performance management process

Step 1 - Define objectives and set

standards

.

Setting standards

The

standard

will itself have an effect on its

achievement.

standards

seen as too high may be ignored as

unattainable

standards

that are too low will lower performance

Performance management process

Step 2 - Measure performance.

Measuring performance

Quantifiable aspects

of performance are

relatively

easy to measure whereas

non-quantifiable

aspects

of performance are more open to subjective
interpretations.

Performance management process

Step 3 - Compare performance with standard.

Comparing performance with

standard

As some variation from the plan is always to

be

expected, managers need to determine the
acceptable range of variation.

Performance management process

Step 4 - Take appropriate managerial action to

correct

variations or inadequate standards.

Taking action

Managers need to act on significant variations
from the plan – either to correct future

performance

or to revise inadequate standards.

Taking action

Managers need to act on significant variations
from the plan – either to correct future

performance

or to

revise inadequate standards.

Be careful – a constant lowering of standards can result in
employees blaming the standard as being too high rather
than accepting that their performance was inadequate!

Performance management process

Measuring performance –

Productivity

output

Productivity

= ----------------

input

Measuring performance –

Productivity

Ways to increase productivity:
• by

increasing output

without a

proportionate increase in input

• by

decreasing input

without a

proportionate decrease in output

Measuring performance –

Productivity

One of the problems with this measure is that it

does

not consider performance from a wider

viewpoint that

also includes the needs of customers and other
important stakeholders.

Improving Performance

Any attempts to improve the performance of

one or

more aspects of the organisation and its

operations

will undoubtedly result in some sort of

change.

Improving Performance

Two types of approaches to performance
improvement:
• Breakthrough improvement
• Continuous improvement

Breakthrough Improvement

• It assumes that the main vehicle for

improvement is major and dramatic change
in the way the operation works.

• It is a radical philosophy that does not

accept many constraints on what is
possible.

‘Go back to basic principles’.
‘Completely rethink the system’.

Breakthrough Improvement

An example of breakthrough improvement

would

be the total redesign of a computer-based

hotel

reservation system.

Continuous Improvement

• It assumes that the main vehicle for

improvement is many small incremental
improvement steps.

• Small improvements have one significant

advantage over large ones – they can be
followed relatively painlessly by other small
improvements.

‘Make sure that every time some kind of improvement –

no matter how small – has actually taken place’.

Continuous Improvement

An example of continuous improvement

would

be the effort to simplify the amount of

information

a customer is asked to provide when making

a

hotel reservation.