The purpose of any business organisation is to satisfy the needs of society outputs through the utilisation of the scare resources or so called inputs people, physical, financial and informational. These resources have to be managed in such a way that strategic, tactical and operational goals can be met and achieved by the organisation. (Regenesys, 2013, p. 11) It can become very costly if organisations fail to reach their targets, they can even loose their competitive edge. Employees collectively have the ability to achieve organisational goals and therefore a great emphasis should be placed on managing performance. But managing people remains challenging and what motivates and drives one individual does not do the same for the next. How do we then improve performance?
Performance management is all about improvement - synchronizing improvement to create value for and from customers with the result of economic value creation to stakeholders and owners. A simple definition of performance management is "the translation of plans into results". (Cokins, 2009, p. 90)
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Having considered the different theories of what Performance management is, I have decided to define it as follows: Performance management is a strategic and integrated way of implementing improvements in an organisation in order to create more value for stakeholders whilst creating a vehicle for behavioural and cultural change.
1.1 Identify a performance management model that would suit the needs of Jelly Belly Candy Company. Critically explain the reasons for your choice by evaluating the applicability of the model against the case study. Page 4-8
1.2 Explain how the performance management model I explained in (1.1) will integrate with the organisations strategy, culture, structure and systems. Page 8-9
1.3 Develop a performance management system that would assist Jelly Belly to achieve the objectives that are outlined in the case study above. Page 10-12
Critically discuss appropriate methods to assist Sam and fellow team members to overcome resistance to changes required by a new performance management system. Page 12-15
Critically discuss the following statement: "Traditional performance management will soon be replaced by Business Intelligence solutions." Page 15-18
BIBLIOGRAPHY Page 19-20
In order to design a Performance Management model we need to understand more about the organisation in question. According to (Halogen, 2009, p. 01) Jelly Belly is a fun business to work at. This organisation was founded in 1869 and remains a family owned business situated in Fairfield, California. They produce over 50 flavors of beans as well as other candy corn and treats and these are distributed in 25 worldwide markets. Yet this family owned business does not fool around when it comes to promoting employee performance and job satisfaction. Like most successful organisations, Jelly Belly understands that staff retention is critical to their success and therefore people should be recognised for their efforts. (Halogen, 2009, p. 01)
As mentioned in the case study Jelly Belly needs an updated and consolidated performance management process. We are dealing with an organisation that are almost 150 years old. Jelly Belly must have seen many performance management models over such tenure, from the Scientific Management Era (Also known as the data era) in 1890 to the Organisational Environmental Era (Also known as the Information Era). Evaluation and performance management programs are critical to aligning corporate and employee values and priorities. (Halogen, 2009, p. 2) In my view Jelly Belly needs a system that is less time consuming, less paper driven and obviously more efficient. With 600 employees over 3 different locations you need to standardise performance processes. A lack of uniformity, inefficiencies and a difficult tracking process are the results of a poor performance appraisal system. (HR.BLR, 2013, p. 03)
As stated in my introduction Performance management can be defined as a strategic and integrated way of implementing improvements in an organisation in order to create more value for stakeholders whilst creating a vehicle for behavioral and cultural change. How does this theory apply to Jelly Belly?
(Cokins, 2009, pp. 12-14) highlight eight facts why there are an increasing interest in performance management and how performance management helps solve organisational problems. Some of these problems include:
Failure to execute the strategy;
Unfulfilled return on investment (ROI);
Always on Time
Marked to Standard
Escalation in accountability for results with consequences;
Need for quick trade-off decision analysis;
Mistrust of the managerial accounting system;
Poor customer value management;
Dysfunctional supply chain management;
The broken budgeting process.
Jelly Belly needs a new performance management system because processes are not automated; this in return means that there are no clear or accurate reviews. This causes employees at the organisation to not be sure what exactly is expected of them. People can only execute strategic objectives if they understand how their job responsibilities are aligned towards the vision. Performance management must therefore be seen as a continuous flow if information and resources. (Cokins, 2009, pp. 11-12) According to (De Waal, 2007, p. 1) performance management is a defined process. This process defines the mission, strategy, and objectives of the organisation. Key performance indicators create measures in order to keep the organisation on track. An organisation can only execute through its strategy. Jelly Belly needs to start designing this performance management model by asking the correct and relevant questions about the strategic objectives. The figure below identifies the process that need to be followed in order to develop a strategic performance management model.
(Regenesys, 2013, p. 15)
Let's consider this process in more details with regards to Jelly Belly. The instruction to head of HR, Margie Poulos was to update the current system and to consolidate the performance management process. Where should she start?
Step 1: Identify and agree on what matters.
Jelly Belly needs to identify and agree on what matters the most in the business. What are the most relevant strategic objectives that need to be executed? This is where the Pareto Principle become relevant and of paramount importance.
Pareto's rule states that a small number of causes are responsible for a large percentage of the effect, in a ratio of about 20:80. (H, 2001) This means that only 20% of a person's effort generates 80% of the results. The reverse of this mean that 20% of person's results absorb 80% of that person's efforts. In business terms this means that collectively 80% of the results (reaching goals) are achieved by a 20% effort.
See diagram below.
What then are the critical 20% of the current strategic objectives of Jelly Belly? I did not manage to find a published mission and vision for Jelly Belly, but I did however find some of the core company strategies on the internet:
Creating "true to life" flavors"
Grow and develop the workforce.
Provide consistent and equitable policies.
I would image that Jelly Belly have a clear mission statement and a "simple" vision so that all managers and the 600 employees can see the company future. I also presume that this vision is shared and understood by most employees. An organisation cannot exist for 150 years without employees "seeing" and "living" the vision.
Step 2: Collect the right management information
What critical information do I need that will help Jelly Belly? If Jelly Belly doesn't collect the correct information they will measure the incorrect things. This is where automated systems play an important role to ensure same practices in all three locations. When you design a performance management system you need to measure what is aligned with the strategic objectives of the organisation. In the case of Jelly Belly a core strategy is "Growing and developing the workforce". The focus of any performance management system should always be on performance enhancement, this in return will achieve individual and organisation effectives. (Regenesys, 2013, p. 16)
Step 3: Learn and improve performance
Managers need drive the performance management system, not the HR department. Once the key performance indicators have been set operational managers must regularly have open and honest discussions with their people. Employees can only understand what is expected of them if it is clearly communicated during these discussions. Accurate reviews ensure that employee morale remains high and increase talent development within on organisation.
One has to understand that Jelly Belly is almost 150 years in existence. This company has grown with the evolution of management theories. It will be dangerous for such an old organisation to get stuck in the "way we did things". New eras require different approaches. This might be a good place to review the evolution of management theories. This will assist us in designing a performance management system suited for Jelly Belly. The theories can be summarised as follows:
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Scientific Management Theory (1890 - 1940) - This is the foundation of all theories and it focus on what work the person does. (The relationship between people and tasks)
Administrative Management Theory (1895 - 1980) - This theory focus on the methods used to do the work. This theory believed that organisational structure will lead to higher efficiency and effectiveness. SOPs (Standard operating procedures) were introduced as well as job specialiasion and the concept of authority and accountability.
Behaviour Management Theory (1915 - 1990) - This theory focus on the behaviour of individuals, more particularly the relationship between how managers behave in relation to the motivational levels of employees. Theory X and Y were also introduced. X - Average worker is lazy and dislike work. Y -assumes that workers want to do a good job and are not lazy.
Management Science theory (1940 - 1995) - This theory view management as a science. Quantitative techniques were developed to maximise the use of people in the business. Examples would be TQM and MIS.
Organisational Environment Theory (1945 - 2000) - This theory argues that there are conditions beyond the organisation that affect the success utilization of resources. A system therefore should be viewed as open and interacts with the environment around it.
I believe that these theories should be combined into one model for Jelly Belly. No one theory is better than the other, in fact theories 1-4 can be integrated into theory 5 as one big system. Components of each theory should be used and considered when designing a performance management model for Jelly Belly.
As seen in the figure below the starting point for any performance management system is the mission and vision. The business need to know why it is in existence and where they are going. This opens up discussions about strategic objectives. Only when the strategic objectives have been set can Jelly Belly focus on the performance management system. Without this alignment the performance management will not succeed. Design is from the top down and execution of the strategy bottom up.
The performance model that I am going to suggest for Jelly Belly must be able to link mission, vision and strategic objectives with the correct and relevant key performance indicators. The most appropriate model for this will be the Integrated Performance Management System (Institute of Management Accountants, 1998, p. 3) can be seen below. In Question 1.2 I will elaborate more on the model.
(Regenesys, 2013, p. 37)
As mentioned in the article, the driving force behind designing a new performance management system for Jelly Belly was automation. All 600 employees need to be accurate reviewed so that they understand what is expected of them. Such an appraisal system will need to be user friendly, easy to understand and web based. A web based system will allow accurate and consistent measurements in all areas of the business. Such a web based system will also allow managers to access performance related data whilst on the move between different sites. The Jelly Belly performance management model needs to be able to achieve the following according to the Advanced Performance institute:
Achieve strategic clarity
Collect meaning performance indicators
Apply performance management analytics
Create a positive learning culture
Gaining cross-organisational buy-in
Ensure organisational alignment
Keep the system fresh
Report and communicate performance well
Implement appropriate software
Dedicate resources and time
(Regenesys, 2013, p. 36)
This performance model must therefore be integrated with the following key performance indicators:
The success of this model is dependent on how accurate the KPA's and KPI's link back to the core and strategic objectives of Jelly Belly. In practical terms a good starting point for the integration of this new model will be to draw up a list of criteria that this system needs to meet. I would image that keywords such as "friendly to use", "ease of use", "uncomplicated" will surface during these discussions. Time will also be an essential factor to Jelly Belly as well as the ability to use the same system in different locations (hence the suggestion of a web-based system).
Implementation of the new performance system at Jelly Belly needs to occur in 3 phases (Regenesys, 2013, p. 38):
Phase 1 refers to conceptual design. Engage senior management in the business to gain support and strategic alignment. Make sure that goals and objectives are correctly evaluated and measured. Define your KPA's and KPI's. Once completed gain final sign off for the model from the executive team and finally then plan your implementation.
Phase 2 is the design and implementation phase. During this phase score cards are developed and training needs are identified. Integration with the organisational systems is also crucial during this phase. Lastly the business needs to be prepared for the change process.
Phase 3 are the ongoing support phase once the new system is up and running. It is important to continually review kpi's, performance barriers etc.
The performance management system that I am developing for Jelly Belly will be a balanced scorecard. A balanced scorecard is a management tool that assists managers in formulating financial and non-financial goals (customers & people). The balance scorecard was developed by Kaplan & Norton. They defined it as follows: "The Balanced Scorecard (BSC) translates an organisation's mission and strategy into a comprehensive set of performance measures that provides the framework for a strategic measurement system. The scorecard measures organizational performance across four linked perspectives, i.e. financial, customer, internal business processes and learning and growth." (Regenesys, 2013, p. 17) According to (Flanagan & Finger, 2006, p. 350) balance refers not only to the four perspectives (financial, customers, internal business and learning) but also to the relationship between financial and non-financial, internal and external and currently reality against vision. Albeit that there was no real life strategic information available regarding Jelly Belly, I have made up key performance indicators as I would see the organisation.
Below find my suggested Strategy Map for Jelly Belly:
(Regenesys, 2013, p. 28) Suggests four phases towards the successful integration of a performance management system. Phase 1 relates to development of the performance management system. In this phase evaluation of the current system and consultation with all stakeholders are essential. Phase 2 is the launching of the process. As mentioned previously the performance management system will fall down if it is not aligned with the business strategy and organisational goals. Phase 3 refers to coaching and mentoring. Managers and staff have to explore the causes of poor performance and have open discussion about performance. The earlier performance issues are identified and addressed the better. Phase 4 refers to performance evaluation. Judgment during these evaluations can be either relative or absolute.
My suggested balanced scorecard for Jelly Belly:
Jelly Belly - Strategic
F1 - Increase Return On Investment
F2 - Broaden Revenue Mix
F3 - Improve Operating Efficiency
Return on Investment
Cost per Unit
New Revenue Sources
C1 - Increase Customer Intimacy With Our Products & People
C2 - Increase Delivery Performance For Customer
Share of Segment
Depth of Relation with customer
I1 -Understand Customers Needs
I2 -Create Innovative New Flavors
I3 - Maximise Quality
I4 - Develop Cost Effective Marketing Programs
I5 - Minimize Operational Problems
I6 - Exceptional Service
New Product Revenue
Develop Customer Self Service
Automate Processes / Streamline Manual Process
Customer Complaints Rate
Product Development Cycle
Hours with Customers
L1 - Rewards & Recognition
L2 - Appointing Right People
L3 - Increase Manager Competency
Employee / Job Satisfaction
Revenue per Employee
Retaining the Right Staff
Strategic Job Coverage Ratio
Strategic Info Availability Ratio
Personal BSC Balanced Score Card
There are some key features of the balanced scorecard according to (Muna, 2003, p. 143):
Measurements are aligned with the vision and strategy of the organisation.
Financial and non-financial measures are in balance as both are being measured.
Measured have both lagging and leading indicators. (Lagging = financial) (Leading = innovation)
If Jelly Belly implements a Balanced Scorecard Performance Management System it will allow the organization to communicate strategic and departmental objectives efficiently that will in turn allow people and teams to perform beter. No matter of your position in Jelly Belly, your balanced scorecard will allow your job to be aligned with the company vision and mission. Lastly, allowing each employee to have a balanced scorecard means that performance will be managed on all levels in the organization.
Perhaps the greatest challenge business leader's face today is how to stay competitive amid constant turbulence and disruption. (Kottter, 2013, p. 4)This is one of the reasons why new efficiencies such as the new performance management system at Jelly Belly are needed to give to company that strategic agility. Change management is a process and a utilization of special techniques and tools to manage the people side of change in order to achieve the desired outcomes and to realise the change effectively within the person, the team and the organization. (Nauheimer, 2005, p. 10) In other words, successful change works from the inside out, not outside in.
Sam is no exception to the rule. Many people find it hard to adapt to new things. We therefore cannot predict how people will react when they are introduced to new organizational changes. The cost of employees resisting change can become enormous. Therefore steps are needed to introduce change successfully within an organisation. Planned change in organisations normally occurs in 3 ways according to (Schemerhorn, 2011, p. 273):
Incremental change - relatively small scope of change like making minor improvements.
Strategic change - this is change on a larger scale. Restructuring and organisational moves fall in this category. Strategic change involves a series of transitional steps.
Transformational change - This is the biggest and most comprehensive scope of change. In this change the organisation mission, culture or goals may change.
The new performance management system at Jelly belly can be defined as strategic change for the following reasons:
This is a large scale company change intervention.
Jelly Belly wants to move from an old state to a new.
Because there are transitional steps towards the implementation if this system we need to understand where in the "change cycle" people like Sam are. Rick Maurer talks about the three levels why people resist change. (Maurer, 2009, p. 12)
Level 1 - I do not get it.
Often people on level 1 resist change because of a lack of information. People don't have the necessary insight why the change have been introduced and often have confusion about what the change means for the organisation. The best way to turn resistance into support on this level is to make your case. Don't talk about "how" you will implement the change, talk about "why" the change have to occur at Jelly Belly. Make sure that the change information is presented in an understandable language. Do not loose people's interests with complex numbers and presentations if they don't understand it. Also try and find multiple ways to communicate your case for the change.
Level 2 - I don't like it.
According to Maurer level 2 is an emotional reaction to change. (Maurer, 2009, p. 12) People get angry, anxious and fearful about the change. People are afraid that the change will cause them some sort of loss. People like Sam might have been conditioned after being with the organization for 15 years. It could be loss of control, status or even their jobs that people are afraid of loosing. The best way to turn resistance on this level into support is to try and remove as much fear as you can. Try and excite people about the positive impact that the new performance management system at Jelly Belly will have on their own life. Remember to engage people (involve them) during this transitional process.
Level 3 - I don't like you.
If people don't like or trust their leaders they will not have confidence in the change process. Often people on level 3 are not resisting the idea, they are resisting you - the leader. People might perceive the change as "another flavor of the month" and might think that the leader will not see the change through. "People may understand the idea you are suggesting (Level 1), and they may even have a good feeling about the possibilities of this change (Level 2), but they won't go along if they don't trust you." (Maurer, 2009, p. 14) The best way to turn resistance into support on this level is to try and mend damaged or broken relationships. The leader has to accept responsibility for the mishaps of the past and mend the relationship. Credibility and trustworthy are the key words.
Another way to consider what Sam is experiencing is to look at the Change Curve. It is a very personal and powerful model that assists people to understand the transition during stages of change. This model is widely used used and attributed to Elisabeth Kubler-Ross, based on her work in personal change in grief. (http://www.educational-business-articles.com) This model can help Sam to understand her personal transitions, and assist her manager to make sure that Jelly Belly gives the necessary support that Sam need.
There are four stages in the Change Curve model. When the new performance management system is introduced Sam's initial reaction would have been shock or denial, this is a reaction to challenge the status quo. This is stage 1 of the Change Curve.
During stage 2 the reality of the change (performance management system) starts to hit home. Sam will react negatively during this stage. Often feeling of fear and anger will drive Sam to actively resist the changes.
(MOS CONSULTING BLOG)
During stage 3 of the Change Curve, Sam don't focus anymore on what she has lost Now she start to Let go and to accept the new system. She will begin to test the new system to see how it functions and come to the understanding that the performance management system is actually good.
By stage 4, Sam not only accepts the new performance management system but she also start to embrace it. Sam will during this stage find new ways of working. It is only when all Jelly Belly employees get to stage 4 when Jelly Belly will start to harvest the benefits of the new system.
By using the change curve and understanding where in the change cycle Sam is, her manager can assist Sam and the other team member to embrace the new performance management model.
Can traditional performance management be replaced by Business Intelligence solutions in the new future?
Performance management is the area of business intelligence that is involved in the monitoring and managing of organizational performance, based upon the key performance indicators (KPI's) such as return on investment (ROI), revenue, costs and overheads. Today software is used to design and execute enterprise wide measurements through systems such as a balanced scorecard. (Rose)
Traditional performance management systems where often described as MBO (Management by Objectives). (Cite HR) Performance management systems need to strategically align with some of these components:
Defining key result areas
Establishing indicators for effectives
Negotiating individual employee objectives
Action plans for each employee
Coaching and training to remedy poor performance areas
The aim of traditional performance management systems was to increase:
Management control over work and the results that are achieved.
Management ability to identify areas of poor performance.
Motivation levels of employees.
Communication between management and employee's thereby ensuring beter understanding of objectives. This also allows for feedback to employees as well as record keeping of past performances.
Business intelligence on the other side is an umbrella term used for referring to a vast variety of software used in organisations in order to analyse raw data. (CIO) Organisations use business intelligence solutions to improve their decision making ability, to cut costs and to identify new business opportunities. Business intelligence gives front line staff the ability to analise the data themselves, instead of waiting for IT to compile and run reports. This democratization of information access help employees to back up (with calculated numbers) sound business decisions instead of just using their gut feelings. (CIO)
This all relate to the increase ability on decision making. There is a clear and defined relationship between information and decision-making. (Davenport) This means that if data is going to be supplied it should be data that is needed to make the right decision. The figure below explains this relationship between information and decisions and that each organization have the choice (based on the culture and systems) on how loosely, structured or automated decisions are made. In the new era of Applied Knowledge loose coupled information and decisions often don't lead to beter decisions. (Davenport) It would seem that the future of improved decisions lies with structured human decisions, this means humans still make the final decision, but the information is available in an improved way.
In so many organisations do we see a multitude of reports all with the same purpose, but sadly containing different data and vastly different interpretations? How can any board make sound decisions on these variances? Often these executives are note even aware of the extent to which staff reinvents the wheel in order to get the information. (Dyche, 2012) These creative inefficiencies have a huge cost. This is where business intelligence will play an important role in the future. Everyone in the business needs to be able to make decisions and they need the correct information to make these decisions.
What we need in business today is organisations that can act smartly and quickly and make the necessary changes on accurate information. One of the biggest challenges remains the increased amount of data in organisations. Organisations who fail to utelise the data correctly will loose customers, market share, employees and returns. The Logic Consultancy Model aims to intercept knowledge at every level in organisations through four specific knowledge levels. (Onesis) The model is presented below:
The four models within the Enterprise Business Integration model are:
1. Data Integration Model - ensuring mapping of all data within the organisation. This means that every table and field are analysed and recorded in order to establish the relationship between them.
2. Application Integration Model - mapping all applications in the organisation. By analyzing these applications automation are made possible.
3. Business Process Management - the ability to interpret every class of business in the organisation. Inter-relations can now also be assessed and interpreted.
4. Business Intelligence Model - the ability to define the business and decision making processes and practices.
The aim of business intelligence and more specifically a model like the one above is to allow the gathering of every corporate model into one organizational plan. Once this model has been implemented Gap analysis in the individual's models can highlight improvement areas.
In my view there is no doubt (considering the theory above) that business intelligent solutions will replace traditional performance systems as the main driver for business performance. I do however still believe that parts of the traditional performance systems will need to be integrated into business systems (examples: strategy map and balanced scorecard)
I want to conclude this discussion and assignment with a recent article in Information Week. The article highlights the top 7 business intelligence trends for 2013. These trends confirm the statement that business intelligence will replace more traditional systems. (Howson, 2013)
1. Dashboards will evolve and expand. These next generation dashboards will keep workers focused on the right metrics and allow employees to take preemptive action. (Howson, 2013, p. 1)
2. Self service Business Intelligence will empower employees to ensure that IT resources are correctly allocated and managed.
3. Mobile Business Intelligence allows for quick and accurate decisions, even out of office.
4. In-Memory goes main stream.
5. Big data generates big interest. Between web clicks, tweets and genomic data companies will embrace solutions to manage bulk data accurately.
6. Cloud will grow to a more feasible option. Currently only 3% of all company data worldwide are stored via cloud. As security concerns are now managed more companies will use cloud.
7. Collaboration of data goes beyond social. Companies in the future will begin to share data across boundaries.