The 5th Key: Performance Management
Performance management is the connecting link between strategy and implementation and concerns the systematic, comprehensive, efficient and effective measurement, steering, evaluation and controlling of the performance on all levels (management, employees, teams, departments), taking into account the resources available or to create. Key objectives are the continuous improvement of individual performance, corporate performance and performance processes, the constant deduction of optimization measures, and the regular reporting to the stakeholders.
Successful performance management is especially based on:
- simple and transparent routine;
- frequent and regular interaction (employee appraisals);
- focus on the future;
- own progress reviews.
In this context, it is important not only to consider economic and financial – quantitative – factors, but also qualitative values, in order to enable a holistic planning and management of the company’s performance and performance ability.
Performance management is furthermore the practical implementation of the last three of the «4 Milestones» on the way to successful leadership:
- Defining the right Objectives
- Focussing on the Strengths
- Assigning the right Roles
Instruments to measure the performance – performance measurement – are all the in the sustainable balanced scorecard (SBSC) defined key management figures respectively the defined quantitative and qualitative objectives.
The results of performance measurement are finally implemented in the continuous improvement of the performance processes and form the basis for the process performance management.
Performance management comprises in particular the following areas:
- Corporate Governance
- Management by Objectives
- Management by Values
Corporate governance stands for a
«holistic, systematic, responsible and on long-term value and sustained success aligned management, leadership and controlling of companies and organizations».
In a broad sense it implies the «legal, cultural and institutional behaviour» of a company or an organization.
Value-conscious, goal- and future-oriented and on sustainable success aligned corporate governance is more but to comply with legal regulations.
Efficient and productive cooperation between all the stakeholders, but especially between the strategic and operational management – supervisory board and executive board –, the respect of the shareholder’s interests, consistency and continuity but nonetheless agility and flexibility in the corporate strategy as well as openness and transparency in the corporate communication are key aspects of good corporate governance. This reveals the importance of the optimal composition and structure of the management bodies.
Added Value and Success Factor
Optimally implemented corporate governance is for banks and investors a guarantee that there won’t be investments made in bad projects and thus for every company an added value and success factor.
Supervisory bodies have tasks and legal duties, should be optimally composed and active, oriented on specific values and becoming increasingly a «Shaping and Controlling Body».
A supervisory body but becomes a real and effective shaping and controlling body only when the body is optimally composed, the cooperation works flawlessly, no conflicts of interest are existing, the members dispose of pronounced soft skills, they optimally complement each other in their individual strengths and weaknesses and when they are completely independent from both the company and each other.
Education and experience of the members are no longer sufficient. The mutually complementary typological and structural composition of the members is of fundamental importance. Assessments have to be made both with the members already in charge and new candidates to determine their personality structure. On basis of these assessments and the defined professional requirements, heterogeneous, powerful and functioning leading teams have to be composed.
Furthermore, every supervisory body should not as often called for have only one «lateral thinker» – which will anyway be sidelined if he too often thinks «lateral» – but all the members should be «lateral thinkers».
A supervisory board should not be a council which is useless in good times and helpless in bad times.
Her you get directly to our detailed brochure «Corporate Governance».
Management by Objectives (MbO)
With Management by Objectives the strategic targets of the company are implemented. For every organization unit (departments, boards – also the supervisory board) as well as for employees the targets are jointly defined. These targets resp. objectives have to be SMART (specific, measurable, ambitious, realistic, timed).
Fundamental elements of MbO are:
- The Target System, which consists at least of the in the Sustainable Balanced Scorecard (SBSC) defined qualitative and quantitative objectives.
- The Organization, with clear assignment of tasks, responsibilities and competencies (TRC).
- The Controlling System (controlling and reporting), for identification and analysis of actual/target deviations.
Sustainable Balanced Scorecard (SBSC)
Besides all the in the traditional Balanced Scorecard (BSC) defined market-, financial-, process- and potential-oriented figures, in the SBSC there are also fixed sustainability-specific economic, ecological and social objectives.
Parameter in the Sustainable Balanced Scorecard (SBSC)
Every SBSC should contain key-figures about the following parameters:
- Client Feedback
- Employee Opinion
Examples of qualitative objectives and key management figures out from our practice and experience:
- charity rate
- communication rate
- complaints rate
- cross selling ratio
- customer contact rate
- customer fluctuation rate
- customer satisfaction rate
- disposal and waste rate
- education rate
- emissions rate (e.g. CO2)
- employee absence rate (absenteeism)
- employee fluctuation rate
- employee satisfaction rate
- environment information rate
- environmental costs rate
- equality rate
- gender rate
- growth figures
- new customer ratio
- number of innovative ideas
- number of market launches of new products
- number of suggestions for improvement
- part-time ratio
- process improvement rate
- raw material and energy consumption rate
- raw material and energy efficiency rate
- recycling rate
- quality improvement rate
- shrinkage figures
- social costs rate
- social impact rate
- takeover rate
- transparency rate
- travel mileage rate
- university cooperation rate
Examples of quantitative objectives and key management figures out from our practice and experience:
- cash flow margin
- cash flow profitability
- contribution margin I, II, III
- costs reduction rate
- debt ratio
- distribution factor
- earnings before interest and taxes (EBIT)
- earnings before interest, taxes, depreciation and amortisation (EBITDA)
- earnings before interest, restructuring and taxes (EBIRT)
- earnings before interest, restructuring, taxes, depreciation and amortisation (EBIRTDA)
- equity turnover
- growth figures
- leverage ratio
- liquidity I, II, III
- number of bookings
- number of offers
- operating cash flow
- overhead costs ratio
- return on assets (ROA)
- return on capital employed (ROCE)
- return on equity (ROE)
- return on investment (ROI)
- return on sales (ROS)
- sales and turnover
- shrinkage figures
- stock turnover
Management by Values (MbV)
Value-oriented management shows how a company can completely and effectively be organized and managed. In accordance to the following 7-S model of McKinsey all the factors together define the way a company works:
The core issue are the shared values, what the company stands for and what it believes in, the fundamental beliefs and attitudes of the company – the basic values, the principles, the corporate culture and the ethical guidelines.
It determines the well-timed allocation of resources to achieve defined goals. Focus on environment and market, especially business sectors, stages of added value, business models, markets, sales channels, customer segments and finally resulting from all this: competitive advantages.
Bestimmung von Organisationsstruktur und -prinzip – Liniensystem (Ein-, Mehr-, Stabslinien), funktionale oder divisionale Organisation, Matrix-, Netzwerk-, Holdingorganisation, etc., zentralisierte oder dezentralisierte (der Trend in grösseren Unternehmen) Organisation – sowie die Art und Weise der Beziehung der verschiedenen Organisationseinheiten untereinander und wer wem rapportiert.
see Lean Management
Die Verfahren, Prozesse und Anweisungen, welche die Wichtigkeit von Arbeiten beschreiben: Finanz-, Verkaufsförderungs-, Vermietungs-, Leistungsbeschreibungs-, Informations- und Kommunikationssysteme, etc.
see Lean Management
Distinktive Qualitäten und Fähigkeiten (Kompetenzen) der Mitarbeitenden und der Organisation als Ganzes.
see Lean Management
Anzahl und Art der Mitarbeitenden innerhalb der einzelnen Organisationseinheiten.
see Lean Management
Kultureller Stil der Organisation sowie Führungs- und Managementstil der Kader um die gesetzten Unternehmensziele zu erreichen.
Resulting Client Benefits
- You have the right and important quantitative and qualitative control instruments
- You have the right measurable success criteria
- You increase the performance of management, employees, teams, units and departments and thus of your entire company at all levels
- You improve the management and leadership skills at all levels
- You improve the motivation, quality, cooperation and satisfaction of your employees at all levels
- You invest in the right and profitable projects
- You have a management based on objectives and values