Introduction to Human Resource Management

Sub -Module 4
(Day 6 )
Performance Management Cycle

Setting Objectives, defining what is needed

Performance Planning

Reset objectives Enabling staff

to deliver
Make changes
Action
Staff and the Organisation

Performance and Development

Reviewing
Taking stock of achievements, diagnostics
The Performance Cycle

» Major Areas of
Responsibility
» Individual Priorities
» Knowledge, Skills and
Behaviors
» Development plan
» Reaching agreement
» End-of-cycle
review
» Continuous
progress and
development » Ongoing Feedback
» Coaching
» Interim reviews
Performance

Performance means the effective outputs that an employee produces by fulfilling

his/her job duties or role requirements.
Employees are appraised based on responsibilities and results which refer to the
expected levels determined by their job duties responsibilities and results ultimately
reflect the value employees create for customers

Performance appraisals should not Performance appraisal should be based on

emphasize
•The number of thank you letters from customers
•How hard an employee works or the amount of
overtime he puts in
•Occasional highlights of work or isolated points
of influence
•Capability, qualification or attitude
•Track record
•Direct/indirect/tangible/intangible/short term/long term
outputs
•Employee’s overall performance contributions
•Performance facts in customer’s thank –you letters
•Achievements ie contributions
•Fulfilled responsibilities and results
Performance Management – Performance Appraisal

Performance Appraisal : System to

evaluate the performance of the
employees and suggest means so
that can achieve the goals of the
organization and achieve career
satisfaction through meeting their
professional goals

A performance appraisal (PA), also referred to as

a performance review, performance evaluation, (career) development discussion, or
employee appraisal is a method by which the job performance of an employee is documented
and evaluated.
Performance Management – Process
• Breakdown of the organizations goals • Routine coaching
• Individual goal setting • Mid-term review
• Signing of goal sheet • Goal updating
• Recording of key events

Performance
Goal setting
coaching

Performance Performance
feedback appraisal

• Face to face performance review • Employee self appraisal

• Performance complaint handling • supervisor’s appraisal
• Application of appraisal results • Collective appraisal
• Release of results
Performance appraisal is unavoidable…

Importance
 Set goals
 Recognize performance
 Guide progress
 Identify problems
 Improve performance
 Discuss career advancement
Advantages/Purposes of Performance Appraisal
Enable each employee to understand his role better and become more effective on
the job
Understand his own strengths and weaknesses with respect to his role in the
organization
Identify development needs of each employee
Improve relationship between senior and subordinate through realization that each
other is dependent for better performance and achievement of goals
Mechanism for improving communication
o Senior communicating goals /expectations/targets
o Subordinate communicating –resources required/challenges
Provide opportunity to employee for self introspection, Self evaluation and target
setting to remain on path of development
Prepare employees for higher jobs by continuously reinforcing development of
behavior ad qualities for these jobs
Instrument in creating positive and healthy climate in the organization that moves
people to give their best and enjoy doing so .
Help in variety of HR decisions by generating data on employees performance
Format- Performance Appraisal
Components

Identification of KPA’s /KPI’s –Annual/Six monthly/Quarterly

Attributes required- For present and future jobs
Self appraisal
Performance Analysis-factors facilitated / hampered growth
Performance discussion and counseling
Identification of training needs- self /senior
Action planning and goal setting for next year
Final assessment for training and development or reward/punishment/career progression
Objectives - Performance Appraisal

To review past performance

To assess training needs
To help develop individuals
To audit skills within an organization
To set targets for future performance
To identify potential for performance

Performance management is NOT

• Micro management of specific task of employees
• To find employees’ faults
• To satisfy every employee
Performance Appraisal Methods
PAST ORIENTED METHODS FUTURE ORIENTED METHODS
1. Critical Incident method 1. Management by objectives
2. Checklist 2. 360 degree appraisal.
3. Graphic rating scale 3. Psychological Appraisals.
4. Confidential report 4. Assessment Centre
5. Essay evaluation
6. Forced choice method
7. Behaviorally anchored Rating scales (BARS)
8. Group order ranking
9. Individual ranking.
10. Paired comparison.
11. Field review technique
Performance Appraisal – Critical incident
Rater attention on key behaviors on doing job effectively or ineffectively.
These critical incidents represent the outstanding or poor behavior of the employees
Appraiser writes little anecdotes on employees specific behavior for being effective/ineffective
Not vaguely recording personality traits
 Focus on behaviors, judge performance not personality
LIMITATIONS
Negative incidents may be more noticeable than positive incidents.
Results in very close supervision which may not be liked by the employee.
 Recording of incidents is a chore for the supervisor concerned who may be too busy or forget to
do it.

Example:
 June 21 - Sales clerk patiently attended to the customers complaint. He is polite, prompt, enthusiastic in solving the
customers’ problem
 June 21 - The sales assistant stayed 45 minutes beyond his break during the busiest part of the day. He failed to answer
store manager’s call thrice. He is lazy, negligent, stubborn and disinterested in work
Performance Appraisal – Check list
Rater uses a bit of behavioral descriptions and checks those behavior as applicable to the
employee
The rater merely goes down the list and gives ‘yes’ or ‘no’
 Usually evaluated by the staff of HR rather than rater himself

Example:
• Is employee regular Y/N
• Is employee respected by subordinate Y/N
• Is employee helpful Y/N
• Does he follow instruction Y/N
• Does he keep the equipment in order Y/N
Performance Appraisal – Graphic Rating scale
One of oldest and most popular methods
Used to assess factors such as quantity and quality of work, job knowledge, cooperation, loyalty , dependability,
attendance, honesty, integrity, attitudes and initiative etc.
The rating scale consist of several numerical scales
 Less time consuming to develop and administer
Permit quantitative analysis
Greater standardization of items so comparability with other individuals is possible

Employee name_________ Dept_______

Rater’s name ___________ Date________
______________________________________________________________________________
Exc. Good Acceptable Fair Poor
______________________5_______4________3__________2______1___________________
 Dependability
 Initiative
 Overall output
 Attendance
 Attitude
 Cooperation
___________________________________________________________________________
Total score
Performance Appraisal – Confidential Report
 Descriptive report
Prepared by the employee’s immediate supervisor
The report highlights the strengths and weaknesses of employees
Prepared in Government organizations
Does not offer any feedback to the employee
Performance Appraisal – Essay Evaluation Method
The rater is asked to express the strong as well as weak points of employee’s behavior
 The rater considers the employee’s :
 Job knowledge and potential
 Understanding of company’s programs, policies, objectives etc
 Relation with co-workers and supervisors
 Planning, organizing and controlling ability
 Attitude and perception
This method has the following limitations:
 Highly subjective
 Supervisor may write biased essay
 Difficult to find effective writers
 A busy appraiser may write the essay hurriedly without assessing properly the actual
performance of the worker
 If the appraiser takes a long time it becomes uneconomical from the view point of the firm
Performance Appraisal – Forced choice method
Forced choice appraisal is special type of checklist but the rater has to chose between two or more statements
all of which may be favorable or unfavorable.
Appraiser’s job is to identify which statement is most (or least) of individual being evaluated
Since the appraiser does not right answers reduces bias
Looks at overall performance and based at employee’s behavior
Favorable qualities earn plus credit and unfavorable ones earn the reverse

Criteria Rating

1.Regularity on the job Most Least

• Always regular
• Inform in advance for delay
• Never regular
• Remain absent
• Neither regular nor irregular
Performance Appraisal – BARS
BARS represent a range of descriptive statements of behavior varying from the least to the most effective
In this a rater is expected to indicate which behavior on each scale best describes an employee’s performance
Combine major elements of critical incident and graphic rating scale approach.
Specify definite, observable and measurable job behavior

Performance Points Behavior

Extremely good 7 Can expect trainee to make valuable suggestions for increased sales and to have
positive relationships with customers all over the country.

Good 6 Can expect to initiate creative ideas for improved sales.

Above average 5 Can expect to keep in touch with the customers throughout the year.

Average 4 Can manage, with difficulty, to deliver the goods in time.

Below average 3 Can expect to unload the trucks when asked by the supervisor.

Poor 2 Can expect to inform only a part of the customers.

Extremely poor 1 Can expect to take extended coffee breaks and roam around purposelessly.
Performance Appraisal – BARS
• This method in which we’ll design critical areas of
performance of jobs. The employee’s behaviour is observed
by their superiors and then rate them accordingly according
to their behaviour. This is designed to identify critical areas of
effective and ineffective performances of individual
employees
• Experimental studies of BARS had collected eight
performance criteria namely knowledge and judgment,
human relations skills, conscientiousness, skill in operation of
register, organizational ability, skill in monetary transaction,
observational ability.
Performance Appraisal – Group order ranking
 Group order ranking requires the evaluator to place employees into a particular classification such as “top one-
fifth” or ‘ Second one-fifth”
Evaluator are asked to rank the employees in top 5 /10 percent ,then next 15/20 percent and so on .
Also called “ forced distribution method”
Not good if the number of employee being compared is small
Comparison is relative an employee who is mediocre may score high only because he or she is best of the
worst

No.
of
employees

10% 20% 40% 20% 10%

poor Below average good Excellent

average
Performance Appraisal – Individual ranking
 Evaluator merely has to list all the employees in an order from highest to lowest.
Only one can be the best
This has same advantages/disadvantages as group order ranking.

The evaluator rates the employee from highest to

lowest on some overall criteria. In this “how” and
“why” are not questioned nor answered

Employee Rank

A 2
B 1
C 3
D 5
E 4
Performance Appraisal – Paired comparison
For several traits paired comparisons are made, tabulated and then rank is assigned to each
worker

No. of comparisons is calculated by the formula: N(N-1)/2

This method is not applicable when the group is large

A score is obtained for each employee by simply counting the number of pairs in which individual
is preferred member.
It ranks each individual to all others in a one-on-one basis.

Becomes unwieldy when large number of employees is large

Performance Appraisal – Management by objectives
 First step: MBO emphasizes collectively set goals that are tangible, verifiable, and
measurable (GOAL SETTING)
 Second step: setting the performance standard for the subordinates(ACTION PLANNING)
 Third step: the actual level of goal attainment is compared with the goals agreed upon
(SELF CONTROL)
 Final step: involves establishing new goals and possibly new strategies for goals not
previously achieved(REVIEW)
Performance Appraisal – Management by objectives
MBO stands by Management by objectives
• methods of performance appraisal are results-oriented. That
is, they seek to measure employee performance by
examining the extent to which predetermined work
objectives have been met.
• Usually the objectives are established jointly by the
supervisor and subordinate.
• An example of an objective for a sales manager might be:
Increase the gross monthly sales volume to $250,000 by 30
June.
•

Once an objective is agreed, the employee is usually expected

to self-audit; that is, to identify the skills needed to achieve
the objective. Typically they do not rely on others to locate
and specify their strengths and weaknesses. They are
expected to monitor their own development and progress.
Advantages of MBO

•Instead of assuming traits, the MBO method concentrates on actual

outcomes.
•If the employee meets or exceeds the set objectives, then he or she has
demonstrated an acceptable level of job performance. Employees are
judged according to real outcomes, and not on their potential for success
•The guiding principle of the MBO approach is that direct results can be
observed, whereas the traits and attributes of employees (which may or
may not contribute to performance) must be guessed at or inferred.
•The MBO method recognizes the fact that it is difficult to neatly dissect all
the complex and varied elements that go to make up employee
performance.
•MBO advocates claim that the performance of employees cannot be broken
up into so many constituent parts But put all the parts together and the
performance may be directly observed and measured.
Disadvantages of MBO
 
• They can lead to unrealistic expectations about what can and
cannot be reasonably accomplished.
• Supervisors and subordinates must have very good "reality
checking" skills to use MBO appraisal methods. They will need
these skills during the initial stage of objective setting, and for the
purposes of self-auditing and self-monitoring.
• Unfortunately, research studies have shown repeatedly that
human beings tend to lack the skills needed to do their own
"reality checking". Nor are these skills easily conveyed by training.
• One of the strengths of the MBO method is the clarity of purpose
that flows from a set of well-articulated objectives. But this can be
a source of weakness also. It has become very apparent that the
modern organization must be flexible to survive. Objectives, by
their very nature, tend to impose a certain rigidity.
Performance Appraisal – 360 degree appraisal
It is a systematic collection and feedback of performance data on an individual or group, derived
from a number of stakeholders
Data is gathered and fed back to the individual participant in a clear way designed to promote
understanding, acceptance and ultimately behavior
It makes the employee feel much more accountable
Also called multi-rater feedback, full-circle appraisal and group performance review
Supervisor, peers, suppliers ,subordinates, customers

Suppliers/
customers superiors vendors

peers Employee Team

members
Improved feedback from more sources
Team development
Reduced discrimination risk
Improved customer service
subordinates
Performance Management
Problems in Performance Appraisal
Leniency error
Halo effect
Similarity error
Low appraiser motivation
Central tendency
Recency effect
Performance Appraisal-goal setting
Bell Curve - Overview
• The Normal Distribution Curve is used as tool in measuring
human capacities.
• It is a differentiation tool used to assess an employee’s
performance and promotability.

A bell curve, or more specifically, a Gaussian distribution is a symmetric

curve that is pronounced in the middle , and tapered off at the edges .
As such, the middle portion under the curve shows more area than
either of the ends.
Bell Curve - Overview

• The employee force is ranked into a 5%-10%-

70%-10%-5% bucket.
• Where 5 percent are rated as 'excellent
• 10 percent are rated as ‘Very Good’
• 70 percent as the ‘Good’ - back bone of the
company.
• 10 percent are rated as ‘Satisfactory’ –
bottom feeder
• 5- percent as ‘Poor’
Bell Curve - Overview

Bell Curve

0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5

Bell Curve - Overview

NOTE - The percentage may differ depending upon the type of

organization and the outlook of the management of the
company.
Bell Curve - Overview
 The ‘ outstanding ’ performers ( RATING – 5 ) are the ones who significantly
contribute to the company’s growth. This category deserves accolades and are
required to be recipients of various benefits.

 The ‘employees who exceed expectations’ ( RATING – 4 ) are the ones who
have been able to achieve performance goals and helped in the growth of the
business.

 The ‘ employees who meet expectations’ ( RATING – 3 ) are the ones who
have been able to meet all or almost all performance requirements in all the areas.

 The ‘ employees who require improvement’ ( RATING – 2 ) have been able to

meet some of the performance expectations. They require immediate counselling and
improvement.

 The ‘bottom grade’ employees ( RATING – 1 ) are considered to be poor

performers. Their performance is unacceptable. They either require special training,
or face the possibility of being discarded by the organization.
Assumptions

• The workforce whose appraisal is being considered is

engaged in a similar type of activity.

• The percentage may differ depending upon the type of

organization and the outlook of the management of the
company.

• Employees would be motivated to improve upon their

skills by the use of various productive techniques.

• It is assumed that it will energize the employees to

take crucial decisions and develop the required skills to
execute and deliver the promises on time.
Potential Appraisals
 It focuses on the potential of an employee. Potential “a latent but unrealized
ability”
 Past performance or the actual performance is not taken into consideration
 Evaluation is based on employee’s intellectual, emotional, motivational and
other related characteristics

Indicators of Potential
 A sense of reality
 Imagination
 Power of analysis
 Breadth of vision
 Persuasiveness
Potential Appraisals
 It focuses on the potential of an employee. Potential “a latent but unrealized
ability”
 Past performance or the actual performance is not taken into consideration
 Evaluation is based on employee’s intellectual, emotional, motivational and
other related characteristics

Indicators of Potential
 A sense of reality
 Imagination
 Power of analysis
 Breadth of vision
 Persuasiveness
Assessment Centers
 An assessment centre is a central location where managers may come
together to have their participation in job-related exercises evaluated by
trained observers.
 Used to assess the strengths ,weaknesses or potential of employees
Career planning & Succession planning
Career Planning
Career
Stages
Career Development
Career Anchors
Role of Training &
Development in
Career
Development

Succession Planning
Meaning and
definition
Career

A Career can be defined as a sequence of positions, roles

or jobs held by one person over a relatively long time
span.
How do people choose careers?

Interest
Self-image
Personalit
y
Family background
Social
background
Qualification
Career Planning
“Career planning consists of activities and
actions that you take to achieve your
individual career goals”

A career path is the sequential pattern of jobs

that form.

Career goals are the future positions that an

individual strives to reach as part of a career.
 How important is career planning?
A The manager
Employee
typical
Win-Win situation
sees career
views a career for all planning
planning as a retention
program And
as a path to motivational
upward tool
mobilit
y

The top
management
view as a
tool for
succession planning
Objectives of career planning

Attract and
retrain talent by Reduce Better
offering better employ successi
career growth ee on
turnover planning
Use HR
effectively Improve
and morale
achieve and
greater motivation
productivity
Typical entry-level Employee Expectation vs. Reality
Expectation
“I will have much freedom to
work as I please”
“Most of my work projects will
fun.” “I will receive lot of helpful
feedback from my boss”
“If I do well at work, I will get
good raises and promotions”
“I can apply the latest technique
that I learned at school”
“I will be able to balance my
personal needs and work
life”
Reality
“My boss tells me what to do
and how to do it.”
“I have much boring, routine
work”
“Money and promotions are
limited and factors other
than performance count”
“People resist new ideas that
I suggest”
“My job and personal goals
often conflict”
Career Planning Process
1. Self Assessment

4. Job Search
Career
planning process 2. Academic/ Career
options

3. Relevant /Practical
Experience
Self-Assessment
The first step in the Career Planning Model involves gathering
information about yourself to assist in making a decision about a
career. You should develop an understanding of self including
values, interests, aptitudes, abilities, personal traits, and desired
life style, and become aware of the interrelationship between self
and occupational choice
 Academic/Career Options
• The second step allows individuals to investigate the
world of work in greater depth, narrow a general
occupational direction into a specific one through an
informed decision making process, and declare a
major.
 Relevant/Practical Experience
• In Step III individuals evaluate occupational choices and
gain practical experience through internships,
cooperative education, relevant summer employment,
volunteer work and campus activities. In addition, more
specific decisions about occupational choices are made.
Job Search

An initial occupational choice is made in Step IV.

Individuals prepare for and begin conducting a job
search
Issue in Career Planning
Dual Family Careers:
The proportion of women in professional occupations has increased dramatically in the recent years.

Low Ceiling Careers:

Some highly specialized jobs have little room for advancement in career terms.

Declining Opportunities:
Career opportunities for certain jobs or categories sometimes decrease due to technological and economic changes.

Career Stages:
Employees move through different career stages and their career needs change as they move from one stage to another.
Restructuring:
The demands of a fast changing economy have been forcing organization to restructure and reorganize themselves.

Career Plateaus:
Employees reach a plateau in their career when they feel that there in nothing else left to achieve.

Work-family Issues:
Elderly parents, school going kids, a sick relative or family member, are some of the many family issues that change the career
path of an employee.
Career Development
Career development is essential to implement career plan.
Career development consists of personal improvements
undertaken by the individual employee, training,
development and educational programmes provided by the
organization and various institutes.

The most important aspect of career development

is
. that every employeemust accept his/her
responsibility for development
Various career development actions prove useful if an
employee is committed to career development.
 Process of Career Planning &
Development

Analysis of individual skills, knowledge, abilities, aptitudes etc.

Analysis of career opportunities both within and outside the organization.

Analysis of career demands on the incumbent in terms of skills, knowledge, abilities, aptitude etc., and
in terms of qualifications, experience and training received etc.

Relating specific jobs to different career opportunities.

Establishing realistic goals both short-term and long-term.

Formulating career strategy covering areas of change and adjustment.

Preparing and implementing action plan including acquiring resources for achieving goals.
Steps involved in Career Development System
There are four steps in establishing a career development system. They are:

1. Needs: -Defining the present system i.e. this step involves in the conducting a needs assessment as in a training
programme.

Establish roles and responsibilities of employees, managers, and the organization. Identify needs;

establish target groups.

Establish cultural parameters; determine organizational receptivity, support, and commitment to career development. Assess existing

HR Programme or structure; consider possible links to a career development programme.

Determine prior attempts at solving the problem or need. Establish the

mission or philosophy of the programme.

Design and implement needs assessment to confirm the data or collect more data. Establish

indicators or criteria of success.

 Steps involved in Career Development System
2. Vision: -The needs of the career system must be linked with the interventions. An ideal
career development system known as the vision links the needs with the interventions.

Create a long-term philosophy.

Establish the vision or objectives of the programme.

Design interventions for employees, managers, and the organization.

Organize and make available career information needed to support the programme.
Steps involved in Career Development System

3. Action Plan: -An action plan should be formulated in order to achieve the
vision. The support of the top management should be obtained in this
process.

Assess the plan and obtain support from top management

Create a pilot programme

Assess resources and competencies.

Establish an advisory group.

Involve advisory group in data gathering, programme design, implementation,

evaluation and monitoring
Steps involved in Career Development System

4. Results : Career development programme should be integrated with the organization’s on-going
employee training and management development programmes.
The programme should be evaluated from time to time in order to revise the programme.

Create long-term formalized approaches.

Publicize the programme.
Evaluate and redesign the programme and its components
.
LG takes up career planning for employees

In an vative way to beat attrition, which has hit 30 per cent

across
inno industrial sector, LG Electronics India is taking up a 5-
year
the ramme to nurture the career of its white-collared
prog
employe s.
e
The any has made the programme mandatory for its
collared white- ployees that number about 1,900.
comp
"In this tiative all our employees will have to undergo an
em
assessm
ini nt by experts who would help them identify their
points. weak ring the course of the next five years they
e
Du
given would be ough training in those areas.
thor
"The or employees will be assessed on the basis of
vision
seni andtheir
leadership abilities. The young people will be
as per their functional
assessed
capabilities,"
 Dell supportsyour growth: Career development programs
 Dell provides programs to power your career growth and development. Our programs help
team members emerge as leaders through mentorship, encouragement, and opportunities
that are just the right blend of rewards and challenges.
 We invest in our people and have developed a series of special programs that
enables you to pursue a career that fulfills your ambitions and potential.

 From one-on-one meetings with mentors to regular 360-degree feedback and routine
check-ins with a long-term career plan, these programs give you ample opportunity to
carve your own path toward leadership.

 Dell supports your career from the beginning by providing higher education
 Career-Impacted Life Stages
a.Growth Stage: The growth stage is roughly from birth to age 14 and is a period
during which an individual develops a self-concept by identifying and interacting with
other people. Basically, during this stage an individual establishes his or her identity.

b.Exploration Stage: The exploration stage is the period roughly from ages 15 to 24, during which
an individual seriously explores various occupational alternatives. The person attempts to match
these occupational alternatives with his or her own interests and abilities resulting from
education, leisure activities, and work.

c.Establishment Stage: The establishment stage is roughly from ages 25 to 44 and is the primary
part of most people’s work lives. Hopefully, during this period, a suitable occupation is found and
the person engages in those activities that help earn a permanent career. During this period, the
individual is continually testing personal capabilities and ambitions against those of the initial
occupational choice.
Career-Impacted Life Stages
d. Maintenance Stage: Between the ages of 45 to 65, many people
move from the stabilization sub stage into the maintenance stage.
During maintenance, the individual has usually created a place in the
work world, and most efforts are directed at maintaining the career
gains earned.

e. Decline Stage: As retirement becomes an inevitable reality, in the

decline stage, there is frequently a period of adjustment, where many
begin to accept reduced levels of power and responsibility.
Advantages of Career Planning and Development
For Individuals:

1. The process of career planning helps the individual to have the knowledge of various career
opportunities, his priorities etc.

2. This knowledge helps him select the career that is suitable to his life styles, preferences, family
environment, scope for self-development etc.

3. It helps the organization identify internal employees who can be promoted.

4. Internal promotions, upgradation and transfers motivate the employees, boost up their morale and
also result in increased job satisfaction.

5. Increased job satisfaction enhances employee commitment and creates a sense of belongingness
and loyalty to the organization.

6. Employee will await his turn of promotion rather than changing to another organization. This will
lower employee turnover.

7. It improves employee’s performance on the job by taping their potential abilities and further
employee turnover.

8. It satisfies employee esteem needs.

Advantages of Career Planning and Development
For Organizations: -
A long-term focus of career planning and development will increase the effectiveness of
human resource management. More specifically, the advantages of career planning
and development for an organization include:

• Efficient career planning and development ensures the availability of human

resources with required skill, knowledge and talent.
• The efficient policies and practices improve the organization’s ability to attract
and retain highly skilled and talent employees.
• The proper career planning ensures that the women and people belong to
backward communities get opportunities for growth and development.
• The career plan continuously tries to satisfy the employee expectations and as
such minimizes employee frustration.
• By attracting and retaining the people from different cultures, enhances cultural
diversity.
• Protecting employees’ interest results in promoting organizational goodwill.
“IF YOU ARE PLANNING FOR ONE YEAR, GROW RICE;

IF YOU ARE PLANNING FOR TWENTY YEARS, GROW TREES;

IF YOU ARE PLANNING FOR CENTURIES,GROW PEOPLE”

Career Anchors
Career anchors are the basic attitudinal characteristics that
guide people throughout their careers.

Entrepreneuria
l Creativity:

Technical/Func General
ti onal Managemen
Competence:
t:

Security/Stabilit
y:

Autonomy/Inde
p endence: Service:

Pure
Challenge
Career Anchors
Autonomy/Independence:
They want to be self reliant and do not like to be bossed over. They excel as entrepreneurs,
professors,
consultants, professionals and free-lancers.
Security/Stability:
Individuals who desire security and stability want to be free from any anxiety of uncertainty or insecurity.
Technical/Functional Competence:
Those with a technical/functional competence anchor exhibit strong inclination to develop something which
they can call their own.
General Management:
They have good planning, organizing, managing and controlling skills. They enjoy responsibility and revel in
uncertainty.
Entrepreneurial Creativity:
They enjoy jobs where they are given enough freedom to create and are not bound by organizational
framework. Example: artists, free-lancers, entrepreneurs and innovators.
Service:
Service drives individuals to take up jobs in not-for-profit service organizations. The worthwhile causes they
pursue can range from environmental protection to poverty alleviation.
Pure Challenge:
People with this career anchor just love solving difficult problems.
 Employees Leave–They always do
Preparation for that day is Succession
Planning
Succession Management
The integrated approach to workforce recruitment,
development, and retention to ensure that the
organization has candidates whose present and future
potential contribute to their individual success and the
success of the organization.
Succession Planning
Succession planning in an organization helps identify specific
individuals to fill future vacancies in key positions.

A succession plan is a plan for identifying who is currently in

post and who is available and qualified to take over in the
event of retirement, voluntary retirement, dismissal & sickness.

It helps in identifying human resource shortages and skill

shortages before openings occur. Thereafter, it becomes easy
to groom qualified candidates for future vacancies.
 Succession
General Manager Key
V. K. Garg
Names given are replacement
A/2 candidates
A. Promotable now
P A to
B. Needing development
General Manager
C. Not suitable to position
L.
Mathews 1. Superior performance
B/1
2. Above Average performance
Assistant General Manager 3. Acceptable performance
R.K. Arora A/2 4. Poor performance
B.K. Nehru B/3

Division: Division: Division:

Accounting & Planning Manager Technical Advisor
HR Manager N.R. Murthy B/3
Taxation
C.P. Thakur A/1 A.N. Gupta
Manager
A/1
A.T. Roy
K.P. Rao B/1
C/2
Northern Region Central Region Southern Region Manager Eastern Region
Manager Manager A. Subramanyam Manager
L.C. Srivatsav A/2 S.P. Kumar B/2 R. Krishna
A. Thapar C/4 A/1 B.K. Menon B/3
R. Pandey B/3 B/1
Need for succession planning

The purpose of succession planning is to identify and develop

people
to replace current jobholders in key positions.

Succession planning, compares assure a steady flow of

internal talent to fill important vacancies.

Succession planning encourages ‘hiring from within’ and creates a

healthy environment where employees have careers and not merely
jobs.
If qualified candidates are not available within the company, outsiders
can be considered readily for possible openings. Complete dependence
on succession from within or from outside is not desirable. Internal
candidates require a ‘pat on the back’ when they do well. External
candidates are needed for injecting fresh blood into the company.

The absence of a succession plan can seriously hamper the growth

prospects of an organization. Imagine the disastrous consequences when
there is a sudden vacuum at the top level. There is no one to steer the
ship.
Some of these reasons are given below:

• Superannuation: Employees retiring because they

reach a certain age.
• Resignation: Employees leaving their current job to
join a new job
• Promotion: Employees moving upward in the
hierarchy of the organization.
• Diversification: Employees being redeployed to new
activities.
• Creation of New Position: Employees getting
placed in new positions at the same level.
Steps in succession planning
Step 1: Identify critical positions

Step 2: Identify competencies

Step 3: Identify succession management strategies

Step 4: Document and implement succession

plans Step 5: Evaluate Effectiveness

 Steps in succession planning
Step 1: Identify critical positions
Critical positions are the focus of succession planning efforts. Without these roles, the
department or agency would be unable to effectively meet its business objectives.
Workforce projection data or demographic analysis is essential in identifying risk
areas. A risk assessment may also be conducted and compared to current and future
vacancies to identify critical positions within your organization.

Step 2: Identify competencies

A clear understanding of capabilities needed for successful performance in key areas
and critical positions is essential for guiding learning and development plans, setting
clear performance expectations, and for assessing performance. By completing the
process of competency or position profiling within your organization, current and
future employees gain an understanding of the key responsibilities of the position
including the qualifications and behavioural and technical competencies required to
perform them successfully.

Step 3: Identify succession management strategies

Now that critical positions have been identified and have been profiled for
competencies, the next step is to choose from a menu of several human resource
strategies, including developing internal talent pools, onboarding and recruitment to
address succession planning.
 Steps in succession planning
Step 4: Document and implement succession plans
Once strategies have been identified, the next step is to document the strategies in an
action plan. The Succession Planning: Action Plan provides a mechanism for clearly
defining timelines and roles and responsibilities.

Step 5: Evaluate Effectiveness

To ensure that the department or agency’s succession planning efforts are successful, it is
important to systematically monitor workforce data, evaluate activities and make necessary
adjustments.
 Career Planning Succession
Planning
1. Career planning is the process or activities offered 1. Succession planning is the important process by
an organisation to the individuals or its employees to which involves identification of individuals or identify
their strength, weaknesses, specific goals and employees as the possible successors to the key or the jobs
they would like to occupy. Through career very senior positions in an organization which such planning, the
implement steps
employees, individuals,
to attainidentify
their career
and position become vacant.
planning
Thus,
focuses
in short,
on succession
the identification of vacancies
goals. and locating probable successor.

2.In career planning, an organisation is concerned with 2. In succession planning, the focus of attention is
strategic questions of career development. the persons who can occupy the vacant post.
3. Career Planning is a must for all managerial cadres 3. Succession planning is essential for all those who
and posts. operate in key functional areas and also for key
managerial cadres that are likely to become vacant.
4. Career Planning's basis is ter til the 4. Succession Planning is usually for 2 to 5 or 2 to
long m l 7 years period for an individual but it is a continuous
retirement of the employment contract. exercise for an organisation.
5. The important objective of career planning is to 5. The important objective of succession planning is
explore the opportunities to enable the individual to identify the most suitable, potentially qualified,
employees to grow and to develop and also to efficient, skilled and experienced employees or
encourage or motivate them for self- individuals to occupy or succeed to key positions
development. when they become vacant.
 BALANCED SCORECARD

Balanced Scorecard
 BALANCED SCORECARD

How would you feel about boarding the plane after the following conversation
with the pilot?
 BALANCED SCORECARD
Q: I am surprised to see you operating the plane with only a single instrument. What
does it measure ?

A: Airspeed .I am really working on airspeed of this flight.

 BALANCED SCORECARD

Q: That is Good. Airspeed certainly seems important. But what about

altitude. Would not an altimeter be helpful?

A: I have worked on altitude for the last few flights and I have gotten pretty
good on it. Now I have to concentrate on proper air speed.
 BALANCED SCORECARD

Q: But I notice you don’t have a fuel gauge. Would not that be useful ?

A: You are right; fuel is significant, but I cannot concentrate on doing too many
things at the same time. So on flight
I am focusing on air speed. Once I get to be excellent at Air speed, as well as
altitude, I intend to concentrate on Fuel consumption on the next set of
flights.
 BALANCED SCORECARD

Q: to the participants
Would you like to board this plane after having this discussion ?

A: Perhaps not.

What could be the reasons?

 BALANCED SCORECARD

Navigating an organization is as complex as an Aero plane

 BALANCED SCORECARD

They also require instrumentation to guide their organizations

………. like pilots have to guide an aeroplane

 BALANCED SCORECARD

Would you be satisfied as manager getting one dimensional

Information about your organization ?
 BALANCED SCORECARD

Perhaps not, therefore

You need instrumentations/ information to navigate in this

competitive world
 BALANCED SCORECARD

BSC provides managers with the instrumentations they need to Navigate

future competitive success.
 BALANCED SCORECARD

BSC translates an organizational mission and strategy into comprehensive set of

performance measures that provides the frame work for strategic measurement and
Management system

4 Balanced Perspectives
• Financial
• Customers
• Internal Business Processes
• Learning & Growth
 BALANCED SCORECARD

Measures are balanced

Between the outcome measures—the results

from Past efforts---and the measures that drive
future performance
BALANCED SCORECARD

4 Perspectives permit a balance between

Short term and long term objectives
Outcomes and performance
drivers Hard objectives measures
and
Soft objective measures
BALANCED SCORECARD

Competing in the Information Age

 BALANCED SCORECARD

Industrial Age

Financial Control
ROCE(Return on capital
employed )
Prod Control Profitability
Physical Capital
 BALANCED SCORECARD

Made
Many
Such
Measures
Obsolete
Information Age
Financial Control
ROCE
Prod Control
Profitability
Physical Capital
 BALANCED SCORECARD

Required
New
Capabilities

Information Age

Develop Customer Relationship

Introduce innovative products/services
Quality products at low cost
Employee development and motivation
Deploy information technology
 BALANCED SCORECARD

Information Age

New
Cross Functional
Operating
Links to customers and Suppliers
Environment
Customer Segmentation
Global Scale
Innovation
Knowledge Workers
 BALANCED SCORECARD

Information Age

Total Quality Management

Improvement JIT-Production and Distribution
initiatives Time based Competition
Lean Production/Lean Enterprise
Building Customer-focused Org
Activity Based Cost Management
Employee Empowerment
Reengineering
 BALANCED
Capital You don’t see on the Balance Sheet
Human Capital
The collective skill, knowledge
attitudes and behavoiur of the
People in the Organization
SCORECARD
Information Capital
The resources and processes in
Organizational Capital
place that ensure effective use of
The human capital The values, working relationship
And cultural norms at work in
The organisation
 BALANCED SCORECARD

balanced scorecard
 BALANCED
SCORECARD
History

Measurement Alignment & Enterprise

& Communication Strategic
Reporting-1992 1996 Management-2000
Articles in HB Review
Acceptance and Acclaim
The BSC-Measures that
BSC Translated in 18 languages
Drive performance---1992
Selected by HBR as most
Putting BSC to work-1993
Important management
Practice in 75 years
Using BSC as a Strategic
Management System-1996
 BALANCED SCORECARD

Financial For Guiding

Measures are Information age Must Create future Value
Inadequate Organizations
Through

Investment in
Customers
Suppliers
Employees
Processes
Technology &
Innovation
 BALANCED SCORECARD

A balance scorecard translate a organization’s

mission and strategy into set of performance
measures that provide the framework for
implementing its strategy
 BALANCED SCORECARD

Strategy

Strategy specify how an organization matches its

own capabilities with the opportunities in the
marketplace to accomplish its objectives
 BALANCED SCORECARD

A strategy is a set of goals and specific

action plans that, if achieved, provide
the desired competitive advantage

Strategic Management involves identifying and

implementing these goals and action plans
 BALANCED SCORECARD

strategic thinking

•Anticipating changes
•Product/service and production designed
to accommodate expected changes
•Flexibility
•Ability to make quick changes
•Speed to market
•Agile manufacturing/ service
•Driving firm by using windshield not
the rear view mirror
•Creative and integrative
thinking………
 BALANCED SCORECARD

Do we need to be clear about……?

Goal
Objective
Mission
Vision
 BALANCED SCORECARD

A goal or objective consist of a projected state of affairs which

a person or a system plans or intends to achieve or bring about
A personal or organizational desired endpoint in some sort of
assumed development.
 BALANCED SCORECARD

Vision: Defines where the organization wants to be in future.

Vision: Defines where the organization wants to be in future.
 BALANCED SCORECARD

Mission: Defines where the organization is going now, describing

why this organization exists
BALANCED SCORECARD

Targets: defines goals and objectives

 BALANCED SCORECARD

Goal Objective Mission

2013 2028
2008
5000 Cr 12,000 Cr 50,000 Cr
 BALANCED SCORECARD

Goal Objective Mission

2014 2029
2009
7000 Cr 15,000 Cr 55,000 Cr
 BALANCED SCORECARD

Balance Scorecard as a Management System

 BALANCED SCORECARD

Financial and
Balance
Emphasizes Non Financial
Scorecard
measures must be
Part of
Information
System
 BALANCED SCORECARD
4
Perspectives

Financial

Perspective Customer

Internal
Perspective Business
Process
Perspective

Learning &
Growth
Perspective
 Mission Clarify mission & Vision
Vision statement

Develop Strategic Goals

Strategic Goals

Derive Balanced Scorecard

Sub-Goals
Sub-Goals
Financial
• Sub-Goals
Map Sub-Goals to Customer Internal Business
Methodology each quadrant of the
Balanced Score Card
•• Sub-Goals
Sub-Goals •• Sub-Goals
Sub-Goals
Learning & Growth
Overview •• Sub-Goals
Sub-Goals

For each BSC Quadrant

- identify measurement areas

Indicators
- develop measurement goals
- postulate indicators

Trouble Reports
- identify data elements
Module

Data Elements
A Balanced Scorecard Perspective
on Performance
FINANCIAL
FINANCIAL s
ve e

Initiatives
Measures
Objective

Targets
es
ir
How do we v
c
look to
shareholders? te as
i
look to OMTIn

CUSTOMER s shareholders? INTERNAL BUSINESS

CUSTOMER
Initiatives
Measures
Objective

ve es

Initiatives
Measures
Objective
s
t u sv
ire PROCESS
Targets

Targets
ec setgiati s
How
Howdo
doour
Vision
Vision i
our bjea rt
customers
a and What must c
seeus?
us? Strategy we excel at? et e s g iati
see
What at?
must bj ea r t
OMTIni
we excel

LEARNING and
es Measures

Initiatives
Objective

GROWTH ir s Targets
v
Can we c
continue to t
improve and e as
i
create value?
continue to
OMT In
improve and
 BALANCED SCORECARD
4
Perspectives

Financial
Financial Perspective Evaluate
Perspective the Profitability of the Strategy
 BALANCED SCORECARD
4
Perspectives

Customer

Perspective

Customer Perspective identifies Targeted

Customer and market Segments and Measures
the Organization’s success in these Segments
 BALANCED SCORECARD
4
Internal Perspectives
Business
Process
Perspective

This perspective focuses on internal operations

that create value for customers that ,in turn,
furthers the financial perspective by increasing
the shareholder value
 BALANCED SCORECARD
4
Internal Perspectives
Business
Process
Perspective

3 sub
Processes

Innovation Process Operations Process Postsales-Service

Process
Creating Products Producing & delivering Providing service and
Services &Processes Existing products that Support to the customer
To meet the demand Will meet the needs After the sale of a
Of Customers Of Customers product or service
 BALANCED SCORECARD
4
Perspectives
L
e
a
r
n
i
n
g

&
This perspective identifies the capabilities
Growththe
organization must excel at to achieve superior
Perspective
internal processes that create value for
Customers and shareholders
 BALANCED SCORECARD
FINANCIAL PERSPECTIVE

Target Actual
Objective Measures Initiatives Perform Perform

Financial Operating income

Perspective From Manage Cost
Rs 20 Cr Rs 20.12Cr
Productivity Gain And Unused
Capacity

Operating Income Build Strong

Increase From Growth Rs 30 Cr Rs 34.20 Cr
Customer
Shareholder Relationship
value
Revenue Growth 6% 6.48%
 BALANCED SCORECARD
Customer Perspective

Target Actual
Objective Measures Initiatives Perform Perform

Customer Market Share in

Perspective Communication Identify future
6% 7%
Network Segment Needs of
Customers

Number of New Identify new 1% 2%

Customers Target
Increase Customer Seg 90% give 87%Gave
Customer Customer Top two top two
Satisfaction Satisfaction Ratings Rating
Rating Increase Cust
Focus of Sales
 BALANCED SCORECARD
INTERNAL BUSINESS PROCESS PERSPECTIVETarget Actual
Objective Measures Initiatives Perform
Perform
Reduce Reduce Setup time Re-engineer order 30 days 30 days
Delivery Time Automation of Orders Delivery process

Meet Specified
Delivery dates on time delivery Re-engineer order 90%
92% Delivery process

Improve post Service Response Improve Customer Within Within

Sales Services Time Service process 4 hrs 3 hrs

Improve Number of Impv. Organize teams

Processes In Business from Sales & Manuf 5 5
Processes

Improve % of processes Organize R&D/Mfg 75% 75%

Manufacturing With Teams to implement
Capability Advanced Adv. control
 BALANCED SCORECARD
Learning and Growth Perspective Target Actual
Objective Measures Initiatives Perform
Perform
Align Employee Employee Satisfac- 80% 88%
Employee
And tion Rating Employees
Participation to
Organizational Give top
Build Team Work
Goals Two
Ratings

Develop % Employees Employees

Trained in Process Training 90% 92%
Process & Quality Mgt Programme
Skill

Empower % Workers Supervisors as

Work Empowered to 80% 80%
Coaches
Force Manage rather
Processes Decision
Makers
 BALANCED SCORECARD

BSC as Strategic Management

System
 BALANCED SCORECARD

Balanced 1 Clarify and Translate vision & Strategy

Scorecard
as a 2 Communicate and link strategic objectives
and Measures
Strategic
Management 3Plan, Set Targets and align Strategic Initiatives
System
4 Enhance Strategic Feedback and Learning
 BALANCED SCORECARD
Clarifying and
Translating the
Vision & Strategy

Clarifying the Vision

Gaining Consensus

Communicating Strategic Feedback &

& Linking Learning

Comm and Educating Balance Articulating the shared Vision

Setting Goals Scorecard Supplying Strategic Feedback
Linking Rewards to Facilitating Strategy review
Performance and Learning

Planning & Target Setting

Setting Targets
Aligning Strategic
Initiatives
Allocating Resources
Establishing Milestones
 BALANCED SCORECARD

Clarifying the Vision

Formulation by Sr Executives
Reaching Consensus
Clarifying and
Sorting Out Differences
Translating the
Joint Accountability
Vision & Strategy
 BALANCED SCORECARD
Communicating and Educating
Newsletter
Bulletin board
Brochure
Videos
Intranet
meetings
Setting Goals
Linking Rewards to
Performance
Communicating & Linking Every one
Understand
Strategy for achievement
Outcome Measures
Efforts and Initiatives
required

On time Delivery Communicating to

Reduce setup time Buy new
machines Improve delivery time Directors Executives
Improve packing Employees
 BALANCED SCORECARD

Plan to Change
Set target for 3-5 years
Stretch targets
Benchmarking
Planning & Alignment of Targets
Target Setting Alignment of Strategic Planning
with operational Budgets
 BALANCED SCORECARD

Periodic Review and Change

Targets-achieved or not
Strategic Past and future Review
Feedback & Information from all
Learning Double loop learning
Cause and effect Relationship
Validity and Viability
Strategy replacement according
to outcomes/performance drivers
 BALANCED SCORECARD

Features of Balance Score Card

Indicate company’s strategy and its link with perspectives

Strategy is communicated to all

Strategy translated into measurable targets

Motivates Managers to achieve targets

BSC limits the measures to only four

Highlights effect of one perspective on another

 BALANCED SCORECARD
Pitfalls in Implementing Balanced Score Card

• Difficult to establish Fin-Non financial Linkages

• Improvements at all levels may not be possible

• Both subjective-objective measures

Consideration

• Considering Cost & benefits of initiatives

• Non-financial Achievements are ignored

 BALANCED SCORECARD
Barriers to effective Implementation of BSC

Vision & Strategies not actionable

Strategies not linked to departmental and

Individual Goals

Strategies not linked to Long term/short term

Resource Allocation

Feedback that is tactical not strategic

 BALANCED SCORECARD
Barriers to effective Implementation of BSC
1 Vision & Strategy not Actionable

Strategy &
2 Strategy not Vision
Linked to Dept Team
& Individual Goals

Personal MBO & Monthly

Budget
Incentives Review

4 feedback that is
Financial Plan tactically not strategic

& Capital
Allocation

3 Strategy not Linked to Resource Allocation

 BALANCED SCORECARD
Barrier No 1: Vision and strategy not Actionable

Cant be translated into action

Cant be acted Upon
Cant be understood
Fragmentation & Sub optimization
of efforts
Lacking consensus & Clarity
Different Agendas
No integration
Not linked coherently to
overall strategy
 BALANCED SCORECARD
Barrier No 3: Strategy not Linked to Resource Allocation

Separate Processes for Long term &

Short term Strategic planning
Funding to unrelated priorities
Poor Monthly Reviews
Unfocused New Mgt Techniques
Poor Integration
 BALANCED SCORECARD
Barrier No 4: Feed back not tactically strategic

Bulk of feedback is only financial

measures Little time on strategy
implementation & success No priority to
periodic review and meetings
Inadequate information
Poor tactical review process
 BALANCED SCORECARD
Different Management System for Strategic Implementation
• The strategy is the reference point for the entire management process
• The shared vision is the foundation for strategic planning

Clarifying & Translating

• Goal alignments from The Strategy & Vision
top to bottom • Feedback system used to test
•Education and open The hypothesis on which strategy
communication about strategy Is based

Strategic Feedback
Communicating Balance &
And Linking Scorecard Learning

• Team problem solving

•Compensation is linked
To Strategy •Strategy development is a
Planning &
Continuous Process
Target Setting
• Stretch targets are established and accepted
• Strategic initiatives are clearly identified
• Investments are determined by strategy
• Annual Budgets are linked to long term planning
BALANCED SCORECARD

Let Us Review
 BALANCED SCORECARD
4
Perspectives

Financial

Perspective Customer
Internal
Perspective Business
Process
Perspective

Learning &
Growth
Perspective
 TransBa i LgAthNeCstEraDtegyStoCoOpeRrat
l Atn

Eoi CnaAl teRrmDs

The Strategy

Financial Perspective
If we succeed, how will
We look to our
Measurement is the
language that gives clarity
Shareholders?
To vague concepts Customers Perspective
To achieve our vision,
How must we look to our
Customers ?
Measurement is used to communicate,
Not to control Internal Perspective
To satisfy our customers,
Which processes must
We excel ?
Strategy can be described as a series of Organizational Learning
Cause and Effect relationship
To achieve our vision, how must
our organisation team
Improves?
 BALANCED SCORECARD
Clarifying and
Translating the
Vision & Strategy

Clarifying the Vision

Gaining Consensus

Communicating Strategic Feedback &

& Linking Learning

Comm and Educating Balance Articulating the shared Vision

Setting Goals Scorecard Supplying Strategic Feedback
Linking Rewards to Facilitating Strategy review
Performance and Learning

Planning & Target Setting

Setting Targets
Aligning Strategic
Initiatives
Allocating Resources
Establishing Milestones
 MBaAkeLAStNraCteEgDy

ESveCryOonReEs’ CJoAbRD

CORP
SBU

Education
Personal Goal
Alignment
Balanced Pay
checks

The Strategy Focused Workforce

 BALAMNaCkeESDtraSteCgyOaRcEonCtiAnuRo

uDs Process

Strategy

60% OF Org
Don’t link
Strategic Learning
Strategy Loop 85% of Mgt teams
& Spends less than
budgets 1 hr per month
Balanced On strategy
Scorecard issues
78% orgs lock
Budgets to Budget 92% of orgs
an Annual Do not report
cycle On lead
Management Control indicators
Loop

Performance
Input Output
Where it started……..
 Introduced in 1992 by Drs. Robert Kaplan (Harvard Business
School) and David Norton as a performance measurement
framework

 The Balanced Scorecard is the most commonly used

framework
for ensuring that companies execute their strategies

15
2
What is Balance Scorecard?

 A Balanced Scorecard monitors the performance of

all or part of an organization, towards strategic
goals

 It is used in business, industry, government, and

nonprofit organizations worldwide to align business
activities

 Itgives a framework and helps planners identify

what should be done and measured

15
3
Why Implement a Balanced Scorecard ?
 Increase focus on strategy and results

 Alignorganization strategy with the work people on

day-to-day basis

 Improve communication of the organization’s Vision

and Strategy

 Toprovide a more reliable basis for awarding

incentive based pay

15
4
Why Implement a balanced Scorecard ?
 To givemanagers a comprehensive view of the
performance of an employee and business

 Employee Satisfaction

 To survive and prosper in today’s world

 Itprovides feedback to both the internal business

processes and external outcomes in order to
continuously improve strategic performance and results

15
5
Four Strategic Perspectives

15
6
Financial

 Examines company’s implementation and execution

of its strategy


Three possible stages as described by Kaplan
and Norton
 Rapid Growth
 Sustain
 Harvest

15
7
Customer
 Customer Satisfaction

 Retention

 Marketing

 Product/Service in the eyes of the customer

15
8
Internal Business Process
 Metrics based on this perspective allow the managers to
know how well their business is running

 Innovation - Measures how well the company identifies

the
customer’s future needs

 Operations – Measures quality ,costs, technology &

plant infrastructure

15
9
Learning and Growth

 Training

 Forward Focused

 Concerned with -Human capital

-Information capital
-Organizational capital

16
0
Process
Formulate business strategy
Outline the company’s value
Define business strategy
chain activities

Identify the strategically

Outline a strategy map required organizational
outcomes

Identify workforce requirements

Identify the required work force behaviors

16
1
Balanced
Score Card

16
2
Philips

 Philips is world leader in healthcare, lifestyle and lighting

 Philips integrates technologies and design

into people life

 Mission :Improve the quality of people’s lives through

timely introduction of meaningful innovations

16
3
Issues
 During the mid-90s, Netherlands based Royal Philips
reported losses

 Due to rapid changes in the external environment and growing

competition of Asian companies like LG and Samsung

 Led to the Company initiating

 High manufacturing costs
 Initiating job cuts
 Selling unprofitable businesses

16
4
Why Balance Scorecard ?

 The initiative to implement the Balanced Scorecard came

from the top management at its HQ in the Netherlands

 Need to shift focus from high-volume business to high-

value business

 They realized they had to make operations

 Flexible
 Innovative

16
5
Implementation
 This led the Company to introduce a program called
Business Excellence through Speed and Teamwork (BEST)
in July 1999

 The Balanced Scorecard was one of the tools of the BEST

 There were four perspectives in Philips' Balanced

Scorecard:
 Competence
 Processes
 Customers
 Finance

16
6
Implementation

 They used Balanced Scorecard strategy across

Philips’ divisions with more than 1,20,000
employees spread across 150 countries

 They established the Critical Success Factor’s

(CSFs)

 Philips used the traffic light system to measure the

level of achievement of the key indicators:
 Green light – Target that had been met
 Amber – Performance in line with the target
 Red – A problem area

16
7
Measuring Results
 The Balanced Scorecard was used as an instrument
to
 Evaluate actual performance against targets
 Monitor future plans

 It enabled employees understand the existing

policies and
plans for the future

 Achieving revenue growth, employee satisfaction,

customer satisfaction were the common indicators
in all business units

16
8