Robby Anzil Firdaus

&
Dian Purnamasari
 Our Sub Topic For Today
• Performance Management Defined
• Performance management as a system
• Objectives of performance management
• Principles of performance management
• Characteristics of performance management
• The performance management cycle
• Performance and development planning
DEFINED
 Definisi
Performance Management :
• is a process for establishing shared
understanding about what is to be
achieved and how it is to be achieved
• an approach to managing and developing
people that improves individual, team and
organizational performance.
• as a strategic and integrated approach to
delivering sustained success to
organizations that focuses on performance
improvement and employee development.
 Aims of Performance Management
Support the achievement of the
business strategy.
It is integrated in four senses:

1) vertical integration – linking or

aligning business, team and
individual objectives;

2) functional integration – linking

functional strategies in different
parts of the business;
 Aims of Performance Management
3) HRM integration – linking
different aspects of human
resource management.
4) the integration of individual
needs with those of the
organization  focused on
performance improvement.
 Is It Achievable?

• performance improvement
is not achievable unless
there are effective
processes of continuous
development.
 Management Involvement
• Performance is not only
about what is achieved
but also about how it is
achieved. Management
is involved in direction,
measurement and
control.
Performance management is concerned with:
• Aligning individual objectives to
organizational objectives.
• Encouraging individuals to uphold
corporate core values.
• Enabling expectations to be defined and
agreed in terms of role responsibilities and
accountabilities (expected to do), skills
(expected to have) and behaviors
(expected to be).
• Providing opportunities for individuals to
identify their own goals and develop their
skills and competencies;
• Motivating people by providing them with
recognition and the opportunity to use and
develop their skills and abilities.
 Scope of Performance Management
• Performance management is
essentially a developmental process
that aims to improve the
performance and potential of people
through their own efforts and with
the help of their managers and the
organization.
• The scope performance management
gives to recognize achievements and
provide opportunities for growth
means that it is part of the total
reward system.
Performance Management ≠ Performance Appraisal
SYSTEM
 Performance management system defined

• A performance management system is

a set of interrelated activities and
processes that are treated holistically
as an integrated and key component
of an organization’s approach to
managing performance through
people and developing the skills and
capabilities of its human capital, thus
enhancing organizational capability
and the achievement of sustained
competitive advantage.
OBJECTIVE
 Objective of Performance Management System

The real goals of any performance

management system are threefold :
1. Correct poor performance.
2. Sustain good performance.
3. Improve performance.

All performance management

systems should be designed to
generate information and data
exchange so that the individuals
involved can properly dissect
performance, discuss it, understand
it, and agree on its character and
quality.
 Aims of Performance Management System

• Improve performance
• Overall the purpose is to make
it clear to people how their
performance links in with the
performance of the business.
• Most employees want
direction, freedom to get their
work done, and
encouragement not control.
 The Process

• the process is a: have a discussion

around the requirements of the role,
dealing with what aspects are being
done well and what aspects are not
so good.
• Managing performance is about
coaching, guiding, appraising,
motivating and rewarding colleagues
to help unleash potential and
improve organizational performance.
Characteristics
 What They Say?

• As Mohrman and Mohrman

(1995) emphasized:
‘Performance management
practices must derive from
and be tailored to fit each
organization’s changing
requirements. This will lead to
a wide diversity of practices.’
But there are certain common
characteristics.
 Primary Elements
Five primary elements :
1. Agreement : is based on the agreement of
role requirements, goals, and performance
improvement and personal development
plans.
2. Measurement : Focuses on targets, standards
and performance measures or indicators
3. Feedback : Delivered performance compared
with expectations expressed as goals or
objectives. measuring outcomes in the shape
of delivered performance compared with
expectations expressed as goals or objectives
4. Positive Reinforcement : Review of
achievements against objectives,
requirements and plans, feedback,
reinforcement and coaching.
5. Dialogue. It provides the setting for ongoing
dialogues about performance that involves
the joint and continuing
 FOCUS

• Performance is NOT just a top-down

process in which managers tell their
subordinates what they think about
them, set objectives and institute
performance improvement plans.
• It is not something that is done to
people. As Buchner (2007)
emphasizes, performance
management should be something
that is done for people and in
partnership with them
 Input and Values
• The inputs are the knowledge,
skills and behaviors required to
produce the expected results.
• Developmental needs are
identified by defining
requirements and assessing the
extent to which the expected
levels of performance have been
achieved through the effective
use of knowledge and skills and
through appropriate behavior
that upholds core values.
 Characteristic

• Performance management is a
continuous and flexible process.
• It is based on the principle of
management by contract and agreement
rather than management by command.
• It relies on consensus and cooperation
rather than control or coercion.
• focuses on future performance planning
and improvement and personal
development rather than on
retrospective performance appraisal.
Cycle
Performance Management Cycle
• Characteristics of performance management. As Mohrman
and Mohrman (1995) emphasized: ‘Performance
management practices must derive from and be tailored to fit
each organization’s changing require ments. This will lead to
a wide diversity of practices.’

• But there are certain common characteristics as described

below. Performance management is a planned process whose
five primary elements are agreement, measurement,
feedback, positive reinforcement and dialogue.
 Performance Continous
Management Cycle Improvement Cycle

The performance management cycle closely resembles the cycle for

continuous improvement defined by William Deming (1986).

Performance management is all about continuous improvement.

The performance management
sequence

Notes:
• that ratings and financial reward are not an
inevitable part of the sequence.
• also that this logical and linear model is unlikely
to give a realistic picture of what actually
happens in many organizations.
• It may represent the grand design but because
the system is operated by people, who may be
fallible, the reality is often different.
The performance management
sequence

The key performance management

activities

Within this sequence, the key

performance management activities are
performance and development planning,
defining performance measures,
concluding performance agreements,
managing performance throughout the
year and reviewing and analysing and
assessing performance
formally.
 Example of performance management
Examples of the performance management cycle as
it exists in:
• CEMEX
• DHL
• the Royal College of Nursing
PLANNING
 Performance and
development planning
The performance planning part of the performance
management sequence involves the agreement
between the manager and the individual of how the
latter is expected to perform in terms of results and
behaviours
These objectives may have been cascaded down
from the strategic objectives of the organization
to achieve alignment, but in practice this may be
diffi cult to achieve

Precision in defining and measuring performance dimensions (Furnham, 2004)

Define performance with a focus on valued outcomes. Therefore performance dimensions

should be functions combined with aspects of value such as quantity, quality, timeliness,
cost effectiveness, need for supervision or interpersonal impact.
Performance and development planning
• Role profile definition
• need to be updated every time a formal performance
agreement is developed

• Defining key result areas

• What do you think are the most important things you have to do?
• What do you believe you are expected to achieve in each of these areas?
• How will you – or anyone else – know whether or not you have achieved
them?

• Defining what people need to know and be able to do

• To perform this role effectively, what has the role holder to be able to do
with regard to each of the key result areas?
• What knowledge and skills in terms of qualifi cations, technical and
procedural knowledge, problem solving, planning and communication
skills etc do role holders need to carry out the role effectively?
• How will anyone know when the role has been carried out well?

• Understanding behavioural competencies

The usual approach to including behavioural competencies in the performance
agreement is to use a competency framework developed for the organization.
Ex. Personal drive, team work, communication.

• Core values
• encourage people ‘to live the values’. Exp. Integrity, customer focus
 Performance measures
Measuring performance is relatively easy for those who are
responsible for achieving quantifyed targets, for example sales. It
is more difficult in the case of knowledge workers, such as
scientists. But this difficulty is alleviated if a distinction is made
between the two forms of results – outputs and outcomes.

• output is a result that can be measured quantifiably,

Output measures or metrics include:
• financial measures – income, shareholder value, added value, rates of
return, costs;
• units produced or processed, throughput; level of take-up of a service;
• sales, new accounts;
• time measures – speed of response or turnaround, achievements
compared with timetables, amount of backlog, time to market, delivery
times.

• outcome is a visible effect that is the result of effort but

cannot necessarily be measured in quantified terms
Outcome measures include:
• attainment of a standard (quality, level of service etc);
• changes in behaviour;
• completion of work/project;
• acquisition and effective use of additional knowledge and skills;
• reaction – judgement by others (colleagues, internal and external
customers).
The performance and development agreement

• Role requirements
• Objectives in the form of targets and standards of
performance.
• Performance measures and indicators
• Knowledge, skill and competency
• Role-specific profiles
• Corporate core values or requirements;
• Certain general operational requirements
• A performance development plan
• A personal development plan
• Process details: how and when performance will be
reviewed and a revised performance agreement
concluded.
Managing performance
throughout the year
One of the most important features of performance
management is that it is a continuous process that refl
ects normal good management practices of setting
direction, monitoring and measuring performance, and
taking action accordingly.

Performance management should be regarded as an

integral part of the continuing process of management.
This is based on a philosophy that emphasizes:
• the achievement of sustained improvements in performance;
• the continuous development of skills and capabilities;
• that the organization is a ‘learning organization’ in the sense
that it is constantly developing and applying the learning
gained from experience and the analysis of the factors that
have produced high levels of performance.
Formal performance reviews &
Analysing and assessing
performance
• Although performance management is a
continuous process it is still useful to have a
formal review once or twice yearly.
• This provides a focal point for the consideration
of key performance and development issues.
• Performance management is concerned with
analysing and assessing performance in
achieving objectives and implementing
development plans
• A rating scale is supposed to assist in making
judgements and it enables those judgements
to be categorized to inform performance or
contingent pay decisions, or simply to produce
an instant summary for the record of how well
or not so well someone is doing.
 The ethical dimension

Ethical principles for performance management (Winstanley and Stuart- Smith, 1996)
• Respect for the individual – people should be treated as ‘ends in themselves’ and not
merely as ‘means to other ends’.
• Mutual respect – the parties involved in performance management should respect
each other’s needs and preoccupations.
• Procedural fairness – the procedures incorporated in performance management
should be operated fairly in accordance with the principles of procedural justice.
• Transparency – people affected by decisions emerging from performance
management processes should have the opportunity to scrutinize the basis upon
which decisions were made.
 Issues in performance management
• Performance management is not a single intervention that can be implemented easily. It relies on
a range of activities, involving several core HR processes, and requires these to be carefully
integrated.
• A sophisticated ‘process’ does not always lead to effective performance management. It is diffi
cult to improve management capability in managing performance.
• There is an enduring underlying belief that performance management is a good thing to do.
However, there is a reluctance in organizations to evaluate the effectiveness of performance
management systems and to harness the results of research.
• There is often a lack of understanding about the nature of the link between performance and
organizational culture, and the implications for performance management. Performance
management reflects the organizational culture and context.
• When the performance management system is not delivering, that is likely to be reflecting a
deeper issue such as lack of organizational agreement about clarity of purpose, priorities or
standards, or a mismatch between espoused values and actual behaviours.
• Aligning the performance management process with the direction of any desired organizational
change is essential.
• It can support organizational change but may not be the only, or main driver of it.
Effective performance management
Effective performance management (Rogers, 2004)

An effective performance management system encourages managers and

associates to work together, communicate openly and provide feedback
regularly. Until people focus on communication, cooperation and collaboration
skills, appraisal forms remain vehicles for failure and appraisals go on evoking
fear and suspicion.
Engelmann and Roesch (1996) list the following negative consequences of
poorly designed or poorly administered performance management schemes,
or schemes that lack management commitment (and it could have been
added, the ownership and support of other stakeholders):
• Poor motivation and self-esteem because employees receive inadequate
feedback on their work performance;
• Little or no focused communication about performance between
supervisors and employees;
• Inefficient use of supervisors’ time;
• litigation over alleged discriminatory actions.
 Principles of effective performance
management

Principles of effective performance management (Strebler, Bevan and

Robertson, 2001)

1. Have clear aims and measurable success criteria.

2. Be designed and implemented with appropriate employee involvement.
3. Be simple to understand and operate.
4. Have its effective use core to all management goals.
5. Allow employees a clear ‘line of sight’ between their performance goals and those
of the organization.
6. Focus on role clarity and performance improvement.
7. Be closely allied to a clear and adequately resourced training and development
infrastructure.
8. Make crystal clear the purpose of any direct link to reward and build in proper
equity and transparency safeguards.
9. Be regularly and openly reviewed against its success criteria.
PRACTICE
 ‘Best practices’ in performance management (Ed Lawler) by
risher 2005

• Ownership of performance management by line managers. they need to take

control.
• Training for both managers and individuals being appraised. Both managers and
employees need to understand the process
• Leadership by top management. Executives need to demonstrate their strong
commitment to the performance system and the importance of high performance.
• Performance goals that are driven by business strategy.
• Ongoing feedback from managers.
• Use of competencies, development planning and how individuals achieve their
results.
• Ties between financial rewards and performance ratings. To manage the budget for
salary increases, managers need to differentiate among their people.
• Calibration meetings for managers to compare and level ratings. When managers
meet to discuss performance ratings, it strengthens the credibility and validity of
ratings and reinforces the perceived importance of the process.
• Use of e-HR appraisal systems to integrate performance management. E-HR
systems also make the process more than a year-end event.
 Impelementation
• Balance Score Card (BSC)
• Objective Key Result (OKR) “agile approach”

as a form of performance management

 Strategy Map &
Balanced Scorecard:
Apa dan Mengapa?
KELEMAHAN DALAM IMPLEMENTASI STRATEGI
TERKAIT PERFORMANCE MANGEMENT
• Dalam menghadapi persaingan bisnis yang semakin ganas,
STRATEGI memiliki peran yang sangat penting untuk
memenangkan persaingan.

• Namun, hanya kurang dari 10% dari strategi perusahaan

yang diimplementasikan secara efektif

• Kebanyakan - 70% - masalahnya tidak terletak pada

strategi yang ‘salah’, tetapi pada implementasi nya yang
kurang ‘efektif’
ADANYA GAP ANTARA STRATEGI
DAN TINDAKAN

MISSION
Why we exist
VALUES
What’s important to us
VISION
What we want to be
STRATEGY
Our game plan

Strategy Map
Translate the Strategy
Balanced Scorecard
Measures and Focus
Strategic Initiatives
What We Need to Do
Personal Objectives
What I Need to Do

STRATEGIC OUTCOMES
Satisfied Efficient and Motivated &
Delighted
SHAREHOLDE Effective Competent
CUSTOMERS
RS PROCESSES WORKFORCE
BALANCED SCORECARD
Definisi

Balanced Scorecard adalah suatu metoda untuk

membantu organisasi menterjemahkan strateginya
menjadi sasaran operasional yang dapat meningkatkan
kinerja dan mengubah perilaku
‘The Strategy-Focused Organization’

Professor Kaplan & Dr. Norton

 PERSPEKTIF BALANCED
SCORECARD
Suatu Sistem pengukuran
yang menggunakan
4 perspektif:

• Financial FINANCIAL CUSTOMER INTERNAL

PROCESSES
LEARNING
AND
GROWTH

• Customer
• Internal Business Process
• Learning & Growth
ORGANISASI / PERUSAHAAN
ORGANISASI / PERUSAHAAN

f( )
Financial Happy
Results Customers
ORGANISASI / PERUSAHAAN

f ( )
Happy Good
Customers Process
ORGANISASI / PERUSAHAAN

f( )
Good Learning &
Process Growth
KOMPONEN BALANCED
SCORECARD
Setiap Perspektif memiliki 4 komponen
 BALANCED
artinya….

▪ Seimbang antara ukuran finansial dan non finansial

▪ Seimbang antara ukuran jangka pendek dan jangka panjang
▪ Seimbang antara ukuran proses (leading indicator) dengan ukuran
hasil (lagging indicator)
▪ Fokus pada sasaran strategis dan keselarasan organisasi
 HUBUNGAN SEBAB AKIBAT DARI
STRATEGI

Visi & Strategi

Financial s
es res ve
Agar berhasil secara finansial,
ctiv asu ets tiati
e e g i
bagaimana kita sepantasnya bj M Tar In
O
dipandang oleh pemegang
saham?

Customer
es e s es
Untuk meraih visi kita bagaimana kita iv ur s ti v
e ct eas get itia
sepantasnya dipandang oleh pelanggan kita? bj M Tar In
O

Internal Process
s
Agar dapat memuaskan pemegang saham dan es res ve
ctiv asu ets tiati
e g
pelanggan kita, dalam proses bisnis apa kita bj Me Tar Ini
harus unggul? O

Learning and Growth

s
Untuk meraih visi kita, bagaimana kita es res ve
mempertahankan kemampuan kita untuk ctiv asu ets tiati
e g i
bj Me Tar In
berubah dan terus berkembang? O
STRATEGY MAP
• Suatu peta yang menggambarkan secara visual hubungan
sebab dan akibat antara sasaran-sasaran strategis serta
menunjukan bagaimana suatu sasaran strategis berdampak
pada yang lain

• Strategy Map merupakan kerangka kerja yang

menghubungkan antara “intangible assets” dan “shareholder
value creation” memalui 4 perspektif BSC

• Strategy Map dapat terdiri dari beberapa Strategic Themes

STRATEGIC OBJECTIVES ARE LINKED ACROSS
THE 4 BALANCED SCORECARD PERSPECTIVES

Strategic Theme: Strategic

Operational Excellence Objectives

Financial Profitability
●Profitability

Fewer
●More customers
More
Planes Customers ●Fewer planes

Customer Flight Lowest ●Flight is on time

Is on Time Prices ●Lowest prices

Fast
Internal ●Fast ground
Ground
Turnaround turnaround

Learning
Ground Crew ● Ground crew
Alignment alignment
BALANCED SCORECARD TERMINOLOGY

Strategic Theme Objectives: Measures: Targets: Initiatives:

Operational Excellence What the How success The level of Key action
Profits
strategy is or failure performance programs
Financial
trying to (performance) or rate of required to
Grow
Fewer achieve against improvement achieve
Revenu planes objectives is needed targets
es
Attract & monitored
Customer Retain More
Customers

On-time Lowes
Service t
prices

Internal Objectives Measures Targets Initiatives

Process Fast
ground ● Fast ground ● On Ground Time ● 30 Minutes ● Cycle time
turnaro
und turnaround ● On-Time ● 90% optimization
Departure
Learning
& Growth Ground
crew
alignment KPI

We “Tell the Story of the Strategy” using a ‘Cause and Effect” Model for each Strategic Theme
STRATEGY MAP AND COMPLETE BSC
BSC SEBAGAI INTEGRATOR
“BEST MANAGEMENT
PRACTICES”
EVA/ABC
Financial Perspective
“To satisfy our
shareholders,
Objectiv
es
Profitab
Measur
es
Targets
Initiativ
es (CRM)
what financial
objectives must
ility Customer
Financial
Growth
we accomplish?” Shareh
older Relationship
Value
Management
Customer Perspective
Objective Measur Initiativ
‘To achieve our Targets
s es es
financial
objectives, what
customer needs
Image
Process
Customer
Service
Re Engineering
must we serve?”
Price/
Cost

Lean Manufacturing
Internal Perspective
TQM/ “To satisfy our
customers, and
Objectives
Measur
es
Targets
Initiati
ves

Six Sigma shareholders, in

which internal
Cycle Time

ISO 9001
business
process must we
Quality
Product Internal Competency-
excel?” ivity

based HRM
Learning Perspective
Objectiv Measur Initiativ
“To achieve our Targets
es es es
goals, how must
Change our organization
learn and Continuous Learning &
Learning
Management
innovate?” Intellect
ual Growth
Assets
LINKING STRATEGY TO BUDGETS
Strategy
(3-5 Years)

1. Translate
into
Balanced
Scorecard
2. Set
Stretch
Target

3. Identify
Strategic
Initiatives
and Resource
Requirements 4. Authorize
Financial
and Human
Resources Budget
(1 Year)
 LINKING LONG TERM STRATEGY TO
TACTICAL PLANNING & BUDGETING

Mission Targets Initiatives Milestones Accountable Resource

Vision Strategy Map Objectives Measures
Allocation
F . Grow high- . 100% . ’04 xx%

Financial
1 margin revenue from . ’05 xx%
service high- . ’06 xx%
healthcare to our community

F
Be the community hospital of

margin
2 services
To provide top-notch

Customer . Provide . Customer . ’04 xx% . Develop . Survey . Mkg. .$ xxxx

C personaliz satisfactio . ’05 xx% organization drafted Team
1 ed care n survey wide survey By 6/04
. ’06 xx%
rating
P
1 . Keep . Service . ’04 xx% . Electronic . Complete . Dept Chairs .$ xxxx
Internal
choice

P patients level spot . ’05 xx% Notes by 2004

2 informed check rating . ’06 xx% project . All patients
logged in

. % new . Learning .$ xxxx

. ’04 xx% . Deadline
Learning

. Provide . HR
technology technology . ’05 xx% Assessment met Committee
L used by staff
4 & . ’06 xx% project
Resources

Strategy Tactics
“Leadership” “Management”
 Bibliography
• Armstrong, M. (2009). ARMSTRONG’S
HANDBOOK OF PERFORMANCE
MANAGEMENT (p. 401). p. 401. London:
KOGAN PAGE.