Performance
Management:
Views from Industry
MGT 2206-001-Business Analytics
Villanova School of Business
What is Performance
Management?
 Performance Management is the use of
metrics and indicators, both financial and
non-financial, to measure, monitor, and
improve organizational performance.
 Performance management relates to having
various metrics that firm’s can track and use
to take action as needed. These metrics
might be part of a balanced scorecard, and
might be presented in a dashboard. You
might be able to drill down and look at these
metrics at lower levels in the
organization. Also, six sigma and lean
management are often related to
performance management.
2
Famous Quotes
 “If you can’t measure it, you can’t
manage it”
 “What gets measured and rewarded
gets done”
 “Measurement and scorecards at the
performing level were the single
biggest management tool for
success”
3
Performance Management
Successes
Comcast: problem resolution
on-time performance increased from 45% to 98%, costs down
30%
Apple: product development
cycle time down 75%, costs down 45%, customer satisfaction
up 25%
Amazon: order fulfillment
cycle time down 60%, accuracy up 60%, operating expense
down 40%, customer satisfaction up 100%
Wawa: new product introduction
inventory down 25%, cycle time down 50%, unavailability
down 50%
4
PERFORMANCE MANAGEMENT STEPS
Cascading of Goals
Performance Planning
• Performance measures provide “line of sight” from
strategy to individual job performance
• Everyone knows how performance is measured and evaluated
• Everyone knows what they are supposed to do -- and how to do it!
Performance Execution • Everyone knows upstream and downstream dependencies
Feedback
Consequences
Development
5
• Measurement is fact-based, relevant, actionable
• Information is standardized, visible, consistent, and timely
• Significant component of all individuals’ pay linked
to measurement
• Individual and manager identify performance gaps and develop
plans to close the gaps
Performance Management
Methods
– Map/Define/Describe the work that needs
improvement
– Better execution of the “plan” via
Leadership/Communications, i.e. “just do
it”
– Find and Share a “Best Practice”
– Apply Lean or Six Sigma or other tools to
solve problems more efficiently and
effectively
– Redesign the process-redesign patterns
– Automate process with IT applications
6
PHI Power Delivery Process Model
PD Chief Operating Officer
Core Process
Managing Process
Plan the Business
Manage Emergency Preparedness
C
u
s
t
o
m
e
r
s
Manage Customer Relationships
Supply Customers’ Energy
Manage Revenue
Operate the System
Manage Customer System Construction
Manage System Maintenance
Manage Transmission System Construction
Account
Managers
Call
Centers
Revenue Management/
Revenue Accounting
Field
Operations &
Gas Div
Regional
Operating
Centers (Dispatch)
Engineering
Groups
Support from: HR, Strategic Support Services, Business Planning & Finance, IT,
Accounting & Finance, Safety & Environmental, Regulatory Affairs. and
Corporate Services
7
The Manage Revenue Process
By the Numbers
1,921,000
Number of Customers
$5,118,780,000 Actual Billed Revenues
$161,163,000 Actual Expenses
3,695,510
Actual Calls Received
22,487,931 Actual Number of Bills Generated
18,981,460 Actual Number of Payments Received
Number of Employees
About 1,000 that work in the process
8
Manage Revenue – The Work Flow
9
Improving Process Performance
Understand nature of
performance gap
Set performance
target
Measure process
performance
Develop intervention plan
Improve execution
(training, tools,
attitudes, etc.)
Understand
customer needs and
benchmark
competitors
Modify
design
Perform
process
Create process and measures
Hammer and Company
10
Improve design
Replace
design
The Dimensions of
Process Design
Who does the work
When the work is done
Redesign rearranges
the value-adding tasks
Where the work is done
Whether the work is done
What inputs the work is given
What interconnections are
made between the work
What intensity the
work is performed with
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Principles of Superior Process
Design-Partial List
 Organize around outcomes, not tasks (case
worker example)
 Look for ways that those who use the results
of the process can perform some of the
process (self-serve grocery checkout)
 Treat geographically dispersed resources as
though they were centralized (call center)
 Shift from serial to parallel work steps by
sharing information sooner (new customer
account set-up)
 Make decisions at the place where the work
is done
12
Which situation suggests an
execution versus redesign project?
130
130
120
120
110
110
100
100
90
90
80
80
70
70
60
60
Germany
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France
UK
US
Canada
Asia
Germany
France
UK
US
Canada
Asia
Lean and Six Sigma
 Lean = Attack on Waste
– Focuses on maximizing process velocity
– Centers on separating value added activities from non- value
added activities (waste) in work processes.
– Provides a robust set of tools to determine the root cause and
elimination of that waste.
 Six Sigma = Attack on Variation
– Emphasizes the need to recognize opportunities and eliminate
defects from the customer perspective
– Data driven
– Recognizes that variation hinders our ability to reliably deliver
high-quality products and services
– Provides a prescriptive cultural infrastructure effective in
obtaining sustainable results (DMAIC)
14
What is Lean?




15
Purpose:
– Create competitive advantage for a
business by eliminating waste and adding
value to everything it does.
Principles:
– Specify VALUE from the Customers
perspective
– Identify the Value Stream and find the
WASTE
– Make the Value Steps FLOW
– Produce what the Customer requires: PULL
– Continue to Improve towards PERFECTION
Techniques:
– E.g. Value Stream Mapping, Kaizen, Flow,
6S
Powered by the People
– stresses engagement at all levels of the
organization
Value
Waste
Forms of Waste
•
•
•
•
•
•
•
•
•
Motion
Waiting
Interruptions
Searching
Inspection
Defects and
variation
Setup
Inventory
Unnecessary
processing
A Process Design Success Story –
National Price Increase Process
85 STEPS / HANDOFFS over
12 DIFFERENT ENTITIES
Customer
Product Management
We do
this…?
Customer Warehouse
Marketing Specialists
Sales Reps
Contract Admin
Contract Admin Database
CSO
SPOC System
Word Processing
Revenue Accounting
Retriever
Work Process Approach Can Remove Waste, Improve Cycle Time, and
Reduce Stress
16
Air Products Kaizen Events
Pre-Kaizen Event Milestones
1. Document and Verify the Scope
2. Analyze whether the Kaizen event is appropriate
3. Prepare for the Kaizen event
Day 1 - Focus the
Kaizen Event
Day 2 - Evaluate the
Target Work Process

Build a description of 
the work process

Do a walk through

Value
Work
Process
Waste
Day 3 - Solve the
Performance Issue
Day 4 - Improve the
Target Work Process
Do Process
Observations

Generate

Improvement Ideas
Implement
improvement ideas

Before Photos

Measure results
Develop a Mission
statement

Do Workplace Layout
Select Improvement 
Ideas

Do Spaghetti Charting


Set goals
Summarize Findings


Define Do’s and
Don’ts
Post-Kaizen Event Milestones
1. Institutionalize Improvements
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2. Replicate results at other sites

Post-Observations
Communicate
Activities and Results
”Seeing” and eliminating
non value added…in any
process, any business
Six Sigma
Critical Customer Requirement
6s = 3.4 defects
per million
opportunities
6s = 99.9997%
Yield
Average
Goal: Improve process capability
and eliminate variation or defects
Approach: Multiple problem solving
approaches embedded into the
DMAIC methodology
DMAIC Project Length: 2 to 6 months
Define
Six Sigma Key Elements

Links process outputs to Critical
Customer Requirements

Utilizes quantitative data to
understand performance

Incrementally eliminates/reduces the
causes that are preventing process
excellence
the improved process
to “hold the gain”
Control
the problem in the business
6s
the process with
Targeted solutions
Improve
Measure
the current process
capability against CCR’s
Analyze
to determine the root cause(s)
of defects in the process
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Work Process Example
Place
Order
Customer
Sales
Win
Business
Customer
Service
19
Take
Delivery
Pay
Bill
Define
Reqts
Set Up
Account
Input
Order
Send
Invoice
Production
Commit
Inventory
Load
Product
Logistics /
Distribution
Schedule
Delivery
Deliver
Product
Apply
Cash
6s
What is Six Sigma??
 6 Sigma = Fewer than 3.4 defects
per million opportunities
 6 Sigma = 99.9997% of the Process
Output is within Customer
Specifications
 6 Sigma = Flawless Execution
Six Sigma “quality” vs. Lean “speed”



Links process outputs directly to
Critical Customer Requirements
Utilizes quantitative data to analyze
upstream variables and establish
relationships with performance
Identifies and incrementally
eliminates causes that are
preventing process excellence
Goal: Improve process capability and
eliminate variation or defects
Approach: Multiple problem
solving approaches embedded
into the DMAIC method
Project Length: 2 to 6 months
Define
the improved process
to “hold the gain”
Control
the process with
Targeted solutions
Improve
the problem in the business
Measure
the current process
capability against CCR’s
Analyze
to determine the root cause(s)
of defects in the process
20
DMAIC - Incremental Improvement to an Existing Process
Control the
improved
process to
“hold the gain”
Improve the process with
Targeted solutions
Define the
problem in the
business
DMAIC: is a systematic, data
driven improvement
methodology that combines
statistical and process analysis
to reduce or eliminate
variation/defects.
Analyze to
determine the
root cause(s)
of defects in
the process
21
Measure the
current
process
capability
against CCR’s
Lean Six Sigma
Six Sigma
Lean Methods
Scientific Method
QFD
Pull Scheduling
Process Mapping
Hypothesis Testing
Pareto Charts
Fishbone Diagrams
Set-up Reduction
TPM
Regression Analysis
Run Charts
Brainstorming
SPC Charts
Error Proofing
Continuous Flow
Design of
Experiments
Project Management
Source: www.moresteam.com
Six Sigma: Reduce Process Variation by Eliminating Defects
Lean Methods: Increase Process Velocity by Eliminating Waste
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Level 3 Process
“Find and Win Customers”
Outputs
Valid and viable customers
Inputs
Market model
Offerings
Business objectives
Process Steps
1
2
Identify
Opportunities
3
Develop
Relationship
4
Review
Requirements
and Engage
Organization
5
Develop
and Submit
Proposal
Obtain
Commitment
6
7
Establish or
Modify
Customer
Account
Process
Contract
Information
Outputs to Next Process Step
leads /
sales
target list
Leads
23
prioritized
list of
qualified
leads
decision to
offer or not
proposal in
hands of
customer
relationship
confirmed
customer
requirements
configured
offering
Qualify
Needs
Proposal
Assess P
agreement
to do
business
approved
customer
account
contract
data input
to ERP
Move Data to ERP
Neg.
Close
Leading Metrics in Sales
and Marketing
 % Leads Becoming
Prospects
 Sales Cycle Time on
New Opportunities
 Revenue Potential
from Prospects
 Won/loss % on new
opportunities
 % Contract renewals
 Revenue potential in
pipeline
– A) By Salesperson
– B) By Segment
 Number of Customer
Touches
– A) By Segment
B) by Time Period
24
Sample Dashboard
25
“Visibility” of Metric Performance
Scorecard
(cross-business comparisons)
Metrics Report
(trends and commentary)
Key Measures Link
(BW or Excel details)
26
Human Performance Model
Optimal or
Desired
Performance
Measure
Business
Challenges,
Goals, and
Strategies
Performance
Needs
Actual
Performance
Causes
• Skills
Solutions
• Training
• Knowledge
• Leadership/
Communications
• Teamwork
• Goals/KPI’s
• Performance
Management
• Environment
• Compensation
• Motivation
• Tools
•Tools
• Processes
Evaluation and
Measurement
Change
Management
PERFORMANCE MANAGEMENT STEPS
Cascading of Goals
Performance Planning
• Performance measures provide “line of sight” from
strategy to individual job performance
• Everyone knows how performance is measured and evaluated
• Everyone knows what they are supposed to do -- and how to do it!
Performance Execution • Everyone knows upstream and downstream dependencies
Feedback
Consequences
Development
28
• Measurement is fact-based, relevant, actionable
• Information is standardized, visible, consistent, and timely
• Significant component of all individuals’ pay linked
to measurement
• Individual and manager identify performance gaps and develop
plans to close the gaps
Performance Management
Methods
– Map/Define the work that needs
improvement
– Better execution of the “plan” via
Leadership/Communications, i.e. “just do
it”
– Find and Share a “Best Practice”
– Apply Lean or Six Sigma or other tools to
solve problems more efficiently and
effectively
– Redesign the process-redesign patterns
– Automate process with IT applications
29
Thank You
&
Good Luck Managing
Your Performance in
MGT 2206-001-Business Analytics
Villanova School of Business