Level 3 Diploma in Management

Transcription

1 People and Building Team Level 3 Diploma in Management Chapter 3 Managing and Improving Performance

2 [Intentionally Blank] Copyright The Institute of Leadership and Management ILM is a registered trade mark of The City and Guilds of London Institute. These materials may not, in whole or part, be copied, reproduced, communicated, or otherwise distributed without the prior written permission of ILM. Permission has been granted to Skills Team Ltd to adapt and include materials relevant to their Diploma in Management programme September 2014 Institute of Leadership & Management l m.com

3 Managing and Improving Performance (part of Units M&L 11 and M&L 15) Contents Unit Specifications... 1 Introduction... 3 Understanding the Role, Functions and Processes of Management... 4 Planning Co-ordinating and Controlling Work... 5 Planning Tools and Techniques... 6 Controlling Work Streams Ensuring that Team Objectives are Met Organisational Vision, Mission Statements and Objectives Organisational Goals and Objectives Strategic Plans Vision to Objectives Business Objectives and Performance Measures Monitoring and Measuring Performance Ensuring Staff Understand Monitoring and the Features of Measurement Systems Quality Standards and Their Place in Performance Measurement Key Performance Indicators Monitoring and Reporting on Business Performance Reporting Timetables Management Information Systems Business Outputs and Outcomes Understanding the Management of Team Performance Reasons for Under-performance in Work Teams Goal Setting in Managing Performance Production and Operations Managing Quality Quality Control or Quality Assurance? Lean Manufacturing Techniques for Performance Improvement Quality Circles Amending Priorities and Plans to Take Account of Changing Circumstances Working to Organisational and Team Priorities... 47

4 Action Planning and Scheduling Work Constraints on Amending Priorities and Plans Understanding the Principles of Effective Decision Making Defining a Decision Assessing the Impact of Decision Making Obtaining Sufficient Valid Information to Enable Effective Decision Making Root Cause Analysis Rational Problem Solving Aligning Decisions with Business Objectives, Values and Targets Validating Information Addressing Issues that Hamper the Achievement of Targets and Quality Standards Dealing with Data and Information Organising and Summarising Data Methods of Making Decisions Budgets and Associated Operational Constraints Bibliography/Further Reading... 74

5 Unit Specifications Chapter 3 - Managing and improving performance The contents of this chapter address the learning outcomes NOT greyed-out in the following tables setting out the M&L11 and M&L 15 units. Title Skills CFA Ref. M&L 11 Level 3 Credit Value 4 GLH 21 Learning Outcomes The learner will: 1. Understand the management of team performance M&L 11 Manage Team Performance Assessment Criteria The learner can: 1.1 Explain the use of benchmarks in managing performance 1.2 Explain a range of quality management techniques to manage team performance 1.3 Describe constraints on the ability to amend priorities and plans 2. Be able to allocate and 2.1 Identify the strengths, competences and assure the quality of work expertise of team members 2.2 Allocate work on the basis of the strengths, competences and expertise of team members 2.3 Identify areas for improvement in team members performance outputs and standards 2.4 Amend priorities and plans to take account of changing circumstances 2.5 Recommend changes to systems and processes to improve the quality of work 3. Be able to manage 3.1 Explain to team members the lines of communications within communication and authority levels a team 3.2 Communicate individual and team objectives, responsibilities and priorities 3.3 Use communication methods that are appropriate to the topics, audience and timescales 3.4 Provide support to team members when they need it 3.5 Agree with team members a process for providing feedback on work progress and any issues arising 3.6 Review the effectiveness of team communications and make improvements 1

6 M&L 15 Principles of Leadership and Management Skills CFA Reference: M&L 15; Level: 3 ; Credit Value: 8; GLH 50: Learning Outcomes Assessment Criteria Understand the principles of effective decision making Explain the importance of defining the objectives, scope and success criteria of the decisions to be taken Assess the importance of analysing the potential impact of decision making Explain the importance of obtaining sufficient valid information to enable effective decision making Explain the importance of aligning decisions with business objectives, values and policies Explain how to validate information used in the decision making process Explain how to address issues that hamper the achievement Understand leadership styles and models Understand the role, functions and processes of management Understand performance measurement of targets and quality standards Explain the difference in the influence on managers and leaders on their teams Evaluate the suitability and impact of different leadership styles in different contexts Analyse theories and models of motivation and their application in the workplace Analyse a manager s responsibilities for planning, coordinating and controlling work Explain how managers ensure that team objectives are met Explain how a manager s role contributes to the achievement of an organisation s vision, mission and objectives Analyse theories and models of management Explain how the application of management theories guide a manager s actions Explain the operational constraints imposed by budgets Explain the relationship between business objectives and performance measures Explain the features of a performance measurement system Explain how to set key performance indicators (KPIs) Explain the tools, processes and timetable for monitoring and reporting on business performance Explain the use of management accounts and management information systems in performance management Explain the distinction between outcomes and outputs Tables extracted from Skills CFA Specifications 2

7 Introduction This Chapter and the various activities within it, is designed to complement the third workshop in the Skills Team Management Diploma programme and introduce you to the principles of objective setting and improving performance. Key skills are explored that will enable you to tackle these elements of your role or future role as a line manager with confidence. The activities will require you to consider theories that align with each topic but, importantly, you will be expected to make parallels with your own experience in the workplace, which will help in ensuring that you can lead your team effectively. This Chapter of the Workbook covers learning outcomes 1 and 4 of Unit M&L 15 and learning outcome 1 and part of 2 in Unit M&L 11 within the Diploma in Leadership and Management. Learning outcomes 2 and 3 have been covered in Chapter 1 of the workbook. 3

8 Understanding the Role, Functions and Processes of Management The Role of Managers and Management A key role of managers and management is to oversee the work undertaken by the organisation. Managers have, in general terms, quite broad responsibilities. Activity: Obtain the job descriptions of, say, 3 line managers in your organisation. What specific responsibilities do they have? What are the key elements of their roles? Managers responsibilities include overseeing delivery of the organisation s performance and output, through effective: Resource management, including recruitment of staff, and prioritisation and coordination of work; Trouble-shooting and problem-solving; Employee motivation and reward; Resolution of workforce conflict and maintenance of a positive working environment; Enforcement of quality and safety standards; Employee development, including training and succession planning; Provision of timely, meaningful information and advice to more senior managers. They can also contribute by identifying and promoting talent; Ensuring communication upwards and downwards; Providing the workforce with a clear understanding of their roles and responsibilities, enabling them to complete work allotted to them; Explaining to the workforce management decisions and direction; and, Providing more senior managers with feedback from the workforce, representing, as appropriate, the concerns of the workforce. 4

9 Planning Co-ordinating and Controlling Work Planning, co-ordinating and controlling work sit right at the core of a manager s role and are fundamental to ensuring organisational efficiency and effectiveness. A plan can be defined as: A description of how we intend to reach an objective. Planning is the process of determining how the desired outcome will be achieved. Planning enables the manager to establish what tasks need to be undertaken, the resources necessary to complete the tasks and how work should be scheduled and undertaken. In essence, there are 2 types of plan not good and bad! but narrative and graphical. The 3 most popular planning tools are the Work Breakdown Structure (a form of To Do List or simple Action Plan), the Gantt Chart and Network Diagrams (the product of Project Evaluation and Review Technique). Whichever planning tools you choose to use you need to understand the concept of estimating. Estimating Estimation is simply an assessment of: The likely time an activity will take; and, The likely cost of that activity. Estimation itself is simply your best guess and is usually based upon experience. It is also something we do every day: for example, we estimate how long it will take for us to complete a piece of work or to travel into the office. Where you lack experience in a particular discipline, you can seek estimations from colleagues who are expert in the field, by conducting research or, indeed, by seeking input from experts outside of your own organisation. For example, if you were planning to decorate your kitchen and you had never decorated a kitchen previously, you might draw on experience of decorating other rooms, adjusting the estimate to reflect the greater or lesser complexity of decorating a kitchen. Similarly, you might obtain an estimate or quote from a local decorator and adjust that to reflect your competence when compared with the professional tradesperson. One way of estimating is to assess best case, worst case and middle case where the best case represents your most optimistic estimate and the worst case your most pessimistic estimate; the middle case being the most likely. So, to decorate a kitchen, we might think it will take 3 days best case and 5 days worst case ; you might then decide to settle upon an estimate of 4 days. 5

10 By accurately estimating the level of effort and the time that will be required to successfully complete the work, managers retain credibility and authority. The most common reason for poor estimation is a failure to take account of the many variables which are difficult to control. For example: Other competing priorities; Annual holidays; Sickness; Equipment failures; Missed deliveries; Unforeseen interruptions; and, Quality failures. Some managers, therefore, might choose to err on the worst case estimate. Planning Tools and Techniques Work Breakdown Structures Work Breakdown Structures (WBS) are a useful tool in planning. A form of simple To Do List, they allow the manager to record every single activity that needs to take place. In its raw form the WBS is simply a list of tasks with the estimate of the effort and duration of each task, although it becomes a comprehensive planning method with the addition of just a little extra detail, such as Start Date, End Date and Who? A template WBS is provided overleaf. Of course, at this stage, it would be useful to understand the difference between effort and duration. In simple terms, effort is the actual time it will take to complete the work, while duration is the period of time that has been allotted for the work to be completed. For example, if you were painting the garden fence, you might estimate that the work will take 10 hours effort but will require a duration of 5 days to complete; this is because you will be painting in the evening after you return from work and there is a maximum of 3 hours light available to you at the end of the day. 6

11 Activity: Using the WBA template below, plan a small work project. For example, plan how you would decorate the kitchen at home or organise an office party. Task Task Description Effort Duration Start Date End Date Who? 7

12 Gantt Charts Gantt Charts are another extremely useful tool for planning control and coordination of work. Also they are effective for budgeting, and for reporting and presenting and communicating plans and progress easily and quickly. However, as a rule, Gantt Charts are not as good as a Critical Path Analysis Flow Diagram for identifying and showing interdependent factors, or for 'mapping' a plan from and/or into all of its detailed causal or contributing elements. You can construct a Gantt Chart using MSExcel or a similar spreadsheet. Every activity has a separate line allowing you to create an overall time-line for the duration of the work (the example below one day decorating a room shows hours, but normally you would use weeks, or for very big long-term jobs, months). You can colour code the time blocks to denote type of activity (for example, intense, watching brief, directly managed, delegated and left-to-run). You can schedule review and insert break points. At the end of each line you can show as many cost columns for the activities as you need, showing, for example, planned spend, actual spend and spend variances, and calculate any totals, averages, and ratios that you need. Gantt Charts are probably the most flexible and useful of all management planning tools. However, they do not very easily or obviously show the importance and interdependence of related parallel activities. Nor do they clearly show the necessity to complete one task before another can begin, as a Network Diagram will do. Gantt Chart Example Decorating a Room (Day One) Hours Task Activity Remove furniture and curtains Dust and hoover room Sand down blemishes and fill holes Wash walls, skirting boards and doors Tape over plugs/switches/wall lights Mix paints Paint walls Paint woodwork Remove tape and touch up Tidy away Network Diagrams or Project Evaluation and Review Technique A second commonly used planning tool is the Network Diagram or Project Evaluation and Review Technique (PERT). PERT is a specialised method for identifying related and interdependent activities and events. While PERT is not normally relevant in simple management planning, it is invaluable for more complex planning, particularly when timings and interdependency issues are crucial. PERT analysis commonly feeds into 8

13 what is known as Critical Path Analysis. 'Critical Path Analysis' sounds very complicated, but it is a very logical and effective method for planning and managing complex projects. A critical path analysis is normally shown as a flow diagram, whose format is linear (organised in a line), and specifically a time-line. The Critical Path on any work project is defined as the longest route through the project ; that is, the total time that it will take for the longest sequence in time of interdependent events/activities to complete. Critical Path Network diagrams are very good for showing interdependent factors where timings overlap or coincide. They also enable a plan to be scheduled according to a timescale. Taking, as an example, organisation of a family party, we can prepare a Network Diagram and undertake a Critical Path Analysis. We know what activities are involved: identifying a venue, booking a venue, booking catering and entertainment, inviting family and friends to attend, ordering a cake, decorating the room and clearing up. Some of these activities can happen in parallel and some are interdependent. That is to say, if the organiser (manager) tried to book catering before the number of attendees was known, it could be a very costly mistake! Similarly, certain tasks must be started before others, and certain tasks must be completed in order for others to begin. For example, the venue must be booked before invitations can be sent out and, obviously, we cannot clear up until after the party. An example network diagram is on the next page. The Critical Path Analysis calculation is shown at the bottom of this simple network diagram. 9

14 Understanding the Principles of Leadership and Management Example Network Diagram Collect keys Book disco and band Set-up venue Decide to have a party Identify and view venues Pick venue Invite guests Party Clear-up Book caterer Pick menu Set-up venue Pick cake Day 1 Day Day Day Day Day Day 37 Day 38 69

15 Controlling Work Streams Chapter 3 - Managing and improving performance In exercising control over work, there are 5 key activities a manager will undertake, namely: Ensuring quality standards are met and products and services are fit for purpose ; Managing the team: Ensuring that work remains within budget; Ensuring that outputs are delivered on time; and Managing risk and issues. Ensuring that Team Objectives are Met Clear direction for the team aimed at achieving the team objectives is detailed in the team plan. The role that each person will play in achieving the team objectives needs to be defined within the plan. Responsibilities will need to be allocated, sufficient resources provided and each person briefed and made accountable for their part in the implementation of the plan. Wherever possible and when time permits it is worth including the team in preparation of the plan, so that they have shared ownership of the results. Each team member needs to understand their role in terms of their individual: Responsibility, what they have to do; Accountability, what they have to achieve and by when; and, Authority, the level of power and autonomy they have in achieving the objectives. SMART team objectives provide a solid framework for monitoring and control. The manager s job in achieving SMART objectives is to ensure that work is completed to quality, cost and time. This will require ongoing assessment of progress towards completion of the plan and making adjustments as required en route to completion. Activity: Cite an example of where, in delivering a recent team objective, you have had to make adjustments to the plan to ensure that you were able to achieve the objective to quality, cost and time. List each adjustment and rationale for it. 11

16 Organisational Vision, Mission Statements and Objectives Most organisations have a vision and/or mission statement that defines its purpose. Vision and Mission statements are the inspiring words chosen by successful leaders to clearly and concisely convey the strategic direction of the organisation, communicating the intentions of the organisation to those people who have an interest in the organisation. The term commonly used for people with an interest in an organisation is stakeholder. Both types of statement are slightly different in their intent, although both typically convey the direction of the organisation. Vision Statements define the organisation s purpose, reflecting the values of the organisation rather than bottom line measures of success. For employees, it gives direction about how they are expected to behave and inspires them to give their best. Shared with customers, it shapes customers' understanding of why they should work with the organisation. For example, look at the Vision Statement of the largest fast-food company in the World, McDonald s: McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile A Mission Statement typically defines the organisation's purpose and primary objectives. Its prime function is internal to define the key measure or measures of the organisation's success and its prime audience is the leadership team and stockholders. The mission statement therefore focuses on what constitutes success for the business. For example, consider the Mission Statement for The Walt Disney Company: The Walt Disney Company's objective is to be one of the world's leading producers and providers of entertainment and information, using its portfolio of brands to differentiate its content, services and consumer products. The company's primary financial goals are to maximize earnings and cash flow, and to allocate capital profitability toward growth initiatives that will drive long-term shareholder value. Organisational Goals and Objectives Strategic Plans Once a vision and mission has been formulated, it is usual to have a set of organisational goals, which are the medium for setting out the big picture of what the organisation is seeking to achieve. A goal describes a high-level target that an organisation seeks to achieve over the long-term (3-5 years). Whilst goals are usually quite difficult to measure and quantify, they set the direction of the organisation and support the mission statement. Objectives are more specific statements that describe what the organisation wants to accomplish in the short-term (up to 12 months). The successful completion of short- 12

17 term objectives should contribute to the achievement of long-term goals. Objectives should be SMART: specific, measurable, achievable, realistic, and time-bound. Wellconstructed objectives should incorporate their own key performance indicators. The significance of the measures chosen cannot be overstated without measures it would be very difficult if not impossible to manage the implementation of the objectives. Usually, the Vision, the Mission, the Organisational Goals and the Organisational Objectives would be set out in the Strategic Plan. The strategic plan would permeate through the organisation in the form of action plans that serve to define how the objectives will be achieved. This whole process should ensure that the organisation itself has clear definition around what it is looking to achieve and that every person in the organisation understands his or her role within it. The management function would usually be expected to ensure the delivery and implementation of strategic goals and objectives, as set out by senior managers, through development and management of action plans. Where organisations operate without having an effective strategic plan they tend to drift and become inefficient and ineffective. Ultimately, they will be very unlikely to achieve competitive advantage without one. Graphically the process looks like this: Vision Mission Goals Organisational objectives Team objectives Vision to Objectives 13

18 Business Objectives and Performance Measures Activity: Create a succinct statement stating why having a comprehensive set of performance measures is so important in management. There is an old business adage that says you can t manage, what you can t measure. And it is very true. If you have no yardstick or benchmark against which to measure performance you will not know how well you have performed and you will not know when and/or to what extent you have achieved your objectives. This is why the M in the SMART objectives acronym is so crucial. 14

19 Monitoring and Measuring Performance Activity: In what ways might you monitor performance? Chapter 3 - Managing and improving performance There are a variety of possible responses relating to monitoring of both individuals and teams, which might include: Independent quality inspections or audits; Team quality monitoring/sampling; Customer feedback; Satisfaction surveys; Observations by team leader or others; Production/operation records (for example, recording daily output); and/or, Progress reports including production graphs, etc. 15

20 Ensuring Staff Understand Monitoring and the Features of Measurement Systems In monitoring performance, staff will need to know what standards are expected and how they will be measured against those standards. The measurement system has to incorporate: A set of measures A monitoring process Facility to interpret the feedback regarding performance gleaned in monitoring Facility to adjust elements of the system if the performance is not on track for achieving the organisational objectives. This will often be communicated via organisational policies and procedures but that alone is unlikely to be sufficient. The line manager s role will include responsibility for disseminating task requirements, including required standards, and ensure that they are understood, implemented and achieved. Ultimately, it is an on-going communication process. Quality Standards and Their Place in Performance Measurement A quality standard is a concise statement describing the expected level of service performance or product quality (AH Raymondson, 2012). One widely applied definition of quality is fit for purpose (PRINCE2). This deserves a little reflection as to the implications of this definition for controlling work. Fit for purpose is effectively adequate that is just right for the job in hand. It is not high quality which is often taken as the meaning of quality in everyday conversation. Of course, there are situations where fit for purpose will require high quality. Much of a manager s time will be concerned with ensuring that products and services are delivered to the requisite standard (quality), at the expected cost and in the timescales required. To enable this to happen we need to understand what standards are to be applied and how to control performance in team production and/or service delivery. Activity: What do you consider to be the purpose of quality standards? 16

21 The main reason organisations have quality standards is to ensure that they whatever their business consistently meet customer requirements, thereby ensuring customers continue to buy their products or use their services. Standards provide benchmarks for performance. Key Performance Indicators There are numerous systems for measuring performance used in organisations. At supervisory level, the focus is more on measuring work performance, output and quality in fairly narrow, but clearly defined, areas. To achieve this we need to be able to have a benchmark or indicator of performance against which we can measure the work performance, output and quality. These measures are often referred to as key performance indicators (KPIs). Key performance indicators come in three main types: Input KPIs measure assets and resources used (purchases made) to achieve business results. Examples might include: Funding for training; Raw materials; and Quality of raw materials (e.g. grade 1, 2, 3, etc). Process KPIs measure the efficiency or productivity of a business process. Examples might include: Production time; Days to deliver a completed order; Number of days to reply to customer requests; Number of personnel trained in use of a piece of equipment; and, Days taken to fill vacancies. Output KPIs measure the financial and non-financial results of business activities. Examples might include: Sales revenue; Number of new customers; Increase in full-time employees; Return on investment; and, Customer satisfaction. A mix of the three types of KPIs process, input, and output would be applied to give a broad picture of individual, team or organisational performance. Any variances then need to be investigated and appropriate action needs to be taken to address the variance. 17

22 Activity: List at least 2 example KPIs that are, or could be, applied in your monitoring of performance (and underperformance) of your team: Monitoring and Reporting on Business Performance The Balanced Scorecard A management system that enables measuring and reporting progress towards organisational objectives, the Balanced Scorecard was developed by Robert Kaplan and David Norton. The Balanced Scorecard provides a quick, but comprehensive picture of the organisation s performance, focusing on 4 main areas of business: Area of Focus Finances Customers Internal Business Processes Learning & Growth Typical Issues Measured Measures relating to the financial health of the organisation Factors such as quality of goods and/or services, delivery and overall customer satisfaction Internal organizational functions, and measurements of their efficiency and effectiveness. Ability of an organization to adapt to the changing environment of business. Retention, ongoing education/training and effectiveness of access to organisational communications Departmental measures should all serve the overall goals of the organisation and flow out from the high-level measures within the Balanced Scorecard. The value of the balanced scorecard approach will only be as effective as the measures within it. Consequently, time needs to be spent to ensure that the organisation has the best 18

23 measures (and not too many) to give appropriate focus on achievement of the organisational goals. Whilst Norton and Kaplan define their parameters for their balanced scorecard, many organisations adapt the principle to give broader coverage of business activity and include what is most relevant to them. For example, you might include and measure performance of: Suppliers Environmental issues Competitors A well-constructed and implemented balanced scorecard is an extremely useful tool for identifying inefficiencies in processes and for monitoring and reporting on business performance. Activity: Thinking about your own work team and the headings provided by Norton and Kaplan for the Balanced Scorecard. Create 2 measures for each of the areas of focus that would be relevant to your team. Area of Focus Measure Finances Customers Internal Business Processes Learning & Growth 19

24 Reporting Timetables Using the balanced scorecard or other reporting tools such as management reports, spreadsheets, budgeting profiles and accounting statements, an organisation would have a timetable for reporting of information against the KPIs set out at the beginning of a financial year. Managers would be expected to submit reports (typically a week beforehand) for collation prior to a management meeting to discuss progress, explain discrepancies, agree amendments and make decisions relating to achievement of organisational objectives. Such joint management meetings would usually be held monthly but more or less frequently often to suit the organisational need. For team members, exposure to the balanced scorecard plan helps impress the organisational goals and objectives and, with objectives cascaded down to team level, help individuals appreciate their roles in delivery of those objectives. Management Information Systems Management information systems (MIS) provide managers with the information required to manage the organisation. Typically, MIS are IT-based systems that retain and process information that can be analysed for ensuring the smooth running of the organisation, including for decision-making and problem solving A comprehensive and organisation-wide MIS might include information relating to: Sales; Stock holdings; Human resources; Supply chains; Customers and customer relationship management; Projects; Business data; Finance and accounting; Budgeting; Planning and forecasting; and/or Strategy. The fundamental benefit of MIS is that it provides co-ordination across companies and organisations of management information, to enable easier reporting and analysis. Summaries of performance can be programmed to provide reports by exception when things are outside the programmed KPIs. Business Outputs and Outcomes All business performance should lead to end results. The end results can be viewed as products and services or less specifically outputs and outcomes. Outputs are the result of processes that are produced and outcomes are the effects that those outputs have. Business activities can be viewed as a progression from inputs through processes to outputs and outcomes, shown graphically below: 20

25 Processes Outcomes Inputs to Outcomes (Format AH Raymondson, 2013) Activity: Imagine the case of a building company that has built a small, modern estate of houses on the outskirts of a town. What might be the outputs and potential outcomes related to building the estate? The output is the new estate of houses. The outcomes might include, for example: Satisfied purchasers (or not); A happy landowner who profited from the sale of the land; Dissatisfied locals who did not want the estate building; and/or Problems for the local primary school and GP surgery, both of which have limited places available to cater for the new families. Ultimately, the outcomes are about the impact that the output has on stakeholders. 21

26 Understanding the Management of Team Performance Using Benchmarks in Managing Performance In looking at how benchmarks might be applied in the workplace we first need to establish what we mean by a benchmark. Activity: a. Create in your own words a definition of a benchmark. b. State why you believe benchmarks are necessary for managing performance. a. b. 22

27 A benchmark: Standard or a set of standards, used as a point of reference for evaluating performance or level of quality. Benchmarks may be drawn from a firm s own experience, from the experience of other firms in the industry, or from legal requirements such as environmental regulations (The Business Dictionary) The word benchmark, has its roots in the horizontal marks stone masons made in structures to have a point of reference to fix a bench a level point from which to work. In business it has come to mean the standard against which performance can be measured. In other words, if we say we want good results, the benchmark is the description or measure of what good looks like. Benchmarks are goals to aim for. Benchmarks can be thought of as best practice. Similarly, they can be thought of as a baseline or starting point from which to aim for a higher benchmark. Key performance indicators on the other hand are specific measurements for precisely measuring performance. For example, a key performance indicator might be the processing a specific number of requests a day. KPIs can be used as a way to measure progress toward the benchmark goal. Whilst we need to have measures of quality for products for example, a product might need to be a certain length to within +/- 2mm we need also to have ways to manage the quality of team performance. After all, the quality of team performance significantly affects the quality of products and services delivered. What is Team Performance? Activity: Create in your own words a definition of what team performance means within a business or organisational context: 23

28 Team Performance: Performance that is externally focused and concerns meeting the needs and expectations of outsiders such as customers, company colleagues or fans. It is assessed using measures such as quantity, quality and time (Source: Pearson) Activity: In what documents might standards that relate to team performance at work be outlined and defined: Many of the organisational requirements that relate to standards of performance will be set out in company policy documents, employee contracts and within performance appraisals. Many of the behavioural standards that are set out in these various documents are legal requirements: for example, equal opportunities policies may be based on the Race Relations Act (RRA) (1976). Policies and Procedures Policies are guidelines that regulate the way things are done in an organisation. They set out expectations regarding how certain matters will be dealt with and set out the parameters of things such as required standards, behaviours and the organisational stance on particular issues. Policies tend to reflect the bigger issues faced by organisations whilst procedures provide a framework for dealing with day-to-day matters in an organised and consistent way. Procedures set out the way that policies will be implemented. Policies guide decision-making and procedures drive action. In combination, policies and procedures should: Make clear the organisation s position on important issues; Define what is expected in terms of performance from employees and the consequences of any breaches of the stated expectations; and, Be consistent. 24

29 Policies may cover a wide range of different subjects from health and safety through to complaints handling and disciplinary procedures. Examples of subjects covered include: Time keeping; Dress codes; Absenteeism; Conduct at work; Bullying and harassment; Data protection; Levels of performance; Professionalism in relationships; Requirements to undertake overtime to fulfil output performance; Quality assurance issues; IT policy; and, Environmental protection. Reasons for Under-performance in Work Teams If we fully understand the reasons for underperformance them we are much more likely to be effective in managing team performance Activity: List at least 6 reasons why team members underperform: 25

30 There are many reasons why an employee may perform poorly. Some of the common reasons for employee under-performance include: Not knowing what is expected because goals are not clear or have not been set; Breaching standards or workplace policies because they are unaware of the standard or policy or because the consequences of breach are unclear; Interpersonal differences a negative or unpleasant atmosphere or low morale reduces performance levels; They lack the capability, knowledge or skills required to do the job; Lack of confidence; Lack of feedback they do not know whether they are doing a good job; Unsatisfactory working conditions; Lack of personal motivation; Personal issues such as family stress, physical and/or mental health problems or issues with alcohol or drugs; Misunderstandings about what or how things should be done; and/or, Bullying and or harassment. It goes without saying that employees have a responsibility to perform to satisfactory level at work. However, a large part of the responsibility for creating a context in which people can perform to their best lies with the team leader. Many of the characteristics of poor performance come down to weak leadership. It falls to team leaders to address the likely causes of poor performance and take the lead to intervene where necessary to ensure performance levels are maintained as highlighted in the following model: Low Performance Team Characteristics Lack of clear goals Conflict (inc. fear of conflict) Avoidance of responsibility Differing values Lack of trust Low self-belief Weak Leadership Poor Team Performance Prime Characteristics of Low Performance (AH Raymondson, 2012) 26

31 Goal Setting in Managing Performance There is a long standing management adage that: you cannot manage that which you cannot measure. Implicit in this is that you need to know what you are entitled to expect in relation to performance and your team members need to know what standards of performance they are required to meet. In short, their individual contribution to the team s performance needs to be measureable. If it is measureable then a judgement can be made as to whether their performance has been satisfactory. That is why it is important to be able to set measureable goals and objectives and why the SMART acronym is so useful in setting out goals, which we will consider once we have examined what goals and objectives actually are. Goals and Objectives Activity: Create in your own words definitions of goals and of objectives within a business or organisational context: Goals: Objectives: 27

32 A goal is: An observable end result to be achieved within a more or less fixed timeframe. (The Business Dictionary) An objective is: An end that can be reasonably achieved within an expected timeframe and with available resources. Objectives are a tool that underlies all planning and strategic activities. 28 (The Business Dictionary) In short, a goal is a general statement of achievement and an objective is a specific and measurable action you take to reach the goal by a certain time. The word objective is often used interchangeably with the word target. Examples of goals and objectives might be: Example 1 Example 2 A personal goal: To achieve outstanding success in my sales team. A personal objective: To have achieved the Top Sales Executive Award by the end of next month. A business goal: To create an easily found and searchable web presence to promote and sell our products. A business objective arising from the above business goal: Objective Setting By the end of July 2012, the Company s main website will be redesigned, re-built, debugged, re-launched to the web and optimised to achieve 100,000 hits and > 750 unit sales per month by October To allocate work and measure performance effectively you will need to agree objectives with team members you are placing work with. The objectives need to be aligned with those of the organisation. For example, if you were running a manufacturing team that produces parts for engines, it would be nonsense to have an

33 objective around producing as many parts as possible by the end of the quarter, if stock levels were already too high. The SMART acronym has become pretty universal as a framework for setting effective objectives; SMART stands for: Specific Measurable Agreed/Achievable Realistic Timed (or Time-bounded) The characteristics of each element of SMART are defined and amplified below: Specific Is the objective clear and precise? What exactly has to be achieved? Measurable Do you know how to measure it (think quality, cost, time, quantity)? Is it possible to easily ascertain whether the objective has been achieved? Agreed/Achievable Agreement with the person undertaking the work leads to greater commitment. Is it achievable? Does the person undertaking the tasks involved see it as achievable too? Realistic Do you (and the person undertaking the task) think that the target is sufficiently challenging but also deliverable? Timed Have clear timescales for the achievement of the objective been set? 29

34 Activity: Compile: a. 3 SMART objectives for 3 tasks that you could give to individuals in your work team. b. 3 SMART objectives for your work team that align with organisational requirements. The most difficult part to achieve is identification of a good measure a measure really answers the question: how would you know when the task is completed to the requisite standard? 1. Individual Objective Measurement Criteria Completion Target Time/Date Team Objective Measurement Criteria Completion Target Time/Date

35 Production and Operations Managing Quality Maintenance of quality standards needs to be managed. Quality management is undertaken to ensure that products and services are fit for purpose and meet the standards or specifications as required. The 2 main approaches to quality management are quality control and quality assurance: Quality Control Quality Control involves inspecting products to ensure that they meet the required quality standards and sets out to identify any faults or defects. Those responsible for quality control will inspect or test either a sample of each product, or every product to ensure that the business is achieving the standards it sets for itself or those set for it by others. Some variation in materials used and in completed work is inevitable and it is the function of quality control to ensure that work output is within defined tolerances. Specifically, quality control is designed to ensure that a product or service meets the stated specification and, assuming the specification is correct, customer needs. Activity: What do you view as the advantages and disadvantages of quality control? 31

36 Your responses might have included: Advantages Quality control is a systematic approach to preventing sub-standard products reaching customers Often requires trained inspectors Disadvantages Could be costly to implement: rejected products usually are scrapped Individuals are not necessarily encouraged to control the quality of their own work Profitability will be reduced if defect levels are high unless measures are taken to remedy the root causes of poor quality Quality Assurance Quality Assurance is about having processes that ensure production/service quality meets customer requirements. In quality assurance, there is more emphasis on selfchecking by workers at each stage of production, rather than separate inspection by specialist inspectors. It relies on developing a working culture that has commitment from staff to get products right first time with the goal being zero defects. The approach emanated from Toyota in the post-war period and has become aligned with Total Quality Management (TQM). In TQM quality chains are created where each person or work team treats the receiver of their work as if they were an external customer thereby creating a right first time or zero defects mind-set. Advantages associated with quality assurance include: Worker motivation can be lifted as they are more responsible for their own standards and will get recognition for their work Costs can be reduced because there should be less wastage as the product is checked at every stage of production It can reduce the feeling of being checked on by managers 32

37 Quality Control or Quality Assurance? The main distinctions between the 2 approaches are set out below: Quality Assurance A medium to long-term process; cannot be implemented quickly Focus on processes how things are made or delivered Achieved by improving production processes Targeted at the whole organisation Emphasises the customer Quality is built into the product Quality Control Can be implemented at short-notice Focus on outputs work-in-progress and finished goods Achieved by sampling and checking (inspection) Targeted at production activities Emphasises required standards Defect products are inspected out Methods to Monitor Actual Performance against Production Targets Monitoring requires systematic collection of data. Evaluation of the data collected gives information to enable progress to be assessed and changes and adjustments to be made where necessary. The overall aim of monitoring performance is to ensure the efficiency and effectiveness of the work. Through monitoring and evaluation, managers glean the information they need to improve, maintain, change or develop employees and team performance. Naturally, planning to make monitoring and evaluation part of the process should help make implementation of systems for monitoring and evaluation much easier. The systems need to be communicated to those involved, so that they understand what is expected of them and what measures of efficiency and effectiveness will be applied to them. There are numerous systems for measuring performance used in organisations one example being the Balanced Scorecard which set out to measure key elements of business performance across all major functions. At supervisory level, the focus is more on measuring work performance, output and quality in narrower, but clearly defined areas. To achieve this we need to be able to have a benchmark or indicator of performance against which we can measure the work performance, output and quality. These measures are often referred to as key performance indicators (KPIs). 33

38 Key Performance Indicators Key performance indicators come in three main types: Input KPIs measure assets and resources purchased used to achieve business results. Examples might include: Funding for training Raw materials Quality of raw materials (e.g. grade 1, 2, 3, etc) Process KPIs measure the efficiency or productivity of a business process. Examples might include: Production time Days to deliver a completed order Number of days to reply to customer requests Number of personnel trained in use of a piece of equipment Days taken to fill vacancies Output KPIs measure the financial and non-financial results of business activities. Examples might include: Sales revenue Number of new customers Increase in the number of full-time employees Return on investment Customer satisfaction A mix of the three types of KPIs process, input, and output would be applied to give a broad picture of your team or organisational performance. Activity: List at least 2 examples of each type of KPI that are, or could be, applied in your workplace: 34

39 The 4 E s Economy, Efficiency, Effectiveness and Energy Chapter 3 - Managing and improving performance Economy Efficiency Effectiveness Inputs Processes Outputs Change inputs Change processes Change outputs Leave as is Sensor Feedback Loop Energy The 4 Es (Format: AH Raymondson, 2010) The 4 Es diagram above represents operations management within an organisation, which consists, at any level of analysis, of turning inputs into outputs. The components are: Inputs Inputs always relate to economy and concerns issues around what is paid for resources and materials. This might mean examining how materials might be procured more cheaply or more expensively, if there was a good reason to do so. For example, a more expensive product might last longer, offering increased value for money. Processes Processes always relate to efficiency and concern the way things are done. In other words, processes are the procedures, systems and methodology used to construct a product or to deliver a service. Analysis at this stage of the loop is about looking at how things could be done differently; that is, more efficiently to achieve the desired objectives. Improvements and changes to the way things are done (efficiencies) will often give economies too. 35

40 Outputs Outputs relate to effectiveness and concern what it is you are making or delivering. Have you got the right outputs or should you consider changing what it is you are producing or trying to achieve? Feedback Feedback is often overlooked but this is a very important element of resource management. Without appropriate feedback from each stage it would not be possible to analyse and manage the systems. A key aspect of feedback is choosing the most appropriate measures. It is considered impossible to manage aspects of work that cannot be measured. Sensor The sensor is merely a term used to represent the need to consider the feedback you obtain from each of the stages inputs, processes and outputs. This is about analysing the feedback and applying judgements to decide one of just 4 options. Specifically, to: Change inputs Change processes Change outputs Change nothing (leave things as they are) Energy The last E energy is possibly the most important and concerns the energy that people have in the workplace. The thinking here is that if people are energised and highly motivated they will contribute to effective management of resources and offer ideas for improvements in economy, efficiency and effectiveness. 36

41 Activity: Consider each element of the 4Es model and analyse it against corresponding activities in your organisation. See if you can identify at least 3 improvements to each of the 4 Es that could be applied at work. Lean Manufacturing The issue of waste reduction and elimination is a key element of Lean Manufacturing and has been adopted by many organisations as part of their drive to achieve economic, efficient and effective planning of production. Do not be misled by the term manufacturing ; Lean principles are just as applicable in virtually all business disciplines and in all organisations. Attributed to James Womack who introduced Lean in his book, The Machine That Changed the World (1990), and famously adopted by Toyota, Lean Manufacturing is a set of principles that enable simplification and organisation of work. The aim of Lean is to reduce waste and to maintain equipment and the working environment, whilst ensuring people are responsive to organisational and client needs. 37

42 Activity: 1. How would you assess your organisation s performance in relation to waste management? List at least 3 things that would reduce waste and, by association, costs within your organisation. 2. What are the benefits of effective waste management?

43 39 Chapter 3 - Managing and improving performance You will have numerous suggestions that are specific to your organisation (and some which are generic to all organisations) but you may have considered: Physical waste such as paper, materials; Under-utilised capacity, machinery, people; Waste within processes and systems (bottlenecks in production, for example); Excessive stockholdings; Spending on unnecessary or lavish items; Inflexibilities; and Supplies arriving too early. From Ford to Toyota Henry Ford was instrumental in formulating the ideas associated with Lean Manufacturing. His car assembly lines incorporated continuous flow and enabled production standards to be well controlled, resulting in minimal waste. However, Ford's system lacked flexibility in that it produced the same product continuously and did not easily allow for changes to the end product. Ford s system was a push system, with Ford setting the level of production, rather than a pull process responding to end user demand. This gave high stock levels of unsold cars and wasted resources and money. Ultimately, Toyota developed the Toyota Production System (TPS) which used just-intime manufacturing methods (explained below) to increase efficiency and to become one of the most profitable car manufacturers in the world. Basic Principles of Lean Manufacturing The focus of Lean Manufacturing is on discovering efficiencies doing things better and removing waste, whilst maintaining quality. Lean Manufacturing takes a customer-value perspective, seeking to establish what the customer is willing to pay for. Customers invariably require value; they should not be charged for defects or for the extra cost of holding excessive inventories. In short, they should not pay for manufacturing waste which is viewed as anything that does not add value to the product. Whilst not ignoring large improvements, Lean Manufacturing has a focus on small and continuous improvement Kaizen (Japanese for continuous improvement). The cumulative effect of hundreds or thousands of incremental improvements combined can lead to massive leaps in effectiveness. Core concepts of Lean Manufacturing, include: Just-in-Time this is about minimising stock and resources by purchasing stock only as it is required. Similarly products should only be distributed when required. Production is organised in batches and, by reducing each batch size, quality can be monitored and defects corrected more effectively, thus reducing the chances of poor quality in future batches;

44 Kanban sometimes called a two bin system. Just-in-Time is supported by developing cues in the system to prompt replacement or reordering of stock. If you had literally 2 bins of parts then an order card with a stock reorder reference and detail of whom it should go to would be at the top of the second bin as a prompt to order a new second bin. Zero Defects this is about getting the product or service right, first time. It is designed to embed in the culture the principle that defects are unacceptable. Eight Categories of Waste in Lean Manufacturing There are eight categories of waste in Lean Manufacturing that should be monitored and managed: Overproduction Waiting Inventory (work in progress) Transportation Over-processing Motion Defects Workforce Producing optimum quantities to match demand. Producing more is considered a waste of resource such as lag time between stages of production stock levels and work in progress inventories should not be excessive inefficient moving of materials should be eliminated spending unnecessary time on the product people and equipment need to move between tasks efficiently time spent finding and correcting production mistakes needs to be minimised efficient and effective use of work force 40

45 Activity: In the last activity you examined waste in a general sense. To take this a stage further, now consider the 8 categories of waste in relation to operations in your own organisation. See if you can identify areas for improvement in each of the categories in the following table: Overproduction Waiting Inventory (work in progress) Transportation Over-processing Motion Defects Workforce 41

46 The 3 Key Stages of Lean Manufacturing There are 3 key stages to Lean Manufacturing: 1. Identify waste In Lean Manufacturing, waste is considered to always exist and improvements to systems and processes can always be made this relates to continuous improvement or Kaizen. Value Stream Maps (VSM) are used to illustrate and analyse the flow of materials and processes along with the output/product on to the customer. VSM highlights how elements of processes are connected and also highlights waste. Additionally, it is used to expose those processes that add value and conversely those that do not. This is followed by corrective actions to improve processes and systems. 2. Analyse the wastage, identifying root causes 3. Solve the root cause, and repeat the cycle For identified wastage, establish what is its root cause using, for example, Root Cause Analysis, brainstorming or Cause and Effect diagrams. Decide what you need to do to resolve the issue and implement improvements to develop greater efficiency. Dealing with Variances in Performance Targets relating to standards, and including measures relating to quality cost and time, should be established and set out as part of the planning process. The indicators applied will enable, through evaluation, any variances in performance deviations from the planned targets to be identified and addressed where necessary. 42

47 Tools to help in monitoring and evaluating variances might include, for example, graphs and tables. A typical cost variance analysis might look like that set out below: COST Project Steps Target cost Actual Variance Total ( ) ( ) ( ) ( ) Purchase Materials Preparation of ground Concreting Erect Shed Total variance+/- (Over-/Under-spend) Example Cost Variance Table (KW Hamilton, 2009) Techniques for Performance Improvement Low levels of ability may arise from: Tasks being too demanding or difficult Lack of aptitude, knowledge or skill Enhancing Ability There are 5 main ways to address ability-related performance problems: Re-supply (resources to do the job) Re-train Re-fit (different combinations of tasks and abilities, maybe by rearranging the jobs of others) Re-assign (the job or the job holder) Release (let the employee go) When low motivation is the cause, you need to work closely with the employee to create a motivating environment in which to work. The most powerful motivators identified by Herzberg were recognition and achievement so you might consider the following as way to contribute to increasing levels of employee motivation: Setting of agreed goals Provision of constructive feedback and praise Job enlargement Job enrichment Job rotation 43

48 Performance Improvement Planning The first stage in developing a performance plan is to evaluate the presenting performance issue. You should: Discuss the issue with the person Evaluate your organisation's motivation system to ensure you are properly recognising and rewarding people's contributions Make sure you are measuring and rewarding the things that you actually want to be done Agree SMART performance goals Have regular 1:1 development meetings with your team Help your people keep their skills up to date through provision of appropriate training and development Create an environment where employees feel fully supported and comfortable in their work. Hold team meetings focused on improving team performance. It is important that you discuss and agree upon a plan for improving performance with the under-performing person. Record what you have agreed, along with dates for goals that should be achieved; then monitor progress with the team member. Quality Circles Initially devised by Kaoru Ishikawa, in Japan, a quality circle is a small group of personnel (say 8-10) and their line managers usually from the same work area or department. They work to pool and develop ideas to bring improvements to working practices. The shared ownership of the improvement process that the quality circle engenders, gives real benefits, such as: improved levels of performance, improvement of quality, more effective company communication, significantly enhanced problem solving capabilities, improved levels of job involvement and satisfaction, along with improvements in economy efficiency and effectiveness. Amending Priorities and Plans to Take Account of Changing Circumstances The 4 E s model that we examined earlier reflects the constant need for managers to take account of feedback and to amend priorities and plans to reflect the changing needs of the organisation. The process of ongoing monitoring and control of the action plan, with its demands for changes to planning and prioritisation, is represented diagrammatically below: 44

49 The Action Planning Cycle (AH Raymondson 2013) Activity: Cite 2 examples where, over the last month at work, you have had to amend priorities and explain the rationale for doing so and the impact the changes had. Activity or Action Amend plans as necessary Collect feedback Reprioritise as necessary Monitor against the plan Review delivery of the plan in line with other priorities The Action Planning Cycle (AH Raymondson 2013) 45

50 Recommending Changes to Systems and Processes to Improve the Quality of Work Continuous improvement or Kaizen is part of a Japanese philosophy to continually improve processes and procedures to get ever-increasing efficiency and effectiveness in the workplace. Some of the ways that improvements are captured include: Quality Circles; Suggestions schemes; Having ideas forums; Through having a culture where ideas are welcomed and encouraged; By presenting recommendations for change to your boss or a nominated ideas champion ; and, Through having a lessons learned forum after major events/activity. Activity: List 3 actions you could take at work to improve the generation, collection and use of ideas for improvements. 46

51 Working to Organisational and Team Priorities As a team leader, you will be responsible for setting team priorities and for working in accordance with the priorities defined by the organisation. Prioritising is a skill that helps define what we should or need to be focusing on. Moreover, concentrating on the priorities will help ensure that you are working as effectively as possible. Senior managers who will expect your team s activities to accord with their priorities set the organisational level priorities. An example showing a company s organisational priorities is set out in the table below: Priority Level Comments 1. Increase sales by 10% 1 Top priority to ensure survival in competitive market place 2. To maintain our unblemished reputation for high quality 3. Implement customer relationship records system 1 A number 1 priority 1 A number 1 priority 4. HR outsourcing 2 On-going for the remainder of the year 5. Team leader training 2 On-going Table: Example Showing a Company s Priorities Day-to-day priorities are often set by team leaders and usually relate directly to decisions around: what needs to be done (objectives or targets), by whom and with what resources; when the work is to be completed by; in what order it is to be completed and any cost or time implications. As new deadlines, goals, and tasks come up, team leaders need to re-assess the team s priorities. Setting goals is not enough, as there will regularly be tasks that require immediate attention. Results will be hard to achieve if the team lacks direction on what they should focus on. In deciding what individual team members priorities should be, strengths and interests should also be taken into account. Whilst it is not always easy or possible to task employees with work that really interests them, it is certainly likely that they will do their best work if they are working on tasks that stimulate and interest them. 47

52 Action Planning and Scheduling Work Action Planning Working each step in an action plan requires you to: Chapter 3 - Managing and improving performance 1. Confirm the date by which the task or project must be achieved; 2. Establish a realistic starting date; 3. Estimate the time needed for each step; 4. Identify what needs to happen before each activity can be undertaken and the time required; 5. Establish what needs to take place after each activity is completed and how much time that is likely to take; and, 6. Allocate responsibilities based on such things as: The experience, skills, and competence required; Who has time to do the task when it needs to be done; and, The willingness of individual team members to do a job or to learn. Prioritised To Do Lists Many people find the process of creating and working from a To Do List increases their efficiency and consequently contributes to stress reduction. For a team leader, this approach can easily be adapted to take account of your team s priorities and the tasks you have allocated to others. A simple but effective addition to a straightforward list is to add some prioritisation to the list of tasks. One way is to rate your task list against an ABC rating of your priorities. This involves marking the tasks on a To Do List with: A = Critical for your goals must be done that day; B = Less critical but still important start after the A's; and, C = Nice to do could do if you have time left after the A's and B's. Another useful distinction to consider is between a task s urgency and its importance. Similarly, a valuable exercise is to create a Not To Do List! 48

53 Activity: Create a prioritised to do list for the next 7 days using the template below: Task Due Date Priority (ABC) Who In Progress Done Examples of different approaches to action planning include: Objective Activities Person responsible Timeframe/ Priority Resource Costs/inputs Basic Schedule/Action Plan 49

54 1. S M A R T Action Specific Measurable Achievable/ Agreed Realistic Timed Staff Responsible Priority Monitoring Notes SMART Action Plan 50

55 Constraints on Amending Priorities and Plans Chapter 3 - Managing and improving performance In managing the performance and output of your team, you will have to work within a range of parameters or constraints. These constraints may affect your ability to amend the priorities and plans of your Team. For example, what could be viewed as a priority for your team may not accord with the overall priorities for the organisation. Activity: List 5 specific examples of constraints that might impact upon your freedom to amend priorities and plans. Examples of constraints that could impact upon your freedom to amend priorities and plan may include: Organisational policies and procedures; Cost implications lack of finance; Insufficient staff; Not having staff with necessary skills and competence; Internal politics; Customer demands and/or market forces; Legislation; and, Lack of resources time, materials, etc. 51

56 Understanding the Principles of Effective Decision Making Defining a Decision In any study of management it is important to establish a definition for relevant concepts. For a study of making decisions we need to know what we mean by a decision. Activity: Create your own definition for a decision. Decision: A conclusion or resolution reached after consideration (Oxford Dictionary) In getting to a satisfactory resolution of a problem or issue, we need to be clear in defining our objectives, along with the scope and success criteria of the decision to be taken. By objectives, we are referring to what it is we are seeking to achieve by making a particular decision. The scope is the parameters we are working within, i.e. the range and limitations of what we can achieve with the resources available, within our span and level of responsibility and within our delegated authority. The success criteria refers to having a clear understanding of what would constitute a satisfactory resolution to the problem or issue. Activity: Why do you think is it important to have clarity around definition of objectives, scope and success criteria in relation to decisions being taken? 52

57 The reasons it is it important to have clarity around the definition of objectives, scope and success criteria in relation to decisions being taken, include: To be efficient and effective in decision making; To ensure that decisions are fit for purpose ; To solve the right problem at its root (rather than merely addressing the symptoms); So that people can have confidence in the decision maker s leadership; To be able to refer decisions that are beyond our scope to the appropriate person; and, To avoid having the problem growing and impacting on other areas of work. Assessing the Impact of Decision Making The following, Pathways to Change Model outlines the decision making process. For every problem there will be a series of options, all of which will have a set of implications. Those implications are in essence the impact that following a particular decision or course of action will have. In ascertaining what the implications are it is really a case of thinking through the answers to the so what? question for each option. Problem or Issue Options Options Options Options Options Options Options Options Implications Implications Implications Implications Implications Implications Implications Implications Implications Implications Implications Implications Implications Implications Implications Implications Implications Implications Judgements Recommendations Decision(s) Implementation What? Why? When? Where? How? Pathways to Change Model (AH Raymondson, 2009) If we have a broad range of options and we understand the impact of each then we can apply well considered judgement to either our recommendation (to, for example, a more senior manager) or to our decision. 53

58 Impact Analysis In considering the implications or impact arising from each option, it is useful to structure your thinking to ensure that you get as full a picture of the situation as possible. A table such as the example below could be adapted to suit most requirements. Problem/Issue: Option Implications Advantages Disadvantages Costs Benefits Timescale Overall Impact

59 Activity: Consider a significant problem at work and work through several options for resolution. Then outline the impact of each option Problem/Issue: Options for Resolution Implications/Impact of Proposed Resolution 55

60 Obtaining Sufficient Valid Information to Enable Effective Decision Making One of the problems facing a decision-maker is deciding how much information is needed to inform a decision. The modern age and the Internet in particular have made access to data and information relatively easy. However, we can have so much information that it becomes overwhelming and very time consuming to absorb. The bottom line is that the information we gather needs to be valid, in other words relevant to the situation, and sufficient to make a decision that delivers a satisfactory resolution. As managers, we develop a bank of experiences that can be re-applied to different but similar situations. Eventually we have sufficient experience that much decision-making becomes intuitive. We develop an instinct for the most appropriate decision. This is fine for relatively routine decision-making. However, where situations requiting a decision are more complex then we need to gather sufficient information to be able to make a well-informed decision. We need a tool bag of techniques to enable us to unearth information that will be relevant. Root Cause Analysis Rational Problem Solving Root Cause Analysis (RCA) is an approach to gathering information that enables us to understand fully why something has occurred or why there has been a problem. Things do go wrong, and unwanted incidents and outcomes can occur. If we understand the root causes of an incident or outcome, corrective measures can be put in place to prevent recurrence of the problem. By directing corrective measures at the root cause of a problem as opposed to the symptom of the problem, the likelihood of the problem recurring will be reduced. In this way we can get sustainable improvements in output or performance. There are many different methods and ways to undertake RCA. At its simplest, it is a process for examining an outcome in a systematic way to find out why the situation occurred, and to put in place measures to prevent it from happening again. By considering a range of possible contributory factors in a systematic way with a logical, analytical and enquiring approach, all the relevant root causes of an incident can be identified. General Principles of Root Cause Analysis Root cause analysis provides a mechanism to ensure that you have sufficient information to make effective decisions. General principles of RCA include: RCA is based on the belief that problems are best solved by attempting to correct or eliminate root causes; To be effective, RCA must be performed systematically, with conclusions and causes backed up by evidence; There is usually more than one potential root cause for a problem; and, RCA can transform an old culture that reacts to problems with a new culture that looks to understand and learn from problems. This leads to a culture that is open and seeks to identify and solve problems before they escalate. 56

61 Root Cause Analysis Processes The process for getting to the root of issues is outlined in the following model: Problem Definition What is happening? Data Collection Evidence the problem exists and for how long and with what impact? Identify Possible Causes What led to the problem? What other problems are related to the main problem? Identify Root Causes Why do the root causes exist? Recommend & Implement Solutions What, how, who, and by when? The Root Cause - Problem Solving Process Format: AH Raymondson (2009) Root Cause Diagramming Root cause or fishbone diagrams are a useful tool for working through the causes of a problem typified by an unexpected or unwanted effect or outcome: poor performance, for example. The diagram below is an example of a fishbone diagram. The effect or issue would be defined; the main causes would feature at the head of each bone and the sub-causes within each category would be placed on the bones. 57

62 Category Category Category ca use cause cause cause cause cause cause cause cause cause cause cause cause cause cause Effect cause cause cause cause cause cause cause cause cause cause cause cause ca use cause cause Category Category Category Example outline of a Root Cause or Fishbone diagram 58

63 Activity: Consider a problem at work. Define the effect of the issue at the right hand side of the box below. Then undertake an analysis of the root causes. Use the following headings to classify the causes: Methods Materials Environment People Equipment Managerial issues Identify the causes as branches of each of the headings. As you do so, think about why these causes influence and exacerbate the problem. Are there any sub-causes of the causes that turn into other branches? 59

64 Information Gathering through Analysis of the Problem Situation The following table outlines example questions that can be framed against the 5 Ws + H in identifying, investigating and analysing the problem: What? What is the problem? What are the facts? What do I need to do, or have to do, to develop a solution? What is the best case solution? What is the worst case solution? What would I really like to do? What similarities are there with situations and problems I have seen before? What have I missed? Why? How? Where? When? Who? Why has this situation arisen? Why did we get the impact we did from the situation? Why should we implement solution a, b, c? How can I get the information I need to understand the problem and make a decision? How does this problem impact on people? How did the situation arise? How will option a, b, c resolve the situation? How can I get to the root of the issue? How can I engage people to contribute to the resolution of the situation? Where did the problem occur? Where could I find answers? Where might we need to promote the issue and the solution? When did the problem occur? When do we need a solution by? When do we need to start/finish? When, if at all, has this happened before? Who is responsible for the various stages of finding and impementing a solution? Who does the situation impact upon? Who has the skills and experience necessary that could be utilised in finding and implementing a solution? Who needs to be informed and kept in the picture? 60

65 Aligning Decisions with Business Objectives, Values and Targets All decisions made should accord with the business or organisational objectives, no matter at what level the decisions are being made. Put simply, this means that decisions should be in the organisation s interest and serve to help in achieving organisational targets. Values are literally about what we value. Organisationally there will be a valued way of operating that defines the organisational identity and decisionmaking should accord with those values. Organisation values are often contained in organisational mission statements. Each decision made should reflect the mission. Values are essentially standards and conditions that relate to what is considered important and necessary for the organisation. It is important to set goals and targets that are congruent with the organisational values i.e. consistent with what is important. Goals and targets that are not consistent with personal values ultimately cause conflict amongst stakeholders. Activity: Obtain a copy of your company or organisation mission statement and record below the elements that relate to values. Also, capture any additional values that you know that are applied within the organisation. Validating Information It is important to check the relevance and accuracy of information in an objective way. Examining information without distortions from personal bias or false interpretation is likely to lead to better decisions. One of the most significant distinctions is between facts and opinions. 61

66 Distinguishing Facts from Opinion It is important to be clear what information is factual and what stems from either your or others opinions. A fact tells us something that can be proved. If it can be proved you should be able to explain how. If you are presenting supportable facts then they should be indisputable. An opinion on the other hand relates to what you think, feel, or believe and cannot be proved. There is nothing wrong with opinion and it is opinion or judgements about situations that drive most organisational decision-making. If you are presenting opinion then you will need to explain why your opinion should be adopted if you are to be convincing in your case. Some pointers in distinguishing between facts and opinions are: Opinion words include: always, never, all, none, least, greatest, best, and worst; Facts often contain dates, numbers, or ages. They are about a specific person, place, or thing. You can find information to prove what is stated; Some opinions can be stated as though they are facts, but if you cannot find information to verify its validity, it is probably an opinion; and, To determine a fact, ask yourself, Can I prove this statement? Addressing Issues that Hamper the Achievement of Targets and Quality Standards Activity: How do you think managers should deal with: a. Issues hampering the achievement of targets? b. Issues hampering the achievement of quality standards? 62

67 Many people confuse the meaning of quality, thinking, mistakenly, that it means high quality : it does not. Quality simply means fit for purpose. Consequently, when a decision compromises quality we are effectively saying that the outcome will not be fit for purpose. Fairly obviously, this would be unacceptable and all decisions need to ensure that agreed measures of quality are achieved. Clearly, a decision to offer something that is not fit for purpose would not be acceptable to customers. Targets on the other hand are exactly what they are targets. For all sorts of reasons managers may need to revise targets to suit changing demands. Priorities change and unforeseen events occur. What is important though is that if a decision is made to change a target then it is for good reason and made in full consideration of the impact to the organisation. Anyone impacted should be informed accordingly. Dealing with Data and Information Activity: What do you consider the difference between data and information? Data is raw, unorganised and unprocessed facts; data is useless until it is organised. When data is processed, organised, structured or presented and placed in context to make it useful, it becomes information. In other words, information is data with meaning. Information rather than data informs decision-making. Averages In presenting a case for a decision, it will often be necessary to present information in the form of averages. For example, on average we lose 27 days per year due to machinery malfunction. Averages enable us to simplify information to make it more digestible. However, there are different kinds of average that may give different results. These are: The mean average; The modal average; and, The median average. 63

68 The mean: is most common and found by adding up all the numbers and then dividing that figure by how many sets of numbers there are. e.g = 36; 36/3 = 12 The mean takes into account all the data; The mean is useful to find a value for data that is relatively closely grouped; and, The mean can be influenced by very large or small values in the sample. The mode: is found by looking for the value that occurs most often. For example, for the following data 3, 1, 3, 5, 2, 5, 9, 1, 7, 1, 9, 3, 3, 5, 9, 2 the modal average is 3. The mode is useful for finding the most popular or most common, e.g. the favourite publishing programme; Often, the mode will be different from the mean; and, The mode does not take all the data collected into account. The median: is found by establishing the value in the middle of a range of data. First, the data needs arranging in ascending or descending order. Thus, for the following data 1, 3, 7, 13, 17, 19, 21, 36, 47 the median is 17. If there is an even number of values, the median will be the mean of the two middle values. For example, in the data stream 1, 3, 7, 13, 17, 19, 21, 36, 47, 50 the median is (17+19)/2 = 18. The median is useful for establishing the middle of the range; It is less likely to be influenced by very large or small values; and It does not take into account all the data. Organising and Summarising Data Often, with numeric data, there are too many different values to make sense of the data. It is common to display values in tabular format using frequencies. Each frequency is the number of occurrences in one of the classes. Definitions: The frequency for a category is the number of data values in that category. The relative frequency for a category is the fraction, proportion, or percentage of data values within that category. The following table shows data relating to staff achieving bonus levels 1-4. Bonus Level Frequency Relative Frequency /40 = 0.45 = 45% /40 = 0.30 = 30% 3 6 6/40 = 0.15 = 15% 4 4 4/40 = 0.10 = 10% 64

69 Charts and Diagrams Presenting Data and Statistics Using Graphs and Charts The presentation of data and statistics can be challenging and requires thought. Some readers will like to see information tabulated put into tables while others will prefer graphical presentation. The key to presenting data is to determine what will make the information you want to get across easily accessible. In some cases, it will be necessary to put much of the data in to appendices, presenting only your formal analysis, and key supporting data, in the Main Body of a report. On other reports, the data itself will be fundamental to understanding the argument and necessarily should be included in the Main Body of the Report. The presentation of data in different types of charts is now much easier than it once was. Most spreadsheet packages allow us to capture data and present that data in a format that meets our needs. The most common types of chart used include: the Pie Chart, the Bar Chart, the Line Chart, the Area Graph and the X-Y Plot. The Pie Chart. Pie charts enable us to compare data as part of the whole. For example, the Pie Chart below shows the components of effective communication. Pie charts are best to use when you are trying to compare parts of a whole. They do not show changes over time. Elements of Communication 38% Tone of Voice 7% Words 38% 55% Albert Mehrabian 7% Example Pie Chart The Bar Chart. Bar charts enable us to compare different groups or to track changes over time. The table below shows the number of customer satisfaction surveys sent out and responses received over time (3 years). The bar chart on the next page shows how this data might be presented. Year Surveys Sent Responses Received

70 Surveys sent and Responses Received Effectiveness of Customer Surveys Surveys Sent Responses Received Year Example Bar Chart The Line Graph. Line graphs are used to track changes over short and long periods of time. Line graphs can also be used to compare changes over the same period of time for more than one group and are particularly effective when used to track smaller changes. For example, the graph below shows the customer satisfaction survey data above broken down into quarterly returns. Surveys Sent abd Responses Received Customer Satisfacton Survey Quarterly View Year Quarter Surveys Sent Responses Received Example Line Graph The Area Graph. Area graphs are very similar to line graphs and are often used to track changes over time for one or more groups. Area graphs are particularly effective for tracking changes in 2 or more related groups. For example, the area graph below shows the same data used in the above line graph: 66

71 Number of Responses Surveys Sent and Responses Received Example Area Graph Chapter 3 - Managing and improving performance Customer Satisfaction Survey Quarterly View The X-Y Plot. X-Y plots are used to determine relationships between the two different variables. The x-axis is used to measure one event (or variable) and the y- axis is used to measure the other. If both variables increase at the same time, they have a positive relationship or correlation. If one variable decreases while the other increases, they have a negative relationship. Sometimes the variables have no relationship and, consequently, do not follow a pattern. Consider the data previously used, amended to show that the number of surveys sent out has increased quarter by quarter. What do you notice? Q Q Q Q Q Q Q Q4 Year and Quarter 2012 Q Q Q Q4 Responses Received Number of Surveys Sent Surveys Sent Responses Received By drawing a straight line from the bottom left (where the X and Y axes intersect), each point plotted is distributed, broadly speaking, pretty close to that line. This indicates a correlation (or pattern) exists between the number of surveys sent out and the number of responses received. The correlation is considered to be a positive correlation because the line moves from bottom left to top right. The raw data supports that this is a positive correlation because the number of responses received increases as more surveys are sent out. A negative correlation exists where the line comes from top left to bottom right on the graph. 67

72 Evaluating Solutions Once all the information has been absorbed and the options, along with their implications have been fully considered, each potential solution needs to be evaluated to determine which is the most viable. There are a number of ways of doing this. At this stage you may only have developed rough-order costs for each option and will most likely develop a more robust financial analysis once a preferred option has presented itself. A simple method of evaluating the various options is through the use of decisionmaking grids. There are 2 main types of decision-making grid: the Straight Comparison Decision-Making Grid and the Weighted Decision-Making Grid. Straight Comparison Decision Making Grids The example below is of a straight comparison decision-making grid in which 5 options are to be compared. Each option is compared against the other options. For example, a straight comparison between Option 1 and Option 5 (Box 1) reveals that Option 5 is the preferred solution. In the next comparison (Box 2), you decide that, when compared with Option 4, Option 1 is the preferred solution. Option 5 Option 4 Option 3 Option 2 Box 1 Box 2 Option 1 Option 5 Option 1 Option 2 Box 5 Box 6 Box 7 Option 3 Box 8 Box 9 Option 4 Box 10 Box 3 Box 4 After comparing all the options against each other (Boxes 3 to 10) the option that features most on the grid Option 2 is selected as the preferred option. Option 5 Option 4 Option 3 Option 2 Option 1 Option 5 Option 1 Option 1 Option 2 Option 2 Option 2 Option 4 Option 2 Option 3 Option 3 Option 4 Option 4 Option 5 Should the situation arise where two options come out with equal preference (see next example), the original straight comparison, which shows that Option 4 was preferred over Option 2 is decisive. Option 5 Option 4 Option 3 Option 2 Option 1 Option 5 Option 1 Option 1 Option 2 Option 2 Option 2 Option 4 Option 2 Option 3 Option 3 Option 4 Option 4 Option 4 68

73 Weighted Decision-Making Grids The example below is of a weighted decision-making grid and relates to moving house. This technique requires you to select the essential criteria those that must be achieved by the chosen solution and weight these in order of importance. In the example, of most importance to the person is the house itself (weighted at 4) and the issue of least importance is public transport (weighted at 1). The person compiling the grid would allocate a score on a scale of say 1-10 and then multiply the allocated score by the weighting. So, if the location of the property in Town A was considered to be a nice area in which to live, it might be allocated a high score of 9. This score of 9 would then be multiplied by 3, giving a total of 27 points for Town A in the Area Column. Each factor is scored accordingly, giving a total score of 69 for Town A. Factor Area Public Transport House Schools Total Weight Move to Town A 9 (27) 8 (8) 5 (20) 7 (14) 69 Move to Town B Move to Town C Move to Town D Don t Move This scoring process is repeated for each of the options enabling an objective judgement to be made about whether to move or not (the Do Nothing Option), and, if a move is viable, where to. The Grid below shows the completed Weighted Decision- Making Grid. Factor Weight Area Public Transport House Schools Total Move to Town A (27) (8) (20) (14) Move to Town B (21) (5) (28) (16) Move to Town C (18) (7) (24) (12) Move to Town D (24) (9) (32) (8) Don t Move (27) (2) (28) (16)

74 In the example, 2 options Move to Town D and Don t Move have come out with the same score. Critically, however, we can use the most important criterion the House to separate the two options. Consequently, the decision in this example probably would be to move to Town D. Methods of Making Decisions Activity: Create a list of at least 10 different ways of making decisions. 70

75 Your list of decision-making methods may have included some or all of the following: Most popular with the users; Decision based on computer simulation; Survey results; Constraint based e.g. space, location; Least maintenance; Weighted attribute based winner; Intuitive decision; Quickest pay back on the investment; Toss a coin or draw straws; No choice decision; Most compatible e.g. software; Cheapest initial investment; Autocratic/arbitrary decision; Cheapest overall investment; Attribute based winner; Earliest benefits; Rule-based decision; On-site testing of options; Legal decision based on law; Least difficult to implement; 71

76 Budgets and Associated Operational Constraints Chapter 3 - Managing and improving performance A budget is a detailed financial plan that specifies monies expected to be available for a fixed period or for a particular project. An essential element of the planning and control process, budgets provide benchmarks that can be compared to actual performance. Mangers make decisions based on budget reports that will either curtail activity or enable activity to be increased. Upon allocation a budget defines the level of approval for planned spending, within a defined delegated level of authority (for example, for items up to 300). The master budget from which funding streams are delegated comprises specified targets. For revenue generating organisations, budgets can be the basis for sales targets. The logic here is that if likely sales can be estimated then we will know what income is likely to be available for other expenditure. Other stipulations will be production activities and financing arrangements. These budget links to forecast financial statements such as the forecast balance sheet, forecast profit and loss account. Activity: a. What benefits come from budgeting b. What problems or constraints could arise from operation of budgets? 72

77 One of the biggest reasons for business failure is a combination of poor budgeting and poor management of budgets. Budgets are directly connected to organisational goals and objectives. If this connection to clearly defined goals is weak, then problems will ensue. If the budget is well managed and fully aligned with organisational goals, then the budgeting process will lead to success in achievement of the identified goals and objectives. Essentially the budget is a detailed roadmap for co-ordination and management of the various team activities within an organisation. Within most organisations, funding is limited. Consequently managers need to bid or argue their case for funding. This can create friction and pressure, as a business case for the resources sought will usually need to be very compelling. An obvious problem arises where a manager has over-egged a case for funding as allocation of funds is likely to be at the expense of other initiatives that are perhaps even more important. Parochial self-interest may hold back achievement of the organisational goals as it introduces distortions into the budgeting system. This is why managers should recognise that their individual needs are secondary to the overall organisational goals. Once the budget has been allocated, managers should be required to drive the overall plan and maximize performance and results for the overall organisation. Where budgets are so restricted that resources do not match demands they may result in significantly reduced employee performance, commitment and morale. Another frustration arises from the hockey stick effect : this is where there is a sudden splurge of spending at the end of a budgeting period to absorb under-spend. Often spending in this way will be on things that are not really needed and account for a lot of waste. Budgets can be used to identify constraints and blockages. For example, a budget that required a particular level of sales would be useless if these sales could not be serviced due to insufficient supply of component parts. The art of maximising the potential from each budget stream requires that all organisational processes be managed to optimise economy, efficiency and effectiveness. 73

78 Bibliography/Further Reading Chapter 3 - Managing and improving performance Author Title Publisher Barner and Barner Building Better Teams: 70 Tools and Techniques for Strengthening Pfeiffer Performance Within and Across Teams Ken Blanchard Leadership and the One Minute Manager Harper Collins Stephen Covey The 7 Habits of Highly Effective People Simon and Schuster UK Fiona Elsa Dent Leadership Pocketbook Management Pocketbooks Ltd Gallagher & Costal The Self-Aware Leader ASTD Press Daniel Goleman The New Leaders Sphere 2007 (previously Harvard Business School Press) Charles Handy Understanding Organisations Penguin Press Chip and Dan Heath How to Change Things When Change is Hard Random House Business Books Hersey and Management of Organizational Behaviour 3rd Edition Utilizing New Jersey/Prentice Hall Blanchard Human Resources Susan Jeffers Feel The Fear and Do it Anyway Arrow Dr Spencer Johnson Who Moved My Cheese? Vermillion John P Kotter Leading Change Harvard Business School Press Tannenbaum and Schmitt How to choose a leadership pattern Harvard Business Review, 36, March-April, Richard Templar The Rules of Management Pearson/Prentice Hall 74

79 Notes Note: Every effort has been made to ensure the accuracy of this workbook. However, no liability can be accepted for misapplication of the content. In particular the legislative elements are subject to frequent change and readers are advised to check the latest legal situation before taking action in the workplace. We are fully committed to preserving copyright owners rights. Any 3rd party references are extracted for comment and review in accordance with fair rights use unless otherwise stated. We obtain all relevant permissions for any exceptional use beyond fair use. Any individual who believes that we may have overlooked the necessary courtesies in use of their material is requested to contact us as we do not wish to have oversights in our learning resources in relation to rights issues.

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