Performance Management Guidelines and Considerations

Transcription

1 Illinois Soybean Association/Illinois Soybean Program Operating Board Performance Management Guidelines and Considerations January, 2012 Written by Randall Rollinson LBL Strategies, Ltd.

2 Illinois Soybean Association/Illinois Soybean Program Operating Board Performance Management Guidelines and Considerations Background Information: The Illinois Soybean Association (ISA) and the Illinois Soybean Program Operating Board (ISPOB) are the statewide organizations for all Illinois soybean producers. The farmers who sit on the boards administer the soybean advocacy and membership programs as well as the soybean Checkoff funds to support market development, soybean production/profitability research, promotion, issue management, analysis, communications and educational programs. ISA/ISPOB programs are designed to ensure Illinois soy is the highest quality, most dependable, sustainable and competitive in the global market place. ISA/ISPOB spent the past two years reviewing and revising the strategic direction, strategic plan and, most recently, the strategic objectives and annual operating plan for the organizations. ISA/ISPOB has developed a set of Key Performance Indictors (KPIs) to evaluate progress in achieving the stated objectives in their combined strategic plan. During the same time period ISA/ISPOB has been at work refining and updating its bylaws and organizational structure to better match the organizations going forward strategy. A primary intention of the board and management team is to align behind the organizations combined strategic direction and plan. (See Figure 1 and 2) Figure 1: ISA/ISPOB Strategic Direction Vision (Destination) The Illinois Soybean Association and the Illinois Soybean Program Operating Board strives to enable Illinois soybean producers to be the most knowledgeable and profitable soybean producers around the world. Mission (Purpose) To ensure Illinois soy is the highest quality, most dependable, sustainable and competitive in the global marketplace. Values (Core Beliefs) Provide leadership to the Illinois soybean industry through Commitment, Perseverance and Honor to achieve maximum profitability for each Illinois soybean farmer. 2 LBL Strategies, Ltd Goal (Theme) To achieve maximum profitability and global competitive positioning for Illinois soybean Producers. (Target: 600 million bushels of Illinois soybeans utilized annually by 2020)

3 Figure 2: ISA/ISPOB Strategic Plan Target Area Objective / Description Indicators Overall Utilization Animal Agriculture Transportation Increase global consumption of Illinois soybeans Increase worldwide livestock consumption of IL soybeans and soybean products. (IL, regional, national & North America) Ensure soybeans and soybean products reach their intended destination efficiently # bushels of Illinois soybeans utilized % increase in global market share of Illinois soybeans % increase in Midwest use permits % increase in the annual soybean harvest crushed in Illinois % increase in the in state soybean utilization rate per species % increase in the bushels of soybean and soybean meal out shipped from Illinois % change in soybeans and soybean meal transported by container, barge, rail and truck % differential in basis between the Gulf and Peoria Yield Increase yield and return on investment % increase in the soy/corn acres % increase in yield by soybean growing district Domestic production ranking by acres planted Domestic production ranking by total bushels produced % change in the total cost of production per acre by soybean district % increase in profit margins of Illinois soybean producers by district High Quality Sustainability Market Access / Advocacy Develop the highest quality soybean, soybean oil and soybean meal products Illinois soybean producers accept and employ sustainable production practices Maintain current markets, open new markets and advocate for equitable public policies and freedom to operate % change in amino acid profile of Illinois soybeans % increase in quality (protein versus oil) ratings of Illinois soybeans by district, by state, by major competitor (Brazil versus Argentina) % of overall production dedicated to IP soybeans. % of Illinois soybean producers who are ISA/ISPOB 'accredited environmental stewards % increase in soybean production efficiency gains for 5 key environmental resource indicators ( Keystone Alliance metrics for Land use, Energy use, Irrigation Water Use, Soil Loss, Climate Impact Net Carbon Emissions ) % increase in the number of ag favorable state policies implemented 3 LBL Strategies, Ltd. 2012

4 Target Area Objective / Description Indicators Aquaculture Industrial Image Building Alignment Producer Communications Organization Excellence Increase worldwide aquaculture consumption of IL soybeans and soybean products Increase domestic industrial consumption of IL soybeans and soybean products Improve our image and build coalitions with key stakeholders Align with other soy organizations to advocate for and advance a proactive agenda Build support and recognition with producers for Illinois soybean association programs Increase effective, progressive leadership at all levels of the organization % increase in ag favorable state legislative priorities coming out of committee. % increase in overall tonnage of soy in aquaculture feeds used in the Greater Gulf Region % increase in gallons of soy biodiesel produced in Illinois % increase in total dollar value of Soy bio products purchased in Illinois % of consumers with a positive perception of animal and crop agriculture. Number of key ag corporations who recognize/acknowledge ISA/ISPOB as a strong corporate partner % of Illinois funded projects where we partner with national and state organizations % increase in the number of producers expressing knowledge of ISA/ISPOB programs % of ISA/ISPOB board members expressing strong or very strong overall satisfaction with ISA's/ISPOB s overall direction % of ISA/ISPOB employees expressing strong or very strong overall satisfaction with ISA's/ISPOB s overall direction Other Revenue Increase membership and sponsorship resources % increase in funding coming from sponsorships % increase in ISA membership 4 LBL Strategies, Ltd. 2012

5 To capitalize on these gains, ISA/ISPOB is working to implement a professional performance management program to help ensure all Checkoff and non Checkoff resources are invested to maximize profitability and the competitive position of Illinois soybean producers. A growing base of available Checkoff and non Checkoff funds is underscoring the importance of this challenge. It is a challenge resonating within ISA/ISPOB and across the US soybean industry. At present there is no unified inter organizational strategy to address this challenge. From what we ve discerned, each soybean organization (i.e. USB, ASA, USSEC, QSSBs) uses its own process to implement the discipline of performance management. This approach unintentionally undermines the possibility for better alignment of Checkoff and Non Checkoff investments. It is our belief that a greater degree of (targeted) funding alignment would provide a major impetus for generating new returns to US soybean producers. (See Figure 3) Figure 3: Soybean Organizational Alignment Where We Are: Where We Want to Be: Source: Strategy Professional Resource Center, LBL Strategies, Ltd

6 Guideline Objectives: This paper is written after spending many of the past 20 years working with various national and state level organizations within the soybean industry. We offer it up aiming to meet four specific objectives. 1. Enable farmer leaders, staff and contractors to gain a clear and shared understanding of what performance management means. 2. Facilitate integration of a practical performance management program into the annual ISA/ISPOB governance cycle and serve as a case study for fellow soy organizations to consider. 3. Summarize ISA s/ispob s annual KPI tracking, reporting, learning and evaluation processes. 4. Define key roles and responsibilities the board, committees, staff and contractors must fulfill to execute an annual performance management program and keep ISA/ISPOB strategically focused. (See Figure 4) Figure 4: Roles and Responsibilities Board Staff Volunteer Organizations Trust Need Credibility Truth Differences 1 6 LBL Strategies, Ltd. 2012

7 What is performance management? Performance management includes all board, committee, staff and contractor activities aimed at ensuring the organization s strategic goal and objectives are met in an effective and efficient manner. (See Figure 5) Figure 5: ISA/ISPOB Strategic Objectives Goal: Achieve maximum profitability and global competitive positioning for Illinois soybean producers Internal Customer Animal Ag Yield Market Access Improve Image Quality Aquaculture Provide Effective Producer Communications Transportation Sustainability Industrial Align Behind Proactive Agenda Learning & Growth Achieve Organizational Excellence / Leadership Development Financial Invest Checkoff for ROI Personal & Confidential Raise Other Revenue 2 7 LBL Strategies, Ltd. 2012

8 Performance management can be thought of as comparing the organization s Actual Results against its Desired Results. Any discrepancy, where Actual is less than Desired, constitutes (by definition) a performance improvement zone requiring attention. (See Figure 6) Figure 6: Performance Improvement Zone Performance Improvement Zone 8 LBL Strategies, Ltd. 2012

9 A performance improvement zone can appear at each level of an organization performance management program. Level 1 is the overall strategic goal to be achieved. ISA/ISPOB has a goal of 600 million bushels of Illinois soybeans being utilized annually. (See Figure 1) Level 2 is also strategic and covers Key Performance Indicators (KPIs) and targeted ranges of performance. Level 3 is operational and covers Projects or Project Measures and their outcomes of performance. (See Figure 7) Figure 7: Two Levels of Performance Management Level Goal: 600 Million Bushels Illinois Soybeans Utilized Key Performance Grow Animal Agriculture 2012 Projects Project Measures & Outcomes (All relevant) Indicators & Targets Level 3 Level 2 Source: Strategy Professional Resource Center, 2011 Level 1 is the center of the bullseye. Each year the board of the organizations must take a careful look at progress being made toward this primary strategic intent. This occurs by examining factual information, KPI performance levels, as well as subjective information available to the board and senior management team. Level 2 of performance management is an ongoing process where the board periodically reviews and approves a carefully selected set of specific strategic objectives, prioritized KPIs and desired target ranges of performance for each KPI. Then on a regular basis (at least annually), KPIs are tracked and actual results reported to gauge whether the desired performance level is being achieved. On a parallel track and annual basis Level 3 initiatives and projects are prioritized by committees, approved by the board and executed by the staff to influence the desired level of KPI performance, i.e. Level 2. In reality it generally takes many projects pulling together (often from across multiple organizations) to achieve a targeted level of performance for one KPI. For each board approved program or project, a Level 3 scope specific performance management program is recommended. It requires that one or more specific project measures and outcomes of performance be defined, tracked and reported against, as a particular project is 9 LBL Strategies, Ltd. 2012

10 executed and ultimately evaluated. Project measures evaluate how well ONE particular project is doing while Key Performance Indicators show how all relevant projects TOGETHER are working to meet a specific strategic objective. Throughout the life of a particular Level 3 program or project, ISA/ISPOB staff work with contractors to give feedback and exert influence to achieve the desired level of project performance. It is important to recognize that performance management is not a precise science. Global disruptive change (e.g. weather, political turmoil, etc.) often occurs which cannot be controlled. In most situations qualitative factors must be given significant consideration when judging whether a Level 3 project is working, or when completed successful in driving Level 1 and Level 2 performance. It is Level 1 and Level 2 performance where ISA/ISPOB ultimately seeks to influence. This takes time and requires that ISA/ISPOB take a long run view. 10 LBL Strategies, Ltd. 2012

11 How does Performance Management integrate with the ISA/ISPOB Annual Strategic Management Cycle? Below is a working draft Strategic Management Calendar detailing the planning, evaluation and budgeting processes of the organization from September, 2011 September You will note that performance management has been fully integrated throughout. (See Figure 8) Figure 8: ISA/ISPOB Annual Strategic Management Cycle Updated Month Sept Oct. Nov. Dec. Contractor Project Program Project Evaluation 11 LBL Strategies, Ltd KPI Results Objective Progress Determined Plan, Evaluation & Budget Development September 1 start of new fiscal year Staff begin assembling evaluation information for third party review for previous fiscal year program areas and projects Identify / verify / monitor trends and issues facing the domestic and global soybean industry Staff completes assembling of previous fiscal year evaluation information. Third party evaluation conducted. Collection of KPI data Identify / verify / monitor trends and issues facing the domestic and global soybean industry Present baseline information on all KPIs Committees review previous fiscal year project evaluations for immediate projects Committees analyze KPI data. Committees highlight and prioritize trends and issues the board should consider in the current planning cycle Monitor execution of current year operating plan by Program Area/Objective Review new and amended projects for the Board s consideration Financial Audit presented to board Allocate new available funding to priority KPIs Update board on committee findings related to KPIs Senior Staff Review Meeting Board / Committee Meetings Executive Committee Production Committee Marketing Committee Board

12 Month Jan. Feb. March April May Contractor Project Program Project Evaluation KPI Results Objective Progress Determined Plan, Evaluation & Budget Development Review major program/project evaluation findings from committees Committees recommend any new and amended projects to the Boards. Executive Committee lead the next fiscal year strategic planning process Study, discuss, and prioritize issues to plan for next FY year planning cycle Review KPI data and monitor execution of current FY operating plan by Program Area / Objective Committees review previous fiscal year project evaluations Conduct mid year review of current Operating Plan by major program area and/or objective Full boards further refine and approve strategies for next fiscal year Approve changes to high level strategic plan for next fiscal year Monitor KPI s and execution for current year operating plan by Program Area / Objective Full board review/confirm the Organizations overall Strategic Direction and high level strategies Staff refine next fiscal year strategic operating plan including a balanced set of objectives, performance indicators Staff prepares project proposals Work with other stakeholders to identify areas for collaboration (e.g. Corn, Poultry, Beef, etc.) Administrative, operating costs and allocation percentages are compiled. Staff solicit and identify potential initiatives and projects for next fiscal year Work with other stakeholders to shape initiatives for collaboration (e.g. Corn, Poultry, Senior Staff Review Meeting Board / Committee Meetings Executive Committee Production Committee Marketing Committee Executive Committee Board Meeting and Training 12 LBL Strategies, Ltd. 2012

13 Month June July Contractor Project Program Project Evaluation KPI Results Objective Progress Determined Plan, Evaluation & Budget Development Beef, etc.) Ensure program and project evaluations requirements are communicated and synchronized Staff coordinates appropriate alignments with national funding priorities Committees support staff in drafting the proposed FY 13 operating plan and budget Next FY Project concepts prioritized by Committees Ensure program and project evaluations requirements are communicated and synchronized Executive Committee discusses operational, program areas, and next FY Evaluations program. Staff makes preliminary recommendations for KPI/project evaluations Pro forma budgets and proposed next FY Operating Plan priorities presented to the combined committee meeting. The full board serving as a committee of the whole vets the proposed Operating Plan priorities for next fiscal year Executive Committee discusses program areas and budget percentages Discuss funding allocations by Target Area,; refine KPI targets as necessary Executive Committee discusses program areas and budget percentages Pro forma budget is presented to the board. Next FY Operating Plan approved by full board Next fiscal year project RFPs issued Ensure program and project evaluations requirements are communicated and synchronized Senior Staff Review Meeting Board / Committee Meetings Combined Committee Meetings Executive Committee New Board Member Orientation Executive Committee Board Meeting and Training Board Meeting and Annual Meetings 13 LBL Strategies, Ltd. 2012

14 Month August Contractor Project Program Project Evaluation KPI Results Objective Progress Determined Plan, Evaluation & Budget Development Committees meet to review proposals received in response to RFPs submitted in July. Approve funding allocations by Target Area for next fiscal year. Final projects/budgets approved Notify contractors of approvals/denials Ensure program and project evaluations requirements are communicated and synchronized Staff/Contractors begin compiling data for project evaluation Senior Staff Review Meeting Board / Committee Meetings Board and Committee Reorganization Board / Staff Retreat Sept Begin program, project evaluation for previous fiscal year. 14 LBL Strategies, Ltd. 2012

15 How do the ISA/ISPOB KPI Tracking,, Learning and Evaluation Processes actually work for Level 2 and Level 3? Level 2: At Level 2 one needs to think of performance management as an ongoing process where the board periodically approves a carefully selected set of specific strategic objectives, prioritized key performance indicators (KPIs) and desired target ranges of performance for each KPI. Then actual KPI performance results are tracked and reported, in this case annually, to see if the desired performance levels are being achieved. For example, is more soybean meal produced in Illinois being consumed by animals in Illinois? (See Figure 9) Figure 9: KPI Tracking,, and Learning (Level 2) Vision, Mission, Values, Goals Strategies Strategic Learning Operating Plan Target Areas Key Performance Indicators (Long Term) Target ranges Quantitative Results Impact on KPI / Targets 2012 Tactical Initiatives Projects Project Objectives Project Measures (Short Term) Outcomes Quantitative & Qualitative Outcomes Board / Committees Committees / Staff If KPI level progress is noted it is important to understand what is contributing to that progress. We may or may not be able to attribute progress to our efforts, but we must better understand what is impacting the KPI in order to realign our efforts and make a course correction where appropriate. If we determine progress is not being made within a reasonable amount of time, we must understand why. Is it because our efforts were not effective? Did we apply the wrong type of effort? Were factor(s) beyond our control playing a major influence? The key is to learn from experience and adjust the organizations plan as necessary to positively impact performance. Level 3: At Level 3 the focus is on evaluating programs or projects to determine if execution was effective in achieving the agreed upon outcomes or level of performance. Central to evaluating any program or project is an accurate assessment of performance against the 15 LBL Strategies, Ltd. 2012

16 desired outcomes established when the project was originally approved by the boards. As with Level 2 it is important to understand what is working and what is not working before final, evaluative judgments are made. An example: In many soy demand building initiatives, a desired project measure reveals incremental change of target audience behavior from one level of performance (A) to the next level of performance (B) via a specific message of change. (See Figure 10) Figure 10: US Pork in Europe Project Measures Stage 1 Awareness Knowledge # of targeted processors aware of the higher yield and lowering processing costs of US Pork Stage 2 Liking Preference # of targeted processors convinced that US Pork offers higher profit potential A Stage 3 Conviction to Try # of targeted processors who try US Pork B Stage 4 Purchase # of targeted processors who buy US Pork; sales to targeted processors Stage 5 Regular Purchase # of targeted processors who process primarily US Pork; sales Source: Agralytica, Results Oriented Management Page 27 In this example, objective evaluators would be engaged along the way to ask such questions as Did behavior change? Why did behavior change or not change? What did the Boards learn? How should the Boards adjust its program going forward? Answers to these evaluative questions would then be the basis for making changes to the project or for guiding future investment decisions. Keep in mind program or project evaluation has two major purposes: first to improve project performance or execution, second to determine if the program or project should be continued, discontinued, or the funding level decreased/increased. 16 LBL Strategies, Ltd. 2012

17 To have a full appreciation of Level 3 performance management, one must recognize the essential role program planning and management plays in the entire process. If projects are approved before complete program descriptions, project objectives, project measures, and outcomes are established it makes it virtually impossible to do a fair evaluation of performance and conceptually more difficult for the Board or Committees to approve such projects. ISA/ISPOB program planners must be diligent in their efforts to understand: 1. the strategic and tactical environment they are targeting, 2. the assumptions they can make about the environment in terms of constraints and opportunities 3. the activities they believe are best suited to achieve the targeted outcomes of performance. It should always be remembered that progress can only be measured in relation to matters over which ISA/ISPOB and its contractors have some level of control and influence over. It is absolutely critical to focus on the right project measures. This level of program management has been nicely summarized by Agralytica Inc. in their work on Results Oriented Management. (See Figure 11) Figure 11: Project Evaluation Drives Learning (Level 3) Goals Assumptions Constraints / Opportunities Project measures? Not achieved Achieved Why? Assumptions Activities (Projects) Why? Are the Underlying Assumptions sound Yes Why? No Feedback Learning 17 LBL Strategies, Ltd Source: Agralytica, Results Oriented Management Page 92 Two types of underlying assumptions need to be examined as part of the evaluation process. First is the causal assumption, as in Is the right solution (project) being applied to the problem or objective at hand? Second is the prescriptive assumption, as in Is the project being carried out in a manner that will contribute to solving the problem or meet the objective?

18 A primary outcome we seek from any program or project is to learn from execution to adapt and modify our planning moving forward to positively impact KPI performance at Level 2 of the performance management program. Therefore ISA/ISPOB must be innovative and thoughtful in selection of appropriate Level 3 project measures at the program planning stage. By doing this ISA/ISPOB can periodically communicate realistic contributions to achieving desired farmer driven outcomes, e.g. more local, domestic and international meal consumption by livestock. To make Level 3 performance management operational it is helpful to think of an evaluation process unfolding over a one year period of time. (See Figure 12) Figure 12: Evaluation Process and Timeline (Level 2 & 3) Project/KPI Evaluations Presented to Committees February Program Development for coming year (Staff, Contractors, Committees) March May June Staff & Exec Committee Review Evaluation Program for next FY (Level 1, 2 & 3) FY Projects / KPIs Evaluated October January June Staff Recommends Projects & KPIs to be Evaluated (Level 2 & 3) Outside Evaluators Chosen August September August August June Committees Discuss Projects to be Evaluated with Proposal Evaluation Budget Board Approved FY Budget Board Obligates Funding for Evaluation 18 LBL Strategies, Ltd. 2012

19 What are the roles and responsibilities of the board, committees, staff and contractors in the performance management program? The answer to this question is a two part answer. Answer one relates to the level of responsibility each organizational component has for the overall strategic management of the organizations. (See Figure 13) Figure 13: Strategic Management Roles and Responsibilities Organizational Component Board of Directors Strategy Element Vision Mission Strategic Goal High Level Strategies Measure Target Responsibility Overall Soybean Utilization 600 Mil Bushels Level 1: Approve, allocate and annually assess progress toward achieving this level of utilization Committees & Staff Strategic Objectives Key Performance Indicators Target Range established for each KPI Level 2: Track, Report and Learn Level 3: Evaluate and Learn Staff & Contractors (some 3 rd party) Tactical Projects Project Performance Measures Outcomes established for each program or project Level 3: Execute, Evaluate and Learn 19 LBL Strategies, Ltd. 2012

20 The second part of the answer relates to specific operational responsibilities each organizational component has at Level 2 and Level 3 of ISA s/ispob s performance management program. (See Figure 14) Figure 14: Performance Management Responsibilities Level 2: Key Performance Indicators (Are we achieving our objectives and ultimately goal?) Role of staff Collect KPI information and report to committees Role of committees Review KPI performance against target ranges, discuss findings and make recommendations to the board Role of board Adjust, refine or reconfirm target ranges Level 3: Program/Project Evaluation Role of contractor Efficiently and effectively execute the project and provide regular progress reports Role of staff Recommend program/project areas for evaluation and when appropriate work with Third Party Evaluators to assemble information Role of staff/committees Review evaluation reports and make recommendations for any changes in target ranges going forward Role of board Adjust, refine or reconfirm target area planning priorities Role of board and committees assure that programs/projects properly align with the target area objective and that those projects are accomplishing what they set out to do 20 LBL Strategies, Ltd. 2012

21 Summary In summary, ISA/ISPOB is very close to having a fully operational performance management program embedded within the strategic management processes of the organizations. From both ROI and cost to build perspectives, significant economies of scale would also be realized by developing an integrated and practical performance management system with likeminded soybean organizations. A formal assessment of the situation would likely find a common need for a standard set of goals, objectives, KPI s and project measures. An opportunity may exist to build out a base set of indicators and measures all state and national organizations could draw from to manage their own performance while facilitating resource alignment wherever possible and desirable. In a best case scenario an integrated performance management system would enable state / district level data to be rolled up to the national level. Alternatively, national and state level organizations would be able to drill down to assess state by state contributions. This level of cascading and transparency would likely point out areas for performance improvement and sources of new returns for producers. Thank you for considering our comments. 21 LBL Strategies, Ltd. 2012