Performance Management

Concept of Performance Management

• Getting maximum from the available resources
• Maximizing the productivity and Profits
• Lowering expenses and increasing efficiency
• Having right-sized resources for the Company
• Having proper plan for the future growth
• Having sufficient funds to run the operations smoothly
• Lowering Production losses and wastages
• Having maximum knowledge, Control and understanding about Operations of the Organization
• Doing everything in the Organization systematically

Symptoms of Low Performance

• Shortage of funds – often funds not available to meet needs
• Lower utilization of productive fixed assets
• Higher claims and complaints from customers
• Higher wastages than industry standards
• Low morale of employees and higher turnover
• Lot of miss deadlines from employees on critical assignments
• Sales and Production departments regularly fail to meet their targets
• Management low control on activities of the Organization
• Difficult to obtain important and critical information on time
• Surprises during operational activities – like un-availability of required raw material, sudden breakdowns of productive fixed assets, resigns from important positions on critical times
• High pressure on Top Management

Effects of Low Performance

• Normally the first impact of low performance comes on funds of the Organization.
• When shortage of funds starts then Organizations start compromising on multiple issues, which leads to further low performance
• Poor utilization of resources, inefficiencies, losses, lack of attitude and discipline lead these organization to heavy losses, where it become even difficult for these even to survive
• Because of low funds, often funds borrowed from other sources at higher cost, which place additional burden on the Organization’s operations
• When main focus is not placed on the problem areas, the overall losses ultimately lead to Organization to heavily dependent on high cost borrowings and in compromising state
• High pressures always remain on Top Management, which lead to wrong critical decisions at critical stage
• High wastages and high claims

Reasons for Low Performance

• No proper business plan
• Goals and targets for Organization and Departments are not clear
• Not appropriate resources – either on lower or higher side
• Human Resources are not according to requirement
• Poor utilization of main resources – Human resources, material, fixed assets and funds
• Organizational Culture, Discipline and Behavior
• Errors in Costing, Contribution Margin and Breakeven calculation
• No Budgets or poor implementation of budgets
• Lacks of System, controls, policies and procedures
• Accounts Department not fully functional in implementing controls and checking effectiveness of activities
• Non-availability of important and critical information to make timely right decisions
• Lack of usage of Software and IT Technology for higher performance

Treatment and solutions

• First of all we have to establish the potential of the Organization and resources required to perform up to maximum potential
• Establish desired performance level
• Present performance is compared with the desired performance
• Business plan is prepared and based on the Business Plan, Plans for all departments are prepared
• Adjustment of resources required – mainly Human Resource, Material, Fixed Assets and Funds
• Establish correct Costing, Contribution Margin and Breakeven analysis
• Implementation of budgeting across the Organization
• Establishing systems, controls and policies for all activities
• Usage of software for immediate and correct availability of information and improved controls
• Establishing system for taking timely and correct information and knowledge from all departments
• Establishing a strong monitoring system for true implementation of Business Plan

Areas to be considered

• Strategic Planning and Management
• Business Plan
• Departmental Plan and Profile
• Human Resource – Job Descriptions, establishing responsibilities and Performance Parameters
• Material Management
• Fixed Assets Management
• Fund Management
• Systems, Controls and Policies
• Costing, Contribution Margin and Breakeven analysis
• Budgeting
• Accounts Department – establishment of role of Accounts Department
• Information and Knowledge Management – through software and system
• Monitoring system

Results to be achieved

• Improvement in Gross Profit margins
• Increase in Production Efficiency
• Decrease in Production losses and wastages
• Decrease in Working Capital requirement
• Improved utilization of Fixed Assets and other Resources
• Availability of information timely and accurately
• The employees should be very clear regarding what work they have to perform in order to achieve overall Company’s Objectives and Goals