The pyramid in Figure 3.1 represents an organization with its core values and business drivers as a foundation and total customer satisfaction on top.
Essential steps for organizational strategic plan are presented in this pyramid. Core values and market drivers form an organization’s philosophy. This philosophy helps the organization determine its strategic initiatives for the goals to achieve growth for the planned period. Team and personal growth goals supported by Organizational Capability Analysis (OCA) enable all team members to achieve performance excellence (APEX). Profit plan goals are determined for the growth of the business. All metrics of the goals are pursued for the continuous improvement resulting in total customer (stakeholder) satisfaction.
FUNDAMENTAL CONCEPTS FOR STRATEGIC PLANNING
Within the Business System (BS), senior management should preferably identify five strategic concepts that are absolutely crucial to business’ continued success:
• Modern business interactions
• Vision
• Growth
• Operational excellence
• Organizational capability
FIGURE 3.1
Strategic planning pyramid.
These five concepts are the foundation of the strategic plan.
According to the digital technology gurus, the current world economy is all set for a sea of change in business activities. It may be recalled that barely two centuries ago, the Industrial Revolution saw dramatic changes in the economies of production and transportation. A tsunami of similar proportions is about to kick-start in the economies because of the Digital Revolution.
The key phrase is going to be transaction interactions.
Interactions shape economic activities. Take an example of a farm tractor manufacturer in the United States. With vertical integration of manufacturing processes, their interaction costs were lower within the firm, while their production (transformation) costs were higher as compared to specialist outside suppliers.
They minimized their transformation costs by buying an engine from Japan, transmission assembly from India, axle assembly from China, and body parts from Canada. The new tractor assembly line was reduced to five stations including a final test and two persons for maintenance and test drive. All was done by increasing interaction activities with the use of information technology and the Internet, which enabled them to find the lowest total transformation cost suppliers internationally.
Today, even the smallest start-up has access to a global market for its products. Take “BizChair.com” founder Sean as an example. Sean is a real entrepreneur, at 14 years old, he locked himself in his bedroom, and three days later, his business was born! Now, he is earning more than $50,000,000 a year selling business chairs online. Sean has been an inspiration to young people around the world trying to sell online!
PURCHASING POWER PARITY (PPP) AND GLOBAL MARKET
In simple words, PPP can be explained by this example: A chocolate bar that sells for Indian Rupees 65 in an Indian city should cost US$1.00 in a U.S. city when the exchange rate between India and the United States is 65 USD/INR. (Both chocolate bars cost US$1.00.)
Because of the effect of PPP, companies searching for customers will be increasingly likely to strike gold as the number of consumers earning more than $10,000 a year at purchasing power parity swells from 800 million today to almost 2.4 billion by 2025, aided by growth in developing economies such as China, India, and Indonesia.
Vision is your market vision. This section should describe both what the market leader will be doing better than the competition and what your business will need to be that market leader. Your market vision is not a tag line—a slogan, but addresses questions such as the following:
What will the competitive landscape of your industry look like in five–ten years?
What will market forces require you to do? What will they allow you to do?
What will our customers reward? What won’t they?
Describe why a shift in scale, technology, global presence, and systems orientation will produce greater value for your customers and shareholders.
Describe your business environment in five to ten years. What major opportunities and risks will you face in this environment?
This topic represents the most important aspect of your business strategy and should demonstrate a clear stance on the external market forces and trends that will shape your competitive environment over the planning horizon and beyond. This topic provides you with a vehicle to present your outlook of what your business and industry will look like in one to five years. Once presented, this vision sets the stage for the remainder of your strategy.
In building your position on the evolution of your market and competitive landscape, you may broaden your outlook to consider all attractive market opportunities. This effort will present new markets, customers, technologies, applications, and competitors. Along with those opportunities and risks, there will be other issues that might surface if the traditional “rules of the game” that define today’s industries were challenged. Consistent with your focus on innovation, you will likely expand your analysis to include paradigms that, while currently unproven, may eventually become the norm.
While you should identify and speak to those external forces that are expected to most closely affect your particular environment, potential items for consideration in addressing this topic may include the following:
1. Changing customer needs
2. Threat of new entrants
3. Strategies customers are pursuing
4. Shifting economic trends
5. Power shifts in the supply chain
6. Expected technological changes
7. Regulatory and political factors
8. Developments in global markets
9. Strategies competitors are pursuing
10. Trends in distribution practices
11. Rising trends in the supplier base
12. Rising cost and pricing pressures
13. Incongruities (e.g., growing markets with falling profits)
14. Overall industry shifts
15. Demographic changes
In terms of a mission or vision statement, you will want to ensure at whatever organizational level you are planning at—Group, Operation, Division, Business Unit—that you maintain linkage to your corporate mission statement. The power of unity is in that connection to a common mission and your planning efforts are best spent on describing your market.
Having established the market vision, Lean Six Sigma linkage is used to determine the process, inputs (Key Performance Indicators), and outputs (Key Business Drivers) for
• Growth
• Operational excellence
• Organizational capability
Figure 3.3 shows how Lean Six Sigma (LSS) links Key Performance Indicators to Key Business Drivers resulting in value creation for the customer for these three.
It is your path to market leadership. Given your market vision, growth plots the course of your business to its value maximizing position in the industry. In plotting that course, your assessment of customer wants, competitor activities, and technological shifts will come into play just as much as which systems or solutions you are offering and which new products or services you will launch over the next five years. This component of your plan should perform the scenario analysis necessary to show the pros and cons of alternative approaches. This section should explore any breakout opportunities to leap ahead of the competitive pack.
Describe how you will position your business to take fullest advantage of these opportunities. Define a reaching, credible, and enduring strategy for global leadership. Why have you selected this strategy over other alternatives? Why are you convinced that this is the winning strategy?
Given your vision for the competitive landscape, the growth section allows you to detail the strategy you believe will most effectively capitalize on the opportunities that you will face within that environment. In one sense, this section provides your organization (and its relevant stakeholders) with a firm understanding of what you intend to do with your business and where you intend to take it.
Current resources and bottlenecks should not limit the creative thinking of your operation. The emphasis should be on your operation’s potential … not its current position.
As you address this component, consider the following questions that are consistent with BS to trigger other subjects that may be more relevant to your operation’s particular situation.
How will you achieve at least 10% average annual sales and earnings growth?
How will you generate at least a top-quartile, greater than 9% free cash flow?
What markets, segments, customers, applications, and geographic regions will you target? Which offers the highest growth opportunities? Which global markets are best for your business? What new products will you develop? What current offerings will you discontinue?
What will your technology roadmap look like?
How does your unit contribute to next year’s corporate goals?
Will you market to the same customers that you do today? Will you utilize the same suppliers? Will you have the same competitors? Should you continue to do business with these groups in the future? How will the way you do business with them change?
What aspects of E-Business can accelerate your growth curve or improve the probability of achieving your plan?
OPERATIONAL EXCELLENCE (STRATEGIC PLANNING)
It addresses the capital and process management to fuel your growth. Operational excellence presents your plan, at a strategic level, to sustain profitability, to increase your productivity, and to build a competitive advantage valued by your market. While the focus is broader than cost reduction, the value of this aspect of your strategy manifests itself by satisfying the need for capital to fuel growth and achieve the leadership position outlined by your vision.
How will you respond to finance your growth plan and assure ongoing top-tier returns? How much cost will you need to take out of your enterprise? Which aspects of your operations are ahead of the competition? What will customers demand going forward?
Operational excellence and cost out activities are critical components to ensuring your business can meet the demands of growing into the leadership position defined by your market vision. You will likely need your functional leaders to work with other operating and functional leaders to ensure connectivity of the strategic issues and the resolution.
As you address this component, consider the following questions that are consistent with the BS. Again, this listing is not exhaustive; please use it to trigger other subjects that may be more relevant to your operation’s particular situation.
• How will you finance the targeted growth?
• How will you improve productivity 4% (at least) annually?
• How will you improve supplier resource management?
• What products need to be designed for lower cost?
• How are you driving cross-unit cost reduction programs such as supplier resource management?
• What is the goal for reducing the cost of nonconformance?
• What specific performance recovery programs are you driving?
• What aspects of E-Business can accelerate your growth curve or improve the probability of achieving your plan?
It describes the viability of your business’ human capital to execute your strategy. All businesses demand a high-performance, accountable, results-oriented culture. The focus is on the strategic ramifications of human capability in your organization, not the demographics or day-today culture. Organizational Capability Analysis (OCA) is discussed in detail later in this chapter.
Where do you stand in terms of having the human capital and organizational architecture to achieve your strategy?
The focus of organizational capability is on the strategic issues that reflect your human capital, its performance, capacity, and structure, ensuring the successful execution of the business’ strategy. The focus is really on the first question shown below—plans to align strategy, capability, organization, and compensation. Again, your functional leaders in this area may need to coordinate heavily with corporate and other operating executives to maximize the impact of this part of your strategic plan. In essence, what emanates from this assessment is a strategic human resources plan that is highly compatible with the business’ strategy and a principal enabler of bringing the business strategy to fruition.
As you address this component, consider the following questions that are consistent with BS. Again, this listing is not exhaustive; please use it to trigger other subjects that may be more relevant to your operation’s particular situation.
• How will you align your organization’s strategy, competencies, leadership team, organization structure, communications processes, and reward systems?
• What specific change(s) will you need to drive, to build, and to sustain an organizational culture that will enable you to realize your strategy?
• How will you effect the necessary changes?
PLAN STAGES, GATES, AND REQUIRED RESOURCES
A Gantt chart or a project planning tool for implementing your plan should address the sequencing of events, major decision points, and necessary resources to achieve success. These points (stages, gates, and resources) are critical to developing, communicating, and measuring your strategic plan. Table 3.1 explains plan stages, gates, key activities for each gate and required considerations and resources.
How do you collect and analyze relevant data and information to address these factors as they relate to your planning process? Here is how.
Through the following activities:
• Customer data obtained through divisional product management and sales team
• Listen and learn
• Surveys
• Competitive environment study through sales team
• Technological changes through Engineering Change Order (ECO)/Marketing Product Specification (MPS) and divisional engineering
• Strengths and weaknesses through Quality Operating System (QOS) process and functional SWOT
• Supplier/Partner Strength, Weakness, Opportunity, and Threat (SWOT) via QOS and Supply Chain Management (SCM) visits
What are your key objectives?
Below is an example of the objectives for a five-year term.
Current Focus (each objective is shown in a different shade)
• Objective 1—Delivery
• Objective 2—Customer focused
• Objective 3—Quality
Forward Looking
• Objective 4—60% manifold (block for assembling control devices) in-sourcing
• Objective 5—Five-axis CNC machining
Objectives development “fix, focus, and flex” (example)
Table 3.2 shows an example for a five-year plan for organizational objectives.
Quarterly objectives development
These objectives need to be converted into goals, each goal having its own metric.
Plan Stages, Gates, and Required Resource Considerations
Stages |
Key Activities at Each Gate |
Key Considerations and Resources |
Concept |
• Identify, develop, and assess alternative business and technical concepts • Develop preliminary business plan • Develop preliminary project plan |
• Realistic and achievable forecasts • Financial attractiveness • Realistic and achievable projects plans • Feasible product concept • Resources availability • Acceptable project risk |
Definition |
• Finalize business plan • Finalize project requirements and specifications • Develop preliminary manufacturing plan • Identify capital requirements • Develop comprehensive project plan |
• Acceptable business and project plans • Design feasibility • Capital requirements • Product and project risks |
Design and development |
• Engineering release and design verification • Finalize manufacturing process design • Finalize equipment tooling and gauging capital requirements • Develop market launch plans |
• Design verification results • Sales and marketing support readiness • Interim quality plan approvals • Product and project risks |
Validation |
• Install all production processes, equipment tooling, and gauges • Execute production trial run • Perform process capability study • Perform validation testing |
• Validation results • Sales and marketing support readiness • Process capability • Product and project risks |
Production |
• Product/Part Approval Process (PPAP) submitted and approved • Limited line rate production • Customer satisfaction tracking |
• PPAP approvals • Product cost versus targets • Distribution channel readiness |
Audit |
• Full line rate production • Metrics monitoring • Customer satisfaction tracking • Capture lessons learned |
• Customer feedback • Project performance versus business plan |
A Five-Year Plan for Objectives—Example
Flex |
||||
Focus |
||||
Fix |
||||
2006 |
2007 |
2008 |
2009 |
2010 |
Fix delivery time issues through SIOP and Pull System to improve Customer On-Time Delivery (OTD) Build robust supplier partnerships through increased MRP communication |
Enhance Customer Satisfaction: OTD > 95% Increase distribution mix >33% by increasing the depth and breadth of the product velocity program |
Leverage SIOP OTD > 95% Drastic reduction in lead times LSS score > 4.2 Full Supplier-viz Software Implementation |
Leverage SIOP OTD > 96% Drastic reduction in lead times LSS score > 4.5 World Class Customer Responsiveness |
Leverage SIOP OTD > 97% Drastic reduction in lead times LSS score > 4.5 World Class Customer Responsiveness |
Supplement our cultural strengths by full implementation of MESH, PWP, and QOS Benchmark in employee engagement and empowerment while protecting the safety of our associates and having a positive impact in our community |
Sustain “World Class” safety levels while integrating machining operations Improve the well-being and satisfaction of our employees through Hydraulic Benchmark performance in MESH, PWP, and GQMS/QOS |
Benchmark in safety and floor-driven QOS/GQMS Culture/MESH/PWP cascading to lower levels of organization |
Benchmark in safety and floor-driven QOS/GQMS Culture/MESH/PWP All employee involvement |
Benchmark in safety and floor-driven QOS/GQMS Culture/MESH/PWP All employee involvement |
Become the quality leader in our markets through process excellence, GQMS implementation, and ISO-TS 16949 certification |
Become the benchmark in quality in our market Improve our quality through DPPM reduction and GQMS Continue driving the Lean journey and cell-based culture for CNC five-axis machining center |
Double-digit DPPMs Process Quality > 4.2 Sigma |
Double-digit DPPMs Process Quality > 4.3 Sigma |
Double-digit DPPMs Process Quality > 4.5 Sigma |
Create a culture that every associate feels like the owner of our business and actively contributes to driving toward 15% operating profit in 2009 |
Partnership with SCM to hit 2007 cost out target Utilization of LSS principles to reduce DOH and drive down internal cost and supplier cost |
15% OI 25% Standard margin >4% Productivity |
15% OI 25% Standard margin >4% Productivity |
|
Quarterly Objectives Development
Plant Operations |
Description |
Goal |
Achieve financial performance |
Free cash flow (FCF) |
9.0% |
Operating profit ($M) |
$0.24 |
|
Operating profit as % sales |
2.4% |
|
Achieve cost outs ($,000) |
$3183 |
|
Improve DOH and inventory $ |
XX/$7.8 m |
|
Meet capital spend plan per quarter plan |
$212 |
|
SOX compliance—risk mitigation |
No med/high |
|
Operational excellence |
Improve delivery performance |
95% by Q4 |
Reduce past dues ($,000) by 50% |
<$250K |
|
Customer DPPM |
513 |
|
Warranty reduction |
Improve 15% |
|
Scrap reduction—% of sales |
1.0% |
|
Variable mfg expense as % of direct labor |
1248% |
|
GQMS implementation |
>90% |
|
Achieve BE certification score |
>500 |
|
MESH implementation—external certify |
85% |
|
Reduce recordable incident rate |
0.2 |
|
LSS score—improve culture focus |
3.5—Q2 |
|
4.3—Q4 |
||
Growth |
5-Axis machining strategy for MCDs |
Proposal 1Q07 |
Organizational capability and culture |
Complete OCA plans—mid-talent upgrade |
Per timing |
Employee engagement—survey score |
10% improve |
|
Diversity + new hires |
30% |
|
APEX implementation |
100% |
|
Validated PWP assessment |
2.5 |
These metrics are reviewed every quarter for continuous improvement. Table 3.3 shows an example.
IMPORTANT BS COMPONENTS FOR STRATEGIC PLANNING
• Profit plan
• OCA
• APEX
As shown in Figure 3.1, profit plan is one of the most important aspects of the BS. Profit planning is supported by four concepts, namely, marketing vision, growth, operational excellence, and organizational capability. It has three main components.
1. Understanding the inputs, processes, and outputs for each one of the four concepts of the business system and leveraging the process outputs to determine the profit plan
Figure 3.2 shows four concepts of profit plan—their inputs, processes, and outputs.
2. Profit plan linkage to Lean Six Sigma for operational excellence
Figure 3.3 shows profit plan linkage to LSS for operational excellence.
3. Zero-based budgeting for profit planning
Budget is the result of a sound profit planning. It states the organization’s plan, which provides objective planning as well as control.
Generally, firms take a typical budgeting approach. The previous year’s budget is taken as a base and expenses are added to it according to anticipated needs. This yearly incremental approach to budgeting is also called rolling budgets. Here, in incremental budgeting, business managers justify only increases over the previous year’s budget and very little attention is paid to new projects, innovative methods, or efficient equipment.
Zero-based budgeting provides a better alternative. It is a method that helps and promotes efficient and strategic planning, which helps in better decision making for the business. It starts with a management review of each department’s purpose and goals. All proposed expenses go through an approval process rather than the approval of only the increments.
After a new project or new marketing campaign is identified, the additional funding resources to complete the task are planned.
For example, if an existing expense of newspaper advertising for the last few years does not increase the market share you expected, you must review it immediately and decide where those funds should be spent, in television and radio advertising or in Internet marketing, or whether they should not be spent at all.
FIGURE 3.2
Four concepts of profit plan—their inputs and outputs.
FIGURE 3.3
Linkage of Lean Six Sigma to strategic planning.
The zero-based budget requires you to lay out a sales plan, a profit plan, and what you need to achieve a profit. The following steps are a must for a good zero-based budget.
1. Itemize your fixed costs like mortgage, rent, utilities, fixed salaries, supplies, and outsourced services.
2. Brainstorm these expense items to the correct base needed, not just what you spent last year, and then implement a savings and expense control plan by taking tough decisions.
3. Your variable costs should fluctuate on a needs basis depending on your projects, sales plan, and a new market or new product plan.
4. Develop your sales plan on the basis of minimum sales to cover your fixed and variable costs. Once you have developed this base plan and your minimum breakeven points for daily, monthly, and yearly profits, you will create an internal organizational desire to remain above the breakeven point and contribute to higher profits.
5. Publish sales plans versus cost plans to show breakeven and profit centers for each project.
ORGANIZATIONAL CAPABILITY ANALYSIS (OCA)
• Develop current employees
• Expecting and coaching for high performance, not tolerating low performance
• Taking and creating opportunities to upgrade by hiring top performers
• Aggressively identifying and developing future leaders of the corporation with broad experiences
• Driving the organization’s Leadership Model for excellence in leadership
Business Excellence Leadership Model and Supporting Competencies:
Table 3.4 shows how the leadership model and competencies fit together.
The following are the four leadership classes considered:
1. Executives and VPs
2. Unit/department managers
3. Supervisors
4. Administrative individual contributors
Leadership Attributes Required for OCA
Leadership Competencies (Executives and VPs) |
Frontline Leader Competencies (Managers) |
Individual Contributor Competencies (Supervisors) |
Admin Support and Technician (Individual Contributor Competencies) |
|
Thinks and acts strategically |
• Business acumen • Vision and purpose • Intellectual rigor |
• Business acumen • Vision and purpose • Intellectual rigor |
• Makes decisions/solves problems |
• Makes decisions/solves problems |
Gets results |
• Drive for results • Change and adaptability • Leveraging resources |
• Drive for results • Change and adaptability • Leveraging resources |
• Drive for results • Promotes and champions changes |
• Drive for results • Promotes and champions changes |
Builds organizational capability |
• Managerial courage • Holding self/others accountable • Developing and motivating others |
• Managerial courage • Holding self/others accountable • Developing and motivating others |
• Pursues personal development |
• Pursues personal development |
Demonstrates leadership style |
• Interpersonal communication skills • Professional presence |
• Interpersonal communication skills • Professional presence |
• Demonstrates a collaborative style |
• Demonstrates a collaborative style |
The nomenclature of the competencies required by each class is the same, but within that competency, each class has different levels of competencies. For example, the competency “Thinks and acts strategically” for VPs means business acumen, and so on, but for supervisors, it means “Makes decisions and solves problems.”
Leadership Attributes and Competencies Required for OCA
Table 3.4 shows leadership attributes and competencies required for OCA.
Competencies for
1. Leadership (executives and VPs)
2. Frontline leader (managers)
3. Individual contributor (supervisors)
4. Admin support and technician individual contributor
Four Attributes of the Leadership required for each category:
• Thinks and acts strategically
• Gets results
• Builds organizational capability
• Demonstrates leadership style
Leadership Competencies (Executives and VPs)
Thinks and Acts Strategically
Possesses Business Acumen, Intellectual Rigor, Vision, and Purpose
• Sees the big picture and demonstrates analytical and creative thinking when creating plans and solving problems
• Establishes and implements effective strategies and measures effectiveness
• Works toward the company’s long-term success as well as for own business’/function’s short-term success
• Sees the big picture, understands and considers customers, competitors, markets, industry, and so on, when making plans and decisions
• Demonstrates an understanding of the broader organization, and how their role or function fits into the strategic plan and overall direction of the company
• Strategically positions their function or business to align with the company’s strategy
• Demonstrates strong intellectual capability and analytical smarts, is able to distill complex issues into workable pieces, and can take all of the information from looking at the “big picture,” make sense of it, and develop plans from it
• Establishes and implements effective strategies, measures effectiveness, has strong business and financial acumen, and understands all segments (i.e., front end and operations) and how they interact
• Demonstrates creative thinking, brings creativity to plans and decisions, and finds new, innovative ways, where appropriate
Gets Results
Ready to Change, Adapt, and Drive for Results by Leveraging Resources
Consistently meets and exceeds expectations and understands that “how” accomplishments are achieved is as important as “what” is actually achieved.
• Does not undermine others for personal gain
• Has a strategy for driving change and is able to bring focus and purpose to the work objectives for others
• Effectively delegates to adapt to changing business priorities
• Can get others on board, remains engaged and committed to objectives, and can overcome resistance
• Can manage the support structure necessary to drive business objectives and pulls the key levers of structure, processes, HR practices, metrics, and rewards to execute strategy and objectives
• Runs a profitable business
Builds Organizational Capability
• Demonstrates a commitment to power-of-one as it relates to talent development by proactively moving talent out of their organization into the organization’s other groups/departments, and moving talent into their organization from other groups/departments
• Optimizes utilization of HR assets and allocates human capital to the most impactful and value-added activities
• Seeks out new talent from different backgrounds, cultures, and experiences, and actively values diversity
• Is able to select, assess, and develop talent; hires ahead of the growth curve; doesn’t hire for current position only; considers assessment and selection of A players
• Raises the performance bar—creates, promotes, and sustains a performance culture
• Creates alignment so that everyone within the organization knows the strategy
• Designs/restructures the organization to achieve business results
• Drives differentiated reviews and feedback; establishes open, candid, and trusting relationships
• Treats others fairly and consistently
• Is good at experience-based development, providing key talent, fresh and challenging assignments; coaching
Demonstrates a Leadership Style
• Lives and embodies the company values and philosophies
• Actively drives and lives the BS
• Projects an exemplary executive image with polish, poise, professionalism, and integrity
• Sets an example of open, honest, timely, and persuasive communication; communication style is approachable and instills trust and confidence
• Makes and supports decisions based on ethics, honesty, and fairness
• Acts in the best interests of the company and its stakeholders (employees, customers, and shareholders); accepts the role of leadership as a 24/7 responsibility
• Inspires others to action
• Is respectful of cultural and organizational norms; is able to adjust style, message, or behavior as needed
• Effectively handles conflicts and issues affecting working relationships
• Lives up to commitments made to employees, colleagues, and customers
• Acts as an ambassador of the company; is actively involved within the communities in which the company does business with
• Works collaboratively and openly across boundaries/business lines; leverages resources; willingly shares information and relevant resource
Frontline Leader Competencies (Managers)
Thinks and Acts Strategically
• Demonstrates an understanding of the broader organization, and how their role or function fits into the strategic plan and overall direction of the company
• Ensures their department/site/function understands and supports both their business/function’s strategy and how it fits into the company’s vision of being an integrated operating company
• Sees the big picture; considers trends with customers, competitors, suppliers, markets, industries, and so on when making plans and decisions
• Uses analytical abilities to distill complex issues into workable/meaningful parts for themselves and others
• Demonstrates creative thinking; brings creativity to plans and decisions; finds new, innovative ways where appropriate
• Makes data-based decisions NOT based on opinion or anecdote
Gets Results
• Effectively models, manages, and drives change; engages/builds commitment to changes
• Can get others on board, engaged, and committed to objectives; can overcome resistance
• Effectively gets things done through others by delegating, motivating, focusing, and leveraging the appropriate resources to meet objectives
• Does not undermine others for personal gain
• Sustains focus on critical objectives throughout the entire cycle
• Develops own skills in order to consistently meet objectives and targets
• Drives compliance to the ethics policy and holds others accountable for ethical conduct—ensures results and high performance is not sought “at any cost,” putting ethics at risk
Builds Organizational Capability
Demonstrates a commitment to One Company as it relates to talent development by proactively moving talent out of their organization into other company groups and moving talent into their organization from other company groups
Seeks out new talent from different backgrounds, cultures, and experiences—actively values diversity
Proactively plans for new resources/skill sets/requirements based on changing business needs
Accurately identifies “top talent” within their organization and among external candidates; can “calibrate” talent
Raises the performance bar—creates, promotes, and sustains a performance culture; ensures employees continuously raise the bar on their own performance
Creates alignment so that everyone within the organization knows the business objectives
Performance reviews are timely, thoughtful, and impactful, resulting in differentiated evaluations and rewards
Treats others fairly and consistently
Is effective at experience-based development, providing key talent, fresh and challenging assignments; coaching
Behaves in accordance with expressed beliefs and commitments
Identifies and manages underperformers effectively and expeditiously
Takes active leadership in employee communications—effective in one-on-one (coaching) as well as in group meetings
Demonstrates a Leadership Style
• Lives and embodies the company values and philosophies—manages with respect and fairness; assists employees in taking responsibility for their own performance, behavior, and growth
• Actively drives and lives the BS
• Projects an exemplary leadership image with polish, poise, professionalism, and integrity
• Is approachable and instills trust and credibility with others
• Acts in the best interests of the company and its stakeholders (employees, customers, and shareholders); accepts the role of leadership as a 24/7 responsibility
• Inspires others to action
• Is respectful of cultural and organizational norms; is able to adjust style, message, or behavior as needed
• Effectively handles conflicts and issues affecting working relationships
• Lives up to commitments made to employees, colleagues, and customers
• Acts as an ambassador of the company; is actively involved within the communities in which the company does business with
• Works collaboratively across boundaries/business lines and openly shares information and resources
Individual Contributor Competencies (Supervisors)
Thinks and Acts Strategically
• Keeps current with information and technology—Seeks available learning opportunities to improve skills and knowledge of relevant issues—customers, products, operations technology, and financial indicators—to facilitate understanding and utilization of the metrics on the Balanced Scorecard and broaden business perspective
• Understands overall business performance—Demonstrates understanding of the factors that affect short-term business results and educates employees to create understanding about the impact of each individual on the organization’s performance
• Seeks to understand customers—Actively seeks information to understand internal and external customers’ circumstances, problems, expectations, and needs, and shares customer information with employees to build understanding
• Communicates vision—Translates and reinforces the group vision and the local business plan into understandable terms for employees, and links day-to-day individual and group activities to plan outcomes
• Interprets new concepts—Grasps new or unfamiliar concepts quickly, breaking down a situation or problem into meaningful components that can be communicated effectively at all levels
• Practices continuous learning—Seeks new ideas, perspectives, and approaches and applies learnings from past experiences and education to current situation
Gets Results
• Drives continuous improvement—Strives for continuous improvement in process and business results; actively seeks alternative solutions and recognizes problems as opportunities for process improvement
• Challenges status quo—Continually challenges current thinking regarding people and process and recommends changes to improve operations; encourages individuals to constructively question established work processes or assumptions
• Manages personal change—Treats change and new situations as opportunities for learning and growth; focuses on the beneficial aspects of change by helping employees identify the benefits to them personally; helps individuals overcome resistance to change; shows empathy with those who resist or fear change
• Demonstrates personal drive—Is self-disciplined; frequently measures progress and evaluates results; reprioritizes and develops action plans to improve progress of goals as appropriate; prevents irrelevant issues or distractions from interfering with timely completion of important tasks
• Applies business tools—Applies prescribed BS tools such as Lean Systems, Six Sigma, Employee Survey Action Plans, and so on, to improve organizational effectiveness
• Sets high standards—For their organization to continuously raise the expectations and standards that define success
• Gains cross boundary support—Works across the organization to provide resources to other departments and foster collaboration to ensure business goals are met
• Aligns and prioritizes resources—Utilizes appropriate processes, equipment, and human resources required to meet organizational and department goals; focuses time, energy, and resources on the most critical activities
• Builds effective working relationships—Proactively builds effective working relationships between one’s area and other areas, teams, departments, units, or organizations to help achieve business goals
Builds Organizational Capability
• Addresses difficult performance issues—Takes appropriate action to improve performance to meet expectations; addresses substandard performance through actionable performance feedback and applies appropriate performance improvement actions, up to and including termination
• Communicates difficult messages—Effectively delivers unpopular messages, which helps create understanding and acceptance; handles difficult situations effectively, providing candid, corrective feedback to address issues
• Stands alone—Willingness to take stands that may be unpopular and provide feedback to more senior managers that is contrary to ideas or accepted practices
• Manages work—Establishes clear directions, lays out work in a well-planned and organized manner, and assigns clear responsibility for tasks
• Provides performance feedback—Provides ongoing coaching and feedback on employee performance, reinforcing positive behaviors and providing guidance to correct performance that is not meeting expectations
• Manages performance—Applies performance management skills and company policies to effectively motivate people to high performance, sets clear performance standards, and holds people accountable for results; develops and maintains performance metrics as required to monitor results and uses as a tool to identify and initiate process improvements
• Ensures safe work environment—Proactively implements, promotes, and maintains a safe working environment through leading by example, anticipating potential accidents and taking corrective actions before incidents, to assure a safe and healthful workplace
• Provide stretch assignments—Challenges employees to learn new skills and gain experiences that will help them reach their potential
• Provides skills and tools—Ensures that employees have the necessary skills, knowledge, resources, and tools to do their jobs safely and effectively
• Promotes inclusion—Demonstrates an appreciation for similarities and individual differences by promoting a culture of inclusion that leverages the full potential of all employees
• Reinforces positive behaviors—Recognizes individual strengths and positive performance; shares ownership and visibility for individual and group success, and accepts responsibility for failures
• Enables employee involvement—Involves others in decisions, problem solving, and continuous improvement activities as appropriate
• Assesses and selects talent—Partners with HR in the assessment, selection, and promotion of employees using company guidelines and policies
• Rewards and recognizes employees—Seeks opportunities to personally recognize and celebrate the achievements of others by linking rewards and recognition to standards of excellence and business performance
Demonstrates a Leadership Style
• Builds trust and credibility—Acts as an employee advocate in appropriate situations by raising and addressing employee issues and considering employee interests and their well-being when making decisions that affect them
• Effectively communicates—Provides relevant information in a timely manner with direct reports, peers, and superiors, and is proficient in both written and oral communications
• Actively listens—Encourages others to express opinions and actively listens to understand others. Consistently practices “open door” philosophy by being approachable at all times and stressing personal, face-to-face communications
• Influences others—Communicates differing perspectives in ways that move others to action or to change one’s views
• Professional demeanor—Maintains a balance between professional and personal relationships with one’s employees and interacts appropriately with all levels
• Presentation skills—Organizes thoughts before communicating and tailors/modifies the message based on audience expectations to effectively present/articulate ideas, to both formal and informal groups
• Meeting leadership—Plans and runs well-organized meetings, demonstrating meeting process and facilitation skills
• Self-management—Maintains composure at all times and encourages others to do the same; stays focused and handles difficult situations effectively
• Personal presence—Presents a positive image to those inside and outside the company; behaves in a professional manner, consistent with the company philosophy and ethics policy
• Role model—Is consistent and fair when dealing with people; honors personal commitments and models company philosophy values in personal interactions
Administrative Support and Technician Individual Contributor Competencies
Makes Decisions/Solves Problems
• Makes effective decisions, even when dealing with limited or ambiguous information
• Breaks down complex problems into manageable components to better identify the root cause of the problem
• Makes well-informed and effective decisions/recommendations for addressing problems/opportunities within own area of responsibility
• Involves and informs others, as appropriate in identifying issues, problems, opportunities, and developing solutions
• Thinks issues through, anticipates problems, and takes action to prevent them or minimize their impact
• Develops innovative/creative approaches to problems/opportunities that achieve desired outcome
• Considers multiple factors (e.g., internal/external customer requirements, time constraints, costs, and desired outcomes) when making recommendations/decisions
• Follows up with colleagues/team members to ensure that the agreed upon action/decision is completed by colleagues/team members
Drives for Results
• Strives to go beyond what is expected
• Assumes personal accountability
• Takes quick, decisive action to capitalize on opportunities, minimize potential problems, and accomplish goals
• Takes initiative; does all that should be done, not just as directed or required by job description
• Takes responsibility for own decisions, actions, and results; accepts blame and shares credit, when appropriate
• Demonstrates enthusiasm and a willingness to take on new challenges, responsibilities, and assignments
• Works with a sense of urgency to complete projects or tasks within budget and on time, meeting or exceeding customer’s expectations
• Prioritizes more critical and less critical activities and tasks
• Organizes and schedules self and resources to ensure completion of projects and tasks
• Uses effective methods for storing and retrieving important information
• Effectively plans, organizes, tracks, and follows up on multiple priorities
Promotes and Champions Change
• Willingly changes direction or behavior in response to changing priorities
• Adapts style to be appropriate for each situation
• Remains productive during periods of ambiguity, uncertainty, and change
• Is flexible and adaptable; changes own activities with little notice; is prepared for change as the department’s priorities change
• Demonstrates support of a change by being able to communicate the what, why, and how behind the change, as well as the impact on key stakeholders (e.g., customers, team members, and department)
Pursues Personal Development
• Quickly masters new or unfamiliar concepts needed to perform effectively
• Actively seeks out development activities to enhance job, improve skills, add value, and increase knowledge
• Regularly reviews strengths and weaknesses and develops plans to build and strengthen abilities needed for success on the job
• Asks for feedback from others (manager, peers, professional network, and other team members) to enhance self-insight and job performance
• Seeks manager’s advice, support, and coaching on development plans
• Takes ownership for personal development by creating development plan and following through on developmental actions and commitments
Demonstrates a Collaborative Style
• Presents ideas and facts clearly and effectively in writing (e.g., e-mails, reports, and customer correspondence) and demonstrates a strong professional image
• Effectively communicates (orally) facts, ideas, opinions, or concerns with people at all levels in the organization (peers, team members, senior management, etc.)
• Instills trust and confidence; is open, honest, and approachable
• Behaves in accordance with the beliefs and commitments expressed in the company philosophy
• Projects a professional image in appearance, communication, and behavior
• Maintains composure during times of stress; acts appropriately in good times and bad
• Collaborates and cooperates with team members/colleagues to accomplish shared goals; supports others when requested
• Promptly and completely responds to requests and provides information and resources to other teams, functions, or business units
• Effectively plans, prepares for, and conducts meetings
Important Note: It may be observed that as you go down the management levels, the content of the number attributes in each category goes up. This is a proof of the strategic belief that an organization becomes strong through its competent workforce.
The performance assessment is carried out on two fronts:
• Accomplishments ratings
• Leadership competency ratings
“O”—Outstanding completion of job responsibilities. Extraordinary accomplishments and results against goals. “Setting the bar” for others.
“H”—Highly effective in fulfilling job responsibilities. Considering the degree of difficulty of goals, resources available, and changes throughout the year, excelled in accomplishments.
“P”—Performing well in fulfilling job responsibilities and finds ways to “raise the bar” on (continuously improve) own performance AND considering the degree of difficulty of goals, resources available, and changes throughout the year, accomplishments against goals were fully satisfactory.
“N”—Needs improvement in meeting ongoing job responsibilities and improvement needed in results and accomplishments. May be responsive but needs to increase initiative and find ways to continuously improve. Should be able to improve with coaching, feedback, and an improvement plan.
“U”—Unsatisfactory: Significant gaps in fulfilling job requirements or achieving results. Immediate and sustained improvement required.
On a Scale of 1 To 5
“1”—Low Problematic
Is not demonstrating capability, or perhaps contrary behaviors are observed. Behaviors hinder overall results/performance—a shortfall of this individual.
“2”—Inconsistent Demonstration
“3”—Fully Demonstrating
Understands the organization’s high expectations and consistently demonstrates proficiency/effectiveness. Actively works to further develop the skills and behaviors required to “raise the bar” on their own performance.
“4”—Very Proficient
“5”—High Demonstration Role Model
Is seen as a role model; demonstrates mastery of the associated skills, competencies, and knowledge; is frequently considered a benchmark for others to emulate and learn from. Generally sets the bar for others.
ACHIEVING PERFORMANCE EXCELLENCE (APEX)
Figure 3.4 depicts the process for APEX.
APEX is an important business process to drive high performance throughout the organization and hold all employees accountable for delivering top performance. This process ensures effective performance management through the following four phases.
FIGURE 3.4
Process for achieving performance excellence.
Planning: It includes the following:
1. Goal setting
2. Competencies
3. Development plan
4. Leadership model
This is where commitment and ownership of the performance are built. Here, employees ask, “What is the organization striving for? How can I contribute to its success in my role? What skills and competencies do I need to make this contribution? At this stage, the employee and the manager work to establish goals and agree on competencies. The development needs to achieve these competencies are established and both of them commit to meeting the goals and exceeding the expectations.
Business Drivers: We discussed the examples of business drivers above in objectives development for strategic planning. Here, employees ask, “What must I accomplish so that I can raise the bar of my performance to a higher level?” This kind of approach aligns employees to work for their unit’s success and ultimately to the organization’s success.
Execution: This is where the progress on goals is tracked and coaching and feedback are provided to ensure continuous improvement in performance. Here, the employee asks, “Am I on the right track to meet my goals and performance expectations? What can I do to raise the level of my contribution? The manager asks, “How can I help you to succeed?” Here, a midyear progress check is required.
Evaluation: This is where multiple inputs are required:
• The employee’s self-assessment
• Direct manager’s assessment
• Functional manager’s assessment
Here, employees ask, “How did I do against my goals? Has my contribution exceeded as per the expectation of the organization?” Here, the manager needs to use judgment to differentiate, recognize, and reward the levels of performance.
Quick Tips to Improve Goal Setting
Table 3.5 gives quick tips to improve goal setting.
Quick Tips to Improve Goal Setting
Issue/Problem |
Examples |
How to Improve |
The goal is activity based rather than result oriented. |
Activity based: Train 3 Black Belts. Result based: Remove 3 calendar weeks from work process by Q1. Result based: Reduce order processing cycle time by 25% by the end of Q2. |
Ensure the goal describes the value-added result of these actions: • Who is the customer of these actions? • What does the customer need from these actions? • If all actions are done well, what is left behind? • Why are the actions being done? • If this task/project is successful, how will the organization/customer benefit? |
The goal is too vague and therefore not measurable or verifiable. |
Vague: Ramp production more quickly. Measurable: Ramp up production on Line A as measured by the number of units shipped defect free. Vague: Improve teamwork through skip-level meetings. Verifiable: Use skip-level meetings to improve teamwork, measured by defined roles and responsibilities with no gaps/overlaps. Further customers do not experience last minute rework owing to product plans not agreed to. Team members are not complaining about each other to the manager but are able to work out differences without manager intervention. |
There is no way to tell if this goal has been achieved, or if the progress is being made toward the goal: • What results are you trying to produce? • What is important about the result (how many, how well, cost, when completed)? • What number would you track to evaluate this factor? • What level of performance will be good enough? If you can’t measure the goal with a number, describe good performance: • What would you see about the result that means it was done well? • How would you do better if this effort was successful? • What would we hear people saying about the result that means it was produced well? • What would the customer say? |
The goal is written at the wrong level of the organization (manager vs. subordinate level). |
The vice president’s (VP’s) goal of “Release product to XYZ manufacturing by Q3” should be a business unit’s goal. VP Goal: Design workflow processes to improve time to market for all new products |
These are the goals you would delegate to someone in your organization: • Is this worth measuring at your level? • What unique value do you add? • What is the result you contribute to the effort? |
A measured goal is listed but there are no targets. |
Measure only: Improve high performer turnover rate. Measure with a specific target: High performer turnover rate of less than or equal to 5%. |
There is a measure for this goal but no specific target to be achieved: • How many, or what percent, do we need to achieve to consider this a success? |
The cost (time and resources) of tracking the measures will exceed the value of the data. |
A review of the measure of customer satisfaction shows more than 16 possible measures. Creating action items for all of them will likely cost more than what the data are worth. |
There are too many measures to track, the measure will be too costly to track, or there is no way to collect the data required. • Will an existing tracking system be “good enough” to use? • Will the value of the data from a new tracking system be worth the cost of collecting the data? |
Performance Improvement Plan (PIP)
Through this plan, the organization tries to upgrade itself. The customer and shareholders no longer consider just reaching last year’s level of performance acceptable. Expectations arise for an organization, and likewise they must for all employees.
Under APEX, everyone will be focused on continuous performance improvement. All employees should want to work toward achieving their goals. Here, it is recognized that some employees will have more trouble raising their level of performance than others.
Employees are responsible for their performance and performance improvement, with the aid of feedback and coaching from their manager. Each employee is entitled to early, honest, and constructive feedback. By providing this early communication, problems can hopefully be avoided. Prevention is the best course of action.
If an employee does not fully and consistently meet expectations, however, then a manager and an employee will need to engage in corrective action to raise the employee’s level of performance. The employee needs to be placed on a PIP and the manager will need to follow the Performance Improvement Process.
• A PIP is the responsibility of the employee to develop and act upon, with guidance from his or her manager.
• The employee is required to demonstrate immediate and sustained improvement.
• Consequences for unsuccessful completion of a PIP (not immediately improving, or not sustaining improvement) should be specifically identified at the beginning of the PIP and, in nearly all cases, will be termination of employment.
• The typical time frame is 90 days—this gives the employee the opportunity to make the necessary adjustments/improvements, to be sustained. If, however, immediate and sustained improvement is not observed, the PIP can be ended.
• No multiple PIPs. If the employee is not successful, or performance begins to deteriorate again, the employee is not eligible for another PIP.
