THE BUILDING BLOCKS OF HIGH-PERFORMING ORGANISATIONSCase Study, Concepts and Debatable Ideas
Kenny OngCNI Holdings Berhad
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Intro: CNI
1. 19 years old2. Core Business: MLM3. Others: Contract Manufacturing,
Export/Trading, eCommerce, F&B Retail4. Malaysia, Singapore, Brunei, Indonesia, India,
China, Hong Kong, Philippines, Italy, Taiwan5. Staff force: ± 5006. Distributors: 200,0007. Products: Consumer Goods and Services
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How do you recognize a high-performing organization?
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“…in the past 18 months, we have heard that profit is more important than revenue,
quality is more important that profit, people are more important than profit,
customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our
performance is inconsistent"CEO, Anonymous
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High-Performance Companies?
1. Business is good?2. People are good?3. Everyone is good?4. Mission is good?
Be very careful of your company’s definition of high-performance before you embark on anything
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Simple, selfish and debatable definition:
What is a High-Performing Organization?
An organization that consistently achieves what it was created to do or what it set out to do
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High-Performing Organizations – The Building Blocks
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The Building Blocks - starting from HR
Succession Planning (Business Continuity)
Talent Management
Differentiation
Performance Management System
Budgeting + Planning
KPIs
BSC
Business Model
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The Building Blocks - starting from HR
Succession Planning (Business Continuity)
Talent Management
Differentiation
Performance Management System
Budgeting + Planning
KPIs
BSC
Business Model
The Hardware
The Software
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Summary: Today’s presentation
1. Business Model
2. Strategy
3. Resources
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1. Building Block #1: Get the right Business Model first
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• How to fail without trying
1. Wrong Business Model
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The Roadmap to Failure Fred Wiersema and Mike Treacy
Perf
orm
ance
Time
Clear Sailing
Today’s performance
Ad-hoc Tactics
Denial & Defense
Doom Projections
Overdue Failure
The Moment of Truth
XPerformance
Freefall
Tomorrow’s actual
performance
Downpresure of Unclear Strategy
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Denial and Defense
• “It’s not really good value our competitor is offering, because it doesn’t include a lot of our features.” - ABC vs Air Asia
• “It’s good value but not in our preferred customer market.” - ABC vs Toyota
• “Sure they’re hurting us, but with their unfair advantage, what can we do?” – ABC vs MILO
• “The rules we are playing by have always worked before” – AMEX vs VISA
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The Roadmap to Failure Fred Wiersema and Mike Treacy
Perf
orm
ance
Time
Clear Sailing
Today’s performance
Ad-hoc Tactics
Denial & Defense
Doom Projections
Overdue Failure
The Moment of Truth
XPerformance
Freefall
Tomorrow’s actual
performance
Downpresure of Unclear Strategy
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Ad Hoc Tactics• Selectively hold discounts to hold business that has
started to go elsewhere• Introduce new promotions, terms, conditions, and offers to
confuse and cloud the market• Beef up customer service by adding people to fix mess-
ups and quicken delayed shipments• Delay capital investments and adjust accounting methods
to portray quarterly financial results more favorably• Introduce “new and improved” products that are new in
form, but not in substantive ways that are of consequence to purchasers
• Introduce Balanced Scorecards and Performance Management Systems
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The Roadmap to Failure Fred Wiersema and Mike Treacy
Perf
orm
ance
Time
Clear Sailing
Today’s performance
Ad-hoc Tactics
Denial & Defense
Doom Projections
Overdue Failure
The Moment of Truth
XPerformance
Freefall
Tomorrow’s actual
performance
Downpresure of Unclear Strategy
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“What is the moral of the story?”
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What is the Business Model?
USP
Market DisciplineProfit Model
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Intro: Market Discipline
• Mamak stall
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Intro: Market Discipline
"They are the most innovative""Constantly renewing and creative""Always on the leading edge"
"A great deal!"Excellent/attractive priceMinimal acquisition cost and hassleLowest overall cost of ownership
"A no-hassles firm"Convenience and speedReliable product and service
"Exactly what I need"Customized productsPersonalized communications
"They're very responsive"Preferential service and flexibilityRecommends what I need
"I'm very loyal to them"Helps us to be a success
Product Leadership
OperationalExcellence
CustomerIntimacy
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Intro: Market Discipline
* Treacy & Wiersema, The Discipline of Market Leaders, 1995
Product/Service Attributes Relationship Image
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Intro: Market Discipline
* Treacy & Wiersema, The Discipline of Market Leaders, 1995
Product/Service Attributes
Price
Quality
TimeSelection
√√
Smart Shopper
Relationship Image
Operational Excellence: Quality and selection in key categories with unbeatable prices
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Intro: Market Discipline
* Treacy & Wiersema, The Discipline of Market Leaders, 1995
Product/Service Attributes
√
Brand
TimeFunction
√√
Best Product
Relationship Image
Product Leadership: Unique products and services that push the standards
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Intro: Market Discipline
* Treacy & Wiersema, The Discipline of Market Leaders, 1995
Product/Service Attributes
√
√
√
√
Service Trusted Brand
Relationship Image
Customer Intimacy: Personal service tailored to produce results for customer and build long-term relationships
Relations
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Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Strategy: Disciplines
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Summary: Today’s presentation
1. Business Model
2. Strategy
3. Resources
Done
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2. Building Block #2: Set the Strategies
Dangers of BSC, KPIs and other evils sold by Consultants
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“…in the past 18 months, we have heard that profit is more important than revenue,
quality is more important that profit, people are more important than profit,
customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our
performance is inconsistent"CEO, Anonymous
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Before we start…
In the old days of HR…• Average training hours per staff• % of staff attending training• # of training programs• % of training programs conducted• Training needs analysis conducted• Competency models developed• Training budget as % of payroll
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Before we start…
Moral of the story…1. Innovation:
– Business models– Products– Services
2. Market Leadership3. Competitive differentiation
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“What is the moral of the story?”
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What is Strategic Planning?
Strategic
Planning
Variables:
Research
Growth
Risks
Stakeholders
Constraints
SWOT
Misc.
Output:
Plans
Priorities
KPIs
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Before we start…
Which comes first?1. Strategies -> KPI?2. KPI -> Strategies?
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Financial
“To satisfy our stakeholders, what Financial objectives must we accomplish?”
Internal Process
“To satisfy our customers, in which internal business processes must we excel?"
Customer
“Who are our target customers?
What is our value proposition?”
Learning & Growth
“What capabilities and tools do our employees require to help them execute our strategy?
Focus: Corporate Alignment
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Revenue Growth
Base Retention
Share Gain Positioning Adjacent Market
New Business
Operational Excellence
Product Leadership
Customer Intimacy
Competencies Information Systems
Motivation, empowerment,
alignment
Financial
Learning & Growth
Internal Process
Customers
Investment Strategy
Productivity Market Value
Linking BSC to Strategy
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Financial
Learning & Growth
Internal Process
Customers / Distributors
Revenue Growth ProductivityMarket Value
Department Operations
Supplier & Alliances
External Involvement
Target Markets
Products/ Services
Channel Strategies
Human Resources
Technology
Information & IntelligenceSystems &
Processes
Focus: Corporate Alignment
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Example: Selection of KPIs for BSC
•Customer satisfactionCustomer loyaltyMarket shareCustomer complaintsComplaints resolved on first contactReturn ratesResponse time per customer requestPrice relative to competitionTotal cost to customerAverage duration of customer relationshipCustomers lostCustomer retentionCustomer acquisition ratesPercentage of revenue form new customersNumber of customersAnnual sales per turnover
•Win rate (sales closed/sales contact)•Customer visits to the companyHours spent with customersMarketing cost as a percentage of salesNumber of ads placedNumber of proposals madeBrand recognitionResponse rateNumber of trade shows attendedSales volumeShare of target customer spendingSales per channelAverage customer sizeCustomers per employeeCustomer service expense per customerCustomer profitabilityFrequency (number of sales transactions)
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Financial
Learning & Growth
Internal Process
Customers / Distributors
Example: 1st Level BSC & KPIs
Profit after Tax. Revenue. Cash-to-cash cycle. Operating cash flow
Customer Complaints. Customer Acquisition Rate. Product Availability. Product Quality & Service. Renewal Annual Subscription. Distributor Rank Achievement. No. of Active Distributor. No. DC/Regional Sales. Distributor with commission
Customer Database Availability. Accuracy of Forecast Planning. Continuous Improvement. Response Time to Customer Needs. Perfect Order Fulfillment. Inventory Turnover. Number of Effective Sponsoring Program. On Time Delivery. No. of Effective Training. Number of Effective A&P
% of staff evaluated on Core Competency Framework. % of staff with Career Development Plans. No. of training hours completed per staff. % of staff with access to strategic information. Q12 Index. % staff evaluated on Culture alignment
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Sample: Other 1st Level KPIs across industries…
Financial Services Retail Telecommunications
•Maximize ARPU•Minimize Churn•Mutichannel customer service
•Understand customer behavior related to customer conversion, acquisition, and retention•Single view of customer•Multichannel customer experience•Personalized customer experience
•Anticipate and prevent churn despite compensation•Increase number of products per customer•Turn call center information opportunity to up-sell and cross-sell•Increase customer satisfaction and loyalty
Hospitality Travel & Leisure Manufacturing
•Personalized customer experience•Maximize share of wallet•Player/customer loyalty•Multichannel customer service
•Increase customer loyalty and preference•Maximize customer revenue•Improve service quality and efficiency•Capture and close sales opportunities
•Single view of customers across supply chain•Zero-error order capture•Streamline opportunity to cash processes•Leverage investment in ERP and backoffice systems
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Lagging and Leading KPIs
Lagging
Leading
Historical, Outcome, Results, 1st Level, Usually Financial or tangible, Quarterly and Annually
Current, Indicators, Drivers, 2nd Level onwards, usually non-financial or intangible, Weekly, Monthly and Quarterly
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Developing ‘Driver’ KPIs
Customer Retention % Lagging, 1st Level
Customer Satisfaction Index
Leading, 2nd Level
On time delivery
Time to market for new products
TNA %
Defect levels, warranty claims
Leading, 3rd Level onwards
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What is the Objective?
‘Do-or-Die’ KPIs for CNI• Revenue• ARPU
• Sponsoring• Retention
• Commission Plan (BDP)• Product• Corporate Image
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Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Strategy: Disciplines, Priorities, and KPIs
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The McPlaybook*
Make it easy to eat• 50% drive-thru• Meals held in one
hand
Make it easy to prepare• High Turnover• Tasks simple to learn
& repeat
Make it quick• “Fast Food”• Tests new products
for Cooking Times
Make what customers want• Prowls market for new
products• Monitored field tests
*Adapted from: Businessweek , Februrary 5th 2007
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Operational Excellence
• Competitive price
• Error free, reliable
• Fast (on demand)
• Simple
• Responsive
• Consistent information for all
• Transactional
• 'Once and Done'
Customer Intimacy
• Management by Fact
• Easy to do business with
• Have it your way (customization)
• Market segments of one
• Proactive, flexible
• Relationship and consultative selling
• Cross selling
Product Leadership
• New, state of the art products or services
• Risk takers
• Meet volatile customer needs
• Fast concept-to- counter
• Never satisfied - obsolete own and competitors' products
• Learning organization
Strategy: Disciplines, Priorities, and KPIs
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• Operational Excellence• Move know-how from top performing
units to others• Benchmark against best in class• Ensure operations training for all
employees• Use disciplines like TQM for continuous
learning to reduce costs and improve quality
Strategy: Value Disciplines
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Strategy: Value Disciplines
• Customer Intimacy• Capture knowledge about customers• Understand customer needs• Empower front line employees• Ensure that everyone knows the
customer• Make company knowledge available to
customers
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• Product Leadership• Reduce time to market• Commercialize new products fast• Ensure that ideas flow• Reuse what other parts of the company
have already learned• Ensure there are multiple sources of
funding
Strategy: Value Disciplines
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Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Strategy: Value Disciplines
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Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Strategy: Value Disciplines
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Sample KPIs for Each Discipline
Operational Excellence
• Price• Selection• Convenience• Zero Defects• Growth
Customer Intimacy
• Customer Knowledge
• Solutions Offered• Penetration• Customer Data• Customer-success
focus
Product Leadership
• Marketing• Functionality• # of Successes• # of Failures• Learn from key
users• Interdisciplinary
teams• Pipeline
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MBO – Sources of KRAs and KPIs, Targets
1. Department Scorecard [E3], 2. Employee’s Job Description, 3. Department SOP, 4. Department Quality Objectives, 5. Corrective Action Requests (CAR), 6. Preventive Action Requests (PAR), or 7. Special Projects relevant to the employee.
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E3 – Department BSC
Financial Perspective
Goals Measures Targets CAPEX OPEXQuality
Innovation
On Time Delivery
Budgeting
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Individual Performance
1.0 Key Results
Area (Max 6)
2.0 Goals and
Targets for Q1
3.0 Achievements and
Efforts for Q1
4.0 Merit* 5.0 Rating (Merit x Weight)
6.0 Appraiser
Overall Comments/ Feedback
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Summary: Today’s presentation
1. Business Model
2. Strategy
3. Resources
Done
Done
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3. Building Block #3: Resource Management
The art and science of allocating, aligning, and managing Resources to
strategic plans
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Resource Management: Some thoughts…
Two major roles of Resource Management:1. Provide real-life CONSTRAINTS to
strategic planning2. Provide RESOURCES to realize strategic
plans
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Resource Management: Some thoughts…
1. Resource Management = Performance Management
2. Performance Management = Resource Management
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Managing Performance
Month 1
Performance Planning
Month 12Performance Appraisal
Month 2-11?
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• Beating a Dead Horse
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Most Common Desperate Performance Improvement methods
1. Send for more Training2. Enforce more Incentives (positive/negative)
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Mager and Pipe
• Analyzing Performance Discrepancies
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Alignment: 4-Wheels Model
Culture
Business
ModelStrategic Planning
StructurePerson
Leadership
Resources
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Alignment: Framework
• Focus point• Alignment• Quality• Innovation & Differentiation• Risk taking• Performance Management• Corporate obsession• Decision making
Culture
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Alignment: Framework
• Org Structure• Job Design• C&B• Policies & procedures• Decision making• Job fit• Management Systems• BSC and KPIs• Decentralized & Empower
Structure
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Strategy: Framework
• Role modeling• Vision/Mission/Philosophy• Leadership Style• Delegation & Empowerment• C&B, Promotions• Sense of Urgency• Speak regularly about Performance
Leadership
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Strategy: Framework
• Recognition• Recruitment• Training• Profit sharing• Values• Motivation• Self Efficacy• Awareness• Useful Competencies• Career aspirations• Attribution (control)
Person
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Strategy: Framework
Enablers• Technology• Equipment• Materials• Human• Intellectual
Property• Partners• Property
Resources
Funding • CAPEX• OPEX
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Alignment: 4-Wheels Model
Culture
Business
ModelStrategic Planning
StructurePerson
Leadership
Resources
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Operational Excellence
Customer Intimacy
Product Leadership
Organization, jobs,skills
Management systems
Information and systems
Culture, values,norms
Each Discipline Requires Different Priorities & Resources
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Operational Excellence
•Central authority, low level of empowerment•High skills at the core of the organization
•Disciplined Teamwork•Process, product- driven•Conformance, 'one size fits all' mindset
• Integrated, low cost transaction systems•The system is the process
•Command and control•Quality management
Organization, jobs, skills
Management systems
Information and systems
Culture, values,norms
Each Discipline Requires Different Priorities & Resources
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Organization, jobs,skills
Management systems
Information and systems
Culture, values,norms
Product Leadership•Ad hoc, organic and cellular•High skills abound in loose-knit structures
•Concept, future-driven•Experimentation and 'out of the box' mindset
•Person-to-person communications systems•Technologies enabling cooperation
•Rewarding individuals' innovative capacity•Risk and exposure management•Product Life Cycle profitability
Each Discipline Requires Different Priorities & Resources
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Organization, jobs,skills
Management systems
Information and systems
Culture, values,norms
Customer Intimacy
•Empowerment close to point of customer contact•High skills in the field and front-line
•Customer-driven•Variation and 'have it your way' mindset
•Strong customer databases, linking internal and external information
•Strong analytical tools
•Customer equity measures like life time value•Satisfaction and share management•Focus on ‘Share of Wallet’
Each Discipline Requires Different Priorities & Resources
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Incentive Problems
Problem with Incentives in managing performance:• Most people are confused or unsure about
compensation tools• Some people misuse compensation tools
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What to Pay?
• Pay for Service• Pay for Job• Pay for Performance• Pay for Competency
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Performance and Incentives
1. Internal Equity1. Internal Job Rates2. Performance differentials
2. External Competitiveness1. External Job Rates - Benchmarking2. Demand & Supply
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What’s the Difference?
• Increment
• Bonus
• Promotion
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Compa Ratio Table
Use this if your company: • Pays for Performance, and • Pays for Job rates
Def:Mid-Point = Mid Point of Pay Grade
Grade E2
Min RM2,000
MID RM2,500
Max RM3,000
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Compa Ratio Table
< 0.7 ≥0.7 - ≤0.9
>0.9 - <1.1
≥1.1 - ≤1.3
> 1.3
5
4
3
2
1
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Compa Ratio Table
< 0.7 ≥0.7 - ≤0.9
>0.9 - <1.1
≥1.1 - ≤1.3
> 1.3
5
4
3 5%
2
1
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Compa Ratio Table
< 0.7 ≥0.7 - ≤0.9
>0.9 - <1.1
≥1.1 - ≤1.3
> 1.3
5 9
4 7
3 9 7 5% 4 3
2 2
1 0
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Compa Ratio Table
< 0.7 ≥0.7 - ≤0.9
>0.9 - <1.1
≥1.1 - ≤1.3
> 1.3
5 15 12 9 8 7
4 12 9 7 5 3
3 9 7 5% 4 3
2 6 4 2 1 0
1 4 2 0 0 0
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Dangers of Direct Incentives
1. lessen internal motivation, 2. switch to mercenary mode, 3. do something and do not do something else, 4. bribe and fraud culture, 5. easier for competitors to recruit, 6. lessen teamwork & helpful culture, 7. less and less impact for same value, 8. mockery of base salary and employment
contract, 9. rebellion from non-incentivised staff, 10.end up incentivising everyone for everything?,
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Other Performance Review processes
1. Result Planning schedule inc. BSC, Budget2. Quarterly Performance Appraisals3. EMC – sales performance4. QMS – non-sales performance5. Divisional meetings6. Annual Appraisals7. Specialized KPI committees8. CAR, PAR, SCAR KPI improvements9. Internal Audit & MSD – process problems10. HRM & TND – people problems11. Supervisor Induction – PM training12. Talent Management
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Employee Distinction?
< 0.7 ≥0.7 - ≤0.9
>0.9 - <1.1
≥1.1 - ≤1.3
> 1.3
5 9 8 7 6 5
4 8 7 6 5 4
3 7 6 5% 4 3
2 6 5 4 3 2
1 5 4 3 2 1
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Employee Distinction?
< 0.7 ≥0.7 - ≤0.9
>0.9 - <1.1
≥1.1 - ≤1.3
> 1.3
5 20 15 12 8 5
4 18 12 9 5 3
3 9 7 5% 4 3
2 1 1 1 0 0
1 0 0 0 0 0
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Employee Distinction
Average Rating
Rating Multiply Factor
Example Rating
Example Increme
nt> 4.1 5 2 4.2 8.4%
> 3.3 – 4.1 4 1.2 3.5 4.2%
> 2.3 – 3.3 3 0.75 2.8 2.1%
> 1.3 – 2.3 2 0.5 1.8 0.9%
≤ 1.3 1 0 1.0 0%
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Employee Distinction
Group I(Talent Pool)
Group II( Potential)
Group III( Performance)
Group IV(Counseling)
2 3 4 5
23
45
PER
FOR
MA
NC
EPOTENTIAL• Identify
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Curse of the Bell Curve
‘A’ Staff
‘B’ Staff
‘D’ Staff
‘E’ Staff
‘C’ Staff
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More Problems….
1. cost of evaluation vs. gains of evaluation2. defer achievements of a good year to next3. barely achieve so that next target is not high4. spread improvements over several years5. value reducing actions to increase performance6. most ratings are 4 or 5, new people are 3
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Before I forget…
• Re-train Appraisers• Train new Appraisers
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Business Situation vs. HR
Upturn Flat Downturn
Fight Complacency
Sharpen Edge
Keep Momentum
Conquer
‘Change’ mgmt
Reduce Fat
Continuity
Everyone Happy
Innovation
Acquire
Profits
Build momentum
Sales
Cash Flow
Talent Mgmt
Stack R&D
Slowdown Hiring
Early wins
Top Talent focus
Stack Sales
Increase attrition
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The Business of business is Business, not Human Resource
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Thank You.
soft copy of slides: www.totallyunrelatedrandomanddebatable.
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