The monitoring, evaluation, accountability, and learning (MEAL) concept should be incorporated into the future corporate performance management system, according to Dr. Loai Fathi Naser, an Assistant Professor in Management at Israa University. He adds that MEAL must be implemented and promoted throughout the formal structure and culture of an organization. In this article, Dr. Naser further discussed how organizations can prepare for managing performance in the future and how to use KPIs as navigational instruments.
Trends
What were the key trends in Organizational Performance in 2021 from your point of view?
2021 is now over. Organizations have faced many challenges throughout the year that affected its operations. The key trends in organizational performance management that emerged in 2020 and seem to continue in 2022 are digital transformation, artificial intelligence capabilities, polishing skills of remote working, and emphasis on wellness and mental health.
Which of the existing trends, topics, or aspects within Performance Management have lost their relevance and/or importance, from your point of view?
I think that polishing skills for remote work lost its importance due to the gradual shift to the normal situation after the COVID-19 pandemic has ceased.
What does the corporate performance management system of the future look like?
According to the Top 3 Enterprise Performance Management Methods by profit.co., contemporary management processes are moving towards customization, flexibility, and agility. These are some of the key changes considered essential for any progressive performance management system. To adhere to agility and flexibility, the performance system should apply and promote the MEAL concept within the organization’s formal structure and culture. Organizations should focus on team performance vs. individual performance, clearly define KPIs and criteria for compensation, and integrate digital tools and technology deployment in the performance appraisal process.
What will be the major challenges in managing performance in the future and how should organizations prepare for them?
One of the major challenges in managing performance in the future is the lack of chances for managers to check in on an employee’s performance and keep them aligned because of neglecting consistent communication and the opportunity of having informal communication between the manager and employee. Designing key performance indicators (KPIs) for performance management would help organizations attract and retain a good caliber of staff through financial and non-financial means. Staff should have professional development plans that are regularly reviewed and updated.
How is technology impacting the way organizations conduct strategic planning and manage performance? Any specific technology tools you would like to mention?
Organizations should integrate digital performance tools into their team’s workflow to see positive results from the process. Making performance feedback a natural part of day-to-day work makes coaching employees and managers alike easier. One software that is available in the market is Synergita. It measures and monitors employee performance in real-time. Synergita also tracks the progress of employees. It helps organizations strengthen their HR tech stack to build high-performing teams.
How is sustainability impacting the way organizations conduct strategic planning and manage performance? Any specific sustainability aspects you would like to mention?
The practice of corporate sustainability leads to sustainability of performance and increases the efficiency of strategies, leading to greater performance. Among sustainability dimensions, it is important to note that the social sustainability aspect has the highest impact, followed by the economic and environmental aspects.
Practice
The COVID-19 pandemic has caused disruptions in our day-to-day lives, social relations, economies, and business dynamics. Given the impact of the crisis, what do you think are the specific changes in the way strategic planning and performance management is being conducted post-COVID?
Performance management under COVID-19 needs planning for uncertainty and developing a range of scenarios. It needs a clear view of a starting position in the wake of the pandemic. A social feedback system provides the employee with a larger amount of feedback (often 50 or more instances over the course of a year) from peers and others. This reduces the emphasis on receiving feedback from the employee’s manager alone. Recalibrating KPIs is essential to ensuring that remote work actually works.
What should be improved in the use of strategy and performance management tools to make an organization even more resilient to future crises?
Well-designed KPIs work as vital navigational instruments. They give a picture of the current level of the organization’s performance and find out whether the business has achieved its goals and objectives. KPIs work as standards for future performance during crises.
While navigating through these challenging times, what would you consider a best practice in Performance Management?
Honest performance appraisals for employees need leadership skill rating. The result of an employee’s good performance could be increased production, customer growth, and an enjoyable work environment. However, poor employee performance may result in just the opposite. One of the tools used to gauge employee performance throughout the year is a performance appraisal.
How does benchmarking support the improvement of performance management and target-setting systems?
Organizations engage in benchmarking to achieve the industry’s best practices and to keep abreast with competitors. Benchmarking serves as a performance management strategy by setting performance standards. It identifies performance gaps by comparing actual with target performance.
Background
Dr. Loai Fathi Naser has over 17 years of experience in program management and organizational development. As an assistant professor, he has more than 12 years of experience in academic teaching and training in Business and Management courses such as Corporate Governance, Entrepreneurship, Microfinance, Institutional Development, Strategic Planning, Project Management, Human Resource Management, Business Communication, and Total Quality Management.
As an organizational development consultant and trainer, he leads teams in organizing program evaluation, organizational capacity assessment, financial transparency and compliance, and conducting capacity-building training and coaching.
Having a clear vision for your organization and being aware of its external environment to prevent threats and capture opportunities instead. This is how strategic thinking works for Fadi Al-Jafari, a Senior Management Consultant, Leader of Data Analysis and Visualization Center, and Project Manager at The KPI Institute. In this interview, he explains what makes a strategy and performance manager successful and how organizations can make sound decisions on the spot.
Trends
What were the key trends in Organizational Performance Management in 2021, from your point of view?
Organizations are working on digitalizing performance management systems (PMS) and ensuring that individuals have the right digital tools to perform their duties as they work remotely nowadays.
Which of the existing trends, topics, or aspects within Performance Management have lost their relevance and/or importance from your point of view?
Regarding the vast changes in external environments, organizations are shifting their strategy planning and execution practices from the traditional approach to the agile approach to make sure they capture the external opportunities and avoid the external threats in the early stages. This will help them adapt in a fast manner to those changes.
What does the corporate performance management system of the future look like?
Digitalized PMS that connects and measures individuals, teams, and organizational work in a timely manner to help top management make decisions on the spot
What will be the major challenges in managing performance in the future, and how should organizations prepare for them?
The major challenges would be how to measure the individual’s performance right and without any biases, use the data to predict future the individual’s performance, and benefit from the data they have to improve the individual’s performance. One solution is to use digital PMS that collects data regularly and measures individual performance based on the tasks they work on and then use data analytics tools to draw conclusions and predictions based on the analysis.
How is technology impacting how organizations conduct strategic planning and manage performance? Any specific technology tools you would like to mention?
Technology is a key element in supporting strategy. Technology supports environmental scanning tasks as organizations can nowadays collect and analyze data on a timely basis. They can analyze their internal environment as well as their external environment. In addition, technology also helps in predicting trends.
Technology helps organizations gather real-time data and big data. Having such big real-time data helps organizations make sound decisions based on facts and figures. Using tools like Tableau and Power BI helps an organization create real-time dashboards that show the trends and changes in data. In addition, organizations can use those tools to predict outcomes to support proactive planning.
How does sustainability impact how organizations conduct strategic planning and manage performance? Any specific sustainability aspects you would like to mention?
Sustainability requires organizational objectives and strategy to consider the social welfare of the employees and communities.
Practice
The COVID-19 pandemic has caused disruptions in our day-to-day lives, social relations, economies, and business dynamics. Given the impact of the crisis, what do you think are the specific changes in the way strategic planning and performance management is being conducted post COVID?
Organizations should focus more on creating an intelligence unit that monitors the minor and major changes in the external environment on a continuous basis. This would help them identify risks or new trends that could affect the environment. This would also help organizations become more proactive and make decisions about needed actions once they have identified the risks.
What should be improved in using strategy and performance management tools to make an organization even more resilient to future crises?
Organizations should shift their mindsets from the usual strategic management approach to a more agile approach in planning and execution. This will help organizations adapt to changes faster based on external circumstances.
While navigating through these challenging times, what would you consider a best practice in Performance Management?
To start with an organizational architecture framework of the PMS, ensure that cascading and alignments are conducted properly. This also enables organizations to develop a governance framework, processes, and procedures to efficiently run the system and avoid internal silos.
How does benchmarking support the improvement of performance management and target-setting systems?
Benchmarking is a process that involves identifying and learning from the best performers in the organization. It helps develop new and challenging targets and measures that will support organizational growth.
Research
Which organizations would you recommend to be observed due to their approach to managing performance and its subsequent results? Why?
I would say Saudi Vision 2030 is a good example to be studied and followed at the national level. Organizations can follow this example and learn how the vision realization offices in Saudi handle such vision and ensure alignments between different entities. The results that Saudi achieves are astonishing, and it can be a great case study.
What aspects of Performance Management should be explored more through research, given their importance in practice?
Alignment approach between business units, departments, and divisions. This approach is requested a lot by clients to know how to handle such alignments internally.
What are the key competencies of a successful business leader ( C-level Executive)?
The business leader must show strategic thinking in terms of having a clear vision for the organization and having a clear goal of what they would like to reach in the future. The business leader must employ analytical and critical thinking to analyze the external environment, capture opportunities, and avoid external threats that could affect the organization.
What key competencies would make a Strategy and Performance Manager succeed nowadays?
An important one is strategic thinking — to be able to analyze different situations that the organization may face and to have a proactive personality that would allow them to capture changes in the market before they arise. It is crucial to identify the opportunities, capture them before the competitors do, and determine any threats to prepare the organization to deal with them.
What processes and tools do you look at when differentiating a successful performance management system from a superficial one?
To have a successful PMS, organizations must have a clear design and architecture of the PMS itself within the organization, and it must have top management support. Moving forward, the strategy office should develop this system internally and develop needed tools and needed processes that include but are not limited to: Strategic Planning Tools, Processes and Timeline; KPI Selection Tools and Processes, Departmental Cascading and Alignment Tools and Processes; Employee Cascading Tools and Processes, and Performance Culture Tools and Processes. In this manner, the organization will perform standardized tools and processes that support the internal alignment between all internal stakeholders. This will ensure clear steps for analyzing internal and external environments, standardized KPIs following best practices, and more aligned objectives on different levels.
In addition, it’s also important for the top management and strategy team to communicate the strategic objectives, values, and organizational identity to all employees. Unfortunately, some organizations keep those elements hidden from the employees, and this leads to misalignment internally, losing organizational direction, huge gaps, and silos between departments and negatively impacting employee engagement. Missing one of the abovementioned points would weaken the PMS within the organization.
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Background
As a Management Consultant, Fadi has been involved in multiple projects related to designing, implementing, and auditing Performance Management Systems. This includes formulating objectives, selecting KPIs, documenting KPIs, and selecting initiatives on both the strategic and functional levels as well as developing balanced scorecards and dashboards to fit organizational needs.
As a Facilitator, Fadi has been delivering Certified Strategy Business Planning Professional, Certified KPI Professional and Practitioner, Certified Performance Management Professional, Certified Employee Performance Management Professional, Certified BSC Professional, Certified Data Analysis Professional and Certified Data Visualization Professional, in both Arabic and English languages.
Any successful and developed performance management system must include the following main stages: planning, implementation, evaluation, and improvement.
Institutional performance management begins with the planning stage, which ends with the preparation of the strategic plan—a plan developed for several years that aims to bridge the gap between the current situation and the desired future vision. Determining the plan’s link with financial planning and the rest of the material, human, and technical resources and property, as well as at the planning stage there is a link with the general framework of risk management as it is necessary to determine the type of risk that could impede the implementation of the strategic objectives and how to deal with the risk during its occurrence, which requires the existence of institutional agility in leadership while dealing with it.
At this stage, the policy development guide is adopted, which is considered one of the basic capabilities to ensure the implementation of strategic objectives and government directions. Indicators and targets must also be set because of their importance in planning, monitoring and evaluation to see what has been achieved of the strategic objectives.
The execution phase involves ensuring the plan’s successful implementation of the strategy. This is where operational action plans are developed and implemented, which include strategic initiatives and projects that ultimately lead to achieving the results of the strategic objectives and bridging the performance gap in the strategic objectives that were measured through performance indicators. This phase also involves the application of a general framework for change management, which is designed to bring about a positive shift that moves the organizational unit and organization from one state to another in order to achieve the strategic objectives in an efficient and effective manner, which may deal with changing the organizational structure, policies, programs, procedures or processes in accordance with the application of the ADKAR model criteria for change management.
It is also possible to choose initiatives and projects (especially the strategy) from the reality of the organizational unit’s work plan, to which the concepts of change can be applied. At this stage, performance indicators are measured, the main purpose of which is to know the level of achieving the strategic goals. Therefore, on all indicators, whether strategic or operational, there are “Lead” indicators that measure efforts to achieve the goals or “Lag” indicators that measure the long-term results of the strategic goals, on all of them to contribute to achieving the strategic objectives of the organization. Any indicator that is far from achieving this should be excluded from the measurement.
Measuring performance indicators contributes to the enhancement of institutional learning, motivates employees to achieve higher levels of strategic performance, and enhances accountability and transparency in the institution. At this stage, implementation begins through the general framework of risk management in terms of identifying risk treatment options, the method of treatment, preparing a risk treatment plan, and following up on the extent of implementation of said plan.
Policies that support the realization of the strategy are applied through the preparation and development of an implementation plan that includes various resources, timetables, risk management, communication, monitoring, and evaluation. Monitoring is necessary to assess the effects of the policy so that there is a possibility to adjust the plan and methods of implementation (if required).
A policy follow-up mechanism must also be set up and this can be done by developing and measuring policy effectiveness performance indicators. Finally, at this stage, strategy governance was addressed, which is the framework for action that ensures the implementation of the strategy and the achievement of its objectives in terms of forming work teams, follow-up, review, accountability, reporting, and evaluation.
The third stage is the evaluation stage, and it includes auditing processes, which aims to provide accurate data on how to implement the main stages of the general framework for operations management by defining, designing, documenting, applying, measuring, and following up on the performance, improvement, and development of processes. Institutions can also measure the maturity of processes through several criteria, namely: strategic alignment, culture and leadership, personnel, governance, methodologies and methods, and information technology.
They can also evaluate services through several criteria, including: linking services to strategic directions and goals, focusing on customers, defining performance standards and indicators for services to reach customer happiness, evaluating service delivery channels, measuring and evaluating customer happiness and adding value to them, and evaluating the human resources that provide services. This stage also includes evaluating indicators and targets, as well as evaluating policies and measuring their effectiveness.
The fourth and final stage is the improvement stage, and it includes reviewing and updating the strategic plan. There are two types of review and update of the plan: periodic annual review and comprehensive update of the plan after the end of the plan period of 3 years or 5 years. This stage also includes updating and improving operations, and there are 7 main steps to do so. The processes are: selecting the work team, analyzing the current process, developing indicators of the results of the process, determining the extent of process stability, determining process viability, and determining the feasibility of an improvement.
This stage also includes the improvement of services as the mechanism for improving them depends on various improvement sources, such as suggestions, complaints, satisfaction studies, studies and analyses, the results of measuring service performance indicators, and others. As for the steps and stages of improvement, they are: describing and analyzing improvement opportunities, identifying improvement action, evaluating the priority of applying improvement action, and evaluating the possibility of applying improvement action.
And here comes the role of benchmarking, which is the process of searching for and implementing best practices that increase the rate of improvement by providing the finest models and achieving improvement goals that lead to creating outstanding performance for the organization. It is a systematic and continuous process of comparison, measurement, learning, and continuous improvement by studying different models inside or outside the entity to reach the same level or excellence by applying the developed methods based on the results of the study. Comparisons are also one of the most important drivers of change in organizations, particularly when the outputs of comparison are employed in offering initiatives and innovations that improve previous work methods or lead to unprecedented successful methods which achieve pioneering in various fields.
Finally, analysis and improvement tools must be used to analyze all the problems facing the organization, including those related to the results of performance indicators. And in addressing the cases in which analysis and improvement tools are used, some important tools in analysis were explained, such as: Pareto analysis, mind map, brainstorming, the Five Why tool, and others.
About the author: Dr. Hisham Ahmad Kayali is a Strategic & Performance Management Specialist who has worked with the Dubai municipality. He participated in the full cycle of updating Dubai Municipality’s strategic plan based on balanced scorecard (BSC) perspectives. That included linking the strategic objectives to critical success factors, key performance indicators, and initiatives for the cycles of 2010-2014, 2013-2015, and 2016-2021. He has a Phd in Economic Science at Plekhanov Russian University of Economics.
Sell the mobility, not the vehicle! Sell the light, not the lamp! Sell the cooling, not the AC!
In a continuously changing market with intense competitiveness and constant shifts in the customer’s behavior, traditional manufacturers have to keep adapting and innovating to maintain their positions.
An innovative business strategy that shifts the traditional way of doing business is servitization, a process through which the producers go from a product based model to a Product-Service System (PSS). Companies are no longer producing and selling products alone. They are selling services, integrated solutions, and an overall greater experience for the end consumer.
According to Miying Yang and Steve Evans’ study on “product-service system business model archetypes and sustainability,” a generally agreed-upon way to classify the PSS is to include it in one of the following models:
Product-Oriented – when the provider sells the product that ends in the buyer’s ownership. Other services such as consultancy or maintenance can be sold.
Use-Oriented – when a business provides customers with the utility of a product while keeping its ownership. Examples are renting or leasing.
Result-Oriented – when the company sells the results of a product or the value being delivered to the customer. The customer only buying the consumed light instead of lighting products is a relevant example of this typology.
To remain relevant in an always-evolving environment, companies should seize every opportunity to enhance their performance and obtain competitive advantages. Servitization is a win-win model benefiting all the involved parties that’s why an increasing number of businesses are approaching it.
Competing through advanced services is, first of all, an opportunity for growth and profitability as the revenue streams are more diverse. By offering complimentary ongoing services, the income gates certain stability due to recurring and incremental revenue streams.
The relations with the clients are strengthened as their satisfaction is increasing and their loyalty is drive-up. Greater alignment with the customer needs facilitates a long-term relationship and a better relationship with the customers means higher barriers to competition.
Using a servitization model can become an important source of insights for further innovation because providers are still connected to their service which eases the detection of improvements and can spark ideas for new services. Additionally, services are more labor-dependent and less visible which makes them more challenging to replicate and become a sustainable source of competitive advantage.
With all the above benefits also come challenges that companies face in their process to adopt servitization. The biggest problem results from the aversion to change. Old habits die hard while shifting towards servitization requires fundamental changes in the way companies are doing business, affecting every aspect from the strategic approach to everyday operations.
It is a time-consuming transition that needs to be done gradually to avoid putting pressure on the enterprise’s resources. Also, it requires adjustments in the existing capabilities, new technologies need to be deployed to support the services offered, and the employees need to develop related competencies. Customers’ perception is another challenge that companies face, as clients may be reluctant to adopt an unfamiliar servitized solution.
Selling Performance: Pay-per-lux and Power by the Hour
Philips Lighting, currently activating as Signify launched the ‘Pay-per-lux’ model, a ‘lighting-as-a-service’ offer for its customers. Signify handles the entire lighting service – design, installation, maintenance, and upgrades while the customers pay a monthly service fee for light. The program considers circular principles and uses advanced technologies like AI and the Internet of Things.In this model, Signify keeps the ownership of the lighting systems and offers a five-year performance contract, which is based on a series of key performance indicators such as light level, uptime, and energy savings.
The solution was first deployed for the National Union of Students from the United Kingdom. Signify is responsible for the lighting system for 15 years, while NUS pays a quarterly fee. As a result, the energy costs have been minimized while the technologies used are continuously updated, and annual checks are done to assess the system’s health and prevent maintenance.
Rolls-Royce manufactures engines for the aviation industry and implements a servitization model named Power by the hour through which customers have access to a service package by a dollar-per-flying-hour payment mechanism. CareServices solution offers a variety of services to customers such as engine monitoring to predict potential maintenance problems and ensure the aircraft is ready to fly on time, efficiency services to balance the low fuel consumption with optimized flight operations, asset and safety management solutions, in addition to world-class customer support.
The most recent service agreement has been signed with South Korean airline T’way Air. It will benefit from a service concept based on predictability and reliability that will secure the cost of operating, maintaining, and enhancing aircraft availability.
To sum up, there are many other companies from different industries that are moving their focus towards servitization. Even though it is not shielded from risk, the model can create significant benefits in relation to resource efficiency, growth, customer relationship, resilience, and impact on competitiveness. For a traditional manufacturer, a gradual transition from product commercialization to a servitize offering can become a decisive factor in its long-term sustainability.
To ensure a smoother transition from the traditional way of doing business to servitization, join the Certified Strategy and Business Planning Professional course offered by The KPI Institute. Develop the right plan and strategy for your business in achieving servitization. For further details, visit kpiinstitute.org.
The customer experience is based on all the interactions a customer has with a company or brand during their relationship. This spans every touchpoint with an establishment which includes accessing them via in-store, online, customer support, and product which encompasses every relationship a customer has with a brand. In essence, customer experience refers to the customer’s view of a brand based on the totality of each interaction.
If you are a business owner, you know that every interaction with your customers, big or small, can impact their experience and how they feel about your brand. You cannot create a unique experience until you know where and when your customers are interacting with your brand. Not all customers know what they specifically want from you, so making this step more enjoyable will help them focus and engage with your brand.
As a business, if you can understand how customers perceive your brand, you can provide them with a better customer experience. Actively collecting customer feedback to understand what is working well and what needs improvement provides a clear picture of how you and your customer service team can improve the customer experience over time. You can use this valuable information about your customers to identify improvement opportunities and enhance the customer experience. Armed with this understanding, employees in the organization can better identify gaps between the desired and current performance, and refocus efforts on new areas of customer service that can be improved.
Importance of a positive customer experience
One thing is for sure: to provide a positive experience, you need to know your customers better than ever. A positive customer experience can also be a huge ROI benefit given that nearly 65% of consumers consider customer experience to be more important than the price of a product or service. This is important to note because if the customer experience is poor, other areas of the business will be affected. Improving customer experience would not only positively affect other areas of the business but also be a great way to increase profit margins. Therefore, creating a positive customer experience is critical to the success of your business because a happy customer is more likely to become a repeat customer who can help you increase your income.
When customers are happy and satisfied with their interactions with your business, it leads to a positive customer experience that increases customer loyalty, repeat customers, and customer retention, as well as encourages branding. When customers feel valued and can appreciate the overall experience of doing business with your brand, they become loyal customers that can help your business expand. Not only that, but loyal customers help spread positive feedback about your brand and attract new customers through referrals.
A great customer experience is based not only on the quality of the products and services you offer but also on how you invite customers to interact with your brand across the multiple touchpoints that you have available. This results in great customer reviews through positive word of mouth that can promote your brand in ways you never imagined possible.
Once you get to know your customers well enough, you can use that knowledge to personalize every interaction. That is why it is so important to provide an amazing experience and make customers want to keep doing business with you. Customers are your best asset in building your brand awareness.
