Article: Creating and Managing Performance Centric Culture

• Recently, the Malaysian government, in its efforts to revamp and renew Malaysia Incorporated – a policy initiated in the mid-80s, has committed to instilling a performance-centric culture to the government machinery and public sector. The major Government-linked companies, like the nation’s primary power supplier, Tenaga Nasional, and the largest communications company, Telekom Malaysia, have been quick to follow the Government’s lead. This is definitely a step in the right direction. However, an initial commitment in itself is not an assurance of the successful creation of the desired performance-centric culture.

• But before we go further, let us, for the purpose of this presentation, come to a common understanding of what performance-centric culture is. By our definition, it is a culture wherein people are focus on activity and behavior that will lead to excellent performance. There is a sense of pride and wanting to do better than just the norm. There is also a sense of competitiveness and belief there is always room for improvement. There is an awareness of what is needed to be done to exceed current performance levels. At all levels, there is seriousness about getting results. Rewards are based on objectives and quantifiable measurements.

• In today’s scenario, organizations cannot take performance for granted, more importantly in the Asian countries. In the 1990s, with the bullish market and expanding economy, most organizations performed well in terms of financial results. The overall buoyancy of virtually every industry obscured the quality of internal processes. I do not think it is an exaggeration to propose that, back then, anybody setting up any business and adhering to some basic business tenets and standards would have done well. To perform well financially, there was no need to drive performance within the organization. Organizations could afford to incur high operating costs and wastages and yet make good profit margins.

• However, organizations with such practices cannot survive in a matured economy – as many organizations discovered to their detriment in the ensuing years. These days, for an organization to do well, it is just not about getting the strategic direction right. Achieving operating excellence is equally important. This is where the emphasis on performances enters the picture.

• • Creating a performance-centric culture helps organizations to:

• • Link strategic direction to operation excellence

• • Identify a mission-critical talent pool that will meeting to future business growth requirements.

• • Develop a high-performance workforce.

• • Develop a pool of highly effective leaders across the organization.

• • Making performance focus an integral part of the internal capabilities and functions.

• Organizations – both public and private – have come to realize the vital importance of developing a culture that prioritizes values and utilizes performance as a fundamental means of achieving organizational goals. Why, then, are so many organizations unsuccessful in creating a performance-centric culture? Why do they struggle to achieve targeted performance results? We all know of the importance of performance-focus, yet we seem unable to gain any significant ground in the area. It is not just a few organizations that are faced with this predicament. The organization that has demonstrated marked success in performance management is the exception rather than the rule. Why?

• To say that organizations do not have strategic direction is not true. Establishing strategic direction is a key component of the planning function of many of today’s organizations. To say that organization do not have performance processes in place is also not true. In fact, many Performance Management Systems are already in place. But here is where we may garner some inkling as to the source of the problem. These Performance Management Systems seem to serve the function of merely tracking data but are quite subjective in the actual performance assessment exercise. As such, and this is unfortunate, rewards and recognitions are not based on actual performance simply because many measurements cannot be quantified at the operational level.

• Make no mistake; there is something very seriously wrong. Many people have the assumption that having a Performance Management System in place means that they have created a performance-centric culture. I submit that we have focused too much on the implementation of the performance processes in the hope that a system in place is sufficient to drive performance. It is not What is lacking – to a severe degree – is the actual knowledge on performance management. The truth is that we do not really understand how to measure performance of the human capital. Worse, it has now progressed to a case of the “blind leading the blind”. In many instances, superiors have no idea what their subordinates’ performance measures are or should be. Performance appraisals are carried out yearly as a matter of form simply because they have to be done. And nobody takes it seriously because they believe it will not make any difference. Can we honestly call this a “performance-centric culture”?

• The first priority for any organization that desires to create a performance-centric culture is to build the knowledge capacity of the human capital in the area of performance management. Many have acquired a lot of information on the subject of performance management, but many do not have enough knowledge to apply this information in the work setting. This is a very serious problem in most organizations but many refuse to acknowledge the problem or, even worse, are not aware there is a problem. If something does not work, blame it on the tools. If changing the tools still does not produce the required results, blame it on the attitude of the human capital. But think about this - How can organizations get people to perform when they, in the first place, do not know what constitutes performance?

• Let me bring you just a few examples of the many problems facing organizations in the implementation of performance management.

• For instance, people often confuse the various terminologies used in the area of performance management. We cannot even agree on what a Key Result Area (KRA) is and how it differs from a Key Performance Indicator (KPI). To some organizations they both mean the same thing, and are glibly used interchangeably. An objective statement is sometimes termed a KRA by some organizations. Others wrongly categorize an objective statement as a KPI, even when there is no quantifiable element in the statement. There are cases where appraisal forms have a column labeled “KPI” follow with another column labeled “Target”. This lays the groundwork for company-wide mystification, because a KPI comprises of two components – the measure and the target. Why then is there another column for the target? Just imagine the perplexity experienced by someone who just joins a new company and is presented with performance management terminology that defers significantly from that of his previous employer.

• Another major problem is that many have not yet learned the skill – and it is a skill – of developing a quantifiable target for a measure. Example, a common mistake is the use of the measure “delivery on time”. For instance, the target specified is, say, “the 5^th of each month”. How can “the 5^th of the month” be used as a target? Logically speaking, 5^th of the month is a work standard.

• Assuming, though, that you insist it can be used, what does it mean? Out of 12 months, if you do meet this “5^th of the month” deadline for just one month, does it mean you have fallen short of the target? Even if you have submitted your requirements for all the 12 months by the deadline of 5^th of the month, does it constitute performance? If the measure does not help one to improve performance, it is just a waste of time.

• The other problem is how do you know that the reports are submitted on time? Is there any documentation or it is just a guessing game?

• It is even worse if meeting target is defined as a rating of 5, everyone just simply performs at an average level to meet target. No one is interested to go beyond the basic performance requirement. So much for creating a performance-centric culture!!!

• There are also instances where employees are assigned measures over which they have no control in terms of getting result because it was top-down driven. Also, many have no idea as to how to assign weights to their respective measures.

• In the light of such trends, we have no alternative but to agree that we are still largely in the dark when it comes to the implementation of a performance-centric culture. Many fundamentals need to be addressed very quickly and there must be some form of standardization in the usage of the various terminologies.

• There is still a lot to be done, if organizations and governments want to create a performance-centric culture. A malaise of modern-day society is that we have a sore lack of patience and are very often prone to taking short cuts. I would strongly urge that we should first go back to the basic of re-educating everyone on the subject of performance management with an emphasis on practical application – education which is currently lacking in most organizations - before actually trying to put performance management processes in place. We presume that everyone knows how to develop measures. In reality, many lack the understanding of the subject and the know-how to develop quality measures. As the saying goes, garbage in, garbage out. Do not develop measures for the sake of doing it. The objective must be clear: We must seriously want to improve performance holistically.

• • In conclusion, I would like the performance management fraternity to consider the following questions:

• • Does your human capital actually have the knowledge capacity in the area of performance management? Do a reality check.

• • Has the organization strategic direction been translated into operational terms?

• • Is everyone in your organization aware of how the performance management structure impacts on the overall organizational strategy as well as on their own pay packet? Does this awareness motivate them?

• • Is there an air of excitement regarding performance? Do the workers get excited and enthusiastic each time it comes to performance review and the setting of targets for the following year?

• • Are the majority of your personnel conversant with performance management principles and techniques? [The acid test is in the formulating of new measures and targets in response to a change in strategy]

If you are unable to give positive responses to most of the questions, I fear that you would have provided even more evidence to support my morose diagnosis – that the Performance-Centric Culture is more a hopeful wish than a crystallized reality.

I hope I am wrong.

Thank you, learned friends.

About the Author

Anthony EL Tan is the Senior Lead Consultant specializing in the field of Performance Management for Top Foresight.

A certified Strategic Management and Balanced Scorecard Professional from Balanced Scorecard Institute and George Washington University and with more than 23 years of practical consulting experience working with organizations of different industries in the area of Organization Strategic Implementation, it has provided him with an in-depth knowledge and understanding of the real performance management problems and issues associated with managing today’s organization in a challenging business environment.

He is Highly Experienced and a Competent Facilitator with Great Analytical Skills. One of a few consultants who has real practical experience in full implementation of Performance Management Solution.

Top Foresight is a leading Performance Management Consulting Firm in Malaysia providing performance management solution incorporating Cloud Based Performance Management System.

You can reach Anthony EL Tan at : [email protected]