Introduction to Management

Fourth edition

by Richard Pettinger

The need for multiple measures in performance assessment and evaluation

It is clear that no single measure of performance is ever likely to be effective. This does not prevent organisations or their top managers from taking single measures nevertheless – it is easier, and many managers enjoy bonuses based on single and simple measures – eg: the share price, sales volumes, profit percentages.

Increasingly, there is also required an ethical dimension; and this is because of increasing concerns over the ways in which companies and organisations conduct their affairs, together with greater legislative pressures and drives for all round transparency in all dealings. The result is the need and (increasingly) the drive to evaluate performance from a greater range of points of view; and this is given substance when the complex approach is much more likely to produce a substantial reflection of genuine success or failure.

These complex approaches can be broken down into the following components.

  • Disclosure of information in terms of volume, quality and honesty.
  • Distribution of returns and rewards on the basis of equity and involvement of all stakeholders.
  • Employment issues, pay, benefits and conditions; industrial democracy; equality of opportunity; information, participation and consultation.
  • The nature of community involvement and relations with the environment.
  • The nature of political involvement and donations to political parties, candidates, vested interests and pressure groups; donations and support for charities and 'worthy causes'.
  • The nature of products and services - with particular emphasis on contentious areas such as tobacco, alcohol, drugs, pharmaceuticals and military equipment.
  • Pricing policies.
  • Productivity and distribution.
  • Attitudes to the supply side.
  • Attitudes to market and supplier dominance and dependency.
  • Marketing policies and attitudes to customers, consumers, client groups; the nature and quality of advertising.
  • A general respect for people and life.

The softer components of organisational strategy and purposes have to be considered. As well as delivering products and services, there is increasing awareness of how things are carried out. This leads in turn to the identification of categories of concern; and these may be divided into the broad - the world, the nation, the local community; and the narrow - industry, the organisation, the sector. There are two sets of issues present, as follows:

  • The range of concerns that ought to be considered by organisations.
  • Public interest, public lobbies and pressure groups; specific interests including socio-political groups, lobbies and fringe interests.
  • Ordinary common decency.

This is a highly qualitative and subjective checklist. However, organisations that enjoy high levels of esteem and respect always do so because their general conduct stands up to social and ethical scrutiny as well as commercial viability. It is very difficult to find examples where commercial success has been achieved without consideration of social factors or public acceptance except in the very short-term. In the longer-term, organisations have to operate in, and be acceptable to, their staff, customers and communities. For this to occur, a positive, mutual and continuing respect is necessary. This is always damaged, and often destroyed, when the general integrity of particular organisations is called into question. Organisations have therefore to have full knowledge and understanding of what is acceptable, both globally and locally. This extends to all spheres of business operation. Marketing initiatives strike a balance between being positive and exciting, while at the same time stopping well short of making claims for the product that are simply not true or presenting something in ways unacceptable to sectors of the communities. Successful staff management is based on mutual respect and trust, as well as effective work organisation. General management is always more successful where those involved understand why they are doing things in particular ways and can trust the organisation to lead them successfully and effectively in the proposed directions, and then deliver the desired results. The production of shoddy or inadequate goods is only feasible until another organisation comes along with improved, adequate and satisfactory products with which to replace them.

Administration

Administration exists to support primary functions. Administrative functions create and operate procedures that are used to:

  • control expenditure;
  • provide information;
  • attend to the human side of enterprise;
  • monitor progress;
  • resolve problems.

Measuring the performance of support functions and administration refers first and foremost, to the contribution that they make to primary activities. To preach perfection, no other position is sustainable. Any system or procedure that hinders or dilutes primary performance is to be abolished and replaced, or reformed.

The best procedures and systems are simple and clear to understand by everyone concerned. They attend to:

  • finance: providing clear and adequate information as to who organisational resources are being used so that judgements may be made as to their effectiveness;
  • human resource management procedures and functions: in the areas of discipline and grievance handling; health and safety at work; consultation and participation; negotiation (where collective bargaining still exists); and procedures with a quick and effective resolution of problems and disputes;
  • progress chasing and quantity assurance: so that blockages, shortcomings and shortfalls can be identified early and addressed successfully; so that customer orders can be prioritised and reconciled;
  • quality assurance: picking up customer complaints early and resolving them quickly.

The main problems with administrative systems and procedures arise when they become too complex to be handled quickly and effectively. This leads to teams of staff being taken on in support functions that have then to be sustained by the primary activities. This is true for both public services and private sector activities. Any extensive recruitment and development of support functions is to be seen in this context. Again, no other position is sustainable.

Problems also arise when head offices of giant and complex corporations, public services, and multinational companies ask for performance targets, especially revenue targets, because of the cost of their own sustenance and maintenance.

More specifically, they arise in public services when cuts in primary services are made to accommodate requested expenditure on support functions.

Qualitative measurement of performance is dependent upon the expertise, knowledge and understanding of those who measure it. It depends for success on knowing and understand­ing each of the elements indicated above. Each element - objectives, motivation, appraisal, payment, and ethics or absolute standards - have to be reconciled with each other; and then in turn, reconciled with:

  • the level of service that customers, clients and users desire;
  • the organisational form, structure, skills, knowledge and attitudes required to do this;
  • the collective and individual values, attitudes and behaviour required;
  • a detailed understanding and acceptance of the required nature of performance;
  • commitment to remedy failure, build on success and continuously improve.

Attention to these aspects is the key to sustained high levels of performance. Except in the very short-term, high levels of high quality output are not possible where morale is low, where staff are unvalued and under-rewarded, where standards of probity and honesty do not exist and where performance in all areas is not measured and appraised as effectively as possible.

How performance is measured

The most important fact is continuity - in the assessment, measurement and appraisal of performance, drawing conclusions on a regular basis so that a full watching brief is maintained, and so that early warning is given of things that may be going wrong.

Ideally, this is punctuated with regular team, peer and organisational meetings arranged for the specific purpose of reporting on performance. Given that no activity takes place in total isolation, performance reporting must consider the effectiveness of working relationships and coordination of activities, as well as the legitimate interests of those both within the organisation, and from outside.

Organisations and their managers should also regularly review the actual measures and indicators used and the ways in which they are used to ensure that these continue to be valid, reliable and capable of demonstrating what they are supposed to demonstrate. This extends to received wisdom, generalisations and self-perceptions, both from inside and outside the organisation, as well as more specific measures. As examples, the following questions may be asked.

  • 'Why do we have performance related pay?' - 'because it motivates the staff and targets performance'.
  • 'Why do my staff complain that I am inaccessible? I am always consulting with them.'

These questions may have genuine answers as above, or not. The answer ought to be subject to constant scrutiny. More generally, other examples raised in exactly the same way need full and careful analysis and consideration. Otherwise, the points raised simply become institutionalised. One or two such features are likely not to be too damaging (though they should always nevertheless be remedied). Each feeds off others however, and too many such questions nearly always reflect complacency within managerial ranks. For these (and all other such questions), quantitative and qualitative approaches are required to gather real information; and they then have to be considered from the required managerial standpoint. In turn, it is consequently essential to identify the right points of inquiry for all managers and groups of managers as a check on their own performance, and on their contribution to that of the organisation as a whole.

Points of inquiry

The following points of inquiry need to be treated from two different angles:

  • those that apply to each function;
  • considerations of confidence and expectations.

So each of the following lists requires separate evaluation from each of these angles, and this is to ensure functional performance and stakeholder confidence.

Human resource management

  • The numbers of strikes, disputes and grievances; movements in the numbers of disciplinaries and dismissals; the extent and movements in the operation of disciplinary grievance and disputes procedures.
  • Movements in the numbers of accidents and injuries; movements in the numbers of self-certificated absenteeism.
  • Levels of disputes and grievances among those who enjoy perceived high levels of job satisfaction and job security.
  • Movements in staff turnover; movements (especially decreases) in organisational, departmental, divisional and functional staff stability.
  • Increases in administration and support functions at the expense of front line operations; increases in the administration and reporting workload placed on front line operations.
  • Pay differentials between the top and bottom of the organisation.
  • Pay increases are awarded to those at the top of the organisation at the expense of those at the bottom.
  • Those at the top of the organisation receive benefits (e.g. cars, computers, mobile phones) based on status rather than operational necessity.
  • Pay awards, promotion and other enhancements are given for administrative and procedural efficiency rather than direct performance effectiveness.
  • Performance related pay is achieved by those in head office and other support functions, and not by those at the front line.
  • Those at the top of the organisation are treated more favourably than those at the bottom in matters of discipline, grievance handling, disputes.
  • Those in support functions are treated more favourably generally than those at the front line.
  • Discipline, grievance and dispute problems are institutionalised and not resolved; and these procedures take a long time to work through.
  • Pay awards are paid in arrears rather than on time.

Production and service delivery

  • Production targets, especially where production output bears no relationship to targets set; this is as much a cause for concern when targets are far exceed as when they are not met.
  • Production, volume and quality, especially where these fall short of projections.
  • Increases in customer complaints about one aspect of product performance, for example, failure of one component.
  • Increases in customer complaints about total product performance.
  • Increases in customer complaints about packaging, delivery, appearance, durability and after-sales service.
  • Increases in customer recalls because the organisation has found the product to be faulty.
  • Increases in supply problems, access to components and raw materials.
  • Increases in internal disputes between those responsible for gaining raw materials, those responsible for direct production, and those responsible for sales and distribution.
  • Increases in unit costs, variable costs.
  • Inability of fixed costs to sustain commercial operations and activities.
  • Production and information technology is not/no longer suitable for purposes for which it was bought or designed.
  • Difficulties in use of production and information technology; lack of user friendliness.
  • Maintenance issues and problems with production and information technology; balance of preventative and emergency/crises maintenance.
  • Extent and nature of training offered, demanded and available; extent of obligation to understand this/make it available.
  • Identifying where blockages occur, why, what causes them (e.g.: component and raw materials supplies, availability of packaging); their effects on total effectiveness.
  • New products and developments: proportion of new products that get to market; actual and required research, development capability and expertise; research and development as a percentage of total organisational activities/fixed costs.

Marketing and sales

  • Currency and effectiveness of marketing information and research.
  • Sources of customer satisfaction and dissatisfaction; the benefits that customers expect to accrue from purchase/ownership of the products and services; the benefits that actually accrue as the result, and where the differences between the two lie.
  • Changes in customer perceptions - especially from positive to negative (though a change from negative to positive may cause increases in demand with which the organisation is unable to cope).
  • Organisational perceptions of 'good value' are seen by customers as 'cheap'.
  • Benefits to customers perceived by producers are not/no longer perceived to be benefits by customers themselves.
  • Marketing and promotion campaigns do not have the desired/projected effects on sales.
  • Marketing and promotion campaigns cause major problems due to lack of full investigation, assessment and analysis.
  • Lack of full market knowledge and understanding - often based on market research that generates 'generally favourable impressions' (i.e. 'would you buy' rather than 'will you buy').
  • Poor public relations that are usually symptomatic of organisational lack of sureness, capability or faith in what it is doing.
  • Required and desired images and identity, and not generated by marketing and advertising campaigns.
  • Marketing rebounds - unlooked for (usually negative) consequences of marketing, advertising and promotion activities; this may also be a problem when very high notes are scored and the organisation is unable to satisfy increased demand.

Communications

  • Quality and volume of written, oral, formal and informal communications.
  • Extent and content of grapevine.
  • Extent and nature of communication blockages and misunderstandings.
  • Frequency and value of team, group, department, division and functional meetings; their agenda; outputs and outcomes.
  • Extent and use of formal communication channels; length of time taken; general effectiveness; effects on operations, administration, decision-making processes.
  • Extent and use of informal channels; length of time taken; general effectiveness; specific effects on operations, administration and decision-making processes.
  • Effectiveness of formal and established systems - especially of consultation, participation and access to organisation information.
  • Nature and value of information to which different groups have access.
  • Organisation and operational confidentiality; perceived organisational and operational confidentiality.
  • Information systems: ease of access to information; capacity for the acquisition, storage, retrieval and analysis and processing of information.
  • Visibility and accessibility of managers and supervisors.
  • Language used: the simpler and more direct this is, the more likely it is that what is said will be understood.
  • Integrity of communications: the extent to which they mean what they say and say what they mean.
  • Hidden/secondary agenda: the messages that are actually received by those receiving them; the messages that the organisation is actually putting across; reflected in the nature and language of what is said and written.

Each of these elements is to be considered in relation to all stakeholders and interested parties; and this means assessing the quality of external communications as well as internal.

Organisational

  • Poor quality and volume of communications.
  • One way (or perceived one-way) style of communications where orders are handed down from on high.
  • Lack of adequate consultation.
  • Increases in awards against the organisation by industrial tribunals, the health and safety executive, trading standards.
  • Increases in adverse publicity and media coverage; decreases in favourable publicity and media coverage.
  • Increased psychological distance between levels of the hierarchy and between different functions.
  • Presence of physical distance between managers and those at the front line; lack of recognition of the effects of this and of problems caused/inherent.
  • Lack of autonomy on the part of those working away from head office; the constant need to refer back to head office.
  • Bad/negative/adversarial management style: often compounded by priorities on administration and procedural efficiency rather than operational success.
  • Lack of clarity of overall purpose; lack of attention to subordinate goals, aims and objectives.
  • Poor organisational standing in its community: often caused by a combination of being a known or perceived bad employer; and using production processes which are known or perceived to harm or pollute the environment. This is, in turn, com­pounded when the organisation refuses to take its full place in its community.
  • Inaccessibility of managers and supervisors; lack of communication and coordination between functional and operational groups, departments and divisions.
  • Balances and proportions of front line with support and administration activities; and balances and proportions of resources allocated to each.
  • Complexity/simplicity of procedures; accessibility and understanding of procedures; time taken and resources used in their operation.
  • Extent of crisis management; the matters that fall into the 'crisis' category.
  • Attention to work patterns and methods; extent of alienation, divisive work practices; attention to job and work improvement methods.
  • Extent and prevalence of 'them and us' divides between: head office and outlying functions; primary and support functions; managers and staff.
  • Organisational politics: identifying where the real power and influence lies; why; whether this is appropriate; the extent and influence of over-mighty subjects and over-mighty departments.