Transforming into a Performance-based Organization

Transforming into a Performance-based Organization

by Victor Tsang, Partner, HMI Consulting Limited

The company is a successful toy manufacturer with headquarter in Hong Kong and multiple manufacturing facilities in Dong Guan, Guang Dong Province. It provides OEM manufacturing services on electronic toys to brand name customers in the US, Europe and Japan. Like other Hong Kong manufacturers started in the mid 80’s, the company rode on the economic boom during the 90’s and grew from a small factory into a large manufacturing enterprise with multiple offices and manufacturing facilities.

However, the business environment was getting tougher in recent years that the profit of the company dropped two years in a row. The ever increasing raw material and labour costs, the tightened business policies by the Chinese Central Government, and the fierce competition from Mainland Chinese manufacturers were some of the factors contributing to the declining profit. Moreover, customers were increasingly demanding while employees were less motivated. The management sensed that a change in the current management practice was needed to revitalize the company, getting it back to the growing track.

• Profit declined due to a number of reasons, but there was no systematic structure and approach to identify the root causes, to develop appropriate solutions, and to prioritize the implementation of solutions.
• Employees were not proactive in suggesting improvement ideas which can move the business forward due to the parenting style of management
• Employees were sensitive to any initiatives that could potentially affect their remuneration or responsibilities
• Employees claimed that they were increasingly busy, but the productivity/output of the company stayed at around the same level
• The communication between business units/departments was minimal that there was seldom sharing of good practice within the organization
• There were a lot of meetings taking place, but many times no solid actions were taken
• The same problems occurred over and over again, and there was nobody clearly accountable for the rectification of them.

The seemingly unrelated problems were actually interrelated with each others. In view of the challenges, the company asked HMI Consulting to review the company’s corporate strategies and management system so that an appropriate solution could be developed.

HMI Consulting adopted the Performance Excellence Model to help the client in identifying the disconnects and root causes within the organization leading to poor performance. With the findings, HMI Consulting then designed a performance enhancement solution for the client, and assisted in the implementation of the recommended solution.

• Stage 1: Business Strategy Formulation
• Stage 2. Performance Management System Development (Corporate/Departmental)
• Stage 3: Performance Appraisal System Development (Individual)
• Stage 4. Improvement Initiatives
• Stage 5. Talent Development
• Stage 6. Compensation System Design

In order to tackle the aforementioned issues, HMI consultants guided the client through the different processes of the Performance Excellence Model:

1. Strategy Review and Formalization
Reviewed the organization’s vision, mission, values, strategic directives, and short/long term business plan in details, and conducted facilitation workshops with the senior management to formalize the company’s business strategies.

2. Strategy Communication
Conducted communication workshops with all employees to align the direction of the company, and ran a series of focus-group sessions with selected employees to collect their feedbacks and concerns, assuring their commitment to the company’s strategies.

3. Performance Management System Development (Corporate/Departmental)
Developed a strategic performance management and reporting system with a consistent responsibility structure so that the actual responsibilities and accountabilities of business managers were better clarified. Business strategies were translated into quantifiable targets, and performance gaps were identified that business managers worked in a collaborative manner to close the gaps via improvement initiatives.

4. Performance Appraisal System Development (Individual)
Developed a competence-based and results-orientated performance appraisal system that allowed objective, systematic assessments of individual performance and skills levels, and provided ongoing training to equip supervisors with the necessary know-how to conduct effective and efficient performance assessments,

5. Improvement Initiatives
Conducted training workshops to equip the employees with the tools and methodologies to frame and prioritize problems, analyze root causes, formulate solutions and develop implementation plans, for the closing of the performance gaps identified by the performance management system.

6. Talent Development
Established a talent development mechanism to develop the competencies of the employees required for the future growth of the company. Provide targeted trainings and exercises designed to close the competency gap identified by the performance appraisal system.

7. Linkage with Compensation System
Linked the performance management and performance appraisal system with the compensation system of the company to foster a fair and transparent pay-for-performance system.

The clear definition and communication of the corporate strategies revived the passion of the employees and aligned the direction of the whole company. It also set the stage for the implementation of the performance management and appraisal system that were the core engines of a performance-based organization. The revamped performance management system enabled more effective communication between managers in different business units, as well as between supervisors and staff regarding performance requirements, job objectives and areas to be improved. The clearly defined responsibility structure, together with the quantified strategic and operational goals, facilitated the effective use of time and resources, minimized the unnecessary effort spent on issues not contributing the company’s goal. With the fair and transparent performance assessment mechanism, employees were encouraged to collaborate for the good sake of the company. The linkage of the performance management and appraisal system to the compensation and incentive scheme encouraged enhanced performance, while the improvement initiatives and talent development mechanism fostered a positive continuous improvement culture in the company.