An Effective Performance Management Program for NCEMA - Case Study Example

An Effective Performance Management Program for NCEMA Table of Contents Abstract 1 Introduction 2 1. Performance Management Systems 2 1.1 An Overview of Performance Management Systems 2 1.2 Performance Management Solutions of Similar Agencies 3 2. Financial and Organisational Requirements for Implementing a PM System 5 2.1 Financial Considerations 6 2.2 Staff Organisation and Motivation 7 3. PM System Implementation Plan and Options for NCEMA 8 3.1 General Considerations 8 3.2 Implementation Plan for a software-based PM system 9 3.3 Implementation Plan for a traditional, “DIY” PM system 11 4. A Recommended Performance Management Solution for NCEMA 12 Conclusion 14 References 15 Abstract This paper examines the issues and information available to NCEMA in making a choice of a performance management system to deploy within its organisation. Several different well-known types of performance management programs are first described, followed by an examination of how agencies similar to NCEMA approach the same task. The budgetary, organisational, and philosophical requirements of implementing a performance management system are presented, along with a sensible recommendation for NCEMA for its own program. Introduction The National Crisis and Emergency Management Authority (NCEMA) is the federal organisation of the United Arab Emirates responsible for co-ordinating and managing the government’s response to emergencies and disasters. Coming under the authority of the National Security Council of the UAE, NCEMA is also charged with the development of a national policy regarding emergency response, training, and management of emergency personnel at all levels. (CEMC, 2007) Given these critical responsibilities, it is vital that NCEMA develop and implement a performance management program within its organisation, so that the leadership and people of the UAE can be assured that the agency to which they will turn in times of calamity is operating at the peak of its efficiency and effectiveness. 1. Performance Management Systems The BNet Business Dictionary defines performance management as “the facilitation of high achievement by employees.” (BNet, 2008) This definition, while rather glib, is actually very accurate. A performance management system is a system by which the performance of employees can be measured against a set of objective standards, for the purposes of identifying corrective actions – or by the same token, people or actions deserving special recognition and praise – to improve the performance of employees individually and collectively in relation to achieving the overall goals of the organisation. Some of the different methods organisations can use to fulfill this task are summarised below. 1.1 An Overview of Performance Management Systems Balanced Scorecard: A Balanced Scorecard is a very useful tool, because it is a way in which overall strategy can be expressed in specific, measurable terms. (Evans, EXINFM, 2002, and Kirkman, et al., 2002) In general, the Balanced Scorecard defines objectives in terms of four indicators: Customer Perspective, Internal Processes, Learning and Growth, and Financial. (DaPo, n.d.) These indicators, however, can be modified to best suit the needs of the particular company to which the method is applied. Benchmarking: Benchmarking uses standard measurements within a particular industry to compare an organisation to similar ones. Benchmarking processes are commonly used in institutional settings such as schools and hospitals. Although it is usually thought of as a quality initiative best suited to judging an organisation’s overall performance, it can be modified to a degree. For example, benchmarking processes can be used to compare different departments within an organisation. (Camp, 1995) Continuous Improvement: Combines a quality initiative with a performance management system by focusing on improving customer satisfaction through continuous evaluation and improvements to processes. Continuous improvement was popularised and used most successfully by Japanese companies, where the philosophy is known as “Kaizen”. (Kotelnikov, 2008) Total Quality Management (TQM): Total Quality Management treats every process within an organisation as one which has customer/supplier relationship with the processes before and after it. The process is a balance between continuous improvement and cost efficiency, and can be challenging to implement and use effectively. (BNet, 2008) Management by Objectives (MBO): A management strategy that focuses on goals based on the acronym S.M.A.R.T. : Specific, Measurable, Achievable, Realistic, and Time-dependent. (Bogue, 2005)MBO utilises tracking and feedback methods to monitor progress, and is as much a form of planning as it is a performance management method. Outcomes-Based Evaluation (OBE): Outcomes-Based Evaluation is a very good system for measuring performance in non-profit or government-funded organisations, which do not base their success on customers or profits in the usual sense. (Voelker-Morris, 2004) A related method is Program Evaluation; both start with comparing expected to actual results in any sort of program, and making performance and process changes to minimise the differences between objectives and achievements. These are not all of the different performance management systems that are available, of course, but are some of the better-known methods that might be applied to NCEMA. 1.2 Performance Management Solutions of Similar Agencies The Federal Emergency Management Agency (FEMA) of the United States utilises a system of program evaluation and OBE, in response to a mandate from the U.S. Congress – the Government Performance and Results Act (GPRA) of 1993 – that all government agencies implement a set of performance measures. (FEMA, 2006) One significant requirement under the GPRA is that performance measures not only should be effective for use by the agencies internally, but that the systems should also be sufficiently clear that the Congress can independently assess the efficiency and effectiveness of the agencies’ programs. The general method used by FEMA in measuring performance is to establish a baseline of customer expectations through the use of surveys; the “customers” as they are defined by FEMA are those citizens and others assisted by the agency in the aftermath of disasters. The most recent baseline survey was in 1998, according to the FEMA website. (FEMA, 2006) Based on that survey, FEMA set a number of specific objectives for the agency overall: Distribute 50% of available relief funds within 90 days of a disaster declaration. Distribute 80% of available relief funds within 180 days of a disaster declaration. Be able to successfully complete and close 90% of disaster-assistance programs within two years of the declaration date. Achieve a customer satisfaction rating of at least 90%. (FEMA, 2006) The performance management program does not rely on a single clear method or system, and is administered by a “Labor-Management Partnership Council” comprising seven employees appointed by the unions representing FEMA workers, and nine members of the FEMA management staff. (FEMA, 1994) The Council addresses issues on an agency-wide basis, including matters of workplace safety, training and career development, policy implementation, and performance-improvement programs. (Ibid.) Their recommendations are then disseminated and implemented at the department and section levels by smaller versions of the Council. The American Red Cross, while not a government agency, derives a considerable portion of its annual funding from the U.S. government and so follows a protocol of performance management similar to that mandated by the GPRA. Their solution was to purchase one of the many computer software systems that bundles the various components that are monitored by a performance management program into a user-friendly package. In the case of the Red Cross, they chose the Comshare MPC system, a scalable, multifunctional system that integrated without modification into the Red Cross’ existing computer system. (BNet/Strategic Finance, 2002) The Comshare MPC is an Enterprise Performance Management (EPM) application which deals mostly with financial processes, such as forecasting, planning, budgeting, audit functions, and reporting. The system does not use a specific method of performance management, but rather is constructed in such a way as to integrate with many of the common methods, such as balanced scorecards and ISO. (Azoff, 2003) This is important, because of the need for organisations in which intangible factors weigh heavily on performance management to have a uniform system to manage their operations. A non-profit relief agency such as the Red Cross is exactly the sort of client Comshare had in mind for the MPC system, although it is equally useful for profit-based enterprises as well. The system is not an entirely “off-the-shelf” system, but is about 70% complete; the remainder is customised according to the organisation’s particular needs, and the performance management process they prefer to use. (Ibid.) The Red Cross began the initial installation in late 2002 in its main headquarters in Washington, D.C.; since then, the system has been implemented throughout the U.S., and is in use in some form in Red Cross agencies in many other countries. (BNet/Strategic Finance, 2002) While it should not be inferred that a performance management system for NCEMA should copy either that of FEMA or the Red Cross, these are two useful examples of different approaches to the problem. In the case of FEMA, the preference was for an in-house program utilising the oversight of cross-section committee of management and labour representatives. In the case of the Red Cross, the preference was to utilise a computer program; in essence, substituting technology for people. Both of these approaches have benefits and drawbacks, which will be examined in the following sections. 2. Financial and Organisational Requirements for Implementing a PM System Implementing a performance management system requires money and effort, but because it is usually initially perceived as being something outside the normal business of the organisation, gathering the necessary resources – not only financial, but in terms of effort and support of the people in the organisation – is usually the hardest part of the process. Getting the organisation to “buy in” to the program is essential, and this cannot be achieved without a clear understanding and communication of the costs, risks, and requirements of the performance management system, and the tangible benefits to the organisation that can be expected from successful implementation. 2.1 Financial Considerations There are two areas which will require an investment in order to implement a performance management system. First, there are the system costs themselves; these can encompass such things as a computer software system, or more mundane but equally important requirements such as the printing of new forms and training materials. Second, there are the costs in time and compensation to employees and managers who will be involved in the process. This can include not only compensation for work hours beyond normal schedules, but expenses and compensation for time spent in training programs. Much of these costs, both in time and money, can be integrated into the normal work schedule, and there is no firm rule on the amount of time it should take. (Pulakos, 2004) Between October 1993 and May 1994, the FEMA team charged with developing and implementing that agency’s performance management system worked a total of about 800 man-hours beyond the normal working schedule before it was judged that the program was fully implemented. (FEMA, 1994) FEMA has 2,600 full-time employees (FEMA, 2008), so that equates to approximately 0.3 hours’ worth of additional compensation per employee over a seven-month period. Since performance management is an ongoing process, it is suggested that formula be used as a guideline for budgeting on a yearly basis with the hourly figure adjusted to reflect 12 months instead of seven, or: (0.5 hours) x (number of staff) x (average hourly wage/salary) = additional labour costs, to be added to costs of the system. The costs of the system itself naturally depend on the type of system used, but as a general guideline the costs associated with the Comshare MPC might be useful. The rationale for this is that even a non-software based program would still incur considerable costs in training, initial consultation, materials, and follow-up consultation, and these should be at least roughly similar to those for a software system. The base cost of the Comshare MPC is $75,000, with additional costs of $7,500 to $22,500 depending on the level of customisation, training, and on-site assistance required. Follow-on yearly costs are 20% of the initial license. (Azoff, 2003) Thus, a target budget of $82,500 to $97,500 for the initial implementation, plus a subsequent annual budget $16,500 to $19,500 for the system would be definitely required for the Comshare MPC or similar software-based system, and would not be an unreasonable estimate for any other type of system. 2.2 Staff Organisation and Motivation Mark Pestrak, who is a Principal of Computer Sciences Corporation, a leading IT services and consulting firm, was the team leader for the implementation of a new Performance Management system in San Diego County, California in 1999. San Diego County, the fourth-largest county in the United States, has over 18,000 employees organised in five business groups (LeSueur, 1998 and Pestrak, 2005), so developing a system to cover such a massive and diverse organisation was no mean feat. Pestrak cites four key factors in the program’s eventual success (Pestrak, 2005): Strong executive support. The County leadership quickly defined their vision and goals for the project and assigned appropriate resources to complete it. Choosing a program format that, when demonstrated, built enthusiasm among the workforce and drew them into the project. In San Diego County’s case, the solution that was eventually chosen was a software system called pbviews built by Panorama Business Views, and which is similar in function, appearance, and price to the Comshare MPC. Regular communication. Communicating the progress of the project both to the executives and the users helped to avoid confusion and frustration, and gathered valuable feedback that allowed modifications to be built into the system as it was developing, rather than being applied as fixes afterwards. Speed. Once the decision is taken to implement a performance management system, priority must be given to putting it into action as quickly as possible. Pestrak points out that perfection is impossible, and that any system will require fine-tuning after start-up; the sooner it is put to use, the more quickly these changes will be discovered and made to make the system really valuable. In addition to these success factors, there are other important considerations to making a new PM system effective. The involvement of Human Resources from the beginning of the project is critical. This area will be the first affected by the changes, as the PM system will have to be considered in hiring new people even before it is completely implemented. (Pulakos, 2004) Apart from fully having the project financing in place from the beginning, the core team that will be developing the program should also be in place from the outset. While the exact number of people that should be a part of the core team can vary according to the organisation’s size and comfort level, this team should represent every part of the organisation: Executive Management. Human Resources. Information Technology: Whether the organisation chooses a specific software system or a more traditional method relying on data management such as Excel, IT will be heavily tasked to develop user tools and training for the new program. Finance and Budget. Legal: The new system must conform to all legal requirements pertaining to employees’ hiring, termination, and assessments. Representatives of distinct work processes or departments: The PM system will have an effect on how everyone within the organisation does their jobs, and it will affect different areas of expertise in different ways. To successfully integrate the program throughout the organisation, all parts of it must be represented in the implementation process. 3. PM System Implementation Plan and Options for NCEMA 3.1 General Considerations The implementation of a PM system for NCEMA should follow a two-phase process. In the first phase, the following steps will need to be completed. It is important to remember that these are not sequential activities, but must all be done concurrently: Organisation of the Implementation Team: The Implementation Team should be organised with sufficient personnel and authority to fully manage the project from conception to integration. Specifically, team members must include members of the executive management who have authority to make decisions about the program without the need for frequent approval from the organisation’s other leadership. Budget Requirements: The full budget for implementation of the program and its follow-on yearly costs must be accounted for before the project begins. It is not strictly necessary that the entire budget amount for the implementation project be available at the outset, so long as the funding stream is determined and secure. Choosing a PM System: Obviously, this is the most important part of the entire process. The system must be chosen at the same time the Implementation Team and the budgetary requirements are developed. Developing an Implementation Plan: The advantages to outlining the full implementation plan at the beginning are in generating ideas and determining who should be involved; it is unlikely a perfect plan can be developed at this point, nor should one be expected. Also in this planning, an area of the organisation which can serve as a pilot or starting point for the full implementation of the program can be identified. (Tipping, n.d.) It is important to choose a pilot area within the organisation that will serve as a realistic test of the PM system on a smaller scale. With that in mind, Michael Tipping, the CEO of Panorama Business Views, recommends that the pilot area has the following characteristics: It should have a wide range of performance measures – or potential performance measures – that are not focused on strictly financial measures; the measures should be well-defined and widely-recognised, and applicable to other parts of the organisation; and it should have a good availability of data from a number of input sources, in other words, the performance measures should be affected to some degree by the performance of other parts of the organisation. 3.2 Implementation Plan for a software-based PM system Here the assumption is made that as part of the first phase of the program, NCEMA has decided to use a software-based PM system such as the Comshare MPC or pbviews mentioned above. The first task that must be accomplished is to define the performance measures to be included in the program. Because NCEMA is a non-profit organisation, a PM system based on OBE is a good starting point. This, however, should be combined with a Balanced Scorecard approach for maximum effectiveness, because there is one key shortcoming in the outcome-based approach: While evaluating outcomes does suggest improvements to processes, it is a remedial approach. A balanced scorecard, on the other hand, sets objectives, measures, and processes to achieve them at the beginning of the evaluation cycle. The four indicators of the balanced scorecard are usually applied to profit-generating businesses, but can be very useful to NCEMA if defined in relevant ways: Customer Perspective: The “customers” of NCEMA are those who receive the agency’s assistance in times of crises or disasters. A “customer satisfaction” survey, such as the ones conducted by FEMA, would provide a baseline of the effectiveness of NCEMA’s services and gather information about relief recipient’s expectations. Internal Processes: This can be further divided into two areas; interdepartmental, which is concerned with co-ordination and communication between departments or areas of the organisation, and intradepartmental, which is concerned with processes within individual departments. Learning and Growth: This is a critical area for an organisation such as NCEMA, because of the high-skill requirements of rescue, medical, and relief work. Financial: This can be defined as efficient use of the agency’s budget, and effective distribution of relief funds. Within each of these indicators there can be a large number of individual measurable factors, but not all will be useful and therefore some factors should be filtered out of the system. (DaPo, n.d., Tipping, n.d., and Evans, 2002) Factors that do not have a clear corrective action, where a change in the measure cannot be affected by a change in action by individuals or groups should be eliminated. Duplicated factors, two or more different measures of the same outcome, should also be avoided. Factors which do not have clear “ownership” (Tipping, n.d.), i.e. that are not clearly the responsibility of an individual or group, should not be included. Trivial factors, those that do not demonstrate progress toward an overall objective, should also be eliminated. Finally, any factor that cannot be measured in a clearly defined way, or for which the gathering of data is impossible will be of no real value to the program, and should not be included. With a software-based system, there will be a period of customising the software with the chosen performance measures, and installation of the programs into the organisation’s network. This will depend entirely on the specific system selected, and the IT personnel and expertise available to NCEMA. In any case, it is strongly recommended that implementation team members from outside the IT area also participate in this part of the process, to keep the program as “user-friendly” as possible. One problem cited by Tipping, Pulakos, and others in using a software-based system is the risk of having it become too dependent on the IT department for success, and becoming unwieldy for other, less IT-skilled people to use comfortably. At this point this system is ready to be used in the pilot area, and should be rolled out at the beginning of a regular evaluation cycle, such as a quarter. One quarter is a reasonable amount of time for a test program – long enough to ensure the input of a useful amount of data, yet short enough that eventual full integration of the PM system will not be undesirably delayed. In order to give the pilot the most realistic test, the implementation team should avoid constant, day-to-day oversight if at all possible and let the users develop their own familiarity and comfort with the system. Evaluation and troubleshooting are still critical, however; a good solution would be two assign one or two “facilitators” from the implementation team to assist and monitor the progress on a constant basis, with the full team meeting on a weekly basis to make an assessment and any necessary larger changes. At the end of the pilot program, the implementation team should again meet to make a decision about going forward with full integration, and at this time it is important that feedback from everyone who has used the system is considered. 3.3 Implementation Plan for a traditional, “DIY” PM system The only significant difference between the implementation plan for a software-based and a “Do-It-Yourself” PM system is in the graphical or paper-based output of the reports. The Balanced Scorecard lends itself well to such common computer applications as Excel, both in its objective-setting phase and in the reporting phase, as shown by the examples below: The above is an example of a Balanced Scorecard for a regional airline, and is provided by BalancedScorecard.org. This particular example represents objectives, measures, targets, and initiatives for the entire company. A reporting format for one particular area of the company, for example Ground Operations, might look like this: OPERATION MEASURE OWNER TARGET 25 MINUTES FUEL SERVICE COMPLETION TIME FUEL HANDLERS Read More