Development and Contents of a Performance Plan

Most of us are used to thinking of performance management focused on the employee, rather than the organization, groups, etc. Therefore, when first reviewing the steps to develop a performance plan, it may be best to use the example of employee performance management as done below. The reader should keep in mind that these steps might be followed in performance efforts focused on the entire organization or some subsystem of the organization.

In the example below, the focus -- or domain -- of the performance management process is an employee. The employee is a machine operator; consequently, application of performance management in this example is rather straightforward for clarity in the example. Most applications are not this straightforward.

1. Review organizational goals to associate preferred organizational results in terms of units of performance, that is, quantity, quality, cost or timeliness
Organizational goals are often established during strategic planning. Performance management translates these goals to results, which typically are described in terms of quantity, quality, timeliness or cost. Results are the primary products or services desired from the focus of the performance process. Examples are a percentage increase in sales, extent of impact on a certain community, etc. Goals should be "SMART" (an acronym), that is, specific, measurable, acceptable, realistic to achieve and time-bound with a deadline. For example, an overall goal may be to increase the organization's profit by 30% by the end of the next fiscal year. An associated strategy (or sub-goal), among others, may be to increase profit of the Catalog Department by 50% over the next fiscal year.

2. Specify desired results for the domain -- as guidance, focus on results needed by other domains (e.g., to internal or external customers)
For example, the operator's results are high-quality, printed images for the internal customer, the Catalog Department. This aspect of performance management is sometimes called "goal setting", particularly when the focus of the performance process is on employees. Goals should be "SMART" and challenging.

3. Ensure the domain's desired results directly contribute to the organization's results
Aligning results with organizational results is another unique aspect of performance management process. Do the employee's results directly contribute to the results of the organization? What organizational goals? How? For example, do the prints directly contribute to the desired profit increase of 50% of the Catalog Department? How? Is there anything else the operator could be doing that would be more productive for this goal? Should a job analysis be done to verify efficiency?

4. Weight, or prioritize, the domain's desired results
A weight, or prioritization, is often in the form of percentage-time-spent, or a numeric ranking with "1" as the highest. For example, the employee's results might be weighted as follows:
a) 80% of his time over an 8-hour period, Monday through Friday over the next fiscal year, to be spent running the machine
b)10% of this time in training
c)10% of this time in a Quality Circle.

5. Identify first-level measures to evaluate if and how well the domain's desired results were achieved
Measures provide information to evaluate accomplishment of results. Measures are usually specified in terms of quantity, quality, timeliness or cost. For example, measures for the operator might be the number of prints over some time interval, a certain grade on a test during his training and attendance recorded on attendance sheets to his Quality Circle. Identifying which measures to take is often the toughest part of the performance management process. You have to look at the appropriate level or domain in the organization, its desired results, and consider what are the most valid, reliable and practical measurements to use. With complex and rapidly changing domains, it often helps to identify outcome and driver measures, and patterns of effects. More about these terms in Performance Measurement, which is also referenced back in Basic Overview of Performance Management.)

6. Identify more specific measures for each first-level measure if necessary
For example, regarding the operator's measure for operating his machine, he may have to produce at least 500 high-quality prints an hour for eight hours, Monday through Friday during the fiscal year. High-quality means no smears or tears. The Director of the Catalog Department evaluates whether the operator made this goal or not.

7. Identify standards for evaluating how well the domain's desired results were achieved
Standards specify how well a result should be achieved. For example, the operator "meets expectations" if the Director of the Catalog Department agrees that the operator produced 500 high-quality prints an hour for eight hours, Monday through Friday during the fiscal year. If he produces 600, he "exceeds expectations", 700 is "superior performance", 400 is "does not meet expectation", etc.

8. Document a performance plan -- including desired results, measures and standards
The performance plan describes the domain's preferred results, how results tie back to the organization's results, weighting of results, how results will be measured and what standards are used to evaluate results. Developing the plan is often the responsibility of the head of the domain (in this example, the employee's supervisor). However, the plan should be developed as much as possible with participants in the domain.

Operations Management

Operations management in process, manufacturing, and service organizations; Operations strategy and policy; Product and service design and development; Manufacturing and service systems design; Technology management for operations; Multi-site operations management; Capacity planning and analysis; Operations planning, scheduling and control; Project management; Human resource management for operations; Work design, measurement, and improvement; Performance measurement and productivity; Quality management; Purchasing/sourcing systems; Materials and inventory management; Logistics, transportation, distribution, and materials handling; International and comparative operations; Operations information management; Regulatory and environmental issues in operations.

Your house is so underwater!!!

You bought at the peak of the market. You put next to nothing down. (Maybe you even took out one of those 105% LTV loans to cover closing costs.) Now prices are falling, falling, falling, and you are underwater on your mortgage. Deep underwater, where the strange sea creatures dwell.

If it’s any comfort, you are not alone. Here’s what Zillow.com, the real estate website, says today:

“Of homeowners nationwide who purchased when U.S. home values peaked in 2006, one out of every two (51.6%) now owes more on their mortgage than their home is currently worth.”

You’re in better shape if you bought before or after the 2006 peak in prices. Here’s the percentage of homes that are underwater on their mortgages based on when they were bought, according to Zillow:

2003 7%
2004 16%
2005 42%
2006 52%
2007 45%

Las Vegas may look dry, but from the point of view of homeowners, it’s deep underwater. Zillow says that buyers in 2006 posted a median downpayment of just 2%, and since then, home values have fallen 25 percent year-over-year, so 89.9% of homeowners now owe more than their home is worth.

Stockton, Calif., is worse: 95.8%. No wonder it’s known (unofficially of course) as the Foreclosure Capital of the U.S.A.

Major U.S. stock indexes closed solidly lower

Major U.S. stock indexes closed solidly lower Wednesday as investors grappled with crude oil topping $123 per barrel for the first time and a mixed bag of economic reports. The spike in oil prices was depressing transportation issues along with the broader market. It occurred even though the Energy Dept. said crude and oil inventories rose in the U.S. last week.

Finance and homebuilding stocks were taking a hit from news of a 1% drop in the National Assn. of Realtors’ March index of pending home re-sales. Finance stocks also were affected by reports the SEC is scrutinizing the liquidity of investment banks it supervises.

Investors also weighed earnings reports from Disney (DIS) and Cisco Systems (CSCO), and news that Qatar Airways is seeking compensation from Boeing (BA) for delays in shipment of 787 aircraft.

Yahoo (YHOO) shares were lower amid indications Microsoft (MSFT) chairman Bill Gates was closing the door on a further offer to acquire the Internet portal.

There was little reaction to a report that nonfarm productivity rose by a more than expected 1.9% in the first quarter.

Bonds rose as stocks fell. Gold fell as the dollar index rose.

On Wednesday, the Dow Jones industrial average dropped 206.48 points, or 1.59%, to finish at 12,814.35. The broader S&P 500 index fell 24.90 points, or 1.76%, to close at 1,392.57. The tech-heavy Nasdaq composite index shed 44.82 points, or 1.79%, to end the session at 2,438.49.

Along with the Street's oil-fueled inflation worries, Wednesday's sell-off in the stock market reflects profit taking following big gains from the Apr. 15 lows, says S&P MarketScope.

After a brief holiday, volatility returned to the market Wednesday, with losses accelerating in the final hour. “The lack of any short covering by this late in the session indicates the bears are in firm control of the market,” said S&P technical analyst Chris Burba in a note.

“Ironically, the latest jump in oil prices has put stocks back under pressure and pulled [bond] yields down to session lows, despite the inflationary implications that continue to haunt the Fed,” says Action Economics.

The combination of oil prices approaching $124 per barrel and hawkish remarks on May 6 by Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, spurred renewed concerns among investors about the inflation risk and the likelihood that the Fed will have to raise interest rates to fight it, says Diane Dercher, chief economist at Waddell & Reed Financial in Overland Park, Kan.

“I think the market is perhaps overreacting to that risk as far as what the central bank’s reaction to inflation will be in near term,” she says. Fed Chairman Ben Bernanke said on Tuesday that he remains focused on the downside risk that the housing slump poses to the U.S. economy, which suggests he’s not close to raising rates anytime soon.

If anything, rising energy prices are acting to depress economic growth, putting a strain on consumers’ purchasing power but not being passed through to wages and not feeding the inflation wage price spiral, she says. The U.S. imports more than half of the oil it consumes and those imports increased to a record 3.24% of gross domestic product in the first quarter of 2008, surpassing the prior peak of 3.22% of GDP set in 1980, Dercher says. With oil prices now over $120, she thinks that will continue to impose a drag on economic growth and doesn’t see a risk of interest rates rising over the next six to 12 months.

(Bussiness Week)