PERFORMANCE MANAGEMENT - gpaunit.org · 3 Goba Performance Audit Unit Performance Management Audit Report for Apha Company Global Performance Audit Unit a division of The KPI Institute

PERFORMANCE MANAGEMENTAUDIT REPORT

ALPHA COMPANY

May 2017 73 Pages

A DIVISON OF

2 www.gpaunit.org | [email protected]

INDEMNITY STATEMENT

© 2017 The KPI Institute Ltd. All Rights Reserved.

This audit report is the result of primary research conducted by The KPI Institute through

the Global Performance Audit Unit, with the support offered by Alpha Company.

Indemnity statement

The KPI Institute has taken due care in preparing the analysis contained in this report.

However, noting that the data used for the analysis has been provided by third parties, The

KPI Institute offers no warranty that the information collected is otherwise accurate, reliable

and that it indeed fits the purpose intended. The KPI Institute shall have no liability for errors,

omissions or inadequacies in the information contained herein or for interpretations thereof.

The data presented and the recommendations provided herein are based on the information

collected from the Alpha Company and The KPI Institute’s consultancy experience.

Report Contributors:

Head of Performance Audit Services: Alin Sonda

Director of Research Programs: Cristina Tarata

Research Team

Head of Research: Marcela Presecan

Business Research Specialist: Ana Lechintan

Internet Research Specialist: Amalia Rosdia

Graphic Design Team

Head of Graphic Design: Javier Rocha

Junior Graphic Designer: Andrei Popoviciu

Provided by:

Global Performance Audit Unit, a division of The KPI Institute

Life.lab Building

198 Harbour Esplanade, Suite 606

Melbourne Docklands, VIC 3008, Australia

Telephone (international): +61 3 9028 2223

E-mail: [email protected] | [email protected];

www.kpiinstitute.org | ww.GPAUnit.org

3

Global Performance Audit Unit Performance Management Audit Report for Alpha Company

Global Performance Audit Unit a division of The KPI Institute

TABLE OF CONTENTS1. Audit scope 2. Executive Summary 3. How to use the Audit Outputs 3.1 Purpose of the reports, dashboard and infographic 3.2Readershipprofile4.PerformanceMaturityModelFrameworks 4.1StrategicPlanning 4.2 Performance Measurement 4.3 Performance Management 4.4PerformanceCulture5.PerformanceManagementSystemAuditMethodology 5.1 Evidence-based assessment 5.2Perception-basedanalysis 5.3Interview-basedanalysis 5.4ScoringMethodology 5.5 Limitations 6.PerformanceManagementSystemMaturityLevels 6.1Initial 6.2 Emergent 6.3 Structured 6.4 Integrated 6.5 Optimized 7.Auditfindings 7.1StrategicPlanning 7.1.1 Strategy Envisioning 7.1.2StrategyFormulation 7.1.3StrategyFocus 7.1.4StrategyArticulation 7.1.5 Strategy Review 7.1.6 Strategy Governance & Communication 7.2 Performance Measurement 7.2.1KPISelection 7.2.2 KPI Documentation 7.2.3 Target-setting

44999

1010101010111111121212131313131313141417192123252729323435

7.2.4 Data Gathering 7.2.5DataVisualization 7.2.6 KPI Governance 7.3 Performance Management 7.3.1DataAnalysis 7.3.2 Reporting 7.3.3Decision-making 7.3.4 Initiative Management 7.3.5 Learning & Improvement 7.3.6 Performance System Governance 7.4PerformanceCulture 7.4.1IntegratedPerformanceCapability 7.4.2 Communication & Leadership Support 7.4.3 Creativity & Education 7.4.4Education&Knowledge 7.4.5Benefits&Recognition 7.4.6Happiness&Wellbeing8.ConclusionsAppendix 1

37394143464749515355576062646668697172

Audit Scope


1. AUDIT SCOPE

2. EXECUTIVE SUMMARY

The Performance Management System Audit is meant to assess the current

maturity level of the Alpha Company, in terms of the overall Performance

Management System in the organization.

The Audit Report is intended to provide valuable information about the

processes, tools and practices that stand at the basis of Alpha Company’s

Performance Management System, while collecting insight from Alpha

Company’s main stakeholders and the characteristics of related internal

documents,which are reviewedwhen assessing the organization’smaturity

level.

TheauditfindingsindicatethestrengthsandweaknessesofAlphaCompany’s

Performance Management System and they justify further efforts needed

to elevate the organization to the nextmaturity level. By analyzing current

practices, improvement recommendations were made to support the

developmentoftheperformancemanagementandmeasurementcapabilities.

The audit methodology used includes an internal documentation analysis,

thePerformanceManagementMaturityModel Survey and interviewswith

keystakeholderswithintheorganization.Informationwascollectedfromtop

management/senior managers, department heads and supervisors.

TheassessmentrevealedanemergentPerformance

Management System within the Alpha Company,

with an overall score of 2 for the assessed

capabilities.Theresultsshowthehighestscoreof

2.6 achieved for theStrategicPlanning capability,

followedby the scoreof2.1 for thePerformance

Measurement capability,1.8 for thePerformance

Measurementcapabilityand1.6forthecapability

ofdevelopingaPerformanceCulture.

Overall Performance Maturity Level Level 2

0 1 2 3 4 5

Performance Management 1.8

Performance Culture 1.6

Performance Measurement 2.1

Strategic Planning 2.6

5



Strategicplanningisusedwithintheorganization,butnotoptimallyarticulated

andimplemented.Themissionandvisionoftheorganizationareclearandwell-

formulated,whilethestrategyreviewprocessfollowsaspecificmethodology

andinvolvestherightstakeholders.Strategyisverballycommunicatedonlyto

UnitHeadsandSupervisorswhiletheorganizationdoesnothaveamedium

Strategic Planning Level 2

0 1 2 3 4 5

Strategy Envisioning 3.3

Strategy Formulation 2.6

Strategy Focus 2.8

Strategy Articulation 1.7

Strategy Review 3.8

Strategy Governance & Communication 1.5

• Developamediumand long-termperspective in termsofstrategyand

documentitinthestrategicplan;

• Formulateanddocumentstrategicobjectives,whichshouldbestructured

in multiple layers (e.g. pillars, directions) and perspectives (e.g. financial,

customer,internalprocesses,learningandgrowth);

• Developaone-pagestrategymapwiththestrategicobjectivesdisplayed

inlayersandwithcorrelations(causeandeffectrelationships);

• AssociateKPIs and targetswith strategic objectives, to track progress

withstrategyexecution;

• Develop and implement a communication plan that clearly states the

frequency of communication and a break-down of information, based

on the different types of audiences, to raise the level of awareness and

transparencyonstrategy;

• Develop a Portfolio of Initiatives to centralize and monitor initiatives.

Clearlystatetheowner,statusanddeadlineofeachinitiative.

Recommendations for improvement based on the main findings of the Strategic Planning assessment:

and long-term perspective. There is no Portfolio of Initiatives to centralize

andmonitor strategic initiatives,while theobjectives andKeyPerformance

Indicators(KPIs)arenotcascadedatthedepartmentalandemployeelevels.

Furtherdevelopmentneedstobeconsideredtoensurestrategyexecutionis

effectivelymonitoredthroughKeyPerformanceIndicators(KPIs)

Executive Summary


In terms of Performance Measurement, it was identified that targets for

sales are established based on previous results and those for production

are based on orders. The data gathering process relies on the accounting

software, standardized templates, clear deadlines and accountability. All

the performance reports contain visual representation of data, the graphs

and tables are designed on data visualization good practices. Performance

• EstablishaKPIselectionprocessfortheobjectivesoftheorganization;

• Assignatleast2KPIsforeachobjectiveandfocusonabalancebetween

financialandnon-financialKPIs;

• UseastandardizedKPIDocumentationForm,forallKPIsmonitored,that

containsrelevantinformation(e.g.KPIname,definition,calculationformula,

target);

• EstablishtargetsforallactiveKPIsandthresholdswhereverapplicable.

Organize target-settingworkshops and invite the employees responsible

measurementisusedwithintheorganization,butfocusedonfinancialmetrics

and limited to production, inventory and sales.KeyPerformance Indicators

(KPIs) are not used, the organization relies on reports generated using the

accounting software and themonthly achievement evaluation reports. The

current framework only supports performancemeasurement on corporate

anddepartmentallevel,withouttheoptiontomeasureindividualperformance.

0 1 2 3 4 5

Performance Measurement Level 2

KPI Selection 1.7

KPI Documentation 1.6

KPI Governance 1.6

Target Setting 2.2

Data Gathering 2.1

KPI Visualization 3.1

Recommendations for improvement based on the main findings of the Performance Measurement assessment:

for reaching the targets and those responsible with collecting data for

measuringtargetachievement;

• AssignanddocumenttherolesofKPIownersanddatacustodiansforthe

employees involved in the performancemeasurement process, to assure

accountability;

• Provide dedicated training and/or coaching programs on performance

measurementforallkeyemployees.

7



• Organizemonthlyorquarterlyperformancereviewmeetingsandinvite

bothdecisionmakersandKPIownerstoattend;

• Foreachdecisionmadeduring theperformance reviewmeeting, set a

cleardeadlineandassignaresponsibleperson;

• Centralize and monitor the decisions from one performance review

meetingtoanother;

Performance Management relies on data analysis and reporting. Average

valuesformetricsordeltavaluesbetweenactualandtargetedperformance

levelsarerecordedinmonthlyperformancereports.Theresultsarediscussed

duringmonthlymanagementmeetings,butwithafocusonsales,production

(errors),marketing(awareness)andcustomercomplaints.Althoughdecisions

are made, they are not captured in meeting minutes and communicated

only verbally to those present. Actions/initiatives are not consolidated in a

portfoliotosupporttrackingprogress,theyareonlyverballycommunicated

to Unit Heads and monitored by the Management Representative. The project

management framework within the organization is not clearly established

nordocumented,andthereisnocommunicationplanforinitiativestatusand

performanceresults.

Recommendations for improvement based on the main findings of the Performance Management assessment:

• Develop a standardized initiative documentation form with relevant

information that supports implementation (e.g. initiativename, startdate,

enddate,initiativeownerandstatus);

• Consolidate the initiatives in a portfolio and all of the initiative

documentationformsinalibrarytotrackprogress;

• Developcommunicationplansforinitiativestatusandperformanceresults.

0 1 2 3 4 5

Performance Management Level 2

Initiative Management 1.6

Reporting 2.4

Decision Making 1.6

Data Analysis 2.3

Learning & Improvement 1.6

Performance System Governance 1.6

Executive Summary


Level 2

0 1 2 3 4 5

Integrated Performance Capability 1.6

Communication & Leadership Support 1.7

Creativity & Innovation 1.6

Education & Knowledge 1.6

Benefits & Recognition 1.5

Happiness & Well Being 1.6

Performance Culture


frequencyofcommunicationandbreaksdowninformation,basedondifferent

typesofaudiences,toraisethelevelofawarenessandtransparencyregarding

performanceresultsandthebenefitstheseprovidefortheorganization;

• Openatleastonechannelforemployeestosubmittheirinnovationideas

andassignacommitteeresponsiblewithassessingallinnovation/improvement

ideasproposedbystaffmembersanddecidingonfurthercoursesofaction;

Leadership is involved inpromotingaPerformanceCulture,asmanagement

meetings are held monthly and performance results are included in the

meetingagenda.Althoughdiscussed,communicationofperformanceresults

is limited tomiddlemanagement andUnitHeads/Supervisors.Effortswere

made towards offering a safe working environment for its employees, and

investmentsinmoderntechnologyweremadetoimproveworkingconditions

andperformance.Therearenochannelsopenedforallemployeestoexpress

innovation/improvementideas,noristhereacommitteeorgroupresponsible

for assessing any proposed ideas and deciding on further courses of action.

Gamificationactivities(internalcompetitions)arenotorganizedbytheentity.

Adequate allocation of resources is needed to establish knowledge sharing

practicesandensureaninternaldatabasewithinformativematerials,meantto

aidallemployeeswiththeirindividualprofessionalimprovement.

Recommendations for improvement based on the main findings of the Performance Culture assessment:

• Organize gamification activities (internal competitions) and share the

outcomesandthenameofthewinnerstoallemployees;

• Developaninternallibraryofresources(e.g.workinstructions)andmakeit

availabletoallemployees;

• Offer each employee access to educational programs (e.g. trainings,

workshops,conferences,summits),foratleast4to8hoursperyear;

• Organizeinternalknowledgesharingsessions.

9



• PerformanceAuditReportandExecutiveDashboard;

• Roadmap for Improvement Report and Infographic.

The performance management systems maturity auditing generates two

reportsandvisualrepresentationsthroughDashboardsandInfographics:

3. HOW TO USE THE AUDIT OUTPUTS3.1 Purpose of the reports, dashboard and infographic

The reports contain valuable insights and improvement recommendations

that support the development of performance management systems. The

dashboard and infographic tools are designed to help organizations track

progress from one audit to the next one.

The Audit Report contains findings and recommendations on the assessed

capabilities.Ithighlightsthestrengthsandweaknessesofyourperformance

management system in a comprehensive manner.

3.2 Readership profile

The Audit Report and the Roadmap for Improvement Report are intended for

TopandMiddleManagement,aswellastheUnitHeadsandSupervisorsthat

are engaged in performancemanagement-related activities (data gathering,

target-setting,performancereviewetc.).

TheExecutiveDashboardisavisualrepresentationofthescoresobtainedfor

eachauditedcapability.Itisatoolthatcanbedistributedtotopmanagement

andusedforcomparisonwithfutureauditsintermsofresults.

TheRoadmapforImprovementReportrepresentsaguideonhowtoimplement

the improvement recommendations from the Audit Report, prioritizing the

findings that should be implemented first, in order to progress to the next

maturitylevel.Recommendationsaremadeforalltheassessedcapabilities.

The Roadmap for Improvement Infographic is a tool designed to help

organizationstracktheprogressoftheirinitiativesduringPerformanceReview

Meetings.Itsupportstheimplementationoftherecommendationsmadefor

performance improvement.

TheExecutiveDashboardisintendedforTopManagement,whiletheRoadmap

for Improvement Infographic is intended for the department or the position

assigned responsible for governing the Performance Management System

within the organization.

Performance Maturity Model Frameworks


4. PERFORMANCE MATURITY MODEL FRAMEWORKS

The assessment was structured on 4 modules, each analyzed through 6 dimensions.

4.1 Strategic Planning

Strategic Planning is the process of defining the long-term

strategyofanorganizationandoptimizingresourceallocation,

inordertoreachthecommongoal.Italsogivestheorganization

the opportunity to estimate future events and to develop a

strong competitive advantage.

4.3 Performance Management

The performance management system relies on efficient

decision-making and project implementation.We also assess

theabilitytodevelopandchangebasedoncurrentresults,so

as to improve performance.

4.2 Performance Measurement

PerformanceMeasurementreflectstheuse,documentation

andvisualizationofKPIstoanalyzehowstrategyisexecuted,

how to effectively establish targets and collect information

onKPIresults.

4.4 Performance Culture

The Performance Culture represents an assessment of the

practicesemployedtocreatethenecessaryconditionsforthe

organization’s PerformanceManagement System to become

functional, to operate efficiently and be integrated into the

overallorganizationalculture.

11



5. PERFORMANCE MANAGEMENT SYSTEM AUDIT METHODOLOGYThepurposeoftheauditinitiativedeployedbytheGlobalPerformanceAudit

UnitforAlphaCompanyistoshowcasethestrengthsandweaknessesofthe

currentperformancemanagement system, toprovideanoverviewofAlpha

Company’smaturitylevels,intermsofmanagingperformanceandimproving

current practices.

Themethodologyusedincludesprimaryresearch,bothquantitative(surveys)

andqualitative(interviews),aswellassecondaryresearch(documentsanalysis).

These3perspectivesprovideacomprehensiveoverviewofthematuritylevel

of the performance management system within the organization.

• Evidence-basedassessment;

• Perception-basedanalysis;

• Interview-basedanalysis.

• DirectorandManagementRepresentative;

• Unit Heads and Supervisors engaged in performance management

relatedactivities(datagathering,target-setting,performancereviewetc.).

The Performance Management System Audit Report relies on insights

collectedfromthreesourceswhicharefurtherdetailedthroughoutthereport:

5.1 Evidence-based assessment

5.2 Perception-based analysis

The evidence-based assessment relied on the submission and review of

relevant internal documents. The documents selected for analysis are

presented in Appendix 1.

Theevidence-basedassessmentreliedonthaTheperception-basedanalysis

was based on a survey designed to reflect the opinion of employees on

performance related practices. The survey contained 129 statements that

reflectedbestpracticesandwereratedonascalefrom1to5,basedonthe

extent to which they applied in the organization. e submission and review

of relevant internal documents. The documents selected for analysis are

presented in Appendix 1.

Thesurveywassenttothefollowingkeyinternalstakeholders:

The answers were analyzed and interpreted by the Performance Audit

Practitioner.Theoverall scorewascalculatedas theaverageof thescores

for each statement.

Anumberof92statementsthatreflectbestpracticesandcapturethemain

characteristics of the performance management process were scored by the

PerformanceAuditPractitioneronascalefrom1to5.Theoverallscorewas

calculatedastheaverageofthescoresforeachstatement.

Performance Management System Audit Methodology


5.3 Interview-based analysis 5.5 Limitations

5.4 Scoring Methodology

The interview-based analysis was based on an interview guide reflecting

boththeevidenceandperception-basedanalysisresults,designedtoensure

consistencyinresultsandtogainabetterunderstandingoftheauditfindings.

The existence, use and characteristics of relevant internal documentswere

discussedduringtheinterviews,whilethemattersreflectedinthestatements

withhighvariationinsurveyresponseswereclarified.

Giventhemethodologyused,thefollowing limitationsshouldbeconsidered

whenanalyzingtheauditfindings:

Guidelines were provided to support objectivity in the perception-based

assessment, while the statements were presented in the survey in English

language.

There was a high level of support and commitment from the company

representatives towards the objective assessment of the performance

management system.

Thematurityleveloftheperformancemanagementsystemisdeterminedby

theoverall scores of both the evidence andperception-based assessments.

The evidence-based assessment weighs 75% of the final score, while the

perception-based assessment 25%.

>4.51 Optimized

Final Score Modules

3.71 - 4.5

2.71 - 3.7

1.51 - 2.7

1 - 1.5

Emergent

Initial

Integrated

Structured

• Most of the internal documents submitted for review as part of the

evidence-basedassessmentweretranslatedtoEnglishinordertobeanalyzed;

• Datacollectionthroughsurveyscanbebiased,duetothesubjectivityof

respondentsandtheirlevelofunderstandingofthestatements;

• The interviewswere held by the PerformanceAudit Practitioner,with

onlyonepersonassignedbytheorganization.

13



Business management does not rely on a clear strategy and performance

measurementisnotacommonpracticeintheorganization.Decision-making

is seldom using performance data as a reference point and there is limited

alignmentbetweenwhatneeds tobeachievedanddailyactivities.Learning

and improvement are not coordinated processes and there is no performance

cultureintheorganization.

Strategy planning takes place within the organization, but is not a regular

or well-articulated process. Performance measurement practices are used

mainlyatstrategiclevel.Althoughdataiscollected,itisnotextensivelyusedin

thedecision-makingprocesstoensureimprovement.Awarenessinregardsto

usingKPIsislimitedtotopmanagement.

Strategy is aligned across all business units, departments and individuals.

KPIsareusedbyallorganizationalfunctionsanddatacollectionisfacilitated

by technology. Performance improvement relies on extensive data analysis.

ThePerformanceManagementSystem is integratedsuccessfullywithother

organizationalsystemsandthesenseofaperformancecultureisembeddedin

theworkingenvironment.

An optimized Performance Management System implies the consolidation

of all efforts around strategy and provides agility in decision-making. The

PerformanceManagement System is constantly updated to meet business

needsandfullyalignedtostrategy.Advanceddataanalysismethodsareused

to extract valuable information from data. A strong performance culture is

embeddedinthebehavioranddemeanorofeachemployee.

Strategy formulation is a current practice, combining short and long term

perspectives. Measuring performance has been disseminated at operation

levels as well, for several critical departments or business units. Gathering

datareliesonMicrosoftExcelandtosomeextentitisusedindecision-making,

butnotatitsfullpotential.Althoughtoolstomanageperformanceareused,

there may be the case of misalignment between different approaches or

6. PERFORMANCE MANAGEMENT SYSTEM MATURITY LEVELS6.1 Initial

6.2 Emergent

6.4 Integrated

6.5 Optimized

6.3 Structured

instrumentsusedbydepartments/businessunits.Aperformancecultureis

unevenlydevelopedintheorganization,assomepartsofthecompanymaybe

moreresultorientedthenothers.

Audit findings


Referstocorporateidentityelementslikevision,missionandvalues.Looksintohowtheyrelatetotheentity’spurposeandprovideasenseofdirectiontowardsthedesiredstateofevolution.Evaluateswhethertheywereformulatedinasimple,butcomprehensivelanguageandwhethertheyareembeddedinemployees’behaviors.

Containsstatementsmeanttorevealhowthestrategicplanningprocesstakesplace,which stakeholders are engaged and what instruments are used to perform theexternalenvironmentalscananddefinethecurrentstateoftheentity.

Providesanoverviewonthepracticesusedtoconvertstrategyintosimpleactionableobjectives, to assign KPIs to track objectives achievements and to connect plans(strategicobjectives)andactions(initiatives).

Indicates whether the strategy is aligned and integrated across all levelsand functions of the entity. Looks at the tools and instruments used in theimplementationprocess.

Presents the ability of the entity to adapt to changes and keep anupdated strategy,throughathoroughreviewprocessthatinvolvesallstakeholders.

Reflectstheefficiencyofthestrategycommunicationprocess,thelevelofawareness,transparency and understanding in regard to the roles and responsibilities forcascadingandaligningthestrategyacrosstheorganization.

Strategy Envisioning

Strategy Formulation

Strategy Focus

Strategy Articulation

Strategy Review

Strategy Governance & Communication

7.1 Strategic PlanningMaturity Audit

15



A. Strategy Envisioning. Score: 3.3

B. StrategyFormulation.Score: 2.5

C. StrategyFocus.Score: 2.7

Legend Strategic Planning Evidence-based Assessment

D. StrategyArticulation.Score: 1.1

E. Strategy Review. Score: 4

F. Strategy Governance & Communication. Score: 1

The score for the evidence-based assessment was 2.4, while the score for the

perception-based assessment was 3.1. As the evidence-based assessment weighs 75%

ofthefinalscore,whiletheperception-basedassessment25%,thefinalscorewas2.6.

Thisindicatesalevel2maturityscore(Emergent)fortheStrategicPlanningcapability.

7.1 Strategic Planning

Strategic Planning Assessment

0 1 2 3 4 5

A3.3

2.6B

2.8C

1.7D

3.8E

1.5F

Level 2

Strategic Planning Evidence Based Assessment

0 1 2 3 4 5

A3.3

2.5B

2.7C

1.1D

4E

1F

Theevidence-basedassessmentresultsshowalevel2maturityscoreintermsofthe

strategicplanningprocesstakingplacewithintheAlphaCompany.Thishighlights

thefactthatstrategicplanningisusedwithintheorganization,butitisnotoptimally

articulatedorimplemented.Specifically,thereisnoPortfolioofInitiativestocentralize

andmonitorstrategicinitiatives,whileobjectivesandKeyPerformanceIndicators

(KPIs)arenotcascadedatthedepartmentalandemployeelevels.Moreover,the

organizationdoesnothaveamediumandlongtermperspectivewhenitcomesto

strategy.Strategy iscommunicatedverballyonlytoUnitHeadsandSupervisors,

whilethestrategyreviewprocessdoesnotstartinpreparationoftheorganizational

budget.Theprocessesrelatedtostrategicplanningarenotmapped.

Audit findings


The data set for Strategic Planning reveals the highest gaps between the

actual and perceived maturity level regarding strategy articulation, strategy

governance& communication,which strongly relate to the findings from the

evidence-basedassessment.Assuch,thereseemstobesizeablegapsinstrategy

focusandstrategyreviewwithinAlphaCompany.Thiscanbeattributedtoa

limitedunderstandingofthestepsfollowingthestrategicplanningprocess,while

theadequatetoolsandtechniquesneededtoclarifyandfacilitatetheenactment

0 1 2 3 4 5

Strategic Planning Assessment

A 3.33.1

C 2.73.3

F 13

B 2.52.7

E 43

D 1.13.3

Theperception-basedassessmentresultsdepictalevel3maturityscorein

termsofstrategicplanning.

Strategic Planning Perception Based Assessment

0 1 2 3 4 5

A3.1

2.7B

3.3C

3.3D

3E

3F

ofsuchstepsarefewormissingcompletely.Continuouscommunicationacross

organizational levels is imposed to smoothen the transition to a long-term

strategyandtomanagethechangebroughtaboutbytheimplementationofa

performance management system that aids the execution of strategy.

17



Strategy Envisioning analyzes the extent to which an organization has

successfullyshapedanidentityandcreatedavisiontoengageitsinternaland

externalstakeholders.Havingthemission,visionandvaluesclearlyidentified

inanorganizationensurestheabilitytoachievesustainabledevelopmentin

the upcoming years.

Onecannoticefromthedatacollectedthatvariability intermsofstrategy

envisioning is quite low, which is consistent with the general perception

regardingthematuritylevelforthiscluster.

7.1.1 Strategy Envisioning

A. Evidence-based Assessment B. Perception-based Assessment

Legend Strategy Envisioning Assessment

Strategy Envisioning Assessment

0 1 2 3 4 5

A3.3

3.1B

The vision and mission statements published on the company’s website

were reviewed. Vision: Alpha Company is aiming to become a world class

manufacturingofMedicalDevicewithgoodreputation,andthebestpartner

ofourstakeholder.

Mission: Alpha Company provides the good quality Medical Equipment

andHospitalFurnitureProductwith thegoodservicesandsupportsat the

best value to guarantee the satisfaction of customers andmeet regulatory

requirementaswell.

Strategy Envisioning Evidence Based Assessment

0 1 2 3 4 5

A5

4B

1C

A. Thevisioniswellformulatedandprovidesexplicitguidanceonwhattheorganizationaimsto achieve. Score: 5

B. Themissionreflectswhytheorganizationexistsanditspurpose.Score: 4

C. Thevaluestatementsaremeaningfulandreflectsbeliefs,commitmentsandexpectations.Score: 1

Legend Strategy and Business Planning

Audit findings


Anaveragescoreof3.1intheperception-basedassessmentshowsthatthereisonlymoderateconsentregardingthevisionandmissionoftheorganization.

Moreover,internalawarenessaboutcorporateidentityandculturehasyettoberaised.

Strategy Envisioning Perception Based Assessment

0 1 2 3 4 5

A3.2

3.2B

3.2C

3D

3E

3F

Findings Recommendations

• The vision is clear, concise, future-oriented, stable, challenging and

abstract(generalenoughtoencompassalltheorganization’sinterestsand

strategicdirection);

• Themissionisclearandconcise,ithighlightscontributionsandidentifies

keystakeholders,butitdoesnotsupportdistinctionasitisnotexplicitabout

whatmakestheproductsunique;

• AlphaCompanyhasyettodefinetheentity’svalues,whicharemeantto

drivetheiremployees’behavior.

• Review the mission statement to support distinction, by referring to what

makestheproductsunique;

• Define, document and publish the entity’s values, which are meant to

drivetheiremployees’behavior.

19



Strategy formulation is the process that relies on the quintessential role of

stakeholders in formulating the strategy. It refers to the strategic planning

cycleandthe instrumentsusedtoperformtheexternalenvironmentalscan

anddefinethecurrentstateoftheentity.

Strategicplanningtakesplaceintotheorganizationtosomeextent.However,

the approach to formulate the strategy may be improved. There are no

techniquesortoolstotransformthestrategyintoanoperationalinstrument.

The organization’s strategic plan, environmental scan reports and

performance reports were reviewed to assess the strategy formulation

processandthestrategicplanningcycle.

7.1.2 Strategy Formulation

Strategy Formulation Assessment

0 1 2 3 4 5

A2.5

2.7B


Legend Strategy Formulation Assessment

Strategy Formulation Evidence Based Assessment

0 1 2 3 4 5

A3

2B

A. Thestrategyformulationprocessiswellarticulatedandthoroughlydocumented.Score: 3

B. Theorganizationhasbothashortandlongtermperspectiveintermsofstrategyformulation.Score: 2

Legend Strategy Formulation Evidence-based Assessment

Audit findings


Anaveragescoreof2.7intheperception-basedassessmentshowsthatthestrategicformulationprocessisanemergentone,whiletheroleofthestrategicplanning

capabilityisnotyetperceivedasfundamentalbyinternalkeystakeholders.

A. A. Relevantexternalstakeholders(clients,suppliers,externalregulators)areengagedduringstrategyformulationbycollectingtheirinputs.Score: 2.8

B. B. Theorganization’sstrategicplanisconnectedtoandreflectstheorganization’smediumtolongtermstrategicdirectionsanditsvision.Score: 2.8

C. C. AllrelevantInternalkeystakeholdersacrossdifferenthierarchicallevelsareengagedduringthestrategyformulationprocess.Score: 2.6

D. D. Thestrategicplaniswellarticulated.Score: 2.6

Legend Strategy Formulation Perception-based Assessment

Strategy FormulationPerception Based Assessment

0 1 2 3 4 5

A2.8

2.8B

2.6C

2.6D

Findings

• References to data analysis were identified in terms of product

quality, complaints and customer satisfaction, compliance with product

requirementsandsupplier’sperformance;

• Insights are collected from both internal and external stakeholders to

supportthestrategyformulationprocess;

• Theevidence-basedassessmentshowsthattheorganizationonlyhasa

short-termperspective(uptooneyear)intermsofstrategyformulation;

• No internal analysis is performed to support the strategy formulation

process(e.g.SWOTanalysis),whilethestrategyformulationprocessisnot

supported by a process map.

Recommendations

• Developamediumandlong-termstrategyperspectiveanddocumentit

inthestrategicplan;

• Conduct and document an internal analysis to identify the strengths,

weaknesses, opportunities and threats for the organization’s current

activities;

• Develop a strategic planning process map to ensure effectiveness, by

clarifying the activities that are being carried out and the roles of those

involved.

21



Strategy Focus assesses the manner in which strategic objectives are

formulated, documented, measured and used within the organization, in

ordertodriveprogress.Italsoreflectsonthedegreeofcohesionbetween

objectives,KPIsandsuitableinitiatives.

Strategic objectives are not clearly expressed and displayed in a strategy

map.Thestrategyisnotstructuredinmultiplelayersandperspectives,does

not have a combination of both financial and non-financial objectives and

causeandeffectrelationsclearlyestablishedbetweenthem.

Theorganization’sstrategicplanandperformancereportswerereviewedto

assessthestrategyfocus.Theorganizationhasn’tdevelopedastrategymap.

7.1.3 Strategy Focus

Strategy Focus Assessment

0 1 2 3 4 5

A2.7

3.3B

Legend Strategy Focus Assessment


Strategy Focus Evidence Based Assessment

0 1 2 3 4 5

A5

2B

1C

Audit findings


An average score of 3.3 in the perception-based assessment shows that the topics of mapping, prioritization and appropriate association of objectives, KPIs

andinitiatives/projectsareyettobefullycomprehendedandacknowledged.

Strategy Focus Perception Based Assessment

0 1 2 3 4 5

A3.6

3.4B

3.2C

3D

Findings

• Onlyqualityobjectivesareformulatedanddocumentedinthestrategicplan.

• Thereisnolinkbetweeninitiatives/actionsandobjectives.

• Nostrategymapwasdevelopedtodocumenttheprimarystrategicgoals.

Recommendations

• Formulate and document strategic objectives structured on multiple

layers (e.g. pillars, directions) and perspectives (e.g. financial, customer,

internalprocesses,learningandgrowth);

• Associate KPIs and targetswith strategic objectives, to track strategy

executionprogress;

• Developaone-pagestrategymapwiththestrategicobjectivesdisplayed

inlayersandwithcorrelations(causeandeffectrelationships).

23



StrategyArticulation looks into the toolsusedtoexecuteandmonitor the

strategy, aswell as into how it is aligned to the organization’s operations.

This section indicates the extent to which there is consistency between

the strategies used at different levels in the organization, including the

contributionofeachemployeetotheexecutionofstrategy.

In the case of Alpha Company, there is no articulation of objectives and

toolsusedtomakeitsstrategyactionable.Theorganizationdoesnotrelyon

instruments such as scorecards or dashboards to ensure strategy execution

iseffectivelymonitoredthroughKPIs.

7.1.4 Strategy Articulation

Strategy Articulation Assessment

0 1 2 3 4 5

A1.1

3.3B

Legend Strategy Articulation Assessment


Theorganization’s strategic plan,monthly achievement evaluation reports

andperformancereportswerereviewedtoassessstrategyarticulation.

Strategy Articulation Evidence Based Assessment

0 1 2 3 4 5

A2

2B

1C

1D

1E

1F

G1

1H

1I

1J

1K

1M

1L

1N

Audit findings


A. Theorganizationusesascorecardtomonitorstrategyimplementation.Score: 2

B. KPIsarecascadedtodepartmentallevel.Score: 2

C. Each objective is measured through KPIs. Score: 1

D. Theorganizationusesdashboardstomonitorotherimportantmetricsfordecision-making.Score: 1

E. TheorganizationusesaPortfolioofInitiativestocentralizeandmonitorstrategicinitiatives.Score: 1

F. Objectivesarecascadedtodepartmentallevel.Score: 1

G. Departmentalobjectiveshaveinitiativesassociated.Score: 1

H. Objectivesarecascadedatemployeelevel.Score: 1

I. KPIarecascadedtoemployeelevel.Score: 1

J. StrategyMapsareusedatdepartmentallevel.Score: 1

K. Scorecardsareusedatdepartmentallevel.Score: 1

L. Dashboardsareusedatdepartmentallevel.Score: 1

M. PortfolioofInitiativesareusedatdepartmentallevel.Score: 1

N. Scorecardsareusedtoemployeelevel.Score: 1

Legend Strategy Articulation Evidence-based Assessment An average score of 3.3 in the perception-based assessment shows that

thereislimitedunderstandingaboutstrategybeingoptimallyarticulatedand

implementedacrosstheorganization.

Strategy Articulation PerceptionBased Assessment

0 1 2 3 4 5

A3.6

3.4B

3C

3D

A. Initiatives/Projects are prioritized according to their strategic importance for the organization. Score: 3.6

B. TheKPIsreflectingobjectivesachievementarerelevantandclearlydefined.Score: 3.4

C. Thereisastrongperceptionofstrategyclaritythroughcascadingacrosstheentireorganization. Score: 3

D. Theperformancemanagementsystemisverywellalignedandintegratedacrosstheentire organization. Score: 3

Legend Strategy Articulation Perception-based Assessment

25



Findings

• Amonthlyachievementevaluationreportisusedtomonitortasks(mostly

reporting responsibilities), sales and quality objectives. The table contains

theassociatedtarget,achievementsandtrends(instrumententitledLaporan

EvaluasiPencapaianBulanan);

• KeyPerformance Indicators (KPIs), scorecards,dashboardsandstrategy

mapsarenotusedwithintheentity;

• TheorganizationdoesnotuseaPortfolioof Initiatives to centralizeand

monitorstrategicinitiatives;

• Theobjectivesarenotcascadedatthedepartmentalandindividuallevels.

Recommendations

• Develop a Portfolio of Initiatives to centralize and monitor initiatives.

Clearlystatetheowner,statusanddeadlineofeachinitiative;

• DevelopScorecardsandDashboardsatthecorporate,departmentaland

individuallevelstomonitorstrategyimplementationandsupportdecision-

making;

• CascadeobjectivesandKPIsat thedepartmentaland individual levels,

to ensure consistency between the strategies at different levels of the

organization,includingthecontributionofeachemployeetotheexecution

of their associated strategy.

StrategyReviewreflectsontheabilityoftheorganizationtoadapttochanges

andkeepanupdatedstrategy,bymeansofarigorouscontinuousstrategyreview

7.1.5 Strategy Review

Strategy Review Assessment

0 1 2 3 4 5

A4

3B

Legend Strategy Review Assessment


Theorganization’sstrategicplanwasanalyzedtoassessthestrategyreview

process.

Legend Strategy Review Evidence-based Assessment

A. Thestrategyreviewprocessiswellarticulated.

Strategy Review Evidence Based Assessment

0 1 2 3 4 5

4A

process.Strategyreviewisawell-establishedpracticeintheorganization.The

reviewfollowsaspecificmethodologyandinvolvestherightstakeholders.The

auditfindingsindicateastructuredapproachtoreviewingstrategy.

Audit findings


Anaveragescoreof3intheperception-basedassessmentconfirmsthefindingsoftheevidence-basedassessmentandthefactthatalthoughthestrategy

reviewprocessiswell-established,thereisstillroomforimprovement.

Strategy Review Perception Based Assessment

0 1 2 3 4 5

A3.2

3B

3C

2.8D

A. Thestrategicplanisupdatedbasedonthedecisionsapprovedduringthestrategyreviewprocess. Score: 3.2

B. Thereviewedandupdatedstrategicplanisanaccuratereflectionofthecurrentbusinessenvironment and expected trends. Score: 3

C. Allrelevantadjustmentsofthestrategyarecommunicatedacrosstheorganizationtoallkeystakeholders.Score: 3

D. Thestrategyreviewandrealignmentisconductedwiththeinvolvementofallkeystakeholders.Score: 2.8

Legend Strategy Review Perception-based Assessment

Findings

• Thereisaformalstrategyreviewprocessthattakesplaceonanannualbasis;

• The senior andmiddlemanagement are involved in the strategy review

process,whileinputiscollectedfromlowerorganizationallevelsandexternal

stakeholders;

• The strategy review process does not start in preparation of the

organizationalbudget;

• The changes incurred by the review are verbally communicated only to

Unit Heads and Supervisors.

Recommendations

• Reviewthestrategyinpreparationoftheorganizationalbudget,toensure

thattheapprovedchangestothestrategyareincludedinthescopeofthe

budget;

• Documentthechangesincurredbythereviewandofficiallycommunicate

themtoallkeyinternalstakeholders.

27



Strategy Governance & Communication reflects the efficiency of the

strategy communication process, the level of awareness, transparency and

understanding regarding the roles and responsibilities for cascading and

aligningthestrategyacrosstheorganization.

Theorganizationismanagingstrategyinformally,asitisonlycommunicated

verballytoUnitHeadsandSupervisors.Theorganizationshouldtakeactions

toraisethelevelofawarenessandtransparencyregardingstrategy.

The organizational chart and job descriptions were reviewed to assess

strategy governance. No documents were presented to assess the strategy

communication process.

7.1.6 Strategy Governance & Communication

Strategy Governance & Communication Assessment

0 1 2 3 4 5

A1

3B

Legend Strategy Governance & Communication Assessment


Strategy Governance & Communication Evidence Based Assessment

0 1 2 3 4 5

A1

1B

1C

1D

A. Thereisawell-developedgovernanceframeworkfortheStrategyPlanningprocess.Score: 1

B. Thereisacomprehensivemanualorchapterofamanualreflectingallthekeyorganizationalstrategicplanningproceduresandtools.Score: 1

C. Theorganizationhasanextensivestrategycommunicationplan.Score: 1

D. Allprocessesrelatedtostrategicplanningaremapped.Score: 1

Legend Strategy Governance & Communication Evidence-based Assessment

Audit findings


An average score of 3 in the perception-based assessment shows that

the organization is managing strategy informally and that strategy is

communicatedwithoutaclearandwell-designedplan.Thefindingsconfirm

the moderate awareness level among employees regarding the strategy’s

importance or existence.

Strategy Governance & Communication Perception Based Assessment

0 1 2 3 4 5

A3

3B

3C

3D

3E

Findings

• Thegovernanceframeworkisinaninitialstate,asthereisnodedicated

StrategyManagementOfficeorrole/positionwithintheorganization;

• Thereisnostrategycommunicationplan;

• There is no manual/procedure on how the strategy is formulated,

articulatedandcommunicated intheorganization,while itsprocessesare

notmapped;

• Accountabilityformeetingstrategicobjectivesisnotclearlyestablished.

Recommendations

• Officiallyassigntheresponsibilityforstrategygovernancetoadepartment

orapositionwithintheorganization;

• Define and document the roles and responsibilities of all stakeholders

involvedinthestrategicplanningprocesstoensureaccountability;


frequency of communication and a break-down of information, based on

differenttypesofaudiences,toraisethelevelofawarenessandtransparency

regardingthestrategy’simportance.

29



Consistsinevaluatingtheprocesses,toolsandtechniquesemployedbytheentitytoselectKPIs.Statementsrefertotheusage,thestandardizationoftoolsandpractices,butalsototherelevancyandalignmentofKPIstothestrategy.

KPI Selection

AimstoidentifywhetherKPIsaredocumentedintheentityandhowthisprocesstakesplaceintermsoftoolsused,peopleinvolved,governanceandkeepinginformationuptodate.

KPI Documentation

Assesses the extent to with target-setting relies on data and manages to create astimulatingenvironmenttoreachandexceedtargets.

Target Setting

Refers to the data collection process in terms of data sources, data timeliness andaccuracy.Italsolooksintotheusageofsoftwaresolutionstoenabledatagathering,modellingandreporting.

Data Gathering

Provides an evaluation on the entity’s approach in terms of visual design of data.Instrumentsassessed fromtheperspectiveofdatavisualizationgoodpracticesarescorecards, dashboards and performance reports.

Data Visualization

Incurs the assessment of internal accountability levels over performancemeasurementprocessessuchasKPISelection,KPIDocumentation,Target-settingand Data Gathering. It refers to the overall process of owning and distributingresponsibilityforperformancemeasurement.

KPI Governance

7.2 Performance MeasurementMaturity Audit

Audit findings


Thescorefortheevidence-basedassessmentwas1.6,whilethescoreforthe

perception-based assessment was 3.5. As the evidence-based assessment

weighs75%inthefinalscore,whiletheperception-basedassessment25%,

thefinalscorewas2.1.Thisindicatesalevel2maturityscore(Emergent)for

thePerformanceMeasurementcapability.

Theevidence-basedassessment results showa level2maturity score, thus

showcasing what type of performance measurement process takes place

7.2 Performance Measurement

Performance Measurement Assessment

0 1 2 3 4 5

A1.7

1.6B

2.2C

2.1D

3.1E

1.6F

A. KPISelection.Score 1.7

B. KPI Documentation. Score 1.6

C. Target-setting. Score 2.2

D. Data Gathering. Score 2.1

E. DataVisualization.Score 3.1

F. KPI Governance. Score 1.6

Legend Performance Measurement Assessment

A. KPISelection.Score 1

B. KPI Documentation. Score 1



E. DataVisualization.Score 3

F. KPI Governance. Score 1

Legend Performance Measurement Evidence-based Assessment

Performance Measurement Evidence Based Assessment

0 1 2 3 4 5

A1

1B

1.8C

1.7D

3E

1F

within the Alpha Company. Specifically, Key Performance Indicators (KPIs)

are not used and the organization relies on reports generated through its

accountingsoftware&itsmonthlyachievementevaluationreports.Thisshows

that performance measurement is used within the organization, but focused

onfinancialmetricsandlimitedtoproduction,inventoryandsales.Thecurrent

framework only supports performancemeasurement of the corporate and

departmental levels,without theoption tomeasure individualperformance.

Theprocessesrelatedtoperformancemeasurementarenotmapped.

31



A. KPISelection.Score 3.7

B. KPI Documentation. Score 3.6



E. DataVisualization.Score 3.3

F. KPI Governance. Score 3.2

Legend Performance Measurement Perception-based Assessment

The perception-based assessment results show a level 3 maturity score

regarding performance measurement.

Performance Measurement Perception Based Assessment

0 1 2 3 4 5

A3.7

3.6B

3.5C

3.6D

3.3E

3.2F

The data set for Performance Measurement reveals the highest gaps

between the actual and the perceived maturity level in KPI selection, KPI

documentationandKPIgovernance,whichstronglyrelatetothefindingsfrom

theevidence-basedassessment.Assuch,thereseemstobesizeablegaps in

target-setting and data gathering within Alpha Company. Financial reports

from the accounting software were presented as KPIs and this stands to show

that there is need for a comprehensive and coherent approach towards the

useofKPIs,whichwillrepresentthenextstageofstrategyimplementation.

0 1 2 3 4 5

Performance Measurement Assessment

A 13.7

C 1.83.5

F 13.2

B 13.6

E 33.3

D 1.73.6

A. KPISelection. Score: 1 (Actual) | 3.7 (Perceived)

B. KPI Documentation. Score: 1 (Actual) | 3.6 (Perceived)

C. Target-setting. Score: 1.8 (Actual) | 3.5 (Perceived)

Legend Performance Measurement Assessment

Actual Perceived

D. Data Gathering. Score: 1.7 (Actual) | 3.6 (Perceived)

E. DataVisualization. Score: 3 (Actual) | 3.3 (Perceived)

F. KPI Governance. Score: 1 (Actual) | 3.2 (Perceived)

Audit findings


KPI Selection consists of evaluating the processes, tools and techniques

employed by the entity to select KPIs. Statements refer to the usage &

standardizationoftoolsandpractices,butalsototherelevancyandalignment

of KPIs to the strategy.

Theevidence-basedassessment indicated that therewasnoKPIselection

process in place, a fact that was not consistent with the results of the

perception-based assessment, showing that the responses to the survey

variedbasedoneachperson’sexperienceandunderstandingofKPIs.

Theperformancereports,monthlyachievementevaluationreportsandalist

offinancialreportswerereviewedtoassesstheKPIselectionprocess.

7.2.1 KPI Selection

KPI Selection Assessment

0 1 2 3 4 5

A1

3.7B


Legend KPI Selection Assessment

KPI Selection Evidence Based Assessment

0 1 2 3 4 5

A1

1B

1C

1D

A. TheKPIsetisbalancedbyassigningatleast2KPIsforeachobjective.Score: 1

B. TheKPIsetbalancedthefocusbetweenfinancialandnon-financialKPIs.Score: 1

C. KPI names are standardized. Score: 1

D. TheKPIselectionprocessiswell-articulated.Score: 1

Legend KPI Selection Evidence-based Assessment

33



Anaveragescoreof3.7intheperception-basedassessmentshowsthatthetopicofKPIselectionisyettobefullycomprehendedoracknowledged.

KPI Selection Perception Based Assessment

0 1 2 3 4 5

A4

3.8B

3.8C

3.6D

3.6E

3.6F

3.4G

Findings

• ThereisnoKPIselectionprocessinplace;

• KPIs are not assigned to objectives.

Recommendations

• EstablishaKPIselectionprocessfortheorganization’sobjectives;

• Ensure that KPI names are standardized, do not include targets and

indicate how the objective is measured and not the purpose of the

measurementoranyactionstobetakeninthisregard(e.g.“#Timetoprocess

request”,insteadof“-timeefficiency”);

• Assignatleast2KPIsforeachobjectiveandfocusonabalancebetween

financialandnon-financialKPIs.

Audit findings


The section aims to identify whether KPIs are documented in the entity. It

looksintothemannerinwhichthisprocesstakesplaceintermsoftoolsused,

peopleinvolved,governanceandkeepinginformationupdated.

The evidence-based assessment indicated that there was no KPI

documentationprocessinplace,afactthatwasnotconsistentwiththeresults

of the perception-based assessment, showing that the responses to the survey

variedbasedoneachperson’sexperienceandunderstandingofKPIs.

NorelevantinternaldocumentswereprovidedtoassesstheKPIdocumentation

process.

7.2.2 KPI Documentation

KPI Documentation Assessment

0 1 2 3 4 5

B3.6

A1



KPI Documentation Evidence Based Assessment

0 1 2 3 4 5

A1

B1

C1

D1

A. TheentityusesastandardizedKPIDocumentationForm.Score: 1

B. AlltheKPIsmonitoredhavethresholdswhereverapplicable.Score: 1

C. TheKPIdocumentationprocessiswell-articulated.Score: 1

D. AninternalrepositoryordatabaseisusedforthecentralizationofallKPIDocumentationForms.Score: 1

Legend KPI Documentation Evidence-based Assessment

35



An average score of 3.6 in the perception-based assessment shows that the

topicofKPIdocumentationisyettobefullycomprehendedoracknowledged.

KPI Documentation Perception Based Assessment

0 1 2 3 4 5

A3.8

B3.8

C3.4

D3.2

A. AllKPIsaredocumentedpriortoKPIactivation(datagathering).Score: 3.8

B. TheKPIdocumentationtemplateiswelldesignedanduseful. Score: 3.8

C. TheKPIinternaldatabaseprovidesreliableinformationasitisconstantlyupdated.Score: 3.4

D. ThebenefitsofdocumentingKPIsareunderstoodamongkeystakeholderssuchasKPIOwners and Data Custodians. Score: 3.2

Legend KPI Documentation Perception-based Assessment

Findings

• ThereisnoKPIdocumentationprocessinplace;

• The entity does not use a standardized KPI documentation form.

Recommendations

• EstablishaKPIdocumentationprocess;

• Use a standardized KPI Documentation Form that contains relevant

information(e.g.KPIname,definition,calculationformula,target);

• DocumentalltheKPIsthataremonitored

This section assesses the extent to which the target-setting process relies

on actual data, and the extent to which it manages to create a stimulating

environment for employees to reach and even exceed targets within the

organization. As the entity does not use KPIs, the assessment of the target-

setting process was conducted on the metrics monitored by the entity. Targets

forsalesareestablishedbasedonpreviousresults,whiletargetsforproduction

areestablishedbasedonorders.

7.2.3 Target-setting

Target Setting Assessment

0 1 2 3 4 5

A1.8

3.5B



Audit findings


Theperformancereportsandmonthlyachievementevaluationreportswere

reviewed to assess the target-setting process.

Target Setting Evidence Based Assessment

0 1 2 3 4 5

A4

1B

1C

1D

Target Setting Perception Based Assessment

0 1 2 3 4 5

A3.8

3.8B

3.6C

3.4D

3.4E

3.4F

3.4G

37



Findings

• Approximately83%ofthetasksfromthemonthlyachievementevaluation

reportshadtargetstobemet;

• Targetsforsalesareestablishedbasedonpreviousresultsandthosefor

productionbasedonorders;

• Nobenchmarkingdataisusedforestablishingtargets.

Recommendations

• EstablishtargetsforallactiveKPIsandthresholdswhereverapplicable;

• Organizetarget-settingworkshopsandextendaparticipationinvitation

totheemployeesresponsibleforreachingthetargetsandthoseresponsible

withcollectingdataformeasuringthetargets’achievement;

• Usebenchmarkingdataforestablishingtargets.

This section analyzes the data collection process in terms of clarity of data

sources,overallsystemsintegrationtofacilitatedataconsolidation&availability

in time and accuracy.

As the entity does not use KPIs, the assessment of the data gathering process

wasconductedonthemetricsmonitoredbytheentity.Theprocessrelieson

standardizedtemplates,cleardeadlinesandaccountability.

7.2.4 Data Gathering

Data Gathering Assessment

0 1 2 3 4 5

A1.7

3.6B


Legend Data Gathering

The performance reports were reviewed to assess the target-setting process.

Data Gathering Evidence Based Assessment

0 1 2 3 4 5

A3

1B

1C

A. Thereisawellarticulateddatagatheringprocess.Score: 3

B. AllselectedKPIshavedatacollectionsystemsinplace.Score: 1

C. AllKPIsselectedareactive(thedatacanandiscollected).Score: 1

Legend Data Gathering Evidence-based Assessment

Audit findings


An average score of 3.6 in the perception-based assessment shows that the respondents who answered the survey about the characteristics of the current

processforgatheringdataunderstoodthatthisprocessisusedtocalculatethemetricsdisplayedinperformancereports.

Data Gathering Perception Based Assessment

0 1 2 3 4 5

A3.6

3.6B

3.6C

3.4D

A. TheKPIdatacollectioniscompletedontimeaccordingtothepre-establishedschedule.Score: 3.6

B. Instances of inaccurate data are rare events. Score: 3.6

C. ThecostformeasuringselectedKPIsdoesnotexceedthebenefitsofhavingthedata.Score: 3.6

D. Thetechnologysupportingthedatacollectionprocessisrelyingontheintegrationofdifferent data sources and databases. Score: 3.4

Legend Data Gathering Perception-based Assessment

Findings

• Datagatheringreliesonstandardizedtemplatesandhascleardeadlines;

• Accountability exists in terms of data collection as the performance

reportsincludethenameandsignatureoftheemployeethatgatheredthe

dataandtheonethatapprovedit;

• Datagatheringiswelldocumentedandsupportedbytheaccountingsoftware.

Recommendations

• Periodicallyassessthequalityofthedatagatheredintermsofaccuracy,

completenessandtimeliness;

• EstablishadatacollectionsystemforKPIs;

• EnsurethatthenecessarydataformeasuringKPIscanbeandiscollected

in a consistent manner.

39



Datavisualizationprovidesanevaluationof theentity’sapproach in terms

of the visual design of data. Several noteworthy instruments which are

regularlyassessedfromtheperspectiveofgooddatavisualizationpractices

are scorecards, dashboards and performance reports.

One can notice from the data collected that variability in terms of data

visualization is quite low, which is consistent with the general perception

regardingthematuritylevelforthiscluster.AstheentitydoesnotuseKPIs,

the assessment of the data visualization practices was conducted on the

metrics monitored by the entity.

The performance reports were reviewed to assess data visualization

practices as the entity does not use scorecards and dashboards.

7.2.5 Data Visualization

Data Visualization Assessment

0 1 2 3 4 5

A3

3.3B


Legend Data Visualization

Data Visualization Evidence Based Assessment

0 1 2 3 4 5

A3

3B

3C

A. Therearevisualelementsforallperformancemanagementtoolsused.Score: 3

B. KPIdatadisplayedingraphsiscompliantwithdatavisualizationbestpractices.Score: 3

C. KPIdatadisplayedintablesiscompliantwithdatavisualizationbestpractices.Score: 3

Legend Data Visualization Evidence-based Assessment

Audit findings


Anaveragescoreof3.3intheperception-basedassessmentconfirmsthefindingsoftheevidence-basedassessmentandthefactthatbestpracticesintermsof

datavisualizationareconsidered,butthereisstillroomforimprovement.

Data Visualization Perception Based Assessment

0 1 2 3 4 5

A3.4

3.4B

3.2C

Findings

• Alltheperformancereportscontainvisualrepresentationsofdata;

• Graphs are not crowded and have titles and labels, backgrounds are

cleanandcolorsarenotusedinexcess;

• Tableshavetitlesandalegend,dataisgroupedintologicalclustersand

charactersareproperlyaligned.

Recommendations

• Usepiechartsataminimum;

• Avoidstronggridsintables;

• Avoid3Dgraphicalrepresentationsofdata.

41



KPI Governance refers to the assessment of internal accountability levels

over performance measurement processes, such as KPI Selection, KPI

Documentation, Target-setting and Data Gathering. It refers to the overall

processofowninganddistributingresponsibilityforperformancemeasurement.

The roles of KPI owners and data custodians for the employees involved

in theperformancemeasurementprocessarenotestablished.There isno

manual/procedureonhowperformanceismeasuredwithintheorganization,

in addition to the fact that these processes are not mapped.

TheorganizationalchartandalljobdescriptionswerereviewedtoassessKPI

governance.

Thetrainingplanandbudgetwerenotpresented,sowecouldnotassessthe

availabilityoftrainingprogramsonperformancemeasurement.

7.2.6 KPI Governance


Legend KPI Governance

KPI Governance Assessment

0 1 2 3 4 5

A1

3.2B

KPI Governance Evidence Based Assessment

0 1 2 3 4 5

A1

1B

1C

1D

Audit findings


An average score of 3.2 in the perception-based assessment shows that the respondents answered to the survey as to the characteristics of the current process

formeasuringthemetricsdisplayedinperformancereports.

KPI Governance Perception Based Assessment

0 1 2 3 4 5

A3.6

3.4B

3.2C

3.2D

2.6E

Findings

• Thegovernanceframeworkisinaninitialstate,asthereisnodedicated

PerformanceMeasurementOfficeorrole/positionwithintheorganization;

• Thereisnomanual/procedureonhowperformanceismeasuredwithin

theorganization,inadditiontothefactthatprocessesarenotmapped;

• Accountabilityformeasuringperformanceisnotclearlyestablished,as

there are no assigned KPI owners or data custodians.

Recommendations

• Assignanddocument therolesofKPIownersanddatacustodians to

employeesinvolvedintheperformancemeasurementprocess,toensure

accountability;


measurementforallkeyemployees.

43



Assesses atwhat level is data analysis employed in the entity, identifying if specialtechniques or software are used.

Data Analysis

Focusesontheefficiencyofthereportingprocess,whetherissupportedbyasoftwaresolutionornot,ifreportsarereadyontimeandwellstructured.

Reporting

Evaluates how performance review meetings are approached from the preparationstage to the follow-up actions. It provides insight on the discussion focus and thedecision-makingprocessasanessentialcharacteristicofsuchmeetings.

Decision Making

Referstotheprojectmanagementcapabilityoftheauditedentity,ontheframeworkusedto implement initiatives.Assessesthedeliveryofprojectsontime, inbudgetandinaccordancewiththeestablishedqualitystandards.

Initiative Management

Illustrates the ability of the performancemanagement system to adapt to changesbasedonregularreviewsofstrategy.Itanalyzestheprocessofrecording,reviewingandimplementingimprovementideas.

Learning & Improvement

Identifies how the performance management system is coordinated, indicatesaccountability and governance. It assesses the clarity regarding the role of eachinternalstakeholder.

Performance System Governance

7.3 Performance ManagementMaturity Audit

Audit findings


Thescorefortheevidence-basedassessmentwas1.3,whilethescoreforthe

perception-based assessment was 3.4. As the evidence-based assessment

weighs75%inthefinalscore,whiletheperception-basedassessment25%,

thefinalscorewas1.8.Thisindicatesalevel2maturityscore(Emergent)for

thePerformanceManagementcapability

The evidence-based assessment results show a level 1 maturity score in

termsoftheperformancemanagementprocesstakingplacewithintheAlpha

Company.Simpledataanalysisisused,andaveragevaluesformetricsordelta

valuesbetweenactualandtargetedperformancelevelsarerecordedinmonthly

performancereports.Theresultsarediscussedduringmonthlymanagement

meetingsbutwithafocusonsales,production(errors),marketing(awareness)

andcustomercomplaints.Actions/initiativesarecommunicatedverballyonly

to Unit Heads and are monitored by the Management Representative.

7.3 Performance Management

Performance Management Assessment

0 1 2 3 4 5

A2.3

2.4B

1.6C

1.6D

1.6E

1.6F

A. DataAnalysis.Score: 2.3

B. Reporting. Score: 2.4

C. Decision-making.Score: 1.6

Legend Performance Management Assessment

A. DataAnalysis.Score: 2

B. Reporting. Score: 2

C. Decision-making.Score: 1

Legend Performance Management Evidence-based Assessment

Performance Management Evidence Based Assessment

0 1 2 3 4 5

A2

2B

1C

1D

1E

1F

D. Initiative Management. Score: 1.6

E. Learning & Improvement. Score: 1.6

F. Performance System Governance. Score: 1.6

D. Initiative Management. Score: 1

E. Learning & Improvement. Score: 1

F. Performance System Governance. Score: 1

45



Theperception-basedassessmentresultshighlightalevel3maturityscore

forthecompany’sperformancemanagementframework.

Performance Management Evidence Based Assessment

0 1 2 3 4 5

A3.2

3.5B

3.4C

3.5D

3.2E

3.3F

A. DataAnalysis.Score: 3.2

B. Reporting. Score: 3.5

C. Decision-making.Score: 3.4

Legend Performance Management Evidence-based Assessment

ThedatasetforPerformanceManagementrevealsthehighestgapsbetweenthe

actualandperceivedmaturity levelwhen itcomestodecision-making, initiative

management, learning & improvement and performance system governance,

whichstronglyrelatestothefindingsfromtheevidence-basedassessment.This

can be attributed to a different understanding of the steps following the data

analysisandreportingprocesses,whileadequatetoolsandtechniquestoclarify

andfacilitatetheenactmentofsuchstepsseemtobelackingandaresorelyneeded.

0 1 2 3 4 5

Performance Management Assessment

A 23.2

C 13.4

F 13.3

B 2

3.5

E 13.2

D 13.5

Actual Perceived

A. DataAnalysis. Score: 1 (Actual) | 3.2 (Perceived)

B. Reporting. Score: 2 (Actual) | 3.5 (Perceived)

C. Decision-making. Score: 1 (Actual) | 3.4 (Perceived)

Legend Performance Management

D. Initiative Management. Score: 3.5

E. Learning & Improvement. Score: 3.2

F. Performance System Governance. Score: 3.3

D. Initiative Management. Score: 1 (Actual) | 3.5 (Perceived)

E. Learning & Improvement. Score: 1 (Actual) | 3.2 (Perceived)

F. Performance System Governance. Score: 1 (Actual) | 3.3 (Perceived)

Audit findings


Thissectionassesseswhatlevelofdataanalysisisbeingemployedintheentity,

identifying if any special techniques or software are used.A thorough data

analysisprocessfacilitatesbothreportinganddecision-makingbasedondata.

AstheentitydoesnotuseKPIs,theassessmentofthedataanalysisprocess

was conducted on the metrics monitored by the entity.

7.3.1 Data Analysis

Data Analysis Assessment

0 1 2 3 4 5

A2

3.2B


Legend Data Analysis

A. SoftwaresolutionsareusedtoanalyzetheKPIresults.

B. TheorganizationisusingdataanalysisaspartofinterpretingKPIresults.

Legend Data Analysis Evidence-based Assessment


reviewedtoassessthedataanalysisprocess.

Data Analysis Evidence Based Assessment

0 1 2 3 4 5

A2

2B

An average score of 3.2 in the perception-based assessment unravels data

analysiscapabilitiesthathavenotyetfullyformedwithintheorganization.The

dataanalysisprocessissomewhatstreamlinedandscheduledappropriately,with

analysismethodsandtoolsdesignedtoensuredataconsistencyandrelevancy.

Data Analysis Perception Based Assessment

0 1 2 3 4 5

A3.6

3.4B

3.2C

3D

3E

A. Dataisanalyzedregularlyinaccordancewithapredefinedfrequency,oncetheKPIdataiscollected.Score: 3.6

B. InterpretationsofdataisdevelopedbothinisolationandincontextbasedontheinterrelationsidentifiedbetweendifferentKPIs.Score: 3.4

Legend Data Analysis Perception-based Assessment

47



Findings

• BasicMicrosoftExcelisusedtoprocesstheresultsofdataanalysis;

• Simple data analysis is used,with average values formetrics or delta

valuesbetweenactualandtargetedperformancelevels.

Recommendations

• Use data analysis techniques such as Root Cause Analysis, Fishbone

Diagram or the 5 Whys.

C. Dataanalysisisgenerallydoneusingspecificbusinessanalysistechniques,suchasRootCouseAnalysis,FishboneDiagram,5Why’s,etc.Score: 3.2

D. Thedataanalysisprocessgeneratesvaluableinsightthatsupportsthedecision-makingprocess. Score: 3

E. KPIresultsareanalyzedandprocessingofthedatagatheredisgeneratedforalltheKPIsmonitored. Score: 3

Thissectionfocusesontheefficiencyofthereportingprocess,whetheritis

supportedbyasoftwaresolutionornot,and ifreportsarereadyontime&

well-structured.Acomprehensivereportingsystemallowsfortheorganization

togainvaluableinsightintoitscoreoperations.

WithinAlphaCompany, performance reporting is based on a rather simple

procedureofcompilingperformancedataandpresentingitinabasicformat

meant to raise awareness aboutperformance results, aswell as ensure the

transferofimportantdatatokeyinternalstakeholders.

7.3.2 Reporting

Reporting Assessment

0 1 2 3 4 5

A2

3.5B


Legend Reporting


reviewedtoassessthedataanalysisprocess.

Reporting Evidence Based Assessment

0 1 2 3 4 5

A2

2B

A. ThereisawellarticulatedprocessforKPIreporting.

B. The Performance Reports of the organization are comprehensive.

Legend Reporting Evidence-based Assessment

Audit findings


Anaveragescoreof3.5intheperception-basedassessmentshowsthatthecharacteristicsofanefficientreportingsystemarecomprehendedandacknowledged

amongkeystakeholders.

Reporting Perception Based Assessment

0 1 2 3 4 5

A3.8

3.6B

3.6C

3.4D

3E

Findings

• Performancereportsaregeneratedeachmonthandarecompiledon

ayearlybasis;

• Thereportscontaingraphics,tablesandothervisualrepresentations

ofdata;

• The organization does not use a standardized performance report

template;

• Performance results are not accompanied by data interpretations

andcomments,whilereportsdonothaveexecutivesummaries;

• Noqualityassurancereviewofdatatakesplacebeforecompilingthe

reports.

Recommendations

• Increasethequalityofdatabyrandomdatasampling,doublechecking

(4eyesprinciple)and/orautomation;

• Developandimplementastandardizedperformancereporttemplateto

beusedacrosstheorganization;

• Include an executive summary, data interpretations and comments in

performance reports.

49



This section evaluates how performance review meetings are approached,

from thepreparation stage to the follow-upactions. It provides insight into

whatisemphasizedduringameetingandwhythedecision-makingprocessis

anessentialcharacteristicofsuchmeetings.

Resultsarediscussedduringmonthlymanagementmeetings,butarefocused

around sales, production (errors), marketing (awareness) and customer

complaints. Although decisions are made, they are not documented and

communicatedonlyverballytothosepresent.

Nomeetingagendasorminuteswerepresentedtoassessthedecision-making

process.


decision-making process is considered to be effective, although it is not a

formalprocess,inasmuchasitisaresultofmonthlymanagementmeetings.

7.3.3 Decision-Making

Decision Making Assessment

0 1 2 3 4 5

A2.7

3.4B


Legend Decision-making

Decision Making Evidence Based Assessment

0 1 2 3 4 5

A1

1B

A. Performancereviewmeetingsarewellorganized.

B. Thedecision-makingprocessiseffective.

Legend Decision-making Evidence-based Assessment

Audit findings


Decision Making Perception Based Assessment

0 1 2 3 4 5

A3.6

3.6B

3.2F

3.6C

3.2G

3.4D

3.2H

3.4E

3.2I

A. Allkeystakeholders/KPIownersandotherrelevantdecisionmakersareansweringtheinvitationandgenerallyattendtheperformancereviewmeetings.Score: 3.6

B. Discussionscarriedduringtheperformancereviewmeetingsusuallyfollowthetopicsassigned in the meeting agenda. Score: 3.6

C. Theperformancereviewmeetingagendaandthepreliminaryperformancereportarepreparedandcommunicatedinadvanceofthescheduledmeetingdate.Score: 3.4

D. Theperformancereviewmeetingsdonotexceedtheallocatedtime,acommonacceptedstandard is an average of two hours. Score 3.4

Legend Decision-making Perception-based Assessment

Findings

• Performance reviewmeetingsarenot formallyorganized;decisions

aremadebasedondiscussionsfocusedonperformanceresults,during

monthlymanagementmeetings;

• Any decisions are only verbally communicated to those present at

monthlymanagementmeetings;

• Decisionsarenotcentralizedinmeetingminutes,withcleardeadlines

andaresponsiblepersonassigned.

Recommendations

• Organizemonthlyorquarterlyperformancereviewmeetingsandinvite

bothdecisionmakersandKPIownerstoattend;

• Foreachdecisionmadeduringtheperformancereviewmeeting,seta

cleardeadlineandassignaresponsibleperson;

• Centralize and monitor the decisions from one performance review

meeting to another.

51



Initiative management refers to the project management capability of the

audited entity, regarding the framework used to implement initiatives. It

assessesthedeliveryofprojectsontime,withinbudgetandinaccordancewith

theestablishedqualitystandards.

In the case of Alpha Company, there is no framework used to implement

initiatives, the entity does not use a standardized documentation form.

Initiatives are not consolidated in a portfolio to support tracking progress.

Actions/initiatives are communicated verbally only to Unit Heads and are

monitored by the Management Representative.

No relevant internal documents were provided to assess the initiative

management process.

7.3.4 Initiative Management

Initiative Management Assessment

0 1 2 3 4 5

A1

3.5B


Legend Initiative Management

Initiative Management Evidence Based Assessment

0 1 2 3 4 5

A1

1B

1C

1D

1E

A. TheentityusesastandardizedInitiativeDocumentationForm.Score: 1

B. InitiativeDocumentationFormsareconsolidatedinaLibraryofInitiatives.Score: 1

C. Allinitiativesareclearlyassociatedtoobjectives.Score: 1

D. Initiatives names are standardized. Score: 1

E. Theinitiatives/projectsselectedtosupporttheachievementofstrategicobjectivesareconsolidatedinaPortfolioofInitiatives.Score: 1

Legend Initiative Management Evidence-based Assessment

Audit findings


An average score of 3.5 in the perception-based assessment support the findings of the interview-based assessment. Specifically, actions/initiatives are

communicatedverballyonlytoUnitHeadsandaremonitoredbytheManagementRepresentative.

Initiative Management Perception Based Assessment

0 1 2 3 4 5

A3.6

3.4B

A. Theinitiativesstatusisreviewedandreportedwithregularity,atleastduringeachperformancemanagementcycle/reportingperiod.Score: 3.6

B. ImplementedinitiativescontributetotheachievementoftheKPItargetsandtheirrelatedstrategicobjectives.Score: 3.4

Legend Initiative Management Perception-based Assessment

Findings

• Actions/initiativesarecommunicatedverballyonlytoUnitHeadsand

aremonitoredbytheManagementRepresentative;

• Theentitydoesnotuseastandardizeddocumentationform;

• Initiativesarenotconsolidatedinalibraryorportfolio.

Recommendations

• Develop a standardized initiative documentation form, with relevant

information that supports initiative implementation (e.g. initiative name,

startdate,enddate,initiativeownerandstatus);

• Standardizeinitiativenamesandassociatethemtoobjectives;

• Consolidateinitiativesinaportfolio,aswellasallinitiativedocumentation

formsinalibrary,totrackprogress.

53



Thissectionillustratestheabilityoftheperformancemanagementsystemtoadapt

tochangesbasedonregularreviewsoftheorganizationalstrategy.Itanalyzesthe

processofrecording,reviewingandimplementingimprovementideas.

TheorganizationdoesnotkeepaLessonsLearnedLogtosupportlearningand

improvement,noraChangeLogtocaptureallchangesand/orupdatesonthe

performance management architecture.

No relevant internal documents were provided to assess the learning &

improvement process.

7.3.5 Learning & Improvement

Learning & Improvement Assessment

0 1 2 3 4 5

A1

3.2B


Legend Learning & Improvement

Learning & Improvement Evidence Based Assessment

0 1 2 3 4 5

A1

1B

1C

A. ALessonsLearnedLogiskeptandupdatedthroughoutthePerformanceManagementCycle.Score: 1

B. ThereisaChangeLogcapturesallchangesand/orupdatesontheperformancemanagement architecture. Score: 1

C. ThereisanInnovationManagementFrameworkintheorganization.Score: 1

Legend Learning & Improvement Evidence-based Assessment

Audit findings


Anaveragescoreof3.2intheperception-basedassessmentshowsalimited

understanding of the steps following the initiative management processes,

whileadequatetoolsandtechniquestoclarifyandfacilitatetheenactmentof

suchstepsseemtobelackingandaresorelyneeded.

Learning & Improvement Perception Based Assessment

0 1 2 3 4 5

A3.4

3.2B

3.2F

3.2C

3G

3.2D

3.2E

A. Anyideaforimprovementresultedaspartofobservations,dataanalysis,discussionsand performance review meetings is recorded and proposed for further review and implementationifapproved.Score: 3.4

B. ThereisanactiveprocessofcontinuousreviewandrealignmentofObjectives,KPIsandInitiativestotheentitystrategyduringeveryperformancemanagementcycle.Score: 3.2

C. Improvementideasgeneratedbyemployeesareactivelyconsideredforimplementation,onceanalyzedandapproved.Score: 3.2

Legend Learning & Improvement Perception-based Assessment

Findings

• The organization does not keep a Lessons Learned Log to support

learningandimprovement;

• TheentitydoesnotuseaChangeLog tocaptureall changesand/or

updatesontheirperformancemanagementarchitecture;

• Therearenoopenchannelsforemployeestosubmittheirinnovation/

improvement ideas.

Recommendations

• Keepalogwithallthelessonslearnedfromimplementinginitiatives,witha

briefcontextdescription,recommendationsandcomments;

• Keep a log with all the changes and/or updates to the performance

managementarchitecture.Includethereasoningbehindthechangesandthe

datewhenthechangesoccurred;

• Openatleastonechannelforemployeestosubmittheirinnovationideas

andassignacommitteeresponsiblewithassessingallinnovation/improvement

ideas proposed by staff, and deciding on further courses of action.

D. Valuablelessontobelearned,approvedideasforimprovementandanyupdateorchangemadetotheperformancemanagementsystemarethoroughlycommunicatedacrosstheorganization. Score: 3.2

E. Theentityisbenefitingfromastronglearningenvironment.Score: 3.2

F. Thereisahighlevelofcommitmentforcontinuouslearningandimprovementacrosstheentire entity. Score: 3.2

G. Anyinsightrelevanttotheimprovementoftheperformancemanagementcapabilityisacknowledged,analyzedandrecordedintheLessonsLearnedLog.Score: 3

55



PerformanceSystemGovernancereflectshowtheperformancemanagement

systemiscoordinated.Itindicatesaccountabilityandgovernance,assessesthe

clarityofeachrole,foreveryinternalstakeholder.

The project management framework within the organization is not clearly

established and documented, as the processes related to performance

managementarenotmapped.There isnocommunicationplan toreporton

anyinitiative’sstatusorperformanceresults.

Thestrategicplan,organizationalchartandjobdescriptionswerereviewedto

assessthecompany’sperformancesystemgovernance.Thetrainingplanand

budgetwerenotpresented,whichdidnotallowustoassesstheavailabilityof

training programs on performance management.

7.3.6 Performance System Governance

Performance System Governance Assessment

0 1 2 3 4 5

A1

3.3B


Legend Performance System Governance

Performance System Governance Evidence Based Assessment

0 1 2 3 4 5

A1

1B

1F

1C

1D

1E

Audit findings


A. Allupdatesandchangestotheperformancemanagementsystemaresupervisedandapproved by the Performance Manager or designated person in charge of the system. Score: 3.4

B. Thereishighlevelofawarenessaboutperformancemanagementpracticesintheentity.Score: 3.4

C. Thereishighlevelofaccountabilityandsupportfortheperformancemanagementrelatedpracticesintheentity.Score: 3.4

D. Thereisawellarticulatedandimplementedperformancemanagementsystemintheentity. Score: 3.2

E. Theperformancemanagementsystemisimplementedandintegratedwithcleardesignatedrolesandresponsibilitiesacrosstheentireorganization.Score: 3.2

Legend Performance System Governance Perception-based Assessment

Anaveragescoreof3.3 in theperception-basedassessment shows that theorganization ismanagingperformance informallyandconfirms themoderate

awarenesslevelamongemployeesonperformancesystemgovernance.

Performance System Governance Perception Based Assessment

0 1 2 3 4 5

A3.4

3.4B

3.4C

3.2D

3.2E

Findings

• ThereisnoProjectManagementFrameworkwithintheorganization;

• Therearenocommunicationplanstoreportonanyinitiative’sstatus

orperformanceresults;

• Theprocessesrelatedtoperformancemanagementarenotmapped.

Recommendations

• Officially assign the ProjectManagement function to a dedicated office

or a position within the organization and map the processes related to

performancemanagement;

• Developcommunicationplansforinitiativestatusandperformanceresults

reporting;


managementtoallkeyemployees.

57



Reflects how well the performance management architecture is cascaded andintegratedacross theorganization. Assesses the clarity regarding the roleof eachstakeholder,accountabilityandgovernance.

Integrated Performance Capability

Indicates the efficiency of the communication process, the transparency of theentitytowardsinternalstakeholdersandthesupportofseniormanagementforthedevelopmentofperformancemanagementcapabilities.

Communication & Leadership Support

The impact of effective communication is reflected in the employees’ awarenesson latest strategic decisions made and engagement towards achieving desiredperformance results.Clarityandmotivationgenerally lead toproactivity, creativityand generate more ideas for performance improvement.

Creativity & Innovation

Assessestheentity’scommitmenttothecontinuousprofessionaldevelopmentofitsemployees.Referstohowtheentitycangrowbydevelopingitshumancapital,usingmoderntechnologyandbuildingaperformanceculture.

Education & Knowledge

Evaluatestheentity’sapproachtowardsmeasuringandrewardingemployeeperformance.Referstotheestablishedperformancelevelsandthecompensation&benefitsschemes.

Benefits & Recognition

Focusesontheworkingenvironmentintermsofprovidingapositiveattitudeandmindsetwhilenurturingfeelingsofhappinessandwellbeingtowardsperformanceimprovement.

Happiness & Well Being

7.4 Performance CultureMaturity Audit

Audit findings


Thescorefortheevidence-basedwas1whilethescorefortheperception-

based assessment was 3.3. As the evidence-based assessment weights 75%

inthefinalscorewhiletheperception-basedassessment25%,thefinalscore

was1.6.Thisindicatesalevel2maturityscore(Emergent)forthePerformance

Culturecapability.

Performance Culture Assessment

0 1 2 3 4 5

A1.6

1.7B

1.6F

1.6C

1.6D

1.5E

A. IntegratedPerformanceCapability.Score: 1.6

B. Communication & Leadership Support. Score: 1.7

C. Creativity & Innovation. Score: 1.6

D. Education&Knowledge. Score: 1.6

E. Benefits&Recognition. Score: 1.5

F. Happiness&Wellbeing. Score: 1.6

Legend Performance Culture Assessment

Performance Culture Evidence Based Assessment

0 1 2 3 4 5

A1

1.1B

1F

1C

1D

1E

Theevidence-basedassessmentresultsshowalevel1maturityscoreintermsthe

performanceculturewithintheAlphaCompany.Thisshowcasesthefactthatthe

organization has made few steps towards creating the necessary conditions for the

Performance Management System within the organization to be integrated into

theorganizationalculture.Fromthisperspective,itisimportanttoensurethatthe

rightgovernanceframeworkexists,inordertobenefitfromconsistentleadership

support,enhancecommunication,investinlearningandengagingstaffmembers.

A. IntegratedPerformanceCapability.Score: 1


C. Creativity & Innovation. Score: 1

D. Education&Knowledge. Score: 1

E. Benefits&Recognition. Score: 1

F. Happiness&Wellbeing. Score: 1

Legend Performance Culture Evidence-based Assessment

59



Theperception-basedassessmentresultsshowalevel3maturityintermsof

theperformanceculturewithintheorganization.

ThedatasetforStrategicPlanningrevealshighgapsbetweentheactualand

theperceivedmaturitylevelinalltheassessedareas:integratedperformance

capability, communication & leadership support, creativity & innovation,

Performance Culture Perception Based Assessment

0 1 2 3 4 5

A3.5

3.5B

3.3F

3.2C

3.2D

2.8E

A. IntegratedPerformanceCapability.Score: 3.5


C. Creativity & Innovation. Score: 3.2

D. Education&Knowledge. Score: 3.2

E. Benefits&Recognition. Score: 2.8

F. Happiness&Wellbeing. Score: 3.3

Legend Performance Culture Perception-based Assessment

0 1 2 3 4 5

Performance Culture Assessment

A 13.5

C 13.2

F 13.3

B 1.1

3.5

E 12.8

D 13.2

education&knowledge,benefits& recognitionandhappiness&wellbeing.

This can be attributed to a different understanding of the means in which a

performance-orientedcultureisdevelopedwithinanorganization.

A. IntegratedPerformanceCapability.Score: 1 (Actual) | 3.5 (Perceived)

B. Communication & Leadership Support. Score: 1.1 (Actual) | 3.5 (Perceived)

C. Creativity & Innovation. Score: 1 (Actual) | 3.2 (Perceived)

Legend Performance Culture

Actual Perceived

D. Education&Knowledge. Score: 1 (Actual) | 3.2 (Perceived)

E. Benefits&Recognition. Score: 1 (Actual) | 2.8 (Perceived)

F. Happiness&Wellbeing. Score: 1 (Actual) | 3.3 (Perceived)

Audit findings



Legend Integrated Performance Capability

A. Thereisawell-articulatedgovernanceframeworkforthePerformanceManagementSystem. Score: 1

B. AllactiveKPIshavedatacustodiansassigned.Score: 1

C. Thereisacomprehensiveperformancemanagementmanualorprocedurerelatedtoorganizationalperformancemanagement.Score: 1

D. Thereisacomprehensiveperformancemanagementmanualorprocedurerelatedtoorganizationalperformancemanagement.Score: 1

E. Allkeyprocessesrelatedtoperformancemanagementaredocumented/mapped.Score: 1

Legend Integrated Performance Capability Evidence-based Assessment

Thissectionreflectshowwell theperformancemanagementarchitecture is

cascadedandintegratedacrosstheorganization.Assessestheclarityregarding

theroleofeachstakeholder,accountabilityandgovernance.

There is no governance framework for thePerformanceManagement System

withinAlphaCompany,accountabilityislow,astherearenoKPIownersanddata

custodians.Theprocessesrelatedtoperformancemanagementarenotmapped.

Thestrategicplan,organizationalchartandjobdescriptionswerereviewedto

assesstheintegratedperformancecapability.

7.4.1 Integrated Performance Capability

Integrated Performance Capability Assessment

0 1 2 3 4 5

A1

3.5B

Integrated Performance Capability Evidence Based Assessment

0 1 2 3 4 5

A1

1B

1C

1D

1E

61




organizationismanagingperformanceinformallyandconfirmsthemoderate

awarenesslevelamongemployeesonperformancesystemgovernance.

Integrated Performance Capability Perception Based Assessment

0 1 2 3 4 5

A3.8

3.8B

3.5F

3.5C

3.5G

3.5D

3.3H

3.5E

3.3I

A. Employeescanapplyandusewitheaseinpracticeperformancemanagementtools,techniquesandrelatedprocesses.Score: 3.8

B. Thereisaclearunderstandingoftheentity’sstrategicintentacrosstheorganizationatallmanageriallevels.Score: 3.8

Legend Integrated Performance Capability Perception-based Assessment

Findings

• ThereisnogovernanceframeworkforthePerformanceManagement

Systemwithintheorganization;

• Accountabilityislow,astherearenoKPIownersanddatacustodians;

• Theprocessesrelatedtoperformancemanagementarenotmapped.

Recommendations

• Officially assign the responsibility of governing the Performance

Management System to a department or an individual role within the

organization;

• Assignanddocument therolesofKPIownersanddatacustodians, for

employees involved in the performance measurement and management

processes,toensureaccountability;

• Maptheprocessesrelatedtoperformancemanagement.

Audit findings


TheCommunicationandLeadershipSupportprocesshighlightsthedegreeof

efficiency regarding the organization’s communication network, the entity’s

transparencytowardsinternalstakeholdersandthelevelofsupportofsenior

managementforthedevelopmentofperformancemanagementcapabilities.

Leadership is involved in promoting a performance-oriented culture as

managementmeetingsareheldonamonthlybasisandperformanceresults

areincludedinthemeetingagenda.Communicationofperformanceresultsis

limitedtomiddlemanagementandUnitHeads/Supervisors.

7.4.2 Communication & Leadership Support

Communication & Leadership Support Assessment

0 1 2 3 4 5

A1.1

3.5B


Legend Integrated Performance Capability

Legend Communication & Leadership Support Evidence-based Assessment

A. Leadershipisextensivelyinvolvedinpromotingaperformancedrivenculture.Score: 2

B. Theorganizationhasawelldesignedandimplementedperformancecommunicationplan.Score: 1

C. Communicationwithinternalstakeholderstakesplaceregularly.Score: 1

D. Communicationwithexternalstakeholderstakesplaceregularly.Score: 1

E. Theentitycommunicatesitsstrategyplans,performanceresultsandanyotherrelevantinformationeffectivelywithitsinternalstakeholders.Score: 1

F. Theentitycommunicatesitsstrategyplans,performanceresultsandanyotherrelevantinformationeffectivelywithitsexternalstakeholders.Score: 1

G. ThereisaChangeManagementprograminplacesecuringthattheperformancemanagementsystemandanychangestoitarewellabsorbedandconstantlysupported.Score: 1

The strategic plan and performance reports were reviewed to assess

performancerelatedcommunicationandleadershipsupport.

Communication & Leadership Support Evidence Based Assessment

0 1 2 3 4 5

A2

1B

1F

1C

1G

1D

1E

63



Anaveragescoreof3.5intheperception-basedassessmentshowsthatinternalkeystakeholdersacknowledgetheinvolvementofseniorleadershipinpromoting

aperformance-drivenculture.

Communication & Leadership Support Perception Based Assessment

0 1 2 3 4 5

A3.8

3.8B

3.3F

3.5C

3.5D

3.5E

Findings

• Leadership is involved in promoting a performance-oriented culture

asmanagementmeetingsareheldonamonthlybasisandperformance

resultsareincludedinthemeetingagenda;

• Communication of performance results is limited to middle

management and Unit Heads/Supervisors.

Recommendations

• Have senior management officially express support towards the

performancemanagementsystem;


frequencyofcommunicationandabreak-downofinformation,basedondifferent

typesofaudiences,toraisethelevelofawarenessandtransparencyregarding

performanceresultsandthebenefitsthesecanyieldfortheorganization;

• Implementbothtop-downandbottom-upopencommunicationchannels

foremployees.

Audit findings


TheCommunicationandLeadershipSupportprocesshighlightsthedegreeof

efficiency regarding the organization’s communication network, the entity’s

transparencytowardsinternalstakeholdersandthelevelofsupportofsenior

managementforthedevelopmentofperformancemanagementcapabilities.

Leadership is involved in promoting a performance-oriented culture as

managementmeetingsareheldonamonthlybasisandperformanceresults

areincludedinthemeetingagenda.Communicationofperformanceresultsis

limitedtomiddlemanagementandUnitHeads/Supervisors.

No relevant internal documents were provided to assess creativity and

innovation.

7.4.3 Creativity & Innovation

Creativity & Innovation Assessment

0 1 2 3 4 5

A1

3.2B


Legend Creativity & Innovation

A. ThereisanInnovationManagementFrameworkintheorganization.Score: 1

B. TheInnovationManagementFrameworkisconsistentlyimplemented.Score: 1

C. Gamificationactivitiesarefrequentpracticesintheorganization.Score: 1

Legend Creativity & Innovation Evidence-based Assessment

Creativity & Innovation Evidence Based Assessment

0 1 2 3 4 5

A1

1B

1C

65



Anaveragescoreof3.2intheperception-basedassessmentshowsthatinternalkeystakeholdersconsiderthattheorganizationinformallysupportscreativity

and innovation.

Creativity & Innovation Perception Based Assessment

0 1 2 3 4 5

A3.5

3.3B

3.3C

3.3D

2.8E

Findings

• CreativityandInnovationarenotsupportedbyaframework;

• Therearenoopenchannelsforemployeestosubmittheirinnovation/

improvementideas;

• Gamification activities (internal competitions) are not organized by

the entity.

Recommendations

• Open at least one channel for employees to submit their innovation

ideas and assign a committee responsible with assessing all innovation/

improvement ideas proposed by staff members, and deciding on further

coursesofaction;

• Organize gamification activities (internal competitions) and share the

outcomesandthenameofthewinnerstoallemployees.

Audit findings


Thissectionassessestheentity’scommitmenttothecontinuousprofessional

development of its employees. It refers to how the entity can grow by

developing its human capital, using modern technology and building a

performanceculture.

Adequateallocationofresourcesisneededtoestablishknowledgesharing

practices and ensure an internal database with informative materials,

meant toaidallemployeeswiththeir individualprofessional improvement.

Establishing such practices is necessary for building and capturing

organizationalknowledge.

Thetrainingplanandbudgetwerenotpresentedtoassesstheavailabilityof

trainingprogramsforemployees.

7.4.4 Education & Knowledge

Education & Knowledge Assessment

0 1 2 3 4 5

A1

3.2B


Legend Education & Knowledge

A. Learningtakesplaceintheorganizationbasedonastructuredapproach.Score: 1

B. Theentityorganizesanddeliverstrainingprogramstoallemployeesinaccordancetotheir training needs. Score: 1

C. Knowledgesharingisacommonandwelcomedpracticeintheorganization.Score: 1

Legend Education & Knowledge Evidence-based Assessment

Education & Knowledge Evidence Based Assessment

0 1 2 3 4 5

A1

1B

1C

67



Anaveragescoreof3.2intheperception-basedassessmentshowsthatinternalkeystakeholdersbelievethatthereisalearningenvironmentwithinthe

organizationandthatknowledgesharingisbeingdone.

Education & Knowledge Perception Based Assessment

0 1 2 3 4 5

A3.5

3.5B

3F

3.3C

3G

3.3D

3H

3.3E

Findings

• Learningwithintheorganizationisnotbasedonastructuredapproach;

• Knowledgesharingpracticesarenotcommonwithintheorganization.

Recommendations

• Develop an internal library of resources (e.g. work instructions) and

makeitavailableforallemployees;

• Offer each employee access to educational programs (e.g. trainings,

workshops,conferences,summits)foratleast4to8hoursperyear;

• Organizeinternalknowledgesharingsessions.

Audit findings


Thissectionevaluatestheentity’sapproachtowardsmeasuringandrewarding

employee performance. It showcases the established performance levels

andthecompensation&benefitsschemes.

The organization has not developed a bonus system, nor a non-financial

reward scheme in the organization. Flat bonuses were offered to all

employees inthepast,basedonrevenue increase,butthere isno specific

policyinplace.

Norelevantdocumentswerepresentedtoassessthebenefitsandrecognition

practices of the organization.

7.4.5 Benefits & Recognition

Benefits & Recognition Assessment

0 1 2 3 4 5

A1

2.8B


Legend Benefits & Recognition

A. Thereiswell-structuredbonussystemintheorganization.

B. Thereisanon-financialrewardschemeintheorganization.

Legend Benefits & Recognition Evidence-based Assessment

Benefits & Recognition Evidence Based Assessment

0 1 2 3 4 5

A1

1B

Anaverage scoreof2.8 in theperception-basedassessment confirms the

findings of the interview-based assessment and the lack of a clear bonus

system and reward scheme.

Benefits & Recognition Perception Based Assessment

0 1 2 3 4 5

A3

2.8B

2.8C

2.8D

69



A. Thereisastrongcultureofperformanceacknowledgmentandrecognitionfromtheentity’ssidetowardsitsemployees.Score: 3

B. Therewardsschemeoftheentityincreasestheemployees’motivationlevel.Score: 2.8

C. Thebonussystemisperceivedasfairandrealisticbyemployees.Score: 2.8

D. Rewardsareofferedontimeaccordingwithapredefinedschedule.Score: 2.8

Legend Benefits & Recognition Perception-based Assessment

Findings

• Theorganizationdoesnothaveabonussysteminplace;

• Thereisn’tanon-financialrewardschemeintheorganization.

Recommendations

• Developabonussystemlinkedtoindividualandoverallperformance;

• Develop a non-financial reward scheme available for all hierarchical

levels.

Happiness & Wellbeing focuses on the working environment, in terms of

providingapositiveattitudeandmindset,whilenurturingfeelingsofhappiness

and well-being towards performance improvement. The organizationmade

efforts towards offering a safeworking environment for its employees and

investedinmoderntechnologytoimproveworkingconditions.Althoughthere

7.4.6 Happiness & Wellbeing

isnoofficialwellbeingprogramdedicatedtoemployees,theperception-based

assessmentindicatesapositiveworkingenvironment.

Happiness & Well Being Assessment

0 1 2 3 4 5

A1

3.3B


Legend Happiness & Wellbeing

Photos fromthecompany’sproductionareaswerereviewedtoassess the

workingenvironment.

A. Thereisaneffectivewell-beingprogramintheentitydedicatedtoemployees

Legend Happiness & Wellbeing Evidence-based Assessment

Happiness & Well Being Evidence Based Assessment

0 1 2 3 4 5

A1

Audit findings


Anaveragescoreof3.3intheperception-basedassessmentindicatesapositiveworkingenvironmentandthefactthatemployeesmaintainagenerallypositive

attitude&mindsetandshowconfidenceintheirbehaviorandactions.

Happiness & Wellbeing Perception Based Assessment

0 1 2 3 4 5

A3.8

3.5B

3.3F

3.5C

3.3G

3.5D

3H

3.5E

2.8I

Findings

• The organization made efforts towards offering a safe working

environment for its employees and invested in modern technology to

improveworkingconditions.

Recommendations

• Facilitate initiatives that improve the lifestyle choices and health of

workersasawayofpreventingchronicillnesses.

71



8. CONCLUSIONSTheassessment revealed a level2maturity score across all the assessed areas

of Performance Management: Strategic Planning. Performance Measurement,

PerformanceManagement and Performance Culture. A level 2maturity score

relatestoanEmergentPerformanceManagementSystemwithinAlphaCompany.

Thehighestscoreof2.6wasachievedforStrategicPlanning,showingthatitis

practicedintheentity,althoughnotoptimallyarticulatedorimplemented.Afew

stepsshouldbemadeinordertoachievealevel3maturityscoreinthisarea,

suchas:developingamediumandalong-termperspectiveintermsofstrategy,

improvingandtrackingprogresswithstrategyexecution,raisingawarenessand

transparencyonstrategy,centralizingandmonitoringinitiativeprogress.

In terms of Performance Measurement, the achieved score was 2.1, showing

that it is focused on financial metrics and limited to production, inventory

andsales.KeyPerformance Indicators (KPIs)arenotused, theorganization

relieson reportsgeneratedusing theaccounting softwareand themonthly

achievement evaluation reports. The current framework only supports

performancemeasurementofthecorporateanddepartmentallevels,without

the option to measure individual performance. More effort is needed to

progresstothenextmaturitylevelinthisarea,suchas:selectingKPIsforeach

strategicobjectivewithafocusonfindingabalancebetweenfinancialandnon-

financialKPIs,documentingsaidKPIsandestablishingtargetsandthresholds,

ensuringaccountabilitywhencollectingdataandachievingtargets,providing

dedicatedtrainingonperformancemeasurementforallkeyemployees.

Ascoreof1.8wasachievedforthePerformanceManagementcapability,which

isstronglycorrelatedwiththescoreachievedforPerformanceMeasurement.

Performanceresultsarediscussedduringmonthlymanagementmeetings,but

withafocusonsales,production(errors),marketing(awareness)andcustomer

complaints.Actions/initiativesarecommunicatedverballyonlytoUnitHeads

and monitored by the Management Representative.

There are certain recommendations that should be considered to ensure

progressiontothenextmaturitylevelinthisarea,suchas:organizeperformance

reviewmeetings,centralize,documentandmonitoranydecisionsmade,builda

highdegreeofaccountabilityandsetcleardeadlinesforanygrowthdecisions&

theircorrespondinginitiatives,anddevelopcommunicationplansforinitiative

statusandperformanceresultsreporting.

Thelowestscoreof1.6wasachievedforthelastcapabilitythatwasassessed,

showingalevel1maturityscoreintermsofthePerformanceCulturewithin

AlphaCompany. This shows the fact that the organization hasmade a few

steps towards ensuring that the organization’s Performance Management

Systemwillbeintegratedintotheoverallorganizationalculture.Basedonthese

results,itisimportanttoensurethattherightgovernanceframeworkisputin

place,sothattheentitybenefitsfromconsistentleadershipsupport,enhanced

communicationandinvestmentsinlearning&engagementopportunitiesfor

staffmembers.Opening channels for employees to submit their innovation

ideas,organizinginternalcompetitionsandhavingalibraryofresourcescanall

supportthedevelopmentofaperformance-orientedculture.

Conclusions


APPENDIX 1. DOCUMENTS SELECTED FOR THE EVIDENCE-BASED ASSESSMENT

The documents selected for the evidence-based assessment were:

• Strategyplan

• Strategydocumentationfiles

• Environmentalscanreport

• SWOTanalysis

• Stakeholdersengagementplan

• Strategy map

• Corporate scorecard

• Corporate dashboard

• Performance report

• Departmentalscorecards

• Departmentalperformancereports

• Employeescorecard

• Employeeappraisalformoremployeeperformanceevaluationform

• Performancemanagementpolicy/procedures/manual

• KPI documentation forms

• Datagatheringtemplate

• Data audit report

• Anexportedreportfromthesoftwaresolutionwiththedataexportvisible.

• Meeting minutes

• Actionplan

• Initiativesportfolio

• Business case

• Projectplan

• Project status report

• Organizationalchart

• Job descriptions

• Communicationmaterials

• Projectprogresscommunicationsamples

• Employeeperformancemanagementpolicy/procedures/manual

• Employeeperformanceplan

• Competencies dictionary

• Bonus,rewardsandcompensationpolicy

• Employeeprofessionaldevelopmentplan

• Trainingplan

• Training budget

www.gpaunit.org

HeadquartersMelbourne Office

Life.lab Building198 Harbour Esplanade, Suite 606

Melbourne Docklands, VIC 3008, AUT: +61 3 9028 2223 M: +61 4 2456 8088

[email protected]

European DivisionSibiu Office

Sibiu City CenterSomesului Street, No. 3

550003 - Sibiu, RomaniaT: +40 3 6942 6935 M: +40 7 4706 0997

[email protected]

Middle East DivisionDubai Office

Regalia Business Centre, 1st floor,

Office 101, Suite 11, Baysquare Building 3,

Business Bay, POBOX 213297, Dubai, UAE

T: +971 4 563 7316 M: +971 55 787 6427

[email protected]

SE Asia DivisionKuala Lumpur Office

Wisma UOA II

Unit 14-13, Jalan Pinang 21, 50450

Kuala Lumpur, Malaysia

T: +60 3 2742 1357 M: +60 11 3303 2135

[email protected]

A DIVISON OF

PERFORMANCE MANAGEMENT - gpaunit.org · 3 Goba Performance Audit Unit Performance Management Audit Report for Apha Company Global Performance Audit Unit a division of The KPI Institute

Documents