Hit The Ball and Place The Goal Post
Performance Management is the key to strategy implementation
I was
dealing with a power generation company. The company had quoted a very low
price of power generated in the Government auction to win a mega power
generation project. The company was not able to achieve the efficiencies to be
profitable. The Chairman realized that the problem was with performance
management of the team. He wanted me to meet the CEO and CHRO to understand the
root cause of the problem and find a solution.
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| Photo by Jeffrey F Lin on Unsplash |
The next
morning I met Sanjeev, CHRO of the company for breakfast before meeting Srinivas,
the CEO. As we sipped the tea, I asked him, “What is the PLF (Plant Load Factor
– a measure of plant utilization in power plants)?”
Sanjeev:
“It is 60 to 70%. Srinivas will be able to tell you exactly”
ME:
“What was the planned PLF when we quoted for the power tariff in the auction?”
Sanjeev:
“I don’t know. I am new to the system. We will need to check with Rao, the
CFO.”
ME:
“What is the target of the plant head?”
Sanjeev:
“To run the plant efficiently and meet all O&M (Operations and Maintenance)
parameters of the plant”
ME: What
these parameters are and are they quantified?
Sanjeev:
“We trust our top management. They know their job and they work accordingly.
How can we give them targets?”
ME: “I
completely appreciate your point of view. How do you set the targets for the
middle management and front line team?”
Sanjeev:
“Please understand it is a process plant and not a sales organization. The
plant runs on its own. We have defined jobs of all the individuals. They do
their job.”
ME: “How
do you assess their performance during appraisal”
Sanjeev:
“They do their self appraisal and write down what they have down during the
year. It is then assessed by their managers. We have a skip level assessment
system to eliminate manager baises. The
skip level manager assesses the performance. The proposed ratings are then
reviewed and moderated by the leadership team of the plant. We have a very robust
system.”
ME: “Yes.
I can see that you have a very robust performance management system. How do you
assess the performance of the plant leadership team and the pant head?”
Sanjeev:
“The plant leadership team is assessed by the plant. He usually use his
judgement and there are no forms filled at this level. We trust his judgment.
For the plant head the rating is proposed by the CEO and moderated by the Vice
Chairman. I am not involved in this process.”
ME: “Wonderful!!”
By now
Srinivas had come to the office. Sanjeev and I walked into his office.
ME: “Hi
Srinivas, hope you had a good night sleep. ”
Srinivas:
“Boss I left at 1 am. That is usual. How do you expect me to have a good night
sleep.”
ME: “Why
is that you have to work so late every day?”
Srinivas:
“Performance pressures. Our largest plant is not making money and we have
multiple reviews and new ideas every day.”
ME:
“With all the reviews and ideas what is the PLF that you are able to achieve?”
Srinivas:
“We are at 67%.”
ME:
“What is the planned PLF at which you will make profits and can sleep well?
(Smile) ”
Srinivas:
“Planned PLF is 95%.”
ME: “I
am sure we have been able to identify what each individual in the plant
starting from the plant head to a shift engineer needs to do to achieve 95%
PLF.”
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| Photo by Jeffrey F Lin on Unsplash |
Srinivas:
“Well! Broadly yes. But if you are asking me that is it quantified and put in
the goal sheets of people? Then NO. Despite my repeated insistence Sanjeev and
Rajesh (Plant Head) have not done it. But this may still not solve the problem.
The best plant in the world has achieved a PLF of 88%. At this price we will
never make profits. We need to do something about the price.”
ME: “Well!
Can we at least achieve 88% PLF and cut our losses? The rest you may try to
bridge with the price negotiation.”
Srinivas:
“That sounds like a plan. You think if we do a proper goal setting and we
measure people performance against the goals, we will improve our PLF from from
67% to 88%?”
ME: “Yes
definitely! (Smile). As long as Rajesh and you know what should you do to reach
a PLF of 88%. Considering that Rajesh,
Rao, and other leaders along with you had visitied the Chinese plant achieving
88% PLF, I believe that knowledge exists.”
Srinivas:
“Yes! (Smiles)”
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| Photo by Vlad Kutepov on Unsplash |
We concluded
the discussion and moved out of his office.
I
thought this business was hitting the ball in any direction and placing the
goal post around the point the ball crossed the boundary and called it a goal.
So they achieved what could be achieved with some random motion. No wonder they were making such hefty losses and the CEO, Vice Chairman and Chairman are having
sleepless nights.
I worked
with Sanjeev, Rajesh and Rao to set the goals and cascade them to the last
mile. Eventually Rao took over as the CEO of the plant and introduced a
monthly review process.
In India
at least 50% organizations do not have goal setting. It exists only in manuals.
People are encouraged to perform their jobs. At the end of the year the
achievements of people become goals leading to significantly lower performance.
Everyone is rated as high performer and paid out near equal increments and
bonuses. This encourages people to do less in the following year and still be
rated as high performer, as there is no incentive to out-perform.
© Prashant Srivastava. All rights reserved.
