Performance Management

Performance Management in Asset Management

Introduction to performance management

Much has been said about performance management where an organization has to measure its progress towards achieving its goals and objectives. In fact, most successful organization put much emphasis on performance management as one of the major management tools. Performance management has evolved from a mere financial reporting tool to become a major decision-making tool. Much of its success comes from the fact that organizations have become so big and widely dispersed all over the country and the board of directors needs to know the well-being of its company fast and real-time. Furthermore, performance management has become the most effective system in creating a goal-oriented culture in government agencies.

Performance management involves establishing data collection system, analytical tools, periodic or regular monitoring and reporting, communicating the performance, continual improvement programme and lastly, using suitable indicators. Even the display of the periodic monitoring and reporting mechanism, has evolve from a mere paper-based report to a more sophisticated online or real-time electronic system, which is predominantly known as dashboard. Some would say that performance management is only meant for the chairperson, board of directors or the head of an organization, but this is not the true scenario now. Performance management is a must for any dynamic and learning organization.

Performance is measured at every level and unit, which is the cascading approach in performance measurement. This is because that in every level and unit, the unit’s performance will reflect back on the overall performance of the organization and the unit must be aligned to the organization’s objective(s). Their performance indicator is not the key performance indicator of the organization, but their indicator merely shows the unit’s contribution to the overall performance of the organization. It shows their commitment and involvement in realizing the organization’s objective(s).

Nevertheless, the top-to-bottom cascading nature of indicator(s) in an organization is an important fundamental element in performance management. Rightfully, the lowest of the personnel must know the key performance indicator of the organization because their involvement is important to the success of the organizational performance management and for the organization to be able to see the actual big picture of its performance.

Performance management is not only meant for an organization but it is also meant for products and services rendered. It also focus on the effectiveness of the organization’s delivery system and aligning the whole organization towards achieving its goals and objectives. This is done by having a performance management plan (which incorporates the processes, systems and communication plan) and suitable key performance indicators.

The benefits of using performance management are as follows:

1. A systematic measurement system for the organization
2. True understanding of the organizational behavior
3. Enabling a continual improvement program
4. Allow benchmarking against other related organization or industry players
5. Creating a performance based culture in the organization

What are indicators?

There are three (3) types of indicators, which commonly known as:

1. Key Performance Indicator
   A measurement for the performance and progress of achieving the organizational business goals and this is the main performance indicator for the organization
2. Performance Indicator
   Measurements for activities or initiatives that are complementing the critical activities of the organization
3. Result Indicator
   Measurements of output from processes

Performance Management Process

In balanced scorecard concept, vision and objective are important input to measures. Hence, there are four (4) perspectives that need to be considered when putting up measures. The four (4) perspectives are as follows:

1. Financial
2. Learning and growth
3. Business processes
4. Customer

When identifying the key performance indicators, organization must reflect the above perspective(s) besides fulfilling the SMART requirements, otherwise the indicators are either results or performance indicators. The two (2) indicators will however demonstrate the overall picture of the organization, but not its performance.
(SMART: S= specific, M= measurable, A= attainable, R= realistic, T= time-bound or timely)

In establishing the key performance indicator, the top-down is more commonly used rather than bottom-up process. An illustration of this approach is shown below.

Typically, the performance management process specifically for asset management is as follows:

It is a simple process to implement, but the fundamental of this process is that key performance indicator directly relates to the objective(s) of the organization.

Preferably, various management tools should be used to identify the key performance indicators. The tools, amongst others are as follows:

1. Benchmarking
2. Scenario analysis
3. Brainstorming
4. SWOT analysis
5. PESTLE analysis
6. Gap analysis

Using Key Performance Indicators in Asset Management

In asset management, service level is an important aspect of measurement, which measures the ability of the asset to provide service. Amongst the key performance indicators in asset management are:

1. Facility condition
2. Deferred maintenance
3. Customer satisfaction
4. Sustainability
5. Whole life cycle
6. Maintenance norms or operating and maintenance cost
7. Reliability
8. Response time

A few key performance indicators above can be used, but a word of advice, it is far better for the organization to establish its own key performance indicators. The involvement of the whole organization in establishing and implementing a performance management system is ultimate goal of any organization. This is due to the fact that the whole workforce of the organization will be aligned to the same objective(s).

Resources:

1. Department of Public Works, Queensland Australia
2. The Balance Scorecard Institute