Performance Management : A case study approach to identify key enablers to align its organizational strategy and successful implementation.

Ravee Ramamoothie University of Liverpool 2012

Abstract
Strategy execution is a topic of practical importance and its success depends on how an organization integrates and aligns the business units and the employee performance to the strategic goals of the organization. However, many organizations find that their strategic goals realization is not optimized. One of the key issues is that the strategy and the performance goals of an organization are often disconnected with the performance management platform, a function of the strategic HR in managing employee performance. Essentially in this research, a performance management exercise that is aligned to organizational strategy and performance is viewed as a strategy execution and alignment exercise led by the HR team of an organization in the form of a performance management program. The purpose of this case study is to identify how a performance management program can be linked to organizational strategy and firm performance. Elements such as the enablers of alignment, if the model applied differs in companies of different scale, the application of goal setting and expectancy models and the reward systems are investigated to provide insights of the key success factors in implementing a performance management initiative. Case studies of two organizations of different scales in Asia were conducted. Based on these studies, the findings indicate that a few key enablers are critical for the successful implementation of a performance management initiative that aligns the organizational strategy and performance goals. These enablers are identified and validated against a contemporary management model presented by Kaplan and Norton (2006) on best practice principles of alignment and successful strategy execution.

Introduction
Much research has been done in the areas of organizational strategy, organizational performance and performance management, but they all refer to each discipline in isolation. They rarely touch on the complex subject of how all the 3 main steps of organizational success are embedded as one stairway towards organizational excellence. This aligned approach is a pivotal catalyst of competitive advantage.

Performance Management
Beginning from the ground up perspective, performance management is described as the process of measuring employee performance and making it visible, explicit and measurable (Heinrich, 2002 cited in Den Hartog, Boselie and Paauwe, 2004, pg.557) for better management of employee productivity. It is said to be a pragmatic model for performance improvement through tools such as performance measurement, rewards/recognition, goal setting and coaching/feedback (Schraeder and Jordan, 2011, pg. 5). Goal Setting Goal-setting theory (Locke 1968; Lee and Wei, 2011) has been recognized as one of the most practical management theories in the area of employee motivation in organizational psychology (Miner 1984; Lee and Earley 1992; Pinder 1998; Locke and Latham 2002; cited in Lee and Wei, 2011, pg. 279), and amongst the most important of management theories. It plays an important role in the translation of organizational strategy into team and individual performance targets. Management-by-objectives (MBO) is a widely used tool that emerged from the goal-setting theory (Vecchio, 2004), in which the quality of alignment hinges on the aspect of participative management. One of its key features is participative involvement of the supervisor and subordinate in setting concrete and measurable goals for the subordinates performance (Vecchio, 2004, pg.96). One important factor in goal setting and alignment is the organizational environment. Ferris et.al. (1999 cited in Camps and Arocas, 2009, pg.1058) infer that contextual factors such as extremely hierarchical structures in organizations may impede the alignment aspect in goal setting exercise. A bureaucratic culture inhibits participative management. This is where the issue of alignment lies. The lesser the element of participative management in the translation of organizational performance goals and individual performance, the greater the conflict and misalignment (Lee and Wei, 2011). The concept of participative management has been recognized as a means to improve both individual as well as organizational performance. Miles and Ritchie (1971, pg. 48) Ravee Ramamoothie University of Liverpool (2012) 1

termed it as the Human Resources Model, and their research revealed untapped potential of this model when it comes to performance management. This practice aids better alignment and implementation of goal setting. Locke, Alavi and Wagner (1997 cited in Lee and Wei, 2011, pg.280) infer that the key benefit of participative decision-making is cognitive rather than motivational and enhances information exchange. However participative management is dependent on contingent factors such as the culture of the organization.

Strategic HR
Colville and Millner (2011) in their research on organizational transformation find that HR plays a pivotal role in assessing the current capabilities of the workforce and applying appropriate implementation strategies when it comes to embedding performance culture in an organization. They believe key elements such as readiness of the organization and cultural differences will be the key understanding that the HR department needs to acquire. Goal setting and ensuring that they are linked to the strategy and performance goals of the organization becomes the central and critical function of organizational managers. Most often it centers on the function of strategic HR management (SHRM) wherein the HR division of an organization must embed performance management process within its overall people management processes (Jung and Takeuchi, 2010, pg.1931). The research on the subject of how HR practices, organizational strategy and performance management are interlinked is quite extensive and the evidence is growing (Camps and Arocas, 2009) for the need to identify the enablers or mediators to ensure SHRM can effectively implement performance management that is aligned to organizational goals. In this context, strategy translation has been identified by Kaplan and Norton (2006) as one of the key element that drives strategy execution.

Strategy Execution and Translation

In a strategy translation exercise, especially in large companies, it is essential for the middle managers to collaborate with their subordinates to translate the organizational scorecard (organizational strategy translated into corporate metrics) and strategic initiatives (mid and long term corporate initiatives) into divisional and business unit scorecards based on their respective operational and strategic job functions. Den Hartog, Boselie and Paauwe (2004, pg.559) infer that the HRM practice, organizational goals and the association of performance management to strategy or Ravee Ramamoothie University of Liverpool (2012) 2

organizational goals can be linked. However, there is a lack of detail of the methodologies that can be employed by organizations of different scales and sizes, and how exactly the strategy can be translated. Sirkin, Keenan and Jackson (2005) claim that 60% of transformation initiatives fail due to inadequate focus on hard factors. They opine that performance management is vital. Kaplan and Nortons (2006) research in many organizations that are successful in strategy execution reflect a similar pattern, demonstrating equal importance paid to the hard factors as well as to the soft factors. They found that organizations that place importance on strategy and performance governance succeed better in aligning the workforce towards strategy execution. However they do emphasize that soft factors, such as motivation and education, act as critical enablers for strategy execution. Strategy execution is an important element in the case studies. Specifically the processes to be adopted are important for an organization to consider. Additionally the constituents are another factor that are pivotal to ensure that strategy and performance objectives of the organization are carefully weaved into its performance management implementation. Ramamoothie (2012) through two different case studies, sought to analyze & identify the processes that can be used by organizations to align the organizational strategy to performance management. The study includes analysis of the organizational capability required to ensure successful performance management implementation.

Analysis of Results from Case Studies (Ramamoothie, 2012)

Organizational Strategy, Goals and Performance Governance

Based on the case study on MSF, there was neither a corporate scorecard nor a clear strategy in place. The CEO did not have KPIs in place, nor had he practised a formal KPI-based management program with the senior team. In this scenario the organization did not have a clear organizational strategy and performance goal. This aspect was reflected in the entire organization. There was neither translation nor were there KPIs in the entire organization. At the time of research, the consulting firm together with the heads of finance and HR, were still in the process of finalizing the headline KPIs for the organization and its divisions. The response from the senior management team was lacklustre. Though the middle management team seemed to welcome the idea of performance goals, the senior management team opined that the goal setting exercise was a futile effort, as the Ravee Ramamoothie University of Liverpool (2012) 3

market is uncertain and the revenue of the firm is solely dependent on the market movement. Since they are in a brokerage market, their revenue is dependent on the volume of shares traded in the market. Further analysis of this justification by the senior management showed that MSF had actually trailed behind its competitors in the market in terms of the revenue trend and market share over the past few years. It used to be amongst the top 3-brokerage firms in the market. At the point of research, its market share had declined and it was in the 6th spot in the industry. Faced with these findings, the senior team indicated in an interview that this could be due to attrition of their top brokers, who have taken some of the biggest accounts away to their competitors. On the whole, the sentiment of managers on defining their KPIs was not favourable. Resistance to change was evident and thus affected the progress of the initiative. Comparatively in LTC there was evidence of a clear strategy. Based on the companys documents, observations and from the interviews, it was evident that LTC had a corporate strategy. Its corporate KPI agreed with its parent company and it had a separate scorecard (KPIs) for the CEO. Through the corporate strategy office, the CEO had defined KPIs for the companys top management team (CXOs and HODs). These were translated from the organizations KPIs as well as the CEOs KPIs, and were governed and monitored very closely by the CEO on a monthly basis. This practise had already been in place for a few years. With the new performance management program, LTC cascaded the KPIs from each divisions CXO and HOD scorecard towards their respective divisions, covering the entire organization. Observation of documents clearly showed that there was a KPIcascading framework that was established specifically for the program. Employees were allowed to create their own scorecard, which had to be approved by their immediate supervisor and verified by their supervisors immediate supervisor. Emphasis was placed on the role of the supervisors to ensure proper translations into measurable goals for their subordinates. Figure 1 below, reflects one part of the governance framework of the KPI translation exercise. The HR team provided clear guidelines for managers during the training program and also implemented a verification engine in the performance management system (PMS) to validate the scorecards created.

Ravee Ramamoothie

University of Liverpool (2012)

Figure 1 - Governance Framework of KPI Translation (Ramamoothie, 2012)

KPI

KPI WEIGHTAGE

TARGET

RESULTS

Another aspect of the framework was that every employee either cascaded or translated their supervisors KPIs which is a requirement embedded within the PMS. A significant portion of each employees scorecard must contain KPIs cascaded or translated from their immediate supervisors scorecard and the balance from their own operational perspective. Having this in place, it is important for all employees in an organization to align their KPIs to a common goal.

Alignment Aligning all Stakeholders to Common Goal

In MSF, since there were no KPIs attributed to any of the divisions, it was difficult to pinpoint the element of formal alignment process. However interview results reflected that the team seemed to be aligned on the ground about what is expected of each of them. The comradeship and collegial atmosphere were clearly evident when this aspect Ravee Ramamoothie University of Liverpool (2012) 5

was observed during group discussions. The senior management team and the CEO do not seem to think that the absence of a clear strategy and performance goals are causes for concern. They are resigned to the fact that the firm will do well when the market is good and be adversely affected when the market is bad. This belief has been the basis of how they have operated all along. In this sense, the entire organization seems to be aligned in this shared sentiment. LTCs performance management processes reflected well-executed translation of corporate strategy and goals. Alignment of all the divisions within the organization to a common goal was achieved through linking each constituent of the organization and every individuals scorecard ultimately to the organizations strategy and performance goals. The governance framework adopted through a simple structure of cascading and translation of supervisors scorecard ensured the alignment of the employees KPIs to the organizations and CEOs KPIs. Whilst this alignment is quite substantial through KPI cascading effort, the research went further to investigate if the alignment of performance goals was reflected in the outcomes of actual organizational performance. This analysis was carried out to ascertain if the aggregated performance of employees of the organization is close to that of the organizations performance. To determine this, the KPI scores were analyzed after completion of the performance evaluation period. The results revealed that quite a significant number of the employee population exceeded their stretch target, whilst actual corporate performance remained at about 110%. Almost 65% of the employee population scored above 130%, pushing the aggregated employee performance under the performance management scope to 136%. The aggregated employee performance scores reflected a significant positive gap between the actual corporate scorecard achievements with approximately 26% deviation. This raises a question about the quality of KPIs, which directly impacts the quality of alignment.

Ravee Ramamoothie

University of Liverpool (2012)

Figure 2 - Aggregated Employee Performance Score (Source: Ramamoothie, 2012)

On average employees from these divisions MEET TARGET

On average employees from these divisions MEET THE STRETCH TARGET

No. of Divisions with Average KPI Score btwn 100-133%

No. of Divisions with Average KPI Score btwn 134-150%

No. of Divisions with Average KPI Score btwn 150-167%

Total

Company Average for KPI Score

17

31

56 136.51

30%

55%

14%

100%

On average employees from these divisions EXCEED STRETCH TARGET

Further research into the quality of KPIs through interviews with HR and corporate strategy teams revealed that there were indeed shortcomings discovered by the team. The HR team agreed that there were significant weaknesses in terms of the quality of KPIs. They had expected this during the first year of implementation. Survey results with the supervisor population also reflected the same sentiment. Ravee Ramamoothie University of Liverpool (2012) 7

The common remarks on quality of KPIs were as follows; Immediate supervisors not setting the right standards. Weak target setting. Manipulation of target. The HR team felt that the managers could have played a more serious role in ensuring that the scorecards are defined well by each employee. The corporate strategy team opined that their responsibility was to ensure the quality of KPIs stop at the CXO and HOD level only. They felt that a structure similar to the corporate strategys role in ensuring KPI quality at the top management level could be duplicated at each divisional level. This could be done with assignment of performance managers at each division. Besides governing the quality of KPIs, these managers could help their respective divisions employees in developing the right KPIs. On the whole, however, it was observed that the HR team, the corporate strategy team and the general population of the employees felt that the alignment element was a key milestone through the performance management program which was perceived as a major change initiative.

Discussion from Case Studies (Ramamoothie, 2012)

How is the model of performance management applied to organizations of different scale? (With employee strength less than 150 compared to large firms with employee strength more than 3,000)?
From the analysis of the case studies of two companies of different scale (Ramamoothie, 2012), the model that is required for the successful implementation of performance management does not really differ with the size of the organization. Kaplan and Nortons alignment model taken as the guiding principle can be applied across different organization sizes as found in both the case studies. However, what came across through the case studies is that there are 3 elements of key importance that must be part of the model. First element; the organization must have a clear strategy and performance goals to ensure that performance goals of all employees are cascaded from the organizational goals. Ravee Ramamoothie University of Liverpool (2012) 8

The performance management exercise must be based on a foundation of clear strategy and performance targets at corporate and divisional levels decided by the CEO or the board. As evidenced in the case study, LTC being a large company already had this in place as part of their management model. So it was relatively easy for the HR department to take it from there and establish KPIs for the entire organization linking them to its organizational strategy and performance goals. In MSF, they did not have a formal process of strategy definition and organizational goals in place, so it was very difficult for the HR department to implement an organization-wide KPI cascading exercise. Even if a performance management exercise was done at a lower level of the organization, it would have no meaning or relevance to the organizational performance objectives. Second element; Existence of basic MBO process at the executive leadership level. Extending from element number one, if there was a formal process in place at the executive leadership level, the culture of a performance-focused organization and MBO organizational behavior would be typical characteristics that would have flowed through the entire organization in the form of a yearly performance evaluation process. In most organizations, this method of subjective evaluation by the supervisors is already in place especially in large organizations as evidenced by Ramamoothie (2012) in his consulting experience in the Asian region. This platform is another important prerequisite for successful implementation. It would pave the way for organization-wide implementation to evolve from subjective and disconnected performance management, to an objective and well defined KPI based management as is evidenced in LTC. Without this basic organizational process at its executive leadership level, MSF faced obstacles in the path of implementation. Furthermore, resistance from the senior management team was also quite substantial. Third element; for any MBO program to be sustainable, there must be a mechanism to reward employees based on performance. Taking a standpoint on the yearly bonus payment as a major reward mechanism in an organization, if all employees were to receive standard bonus payments irrespective of their performance, as seen in MSF, there would be no motivation for them to improve their performance. This is because it would not have a direct impact on their bonus or career progression. In LTC, on the other hand, the existence of a performance-based bonus tier, even if based on subjective evaluation, provided a solid platform for the HR team to capitalize on. The employees were motivated to objectively define their goals for the year clearly in anticipation of objective evaluation of their performance, knowing Ravee Ramamoothie University of Liverpool (2012) 9

that they would get compensated fairly. Furthermore, the introduction of 360 competency evaluation in LTC strengthened the objectivity of the evaluation. This element is critical to provide the motivation momentum for the employees to participate fully in any performance management exercise. These three elements comprise the most important basic core methodology, which is a pre-requisite in any typical performance management program irrespective of cultural background, size and type of industry as evidenced in the case studies

How are goal-setting and expectancy theories applied in establishing a performance management platform for an organization?
LTCs successful implementation provided the opportunity for Ramamoothie (2012) to analyze the methodology of goal setting and reward element utilized to cascade the KPIs. This exercise involved the aspect of goal setting and expectancy theories in organizational behavior. LTC successfully combined both the theories in their performance management implementation. Goal-Setting Methodology Employed This methodology applied in LTC was a key factor in the successful implementation of the program. The objective was to allow the employees to set their own goals in the participative management context and at the same time to ensure the goals are cascaded from the organizational strategy and performance goals. The HR department established a policy that employees could create their own scorecard but each KPI in the scorecard must be either translated or cascaded from their supervisors scorecard. Each employee, starting from senior management (divisional heads) must cascade or translate from their supervisors scorecard. This structure was employed throughout the organization. The CEO cascaded KPIs from the holding company CEOs scorecard, organizational strategy and performance goals. The CXOs cascaded and translated KPIs from their CEOs scorecard and organizational scorecard. The divisional heads cascaded KPIs from their CXOs scorecard. The same process was applied from divisional heads onwards through the entire organization to the lowest level of employee in the organization. Cascading here means that the employee adopts the measure or initiative of his/her supervisor through shared or direct cascading. For example, if the sales directors KPI is to achieve 100 million in sales, his direct subordinate may take the entire measure (100 million) as his KPI. This is referred to in LTC as a direct cascade. As for shared cascade, taking on the same example, the direct subordinate may take part of the KPI, 20 million in sales, as his/her KPI. Direct and shared KPIs respectively mean to allow Ravee Ramamoothie University of Liverpool (2012) 10

employees to take all of their supervisors KPIs as their KPIs, or part of it as their KPI. Translation on the other hand means that the employee could pick any KPI of his/her supervisors scorecard and define a task or measure that would directly impact the supervisors aforementioned KPI. The employee is allowed to define his/her own measure or task, which would help his/her supervisor to achieve his/her KPIs. This aspect of goal setting adopted by LTC ensured that its performance management program is closely aligned to organizational strategy and performance goals. The important element here is that the employees were allowed to create their own goals and were guided to align their goals to their immediate supervisors. Participative management element was high and was a key factor of buy-in for the change program. It was also easy for the employee to establish his/her KPIs, as the link was his/her immediate supervisor and that allowed more granular structure of linking the lower level employee goals to the organizational goals. Expectancy Theory Methodology Applied LTCs yearly bonus payment reward program provided an excellent form of motivation for the employees. The communication of the HR team urging the employees to set their KPIs and informing them that their scorecard would be measured for yearly bonus payments, clearly sent the message that the company was transforming the way it was going to evaluate employee performance in the future. The employees responded well, and went about setting their performance goals in anticipation of objective evaluation of their performance. The bonus payment ranged from 11 months salary to none at all. Every employee is eligible to receive bonus as long as they fall within the range of performance rating level 3 to 5. Those in level 1 & 2 would not receive any bonus and would risk having to undergo a rehabilitation program at best or termination at worst. In the study conducted by Locke, Bryan and Kendall (1968, pg.104) titled, goals and intention as mediators of the effects of monetary incentives on behavior found that an all or none incentive scheme contingent on performance achievement is more effective compared to other types of incentives. It also proved to improve employees behavior toward task performance. Similar studies conducted by other researchers found the same results wherein the ultimate impact is a function of degree of value perceived by the employee of the incentive (Vroom, 1964 cited in Locke, Bryan, and Kendall, 1968, pg.120). In LTC the none or all incentive scheme was a key factor in motivating the employees to define their KPIs and subject themselves to an objective performance evaluation. They valued the high bonus payment as a reward to be coveted. The employees aimed Ravee Ramamoothie University of Liverpool (2012) 11

for higher than level 3 performance rating for a higher bonus payment and were wary of the no bonus situation if they performed below the level 3 rating. These positive and negative reinforcements based on the theory of operant conditioning by B.F. Skinner (Vecchio, 2004, pg. 51) impacted the seriousness and impetus of the KPI setting exercise at LTC. Conversely, in MSF, there was no visible reward program tied to performance. Although there was an element of subjective performance evaluation for the purpose of promotion at the lower level, the employees did not attach much value to the incentive of promotion which was a remote occurrence since it was a small organization. From observation it was evident that this element has indirectly contributed to the resistance to the performance management program. The employees have no motivation to go the extra mile since it does not change their current remuneration and incentives. The existing reward program failed to motivate the employees to adopt the new change. Importantly, the results collated by Ramamoothie (2012) provide insights that can be relevant for other organizations on the type of reward programs they could consider. This is important as it could be a critical factor in the introduction of a performance management program. Most importantly as per the expectancy theorists, the employee must find value in the reward program. Organizations embarking on the path of performance management exercise aligning organizational strategy and performance goals will need to place more importance to this aspect.

Does aligned performance management approach resolves the core issues in performance appraisal such as yearly performance rating for bonus payments?
LTCs policy of appraisal and bonus payment based on the performance rating as part of the performance management program has helped the process of the appraisal itself. Most employees indicated that the year 2011, when the performance management program was implemented, had been the most effective and efficient year in performance rating. They also mentioned that the ratings were fairer and more objective compared to previous years. The HR team pointed out that the objectivity of the appraisal, through the KPI scorecard scores and the competency evaluation scores lent credibility to the rating that was finally moderated by the divisional council. They also indicated that in the previous subjective appraisal, the good employees sometimes got a mediocre or low rating, while the low performers got a surprisingly good rating. This had caused frustration at both the employee and management level. Politics played a significant role and influenced Ravee Ramamoothie University of Liverpool (2012) 12

the performance rating. Moreover, another major issue was that the employees were unclear about the performance criteria used by their superiors to rate them at the end of the year. The LTCs performance management program induced a high level of objectivity by way of; (1) clearly set goals by the employees based on approval of the supervisors and the heads of departments; (2) the performance review conducted in a one-to-one meeting with the employee, which gave the opportunity for the employee and the supervisor to interact regarding the performance goals and results achieved enabling the supervisors to provide accurate review results; and (3) the fact that performance ratings were now based on objective results. According to the HR team, the performance raters often viewed the scorecard of an employee during the performance rating moderation sessions. The raters interviewed, expressed that the burden of the unknown had been lifted from their function of performance rating and they could now focus on performance objectives clearly. The HR indicated that supervisors who are politically motivated could not skew the rating favorably toward their favorite subordinate due to the transparency and performance visibility at the rating moderation sessions. Without this transparency, employees often get victimized. When a very good employee gets an average or bad rating, the employees motivation level would be disrupted. This would result in eventual loss of good talent by the organization. Laird and Clampitt (1985 cited in Asmub, 2008, pg. 409) described it very aptly. They stated that, unclear objectives for effective performance coincide with unclear communication to employees about the objectives of performance appraisal. Finally, most employees felt that the competency evaluation by peers, seniors and subordinates added objectivity to the performance evaluation. According to them, it gave a social perspective on how he/she fared in the organization socially based on his/her job knowledge, teamwork, creativity and attitude. Often it was found that an employee who is performing well may not necessarily be a great employee in the social context. Borman and Motowidlo (1993 cited in Kline and Sulky, 2009, pg. 168) refer to the 360 peer evaluation as contextual factors, which their research findings indicate to be an important factor of overall effective performance of an employee. The results presented in the research by Ramamoothie (2012) showed how the objective element in performance rating resolved the subjective controversies and thus motivated the employee to set the right objectives. Objectivity, performance visibility, peer evaluation and transparency give greater assurance to organizations that such an Ravee Ramamoothie University of Liverpool (2012) 13

exercise is worth the effort to transform the organization towards a performanceoriented organization.

Conclusion from Case Studies (Ramamoothie, 2012)

Performance Management Capability

From the comparison analysis of case studies of MSF and LTC performed by Ramamoothie (2012), it is apparent that LTCs strong organizational capability in performance management, which is seen through its HR teams competency and capability, was critical in the successful implementation of the performance management initiative. In LTC the executive leadership was only involved in the program by supporting it. They did not initiate, nor did they manage it. The program was entirely conceptualized and managed by their HR team which had the relevant experience and skill sets required in the domain of performance management. In the case study of MSF, the organizational performance management capability (Mithas, Ramasubbu and Sambamurthy, 2009) was clearly lacking. The executive leadership initiated the program but lacked the organizational capability to execute it. The HR team had no relevant skill sets and struggled to implement the performance management exercise. These findings suggest that any organization that intends to align its employee performance management to its strategic and performance goals must have a capable HR or corporate strategy team in place to implement such an initiative regardless of the size of the organization. The executive leadership may not be able to get down to the details of how and what is required to execute the performance management initiative. The responsibility and accountability of execution rests on its implementation team. In the case of Home Depot, when its new CEO, Nardeli intended to implement a performance management initiative for the entire organization, a competent, experienced and capable new HR head, Dennis Donovan was hired to lead the initiative. This led to the successful implementation of a MBO initiative that over the years led Home Depot to stable footing (Charan, 2006, pg.62). The findings of the research carried out by Ramamoothie (2012) offer a similar example. In the perspective of change management, the performance management capability of LTCs HR team helped it to adopt a sense-making approach. The implementation team played the key mediator role of the change process. In the case study of MSF, the HR teams lack of performance management capability made it difficult for them to play the Ravee Ramamoothie University of Liverpool (2012) 14

interpreter role in making (Palmer et.al., 2009, pg. 209) the change and communicating buy-in. A strongly capable implementation team is an important factor in ensuring the success of a performance management initiative, especially a major change exercise which links the organizational strategy and performance goals to employee performance. Performance Managers at Business Units In LTC, the HR leader was able to implement the initiative successfully but the quality of the KPIs were an issue. The HR of LTC intends to address this weakness through the education of its supervisors in setting the right KPIs for their subordinates. However the case study of LTC indicates that the issue of setting easy KPIs is pervasive and is most of the time endorsed and colluded by the supervisor. Therefore, education may not be the only solution to the issue of KPI quality and alignment to organizational strategy and performance goals. The HR team may not have the capability and breadth of operational understanding of every business unit and its divisional performance alignment to organizational strategy and performance goals. Ramamoothie (2012) recommends that for a large organization such as LTC, a performance manager is assigned and specifically trained for the task of setting the right KPIs cascaded from the organizational goals for the respective business units or divisional constituents. These managers should be selected from the pool of senior employees of respective business units who have consistently performed well. As observed in LTCs case study, the focus of the corporate team on the performance management of the divisional heads and CXOs, ensured that the quality of KPIs were up to par and aligned to strategy and performance goals at the executive leadership level. A similar team would be required at the lower level of the organization in the form of a managerial level executive in every division who has the capability, experience, and training in performance management. This will be a more practical solution to resolve the issue of quality of KPIs and alignment at lower levels of the organization. As for mid-sized organizations, the research recommends that the business units or divisional heads are made accountable to set the right KPIs for its constituents. The volume is manageable, as a typical business unit consists of a maximum of 30 employees (for example, in MSF). With a capable manager governing the performance management at every divisional and business unit level, specific education programs directed toward supervisors in performance management competency as well as a competent and capable HR team would constitute the performance management capability of an organization. Ravee Ramamoothie University of Liverpool (2012) 15

The quality of KPIs will be ensured through good performance management capability of an organization. Quality of KPIs, is the most important element in alignment of strategic and performance goals of the organization to employee performance. The assurance of quality KPIs will avoid controversies (Sulky and Balzer, 1998) and is ultimately critical for organizations to set up a valuable reward program.

Glossary
C CEO CXO Chief Executive Officer Chief X Officer (X represents the specific function in the organization that the chief officer is responsible for, such as marketing, finance and etc.) Head of Department Human Resources Human Resource Management Key Performance Indicator Large Telecommunication Company, a case study subject in the research conducted by Ramamoothie (2012) Management-By-Objectives A Mid-Sized Securities Firm, a case study subject in the research conducted by Ramamoothie (2012) Performance Management System Strategic Human Resource Management

H HOD HR HRM K KPI L LTC

M MBO MSF

P PMS S SHRM

Ravee Ramamoothie

University of Liverpool (2012)

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Ravee Ramamoothie

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