Barrier in Implementing Performance Management System based on Information Technology in SBM-ITB

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Conference Proceedings © 2012 – ISBN: 978-979-15458-4-6

www.sbm.itb.ac.id www.cob.uum.edu.my

The 3rd International Conference on Technology and Operations Management

Sustaining Competitiveness through Green Technology Management

Bandung – Indonesia, July 4-6, 2012

Barrier in Implementing Performance Management System based

on Information Technology in SBM-ITB

Galaxy

1,*

, Dermawan Wibisono

1

1School of Business and Management (SBM) - Institut Teknologi Bandung (ITB),

Jl. Ganesha 10 (Gedung SBM-ITB), Bandung 40132, Indonesia

Abstract.

SBM-ITB focuses on Management and Business Education program. It was founded since December 31, 2003. During it operation, the number of student has been increasing around 8% every year (in average). It means that SBM-ITB should adding adequate staff and lecturer in order to keep the education process running well. Quality also the main concern for SBM-ITB to keep survives and keeps being student first choice business` and management school. To keep and maintain it quality, SBM-ITB needs a performance management system that can monitor all the SBM-ITB condition. But SBM-ITB having problem with this kind of system, it still operated manually, it not use any information technology (IT) that can provide real-time online performance data. This paper describes the barrier that holds the implementation this kind of system and proposes some recommendation to overcome the barrier.

Keywords:Barrier, Information technology, Performance Management

1. Introduction

Good decisions require good information. An Integrated Performance Management System based on Information Technology can provide decision makers an accurate, up to date, and real time online data or information. With a well-established Integrated Performance Management System, monitoring and decision making process can be takes efficiently and effectively. SBM-ITB as an educational institution that has several program like SM, MBA, MSM, and Doctorate program still have not this kind of system and it have cause problem for them in monitoring, maintaining the process inside the institution (based on interview with the HRD staff of SBM-ITB). The current system still uses manual method and need a lot of time to process data. The staff said that SBM-ITB has realizes that they need to build a system that can monitor recent condition and performance in real-time online of each lecture and department.

This paper tries to identify barrier in the implementation as it part of process of the implementing this kind of system (Integrated Performance Management System). By knowing the barrier, it can help SBM-ITB in implementing the system.

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2. Methodology

The method employed for the study was study literature and interview. Literature review used as support in analysis and supporting the argument or data that have been taken from interviewer. The interview target was HRD staff of SBM-ITB that in charge to manage and measure the performance of lecture and department in SBM-ITB. The interviewer asked several questions that related to the barrier in the implementing integrated performance management system and also about the current condition of Performance Management System in SBM-ITB.

3. Literature Review

3.1. Definition

Performance management is a process which contributes to the effective management of individuals and teams in order to achieve high levels of organizational performance (Armstrong and Baron, 2005). As such, it establishes shared understanding about what is to be achieved and an approach to leading and developing people which will ensure that it is achieved. Performance management is a strategy which relates to every activity of the organization set in the context of its human resource policies, culture, styles and communications systems. The nature of the strategy depends on the organizational context and can vary from organization to organization.

3.2. Establish an Integrated Performance Management

Performance measurement systems succeed when the organization’s strategy and performance measures are in alignment and when senior managers convey the organization’s mission, vision, values and strategic direction to employees and external stakeholders. The performance measures give life to the mission, vision, and strategy by providing a focus that lets each employee know how they contribute to the success of the company and its stakeholders’ measurable expectations. Integration makes it possible for performance measures to be effective agents for change. If the measures quantify results of an activity, one only need compare the measured data with the desired goals to know if actions are needed. In other words, the measures should carry the message. Inappropriate measures are often the result of random selection methods. For example, brainstorming exercises can get people thinking about what is possible and provide long lists of what could be measured. Unfortunately, such efforts by themselves do not provide reliable lists of what should be measured. Unless the measures are firmly connected to results from a defined process, it is difficult to know what corrective actions to take as well as be able to predict with confidence what effects those changes will have. In order to be able to identify effective corrective actions to improve products and services, results of all key processes must be measured. In this way, specific processes that need to change can be identified when progress is not satisfactory.

3.3. Major Component of Integrated Performance Management System

There are a number of sources that should be examined as a first step in establishing an Integrated Performance Measurement System. These sources typically provide a strategic perspective in developing a set of critical performance measures. They also give us the major components of an integrated performance measurement system. These components are:

1. The strategic plan 2. Key business processes 3. Stakeholder needs

4. Senior management involvement 5. Employee involvement

6. Accountability for measures 7. A conceptual framework 8. Communication

9. A sense of urgency 3.3.1. The Strategic Plan

Strategic Plans set the foundation for effective performance measurement systems. Traditional Performance measurement systems that focus on the wrong set of performance measures can actually undermine an organization’s strategic mission by perpetuating short-sighted business practices. For this reason, it is appropriate to discuss the critical elements of strategic plans and review the compatibility of strategic plans to an integrated performance measurement system. A well-developed strategic plan should contain the basic information necessary to begin the formulation of an integrated performance measurement system as shown in Table 1 below.

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Table 1. Strategic Plan Element

STRATEGIC PLAN ELEMENT PERFORMANCE MEASUREMENT ATTRIBUTES Strategic Goal Articulates the enduring mission or end state desired

Objective Describes (in verb/noun format) the strategic activities that are required to accomplish the goal

Strategy Defines strategic (long-term) requirements in verb/noun format that link to objectives. Typically contain dates, basis of measurement, and performance aspirations (targets)

Tactical Plans Identifies the short term requirements that link to strategy. Typically contain cost, time, milestone, quality, or safety attributes as well as performance targets

3.3.2. Key business processes

Processes and their activities are the means to achieve the outcomes and the end results of the strategic plan. But, usually, there are many processes and activities within an organization, each potentially needing performance measures. With this reality in mind, the secret to a successful integrated performance measurement system is to clearly identify the organization’s key business processes, that is, those having the most impact on the success or failure of the organization’s goals. The primary objective should be to keep the number of key processes to a manageable yet useful level. Too many can lead to an overwhelming number of measures and resulting data. Too few can lead to inadequate information on which to base business decisions.

3.3.3. Stakeholder needs

Stakeholders are a common term in performance-based management and refer to those people who have or perceive they have a stake in the future success of an organization or organizational unit. It is imperative to have a very clear idea of who these people are and what their needs and expectations are. Their points of view and expectations should all be considered in developing strategic goals and objectives. If they have a stake in the output of the process, they should have a stake in the input to the process. If a stakeholder group is important to achieving organizational objectives, the organization should actively manage the relationship with that stakeholder group. Companies must address this increasingly important element in their performance measurement system by communicating with key stakeholders to determine their perspectives on what constitutes business success. (Atkinson 1997) This communication means listening to and understanding their wants and expectations. Equally important, it also means communicating what the organization is doing, as part of its strategy, to satisfy the stakeholders. Successful organizations require the active participation and support of five broad stakeholder groups to achieve their objectives. These stakeholder groups are:

1. Customers 2. Owners 3. Employees 4. Suppliers

5. The broader community

A strategy has to be developed to systematically understand what these stakeholders want and expect. Depending on the stakeholder, however, different techniques or tools are used. For customers, organizations often use surveys or customer focus groups. For employees, surveys, focus groups or discussions are excellent tools.

Developing performance measurement information from stakeholders serves two purposes:

1. It evaluates whether tactical plans, such as customer satisfaction and employee commitment, are being met.

2. It provides a means of testing the presumed cause and effect relationships between performance measures and strategies. For example, does higher quality result in increased sales? (The cause and effect relationships are discussed in more detail in the section entitled Reconciling Gaps in the Strategic Plan)

3.3.4. Senior Management Involvement

In most best in class organizations, the performance measurement initiative is originally introduced, and continually championed and promoted, by the top executives. In many organizations, leadership commitment to the development and use of performance measures is a critical element in the success of the performance

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A significant element of senior management’s stewardship is to implement the strategic plan they had a hand in developing. Therefore, they must be involved actively and directly right from the start of any performance measurement process development by formulating and communicating strategy and by providing input on critical measures (Thomson and Varley, 1997).

Four specific ways Senior Management can make a successful impact through their involvement are: 1. Champion the cause. Lead by example. Show a sincere interest in the system and a fervent commitment

to its success.

2. Delegate responsibilities. Empower employees. Senior managers at companies representing best practices in performance measurement often form design teams that have the responsibility for selecting, defining, and identifying a contact person who has overall responsibility for strategic measures. (APQC 1996).

3. Develop good communication processes. A good communication process provides a critical link between the tasks employees perform and the corporate strategic plan/measures. Two of the most effective methods of communication are the use of special meetings and company publications. These methods have proven to be effective because they can hold the attention of the employees long enough to provide a thorough explanation.

4. Always seek feedback. Senior managers need to know what employees think about their jobs and the company, especially if they’re not in alignment with the company’s strategic direction. Therefore, they must encourage all employees to tell them the truth and then accept it graciously. Doing so creates accountability for both employees and senior management.

3.3.5. Employee Involvement

When developing an integrated performance measurement system, don’t forget to involve your employees in the process. After all, they are the ones who directly contribute to the input, output, outcome, performance, process, and every other aspect of the organizational operation. Employee involvement is one of the best ways to create a positive culture that thrives on performance measurement. When employees have input into all phases of creating a performance measurement system, buy-in is established as part of the process. The level and timing of employee involvement should be individually tailored depending on the size and structure of the organization. Here are some factors to consider when involving employees:

1. Involvement creates ownership which increases loyalty and commitment which increases accountability. 2. Involved employees generally are happy employees, and happy employees contribute to the success of

the organization. That’s why best in class companies’ measure employee satisfaction and the Malcolm Baldrige National Quality Award criteria lists it as a focus area.

3. Employees will perform according to the performance metric, i.e., the performance metric will drive the employees’ behavior. It would be prudent to give them a say-so in the development of a system that will drive their performance.

4. Involve those employees who will be directly impacted by the system as well as those who will have to implement it.

5. Make sure the employees understand the assignment and the extent of their involvement.

6. Identify gaps in knowledge and experience at whatever level and provide targeted, just-in-time training to address these (NPR 1997).

3.3.6. Accountability for Measures

Successful deployment of an integrated performance measurement system is related strongly to developing a successful system of accountability, that is, managers and employees alike buy in to performance measurement by assuming responsibility for some part of the performance measurement process (NPR 1997). When establishing accountabilities for the integrated performance measurement system, here are some things to remember:

 Each performance measure needs to have an owner who is responsible for that measure. Champions also may be identified for groups of measures.

 Employees need to know how the measurement for which they are being held accountable relates to the overall success/failure of the organization. In other words, they need to know how their performance affects the bottom line.

 Employees must be given adequate resources to perform the work for which they are being held accountable.

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 Employees are most likely to meet or exceed performance goals when they are empowered with the authority to make decisions and solve problems related to the results for which they are accountable. (NPR 1997)

 The purpose of establishing accountability is not to play gotcha. Rather, accountability is an expectation of the empowerment process.

 Good performance needs to be rewarded and, conversely, poor performance needs to be penalized. 3.3.7. A Conceptual Framework

A conceptual framework can help in deciding what to measure. For example, measuring organizational performance can be linked to the strategic planning process. Or you can use a balanced set of measures to ensure that senior leaders can get a quick comprehensive assessment of the organization in a single report. A family of measures can be used to align measurement across levels of the organizations (NPR 1997).

3.3.8. Communication

Communication is crucial for establishing and maintaining a performance measurement system. It should be multidirectional running top down, bottom up, and horizontally within and across the organization.

Best-in-class organizations communicate internally by way of:

 Interactive, group-oriented mechanisms (town hall meetings, business update meetings, and focus groups)

 Various forms of print media (newsletters, reports, and publications)

 Advanced computer technology (e-mail, video conferencing, and on-line internet/intranet systems)

 Other highly visible means, such as the routine placement of progress charts in appropriate work areas. 3.3.9. A Sense of Urgency

The impetus to move or move more aggressively to a new or enhanced performance measurement and performance management system is generally the result of a cataclysmic event most frequently, a circumstance threatening the organization’s marketplace survival. One of several scenarios may precede initiating a performance measurement system within an organization:

 A newfound leadership commitment to performance measurement.

 The desire of a high-performance organization to keep its competitive edge.

 The need to link organizational strategy and objectives with actions.

 The resultant outcome of current quality programs. (NPR 1997).

4. Interview Results

From the interview, author gets several data and information about the barrier in the implementation of Integrated Performance Management System Based on Information technology. Actually the performance management system on SBM-ITB still operated manually. All the data for performance measurement need lot of time before it being processed, as it still use paper and just several staff knows how to process the data. Following table is the resume of the interview that describes current condition of SBM-ITB related to performance management:

Table 2. Current condition of SBM-ITB related to development of Integrated Performance Management No Component of IPM Available Not available

1 The strategic plan 

2 Key business processes 

3 Stakeholder needs 

4 Senior management involvement 

5 Employee involvement 

6 Accountability for measures  7 A conceptual framework 

8 Communication 

9 A sense of urgency 

From the table above the problems of the development are: 1. Lack of senior management involvement

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2. Senior management do not have any initiatives to build the system, there is no plan to build this kind of system (based on interview with the staff).

3. Lack of employee involvement

4. Employee also do not have any initiatives to build the system, they do have own job desk and they think the load is fully. So there is no time to build even to think build the system.

5. Sense of Urgency.

6. There is no sense of urgency from the management or employee; they do not see that it is an important issue.

5. Discussion and Conclusions

Figure 1 below is the proposed framework in implementing IPM. This framework is the development based on literature review from The Performance-Based Management Handbook book by Will Artley and Suzanne Stroh (2001) about major components of an integrated performance measurement system:

Figure 1. Proposed Framework in implementing IPM

The framework above shows that to build the system, management should have sense of urgency. Sense of urgency will create commitment and sincerity from the management to build the system. After there is a sense of urgency then start to Phase II (Building Phase). In Phase II, Strategic Plan, key Business process, stakeholder needs, and conceptual framework really needed as guidance in the process building. Employee and senior management should be involved too, to meet the need of management and employee about performance measurement. After phase II finished, then start to Phase III (Implementation). In this phase, the involvement of employee and senior management also needed to ensure the process of measurement. Good communication between management and employee will ensure there is feedback for system.

Based on proposed framework and interview can be concluded that the position of SBM-ITB performance management development is on phase 1 (initiative). There is no sense of urgency from the staff and top management to implement this kind of system. Its means, management and employee itself does not see that this kind of system is an emergency issue.

Based on interview and discussion with SBM-ITB HRD staff, possible barriers in the future if management initiates to implement the system are:

1. Lack of IT employee skill to build the systemTo overcome this problem, author recommends SBM-ITB to hire an outsourcing or hire external expert (IT expert) that can focus on developing the system.

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2. Need more time to be running wellStaff needs to be trained to use new system, like how to input data, processing data, and read the meaning of graph or number that provided by software.

References

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[3] Dale Brethower & Karolyn Smalley. Pfeiffer; Har/Dis edition. (1998). Performance-based Instruction: Linking Training to Business Results.

[4] Gary Cokins, John Wiley & Sons, Inc. (2009). Performance Management - Integrating Strategy Execution, Methodologies, Risk, and Analytics.

[5] Kaplan, R.S. and Norton, D.P. (1992), ‘The Balanced Scorecard - Measures That Drive Performance’, Harvard Business Review, Vol. 70, No. 1, pp. 71-79.

[6] Kaplan, R.S. and Norton, D.P. (1996),The Balanced Scorecard - Translating Strategy into Action, Harvard Business School Press, Boston, MA.

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[9] Kiggundu, Moses N., (1996), “Integrating Strategic Management Tasks into Implementing Agencies: From Firefighting to Prevention.”World Developmentvol. 24, no. 9: 1417–1430

[10] M.K. Badawy (1998), Technology Management Education: Alternative Models. California Management Review. [11] Steven R. Kreklow (2006),Five Critical Factors Preparing for Success in Implementing Performance Management,

GFOA

[12] Thomas C. Mawhinney, William K. Redmon & Carl Merle Johnson. Routledge. (2001).Handbook of Organizational Performance.

[13] Waal, A.A. de (2001), “Power of Performance Management: How Leading Companies Create Sustained Value”, John Wiley & Sons, New York.

[14] Wibisono, Dermawan PhD.,(2006), Manajemen Kinerja – Konsep, Desain, dan Teknik Meningkatkan Daya Saing Perusahaan, Erlangga, Jakarta.

[15] Will Artley and Suzanne Stroh (2001).The Performance-Based Management Handbook.

Cite this paper

Galaxy and Wibisono, D. (2012). “Barrier in Implementing Performance Management System based on Information Technology in SBM-ITB,” Proceedings of The 3rd International Conference on Technology and Operations Management: Sustaining Competitiveness through Green Technology Management, Bandung–Indonesia (July 4-6), pp. 659-665. ISBN: 978-979-15458-4-6.

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