PERFORMANCE MANAGEMENT

IZIKKI KENZA
GI LI
COURSE OUTLINE
I. Introduction

II. Overview on performance management

III. Performance management systems

IV. Key performance indicators

V. Balanced scorecard , OKR, MBO

VI. Dashboards

VII. SCOR model

VIII. Towards sustainability

I. Introduction to sustainability

II. UN SUSTAINABILITY VISION, CSR, ESG GRI..

 INTRODUCTION
The competitiveness of organizations
depends, among other things, of their
performance levels.

It is vitally important that they have a measurement

and evaluation system that, from a set of indicators,
provides them reliable information to reflect their
goals and evaluate their performances.
When discussing performance management, many people
will immediately think of the annual performance review
process.

But the performance appraisal is only one component of

what is considered to be performance management.

Performance management comprises of the methodologies, processes, software

tools, and systems that manage the performance of an organization, whereas
Human Resource Planning only takes care of individual employee’s work
responsibilities and work delivery
How do you prevent your project from deviating, or worse, failing
altogether?
The answer is to identify KPIs that will keep your projects on track from
the beginning
 WHAT IS A PERFORMANCE
The Oxford English Dictionary defines performance as:

‘The accomplishment, execution, carrying out, working out of

anything ordered or undertaken.’

‘To perform is to do something up to a standard, as in to succeed

or to excel .’
WHAT IS A PERFORMANCE
The term performance encompasses economic as well as behavioural
outcomes
“Performance means both behaviours and results. Behaviours emanate
from the performer and transform performance from abstraction to
action. Not just the instruments for results, behaviours are also outcomes
in their own right – the product of mental and physical effort applied to
tasks – and can be judged apart from results.” Brumbach
WHAT IS A PERFORMANCE

‘Performance is a multi-dimensional construct, the measurement of

which varies depending on a variety of factors.’ Bates and Holton

“Performance should be defined as the outcomes of work because

they provide the strongest linkage to the strategic goals of the
organization, customer satisfaction, and economic contributions.”
Bernardin et al
WHY MEASURE IT
o To improve the efficiency and effectiveness
o To reach organizational mission and goals
o To improve existing processes and their performance
o To improve management style, communications, infrastructure
o Encourage and reward behaviours aligned with organizational mission and goal
o To demonstrate the value of the project to the stakeholders

Performance is a prerequisite for feedback and goal setting

processes.
 HOW TO MEASURE IT

How do you measure performance?

Performance measurement is generally defined as regular measurement of outcomes and

results, which generates reliable data on the effectiveness and efficiency of programs.
HOW TO MEASURE IT
Outputs basically only show that
something has been done, but
by no means show whether this
has also brought a real benefit

OUTPUT
OUTCOME
HOW TO MEASURE IT
Output
Products and services delivered. Completed product of a specific activity,
whether executed internally by the organization or by an external contractor. Often
stated as the amount (for example, a year).
Outcome
An outcome represents a specific result a program is intended to achieve. An
outcome can also be defined as the specific objective of a specific program. An
outcome is not what the program actually produced itself (the output), but the
consequences of those products, services, or assistance
HOW TO MEASURE IT
HOW TO MEASURE IT
HOW TO MEASURE IT
HOW TO MEASURE IT
Output measures or metrics include:

• financial measures – income, rates of return, costs;

• units produced or processed;
• sales, new accounts, new customers;
• time measures – speed of response or turnaround, achievements compared
with time tables, time to market, delivery times.
HOW TO MEASURE IT
Outcome measures include:

• attainment of a standard (quality, level of service etc);

• changes in behaviour;
• acquisition and effective use of additional knowledge and skills;
• reaction – judgement by others (colleagues, internal and external customers).
 HOW TO MEASURE IT
EXAMPLE OUTPUT OUTCOME
Installation of a sales and marketing Delivery of project in time and budget Increased sales volume and improved
system marketing efficiency, leading to higher
customer acquisition and retention
rates.
Installing photovoltaic cells on roof Renewable energy supply Reduced CO2 emissions
Reduction in energy costs, contributing
to environmental sustainability
Creating a new training pack for a Training pack created Enhanced skills and knowledge of the
course course participants, leading to
improved job performance and career
development
Improvement in efficiency of entry and Implementation of new technologies or The waiting period of entry/exits at
exit service at airports processes at airport entry and exit border control reduced by 25%
points. ,enhanced passenger satisfaction,
Improved indoor climate and office Completion of renovations or changes Increased employee satisfaction and
layout in the office to improve indoor climate productivity due to a better working
and layout environment
HOW TO MEASURE IT
EXAMPLE OUTPUT OUTCOME

A company implements a new The number of inventory reports Reduction in inventory holding costs
automated inventory management generated automatically each due to optimized stock levels
system. month

An automotive manufacturing plant The number of cars assembled per Increased overall plant productivity
installs a new assembly line robot day by the new robot and reduced labour costs
A logistics company introduces an The fleet management software is Improved on-time delivery rates
advanced fleet management used to schedule and track 100 and reduced fuel consumption
software trucks. across the fleet

A company conducts a training Total number of employees trained Enhanced employee efficiency and
program for staff on using a new in the new software fewer errors in supply chain
software tool for supply chain operations
management.
factory implements energy-efficient Installation of 50 new LED lighting Decrease in energy usage by 15%,
technologies in its production fixtures and 10 energy-efficient leading to lower operational costs
processes. motors.
PERFORMANCE MANAGEMENT
Performance management can be defined as a systematic process to improve
organizational performance by developing the performance of individuals and teams
working with an organization.
It is a means of getting better results by understanding and managing their
performance within a framework of planned goals, standards and competence
requirements.
Performance management is the process of managing an organization’s management
strategy. This is how plans are converted into desired outcomes in organizations
PERFORMANCE MANAGEMENT
Performance measurement is characterized as a system which is based on multi-
dimensional performance measures that are derived from organization strategy with
the purpose to :
- Implement the strategy,
- Evaluate business performance,
- Provide feedback and ensure communication,
- Help in creating learning environment,
- and continuously improving the organization.
 PERFORMANCE MANAGEMENT
Performance management is the
continuous process of improving
performance by setting
individual and team goals which
are aligned to the strategic goals
of the organisation, planning
performance to achieve the goals,
reviewing and assessing
progress, and developing the
knowledge, skills, and abilities of
people.”
PERFORMANCE MANAGEMENT

Performance management is a strategic approach

to creating and sustaining improved performance in
employees, leading to an increase in the
effectiveness of companies.
PERFORMANCE MANAGEMENT
Performance areas can be communicated in various ways :
Through a set of company’s mission :
 The company’s mission is to provide high quality, innovative goods
 The company’s mission is to provide low cost, reliable goods in high volume

It could also be communicated explicitly by

The directors want to increase the number of customers by 20%
The directors want to reduce turn-round time by 10%
PERFORMANCE MANAGEMENT
▪ High quality : Rejects, faults found, Defect Rate, Return Rate
▪ Innovative : new products launched, patents filed, products updates
▪ Low cost : cost per unit, cost/unit compared to last year, Budget Variance
▪ High volume : Units Produced, Capacity Utilization Rate, Market Share, units to last year
budget
▪ Reliable : breakdowns or Downtime Percentage, sales returns, warranty claims, customer
feedback, Mean Time Between Failures (MTBF), On-time Delivery Rate
▪ Number of customers up by 20% : Customer Growth Rate, Acquisition Rate, Customer
Retention Rate
▪Turn-round time down by 10% : Average Turnaround Time, Process Cycle Time, Lead Time
Reduction
PERFORMANCE MANAGEMENT
Performance management systems

IZIKKI KENZA
GI LI
PERFORMANCE MANAGEMENT SYSTEMS
The real goals of any performance management system are threefold :
▪ to correct poor performance,
▪ to sustain good performance
▪ and to improve performance

All performance management systems should be designed to generate information

and data exchange so that the individuals involved can properly dissect performance,
discuss it, understand it, and agree on its character and quality. (Lee)
PERFORMANCE MANAGEMENT SYSTEMS
Traditional performance measure Non-traditional performance measure
Based on outdated traditional accounting system Based on company strategy

Mainly financial measures Mainly non-financial measures

Intended for middle and high managers Intended for all employees

Lagging metrics (weekly or monthly) On-time metrics (hourly or daily)

Difficult confusing and misleading Simple accurate and easy to use
Neglected at the shop floor Frequently used at the shop floor
Have a fixed format Have no fixed format (depends on needs)

Do not change over time Change over time as the need change
Intended mainly for monitoring performance Intended to improve performance
Hinders continuous improvement Help in achieving continuous improvement
PERFORMANCE MANAGEMENT SYSTEMS
PERFORMANCE MANAGEMENT SYSTEMS
The performance management must be seen from two perspectives: management and
measurement
From a management point of view, a 'performance management system' consists of four main
activities:
- Performance planning;
- Measures to control performance;
- Performance measurement;
- Performance reward;
From a measurement point of view, a 'measurement system' provides a basis for an
organization to assess how well its results are progressing towards predetermined objectives
PERFORMANCE MANAGEMENT SYSTEMS
In this sense, performance management is used as a generic term
referring to methodologies, metrics, processes and systems that
monitor and manage the corporate performance, in order to
continuously measure its own effectiveness and efficiency
according to strategic, operational, human resources,
information systems, marketing and financial perspectives.
 PURPOSE
By measuring performance, an organisation:

 Is able to identify whether it is meeting stakeholders, citizens´ requirements

 Assesses how well a process is working

 Provides information so that the decisions are based on fact, not on emotion

 Realises what the problems are and where they are

PURPOSE OF PM SYSTEMS
❑ Strategic
❑ Administrative
❑ Informative
❑ Developmental
❑ Organizational maintenance
❑ Documentation
PURPOSE OF PM SYSTEMS
Strategic
Link employee behaviour with organization’s goal
Communicate crucial business strategic initiatives

Administrative
Works as a deciding factor for :
Salary adjustments
Promotions
Retention or termination
And identify performers, non-performers and under performer employees
PURPOSE OF PM SYSTEMS
Informative
It is an effective communication channel to inform employees about their goals, job responsibilities, key
deliverables and performance standards.

Also a structure method to indicate the key areas of improvement required by the employee in order to
improve his performance.

Developmental
Performance feedback/coaching
Identification of individuals strengths and weaknesses
Identification of causes of performance deficiencies
Tailor development of individual career path
PURPOSE OF PM SYSTEMS
Organizational maintenance
Plan effective workforce
Assess future training needs
Evaluate performance at organizational level
Evaluate effectiveness of HR interventions

Documentational
The performance management reviews, feedback and forms should be documented and
maintained periodically by every organization. It would enable them to look forward, set new
targets, design developmental needs, design training and learning programmes, and career
progression of employees across departments
 DRAWBACKS
• Performance management is not a single intervention that can be implemented easily. It relies on a
range of activities, involving several core HR processes, and requires these to be carefully integrated.

• A sophisticated ‘process’ does not always lead to effective performance management.

• When the performance management system is not delivering, that is likely to be reflecting a deeper
issue such as lack of organizational agreement about clarity of purpose, priorities or standards, or a
mismatch between espoused values and actual behaviours.

• It can support organizational change but may not be the only, or main driver of it.
EVOLUTION OF PERFORMANCE MANAGEMENT

Strategic Operational Individual

performance performance performance
management management management
 EVOLUTION OF PERFORMANCE MANAGEMENT

• Linked to operational • Deals with the achievement

• The traditional level at which of organisational objectives
performance management is management as its focus is the
used in organisations achievement of • Practitioners refer to it as
departmental or group corporate, business or

OPERATIONAL
• In early times, organisations
objectives. enterprise performance
INDIVIDUAL

were loosely defined and their

STRATEGIC
performance management • Although it is aligned with management, this being
focus was based on individuals corporate strategy, its focus is the highest and most
performing tasks as part of a more functional complete level of usage of
group. performance management
• Development of performance • traditionally evaluated in
appraisals in US industry terms of efficiency and • The key processes related
began with early work in effectiveness, by using to strategic performance
salesman selection by industrial financial indicators management systems are
psychologists at Carnegie- strategy formulation and
Mellon University, who used execution, both subsets of
trait psychology to develop a strategic management.
man-to-man rating system.
 PERFORMANCE MANAGEMENT SYSTEMS
PMS can be defined as a set of metrics used to quantify the efficiency and effectiveness of the
actions
By providing relevant information that facilitates the decision-making processes, it allows the
implementation of organizational strategies playing a very important role in translating
corporate strategy into results.
It is a balanced and dynamic system capable of providing support to decision-making through
the collection, compilation and analysis of information assisting the management of uncertainty
It should be designed and implemented according to the organizational strategy, in order to
connect the same with the function of the objectives and the operational aspects providing an
overview of the organizational performance as a whole
PERFORMANCE MANAGEMENT SYSTEMS

❖ By individual measures that quantify the efficiency and effectiveness of actions;

❖ By a set of measures which combine to evaluate the performance of the

organization as a whole;

❖ By a structure support that allows data to be obtained, collected, sorted, analyzed

and interpreted
PERFORMANCE MANAGEMENT SYSTEMS
The strategic alignment with the organisation
mission

Financial and non-financial measures

Dynamic adaptability

Orientation to processes, depth/detail

Clarity and simplicity

PERFORMANCE MANAGEMENT SYSTEMS
 PERFORMANCE MANAGEMENT SYSTEMS

Design its own organizational performance measurement system that meets its
specific needs
PERFORMANCE MANAGEMENT SYSTEMS
There are some obstacles that contribute to the complexity in designing a performance
measurement system :

❖ Unclear terminology;

❖ High amount of existing measures to select;

❖ Countless factors that affect productivity and the decision on what measures
to use;

❖ High number of requirements that a performance system must meet.

PERFORMANCE MANAGEMENT SYSTEMS
Dangers of Poorly Implemented Performance Management Systems:
❖ Use of false or misleading information

❖ Wasted time and money

❖ Lowered self-esteem damaged relationships

❖ Decreased motivation to perform

❖ Employee job burnout and job dissatisfaction

❖ Varying and unfair standards and ratings

❖ Emerging biases

❖ Unclear ratings system

CHARACTERISTICS OF PMSS

• The top- • Individual / • Objective /

down / group subjective
bottom-up orientation measures
approach
 TOP DOWN VERSUS BOTTOM UP APPROACH
▪ In the top-down approach

The top managers do the strategic thinking, decision making, planning and communication to
the organization’s members.

Top down PMSs take the organizations strategy as a given and the PMS is used as a major
instrument to make explicit the set of means-end relationships that was developed by the
organization in order to implement the strategy.

It is difficult for top managers to control how middle managers understand and accept the
strategy
 TOP DOWN VERSUS BOTTOM UP APPROACH
▪ In the bottom-up approach

The PMS is designed by the lower levels of the organization which is more likely to result in greater
understanding of the strategic intent, broader acceptance, and provide for a broader organizational alignment

The acceptance of measurement and feedback system, which is part of the PMS, is influenced by the employee’s
perception of fairness of the system.

The satisfaction with the program, and the perceived usefulness of the feedback are significantly higher in the
participation condition when compared to a tell-and-sell strategy.

A critical remark is that in the bottom up approach it is important to keep an eye on the conformity with the
organization’s strategy.
 INDIVIDUAL VERSUS GROUP ORIENTATION

The focus on individual performance might have bad consequences.

When employees are rewarded for their individual performance, teamwork is discouraged which
has a negative effect on group performance.

Individual based plans will not generate cooperation when the work is highly interdependent and
might be seen as unfair when individual effort and ability do not determine overall performance.
 INDIVIDUAL VERSUS GROUP ORIENTATION
People are individuals, they tend to search for opportunities where individual results are
rewarded more heavily.
Group oriented incentives can be weakened by the social-loafing problem, which are more
likely to occur with larger groups.
Another weakened effect is found for aggregated incentives such as gain sharing, profit
sharing and stock plans.
On the contrary, aggregated plans may have a positive effect in situations where cooperation
is promoted, people with cooperative values are attracted, and overly narrow individual goals
are avoided
OBJECTIVE VERSUS SUBJECTIVE MEASURES OF
PERFORMANCE

Performance could be measured objectively which is usually a number such as the number of

products produced per hour.

When performance is measured subjectively, the rater interprets performance and decides if it

is good or bad.
OBJECTIVE VERSUS SUBJECTIVE MEASURES OF
PERFORMANCE
Advantages of subjective measures relative to objective measures.
 Subjective measures can be used for any kind of job.
 Variables can be taken into account that are not in the individual’s control but
influence performance.
 A judgement can be made on whether results are achieved by acceptable means and
behaviours.
 The risk of lacking measured results and the over-focus of employees on measured
results is lower.

Besides differences in judgment by the raters themselves and ratee, it is difficult for
organizations to make decisions regarding differentiating employees on the basis of their
subjective performance measures
 OBJECTIVE VERSUS SUBJECTIVE MEASURES OF
PERFORMANCE

Objective measures provide a higher acceptance by employees because of the objectivity itself.
Objective measures are not available for most jobs and certainly do not cover all tasks and
behaviours of employees.
 CHARACTERISTICS OF PMSS
• Participation of employees in the design phase has a positive influence on the acceptance of
the PMS.
• When using a top-down approach attention has to be devoted to the understanding and
acceptance of the strategy and objectives by the middle managers.
• When using a bottom-up approach attention has to be devoted to ensure that the design does
not misfit with the organization’s strategy.
• If teamwork determines performance, the PMS should not focus on individual performance.
• When the PMS has a group orientation attention has to be paid to the fact that social loafing
might occur during operation.
• Objective performance measures provide higher acceptance by employees.
• Subjective measures are more flexible in use, but research show low inter-rater reliability.
THEORETICAL BACKGROUND

Strategy planning Goal setting Feedback Pay for

performance
 STRATEGY PLANNING
The first purpose of performance management systems is to help top management achieve strategic
business objectives.
By linking the organization’s goals with individual goals, the performance management system
reinforces behaviours consistent with the attainment of organizational goals.
Even if for some reason individual goals are not achieved, linking individual goals with
organizational goals serves as a way to communicate what are the most crucial business strategic
initiatives.
GOAL SETTING

Goal
Objective
GOAL SETTING
A “goal” can be defined as “The purpose toward which an endeavour is directed“.
In personal and organisational development terms, the goal is the main single aim of
the entity.
Examples of Organisational Goals are:

 “To be the leading supplier of IT applications in the Region”

 “To be an Employer of Choice”
 “To maximise Return on Investment to our Shareholders”
 GOAL SETTING
“Objectives” are the elements which, together, achieve the goal.
The difference between a Goal and an Objective is the element of “measurability”.

Objectives are the overall strategy by which the organisation intends to achieve its goal.

Examples of Objectives based on the above Goals are:

“To increase Market Share in the Region by 5% by year end without compromising on service.”
“Reduce Employee Turnover by 5% by year end while maintaining a high level of internal
talent”
“Increase Profit after Tax by 5% by year end while maintaining headcount and service
quality”.
GOAL SETTING
A goal is an “umbrella” statement that then needs to be broken down into how this will be
achieved – the goal is broken down into strategy to achieve the goal.

An organisation may have more than one goal, but the number of goals should be limited to not
more than 3.

Objectives break down the goal into “bite-size”, measurable units. Each “objective” defines the
quantity, time limit, and parameters in which it is to be achieved.

A “Goal” can have one or more “Objectives”, but the number of Objectives should also be limited
to ensure that they are both manageable and achievable.
GOAL SETTING
Goals or objectives form the basis of performance management systems. They serve two

purposes: control and motivation. Objectives are used to evaluate performance

A goal is a motivational force, and difficult goals lead to the best performance.

Performance management systems make use of the controlling and motivational nature of goals

by setting objectives that must be achieved by the individual or group.

 GOAL SETTING
For the design of a performance management system the question arises how to arrange for
employees to be committed to their goals.

Enhancing goal commitment is :

- To have employees participate in setting them.

- Making public commitment and communication of an inspiring vision by leaders who

behave supportively. In this way the importance of the goals is stipulated which contributes to
goal commitment.
 GOAL SETTING
Scenario 1: Company Expansion

Description: A technology company wants to expand its market presence in Europe over the next five years.

Scenario 2: Sustainability Initiative

Description: A manufacturing firm aims to reduce its environmental impact by implementing sustainability practices
by 2025.

Scenario 5: Product Development

Description: A beverage company plans to launch a new line of organic juices within the next two years.
 FEEDBACK
Feedback on performance will improve the outcomes for future activities. Nonetheless poorly
implemented feedback programs could worsen the situation.

Recommendations for feedback interventions:

 Focus on the task and task performance only

 Include information about how to improve performance.

 Include a formal goal-setting plan along with the feedback

 Maximize information relating to performance improvements and minimize

information concerning the relative performance of others.
PAY FOR PERFORMANCE
Money is the most crucial incentive and that no other incentive or motivational technique

comes even close to that

Organizations use pay for performance to motivate their employees and to increase the

probability that high performing employees stay with the organization

Performance evaluation and pay for performance these have to be connected in a certain

way.
 PERFORMANCE MANAGEMENT SYSTEM DESIGN
1. Alignment with Organizational Goals 3. Key Performance Indicators (KPIs)
 Relevant KPIs: Develop KPIs that are relevant to the specific
 Vision and Mission: Ensure the PMS aligns with the roles and responsibilities within the organization.
organization’s vision and mission. It should support
 Balanced Metrics: Use a balanced set of metrics that include
overarching strategic objectives and drive the organization financial, operational, and behavioral indicators
towards its long-term goals.
 Strategic Alignment: The system should link individual and 4. Employee Involvement
team goals to the broader organizational strategy.
 Engagement: Involve employees in the design and
implementation of the PMS to increase buy-in and
2. Clarity and Communication engagement.
 Clear Objectives: Clearly define performance objectives  Feedback Mechanisms: Incorporate regular feedback
and expectations. Employees should understand what is mechanisms to allow for continuous improvement and
expected of them. employee development.
 Effective Communication: Use effective communication 5. Evaluation and Feedback
channels to disseminate information about the PMS to all  Regular Evaluations: Conduct regular performance
stakeholders. evaluations to provide timely feedback.
 Constructive Feedback: Ensure feedback is constructive and
. aimed at helping employees improve their performance.
 PERFORMANCE MANAGEMENT SYSTEM DESIGN
6. Training and Development 9. Reward and Recognition
 Development Plans: Integrate personal development plans within  Incentive Structures: Develop fair and motivating incentive
the PMS to support continuous learning and growth. structures that reward high performance.
 Training Programs: Offer training programs that help employees  Recognition Programs: Implement recognition programs to
develop the skills necessary to meet performance expectations. acknowledge and celebrate achievements.
7. Flexibility and Adaptability 10. Legal and Ethical Considerations
 Scalability: Design a PMS that can scale with the growth of the  Compliance: Ensure the PMS complies with relevant labor laws and
organization. ethical standards.
 Adaptability: Ensure the system can adapt to changes in the business  Fairness: Design the system to be fair and unbiased, promoting
environment and organizational structure. equity and transparency.
8. Technology and Tools 11. Continuous Improvement
 Modern Tools: Utilize modern performance management software  Feedback Loops: Create feedback loops to continuously gather
and tools that can streamline the process. input from employees and managers on the effectiveness of the
 Data Analytics: Leverage data analytics to gain insights into PMS.
performance trends and areas for improvement.  Regular Reviews: Regularly review and update the PMS to ensure it
remains relevant and effective.
 PERFORMANCE MANAGEMENT SYSTEM
Model Authors, Year Description
Integrated Performance Bititci et al., It is based on two external dimensions (financial
Measurement Systems 1998 performance and competitiveness) and five internal
dimensions (costs, factors of production, activities,
products and revenues).
European Foundation for Quality EFQM, 1999 The EFQM Excellence Model is a non-prescriptive
Management model based on nine criteria, five of them considered
as factors (leadership, people, policy and strategy,
partnerships and resources, processes) and four as a
result (which are derived from the people, customers,
society and performance).
The Performance Prism Neely et al., This model consists of five integrated faces to identify
2002 the areas to be addressed by organizations: the
satisfaction of stakeholders, strategies, processes,
resources and stakeholder input.
 PERFORMANCE MANAGEMENT SYSTEM
Model Authors, Year Description
The Performance Measurement Keegan et al., 1989 Based on two types of performance measures:
Matrix those related to the results and that focus on the
determinants of the results. This model includes
four different classes of performance: financial,
non-financial, internal and external.
The Performance Pyramid System Lynch and Cross, 1991 This pyramid model with four levels associates the
corporate strategy, the strategic business units
and the operations, translating the objectives
from the top down (based on customer priorities)
and low measures up.
Balanced Scorecard Kaplan and Norton, It is a strategic management tool to: (i) clarify
1992 and translate the vision and strategy; (ii)
communicate and relate the strategic objectives
and actions; (iii) plan, set goals and align
strategic initiatives; (iv) improve strategic
feedback and learning.
PERFORMANCE MANAGEMENT
LECTURE 3: KEY PERFORMANCE INDICATORS

IZIKKI KENZA
LI
INTRODUCTION

“What gets measured gets done.”

 INTRODUCTION

Having the ability to analyse your data fast and efficiently doesn’t always mean you are doing it correctly!
 INTRODUCTION

What are the parameters with direct impact on the efficiency that should be
measured and monitored?
 INTRODUCTION

Businesses extract data from several internal INDICATOR

and external sources hence the diversity of INDICATOR

performance indicators for different objectives

that structure the performance management
INDICATOR

Understanding the performance measures is a KPIS

vital part of successful PMSs
DEFINITION
By definition, a performance measure is the numerical or
quantitative indicator that shows how well each objective is being
met.
Metrics are quantitative measurements used to track the
performance of specific business processes at different levels.
While some of them might be tight to objectives, metrics are not the
most important indicators to monitoring strategic actions. However,
they are still relevant to inform businesses about the progress of
their different activities.
DEFINITION
Metrics or indicators help provide context to the performance of key business
goals but are not critical to its success like KPIs are

A KPI is a metric that matters. You can have many metrics, but an
organization needs only a handful of KPIs. Everything can’t be considered
“key,” or nothing will stand out from the pack and get the attention it
deserves
 DEFINITION
A Key Performance Indicator (KPI) is a quantifiable metric that reflects how well an
organization is achieving its stated goals and objectives.

KPIs specifically help determine a company's strategic, financial, and operational

achievements

A pivotal element to consider is the word "key", meaning they only track what is truly
relevant for the company's strategic decisions.
 DEFINITION
KPIs provide a focus for strategic and operational improvement, create an analytical basis
for decision making and help focus attention on what matters most.

Managing with the use of KPIs includes setting targets (the desired level of performance)
and tracking progress against those targets.

A good KPI should help understand if you are making the right decisions. They act as a
map to business outcomes and are the strategic indicators that will move the company
forward.
KPIS IN AN ORGANIZATION

KPIs link organizational vision to individual action. An

ideal situation is where KPIs cascade from level to level
in an organization. You can visualize this by thinking of
your organization as a pyramid
TYPES OF MEASURES

INPUT PROCESS OUTPUT OUTCOME

 TYPES OF MEASURES

• Monitor the amount

PROCESS • are result measures
OUTCOME
of resources being that indicate how
• focus on accomplishments or impacts,
used to develop, • Focus on how the much work is done and are classified as Intermediate
maintain, or deliver a efficiency, quality, or and define what is Outcomes, such as customer brand
consistency of specific awareness (a direct result of, say,
product, activity or produced marketing or communications
service processes used to outputs), or End Outcomes, such as
produce a specific output; customer retention or sales (that are
driven by the increased brand
awareness)

INPUT OUTPUT
KEY RESULT AREAS
Key Result Areas or KRAs are the areas of activity in which an organization must
perform well in order to be successful. Identifying and communicating KRA within the
organization is essential to ensure that the business or project stays focused on what
needs to be done to achieve success.

KPIs are the means by which these KRA can be measured. The actions below the KPIs
are the tasks and projects that you carry out in order to achieve the KPIs
KEY RESULT AREAS
Key Result Area
Key = crucial/main
Result = outcome/end/consequence
Area = space/range/aspect
KEY RESULT AREA = crucial outcome space

Aspects of an organization’s operations that are key to successful delivery of products or

services, essential for strategic planning and continual improvement, tied to mission requirements
KEY RESULT AREAS
✓ KRA is not the result.
✓ KRA is the area identified as important or crucial where a result will assist in the achievement
of the set objectives or goal.
✓ KRA defines what a job is expected to accomplish.

Aspects of an organization’s operations that are key to successful delivery of products or

services, essential for strategic planning and continual improvement, tied to mission requirements
KEY RESULT AREAS

Quality Safety Cost

Delivery Security People

Service
KEY RESULT AREAS
Customer Customer Customer
Market share
satisfaction retention engagement

Low
Product Product Efficient
production
quality quantity processes
costs

Strong Skilled Engaged

High profits
leadership employees employees

Consistent
profits
KEY RESULT AREAS
Typical Key Results Areas for a production department would be:

•Production Efficiency

•Quality Assurance

•Cost Control

•Safety

•Inventory Management

•Maintenance or equipment utilization

 KEY RESULT AREAS
KRAs always link back to Objectives and Goals. This is how we “plan” and “deliver” the

achievement of goals.

Goals, objectives, KRAs, and KPIs come together under the banner of “Performance

Management”.
KEY RESULT AREAS
KEY RESULT AREAS
Vision – Ensuring delivery of quality product within schedule.
Key Result Area
Customer Satisfaction
Product Management
Operational Cost Control
Quality Check
Record keeping
KEY RESULT AREAS
KEY RESULT AREAS

KRA Goal
Security Improve security
Productivity Increase productivity
Quality Focus on quality
Efficiency Enhance process efficiency
Profit Increase profits
Service Improve service
KEY RESULT AREAS
TYPES OF MEASURES
Result indicators (RIs): the indicators which provide a summary of the activity of
more than one team; they give an overview of how efficiently teams are working
together.
Key Result Indicators (KRIs): the indicators that provide the board with a clear
picture of how the organization is performing, whether it is moving in the right
direction and speed or not.
Performance Indicators (PIs): the indicators that provide the management with the
information about the teams (what they are delivering) since these indicators can be
traced back to a team.
Key Performance Indicators (KPIs): the indicators which focus on the most critical
aspects of organizational performance regarding their current and future success.
 KEY PERFORMANCE INDICATORS

A KPI, or Key Performance Indicator, is a measurable value that indicates how effectively an
organization or individual is achieving key business objectives. KPIs are used to evaluate
success at reaching targets and can be applied at various levels of an organization, from
overall business performance to specific projects or departments.
KEY PERFORMANCE INDICATORS
• Measure the right things – the system must measure activities that directly contribute to
an organization’s performance.
• Clearly communicate what will be measured – measures that are ill defined, and/or
not communicated will not be used or understood.
• Consistently apply the measures – measures should be applied consistently to all units
of the organization; failure to do so will result in loss of support for the system.
• Act on the measures – the measurement data must be used in a constructive way. Not
using the data or misapplying the data will have the same results: a lack of support for the
measurement system.
CHOOSING THE RIGHT INDICATOR
They are directly related to objectives and strategies.

They must be understandable but not under-determining.

They must be meaningful.

They vary between locations and customer segments.

They provide fast feedback.

 HOW TO SET ORGANIZATIONAL KPIS
Whatever the nature of your KPIs, you need to make sure that they're SMART. This stands for:

Specific: be clear about what each KPI will measure, and why it's important to avoid any ambiguity about what is being
measure : ”Increase monthly website traffic by 20%”

Measurable: the KPI must be measurable to a defined standard, quantifiable to track progress and outcomes: "Achieve a
customer satisfaction score of 90%."

Achievable: you must be able to deliver on the KPI. it should be realistic and attainable to ensure they are motivational and
practical: "Reduce production costs by 5% within the next quarter."

Relevant: your KPI must measure something that matters and improves performance. KPIs should align with the business's
strategic goals and be relevant to the area being measured. "Increase sales revenue by 15% in the next fiscal year."

Time-Bound: it's achievable within an agreed time frame. it needs to have a specific time frame to provide a deadline for
achieving the target. "Launch three new products by the end of the year."
 HOW TO CREATE A KPI
Establish a clear objective

State clearly, and in simple terms the purpose of the KPI

Outline the criteria for success

What will the target be? Is it attainable? when should it be accomplished? and
how will progress be monitored? Targets should be realistic
 HOW TO CREATE A KPI

Collect the data

Investigate the availability and accuracy of the data. Data may be available
automatically from existing systems or hidden in reports and databases. This data will
all need to be pulled together at regular intervals for reporting in one central place.
 HOW TO CREATE A KPI
Build the KPI formula.
Some KPIs contain but a single metric or measure. However most rely on a combination brought
together under a single calculated formula. For example, a KPI that measures productivity in
revenue by machine would look like this: Total Revenue divided by the total number of machines.
Build formulas and create calculations with test data to see if the results are what you would
expect.

Present your KPIs.

To efficiently communicate your KPIs you'll need to translate the data into understandable visuals
such as graphs and charts
CATEGORIES OF KPIS/KPI LEVELS
Strategic KPIs
• Usually the most high-level. These types of KPIs may indicate how a company is doing, although it
doesn't provide much information beyond a very high-level snapshot. Executives are most likely to
use strategic KPIs, and examples of strategic KPIs include return on investment, profit margin, and
total company revenue.

Tactical KPIs
• Medium term measures that should drive towards achieving the strategic goals. You
know these are strong KPIs if they give a clear indication of tactical pursuits to
achieve the targeted KPI goals. From the departmental examples stated above, the
tactical sales KPI could be customer profitability.

Operational KPIS
• are focused on a much tighter timeframe. These KPIs measure how a company is doing month-over-month (or
even day-over-day) by analyzing different processes, segments, or geographical locations. These
operational KPIs are often used by managing staff and are often used to analyze questions that are derived
from analyzing strategic KPIs. For example, if an executive notices company-wide revenue has decreased,
they may inquire as to which product lines are struggling.
CATEGORIES OF KPIS/KPI LEVELS

Leading
Lagging
CATEGORIES OF KPIS/KPI LEVELS
Leading/Lagging KPIs describe the nature of the data being analyzed and whether
it is signalling something to come or signalling that something has already occurred.
 CATEGORIES OF KPIS/KPI LEVELS
Leading KPIs:
Leading KPIs are predictive measures that provide insight into future performance. They help
identify potential issues and opportunities before they occur, allowing for proactive
management. These indicators often reflect activities or inputs that can influence outcomes.

Lagging KPIs:
Lagging KPIs are retrospective measures that reflect past performance. They are typically
outcome-focused and help assess whether business objectives were met. These indicators are
useful for evaluating the success of strategies and operations.
 CATEGORIES OF KPIS/KPI LEVELS
Predictive vs. Retrospective: Leading KPIs are forward-looking and help predict future
performance, while lagging KPIs look backward and measure past results.

Proactive vs. Reactive Management: Leading KPIs enable proactive management, allowing
businesses to make adjustments before issues arise. Lagging KPIs facilitate reactive
management, helping businesses understand and respond to past performance.
 CATEGORIES OF KPIS/KPI LEVELS

Achieving an objective related to a lead measure indicates that performance is on track, and
achieving an objective related to a lag measure shows that the goal has been accomplished.
CATEGORIES OF KPIS/KPI LEVELS
 CATEGORIES OF KPIS/KPI LEVELS
1.Order Lead Time: The average time taken to process and fulfill an order. Shorter lead times can indicate efficient

operations and predict higher customer satisfaction.

2.Inventory Turnover Rate: The frequency at which inventory is sold and replaced over a period. High turnover rates can

suggest effective inventory management and can predict lower holding costs.

3.On-time Delivery Rate: The percentage of orders delivered on or before the promised delivery date. A high on-time

delivery rate can forecast customer satisfaction and potential repeat business.

4.Supplier Lead Time: The average time it takes for suppliers to deliver goods. Shorter supplier lead times can indicate a

more reliable supply chain and predict fewer stockouts.

 CATEGORIES OF KPIS/KPI LEVELS
1.Order Fulfillment Accuracy: The percentage of orders correctly processed and delivered as per the customer’s

requirements. High accuracy rates indicate effective order processing and customer satisfaction.

2.Freight Cost per Unit: The total transportation cost divided by the number of units shipped. This KPI provides insights

into the efficiency of the shipping process and cost management.

3.Warehouse Utilization: The percentage of warehouse space used compared to the total available space. Higher

utilization rates reflect efficient use of storage capacity.

4.Delivery Performance: Metrics such as the percentage of deliveries made within the agreed timeframe. This can

indicate the reliability and effectiveness of the logistics network.

 CATEGORIES OF KPIS/KPI LEVELS
Achieving an objective related to a lead measure indicates that performance is on track, and
achieving an objective related to a lag measure shows that the goal has been accomplished.

If the On-time Delivery Rate (leading KPI) is declining, a logistics manager might investigate and address

issues such as routing inefficiencies or staffing shortages.

Meanwhile, analyzing Freight Cost per Unit (lagging KPI) can help the manager understand how well the

logistics costs were controlled over the past quarter and inform budgeting for the next period.
CATEGORIES OF KPIS/KPI LEVELS
CATEGORIES OF KPIS/KPI LEVELS
CATEGORIES OF KPIS/KPI LEVELS
CATEGORIES OF KPIS/KPI LEVELS
ROI Return on investment
Customer satisfaction
Hours spent with customers
Revenue growth
return on capital employed
Volume of sales
Number of customer complaints
EBIT earnings before interest and taxes)
Introduction of new products
Safety meeting
Recorded injuries
Accident rate
Training hours
PERFORMANCE MANAGEMENT
LECTURE 4: KEY PERFORMANCE INDICATORS

IZIKKI KENZA
LI
 KPI EXAMPLES
OEE (Overall Equipment Effectiveness) is the gold standard for measuring manufacturing
productivity. Simply put – it identifies the percentage of manufacturing time that is truly
productive.
An OEE score of 100% means you are manufacturing only Good Parts, as fast as possible, with
no Stop Time. In the language of OEE that means 100% Quality (only Good Parts), 100%
Performance (as fast as possible), and 100% Availability (no Stop Time).
Availability
Performance
Quality
OEE
Quality takes into account manufactured parts that do not meet quality standards, including parts
that need rework. Good Parts are parts that successfully pass through the manufacturing process
the first time without needing any rework.
Quality = Good Count / Total Count

Performance is determined by how much waste is created through running at less than optimal
speed. By comparing the actual cycle times against ideal cycle times, OEE allows for a
determination of how much production was lost by cycles that did not meet the ideal cycle time.
Performance = (Ideal Cycle Time × Total Count) / Run Time

Availability refers to the machine or cell being available for production when scheduled. By
comparing scheduled run time to actual run time, the availability component of OEE allows for a
determination of lost production due to downtime
Availability = Run Time / Planned Production Time
OEE

OEE = Availability × Performance × Quality

OEE = (Good Count × Ideal Cycle Time) / Planned Production Time

SCM

Customer Order Cycle Time: Actual Delivery Date – Purchase Order Creation Date

Inventory Days of Supply: Inventory on Hand / Average Daily Usage of Inventory

Delivered on time and in full (OTIF) : On-Time In-Full Rate = Total deliveries made

on time and in full / Total deliveries made X 100

SCM
Shipping Time.
Order Accuracy.
Picking Accuracy.
Delivery Time.
Pick & Pack Cycle Time.
Equipment Utilization Rate.
Transportation Costs.
Warehousing Costs
SCM
Attribute 1 – Productivity related Logistics KPIs
Attribute 2 – Time-related Logistics KPIs
Attribute 3 – Cost related Logistics KPIs
Attribute 4 – Quality related Logistics KPIs
Attribute 5 – Safety related Logistics KPIs
SCM
Attribute 1 – Productivity related Logistics KPIs

 Picking Order productivity

 Shipping Productivity

 Delivery Productivity

 Warehouse Space Utilization

SCM
Attribute 2 – Time-related Logistics KPIs

 Order to Delivery Lead Time

 Receiving operation time

 Order picking time

 Putaway time
SCM
Attribute 3 – Cost related Logistics KPIs

 Order Processing Costs

 Warehouse Maintenance Cost

 Out of Stock costs

 Labour Costs

 3PL Suppliers Spend

SCM
Attribute 4 – Quality related Logistics KPIs

 Receiving Accuracy

 Storage Accuracy

 Picking Accuracy

 Delivery Accuracy

 Perfect Order Fulfillment

SCM
Attribute 5 – Safety related Logistics KPIs

 Time Lost Due to Injury

 Safety- Accidents Records

 Total Recordable Incidents rate

 Total case incidence rate TCIR

FINANCIAL METRICS
Revenue
Turnover Ratios
ROI Return on investment
EBIT earnings before interest and taxes
Gross Profit Margin
PROCESS PERFORMANCE METRICS
Production Efficiency
Total Cycle Time
Quality Rate
Mean time between failures (MTBF)
Defect rate
CUSTOMER METRICS
Average Resolution Time
Customer Satisfaction Rating
 CASCADING KPIS
Cascading KPIs (Key Performance Indicators) is a strategic management approach where

organizational objectives and KPIs are translated from the top levels of the organization down to

individual departments, teams, and employees. This method ensures alignment across all levels of

the organization, helping everyone work towards common goals.

 CASCADING KPIS
Key Aspects of Cascading KPIs

Alignment with Organizational Goals: KPIs are developed to reflect the overall strategic objectives of the

organization. As these KPIs cascade down, they are translacontribute to the broader goalsted into specific,

measurable targets for each level, ensuring that every department and employee's actions.

Hierarchical Structure: At the highest level, the organization sets broad strategic KPIs. These KPIs are then broken

down into more specific targets for departments and teams. Finally, individual KPIs are established, making each

person’s responsibilities clear and measurable.

 CASCADING KPIS
Key Aspects of Cascading KPIs

Clear Communication: Effective cascading requires clear communication of goals and expectations. Each level must understand how

their KPIs connect to higher-level objectives and how their performance impacts the organization as a whole.

Performance Monitoring: Regular monitoring and reporting are crucial to ensure that KPIs at all levels are being met. This involves

continuous feedback loops where progress is reviewed, and adjustments are made as necessary.

Accountability: Cascading KPIs help establish accountability at every level. Each individual knows what is expected of them and how

their performance will be evaluated.

 CASCADING KPIS
• Ensures that all efforts across the organization are aligned with
Strategic Alignment strategic goals, fostering a unified direction and purpose.

• Helps employees at all levels focus on what is most important,

Improved Focus reducing activities that do not contribute to key objectives.

• By setting clear, measurable targets, cascading KPIs help improve

Enhanced Performance overall performance and drive continuous improvement.

• Clarifies expectations and responsibilities, making it easier to hold

Increased Accountability individuals and teams accountable for their performance.

• Provides a framework for making informed decisions based on

Better Decision-Making objective performance data.
 CASCADING KPIS
Complexity:
• Developing and managing cascading KPIs can be complex, requiring careful planning and coordination.

Communication Barriers:
• Ensuring that goals and KPIs are effectively communicated at all levels can be challenging, especially in
large organizations.
Resistance to Change:
• Employees may resist new KPIs or changes in performance measurement, requiring effective change
management strategies.
Data Integrity:
• Reliable data collection and analysis are crucial for accurate KPI measurement, necessitating robust systems
and processes.
 CASCADING KPIS
Organizational Level Team Level (Logistics Team)
•Strategic Objective: Improve overall supply chain •Team Objective: Optimize delivery routes.
efficiency.
•Team KPI: Decrease average delivery time by 20%
•Organizational KPI: Reduce overall supply chain over the next quarter.
costs by 10% within the next year.

Individual Level (Logistics Manager)

Departmental Level (Supply Chain Department)
•Individual Objective: Implement a new route
•Departmental Objective: Enhance logistics and optimization software.
distribution efficiency.
•Individual KPI: Successfully roll out the new software
•Departmental KPI: Reduce transportation costs by to all delivery teams within three months and achieve
15% within six months. a 10% reduction in fuel usage.
CASCADING KPIS
CASCADING KPIS
Duplicate KPIs: The high-level KPI is duplicated at lower levels.

Derived KPIs: A derived KPI is rolled up from lower-level metrics that measure the
same activity in different ways. For example, regions in a global company may
calculate net sales differently and use different currency calculations. When rolled
up, their calculations are harmonized into a single enterprise KPI.
CASCADING KPIS
Conglomerate KPIs: A conglomerate KPI comprises two or more lower-level KPIs that
are summed or averaged. For example, the KPI “sales and administration expenses”
may be decomposed into “total selling expenses” and “total administration
expenses,” which are lower level KPIs.

Unique KPIs: There may be some metrics that exist only in one dashboard and are
not rolled up at all. This is often true of operational metrics.
CASCADING KPIS

0 DELAYS

Minimise Reduce Reduce

transport delays production cycle picking/packing
time time
CASCADING KPIS
0 DELAYS

Minimise Reduce Reduce

transport delays production cycle picking/packing
time time

Enhance Manage
equipment bottlenecks
flexibility
CASCADING KPIS
Achieve 95%
Customer
Satisfaction

Reduce Customer Increase Enhance Customer

Support response Customer feedback quality
to 2hours retention rate

Implement New
response time
metrics
CASCADING KPIS
Increase annual
revenue by 15%

Improve overall Increase market

supply chain share
efficiency
PERFORMANCE MANAGEMENT
LECTURE 5: BSC-OKR-MB0 / Dashboard

LI
PERFORMANCE MANAGEMENT SYSTEMS
Top- Strategic
bottom/Bottom- planning
up Approaches

Goal setting Pay for

performance

Feedback
PERFORMANCE MANAGEMENT SYSTEMS
Management By Objectives
(MBO)

Objectives and Key Results (OKR)

Balanced Score Card (BSC)

MANAGEMENT BY OBJECTIVE
Management by Objectives (MBO) is a strategic management framework made popular by

management guru Peter Drucker in 1954.

This model aims to improve the performance of an organization by clearly defining goals and

objectives, and incentivizing the rest of the company to work towards those.

The objectives are created by the management teams with the help of employees in a top-down

approach. These objectives are meant to be challenging but achievable. They usually follow the

SMART criteria and are planned for the long term.

MANAGEMENT BY OBJECTIVE
Managers can use monitoring tools to keep up to date with the progress of the
employees in meeting their goals. At the end of the year, managers will then review
an employee’s performance and grant the relevant bonuses, if any.
 MANAGEMENT BY OBJECTIVE

❑ MBOs ushered in an era of results-oriented management and served as the foundation for
many goal-setting methodologies today.

❑ It offers clear indicators of success that everyone in the company can work towards.

❑ MBO also allows increased communication between managers and employees through
performance reviews and collaborative efforts on goals
 MANAGEMENT BY OBJECTIVE
❑ Goals under MBO are set on an annual basis, sometimes even longer. This makes it difficult for

companies that use MBO to adapt to today’s fast-paced landscape.

❑ Goal-setting is also siloed, meaning each department is doing its own thing. While the goals and

objectives set are supposed to be aligned with the company’s overarching vision, there’s no cohesive

strategy governing the entire operation.

 MANAGEMENT BY OBJECTIVE

❑Critics also say that objectives are management-driven rather than people-driven, and tying goals

to performance reviews and compensation puts an emphasis on the goal and not the means.

❑The idea of setting achievable goals underscores a sense of risk-aversion – it embeds a culture of
meeting the minimum. It’s equivalent to saying, “this is the minimum I’m happy to commit to.”
 MANAGEMENT BY OBJECTIVE
1 Identification of organisational strategy.
• All organisations should start by identifying their long-term strategic goals

2 Collaborative goal setting.

• Goals should be set in collaboration with superiors and subordinates. These
goals should be consistent throughout all levels of the organisation
3 Rewards linked to goals.
• Attempts should be made to link rewards to the individual goals developed
by the MBO system. Research on linking rewards to measurement shows that
collaborative goal and reward setting is successful as a motivational tool.
Dinesh, D., & Palmer, E. (1998). Management by objectives and the Balanced Scorecard: will Rome fall again? Management Decision, 36(6), 363–369 .
 MANAGEMENT BY OBJECTIVE
4 Development of action plans.
• An action plan helps identify problem areas and assists in resource allocation. Action plans
encourage innovation and empower subordinates, and should again be developed by subordinates
in collaboration with their supervisors
5 Cumulative periodic review of subordinate results against targets.
• An MBO system includes periodic performance reviews. The focus of the review should be on gaps
between the set goals and actual performance. The review should include praise and recognition
for areas where the subordinate has performed well, as well as discussion of areas in which the
subordinate could improve
6 Review of organisational performance.
• The final step of MBO implementation is a regular review of the entire system, which feeds back
into the first step. The overall review provides an opportunity to ensure that organisational plans
are being implemented as expected and that strategic goals remain as the focus
Dinesh, D., & Palmer, E. (1998). Management by objectives and the Balanced Scorecard: will Rome fall again? Management Decision, 36(6), 363–369 .
MANAGEMENT BY OBJECTIVE
Departmental Objective Employee Objectives Performance Bonus

Increase customer satisfaction by Resolve 15% more customer service 10% salary bonus
10% in 2023 queries than in 2022

Reduce customer call times by one 5% salary bonus

minute

Get 100 five-star satisfaction 15% salary bonus

reviews from customers
MANAGEMENT BY OBJECTIVE
Departmental Objective Employee Objectives Performance Bonus

Improving Product testing and Launch three new product features 10% salary bonus
launches

Develop 20 new front-end software 5% salary bonus

tests

Launch alpha testing phase 15% salary bonus

 OBJECTIVES AND KEY RESULTS
Objectives and Key Results (OKRs) is a goal setting framework introduced by Andrew Grove,
former CEO of Intel, in the 1980s. He built upon an earlier methodology Management By
Objectives (MBO) and applied it to the core values of Intel
Now, many Silicon Valley giants use it for their companies, including the Amazon, Netflix,
Facebook, Twitter, Spotify, and LinkedIn.
 OKR
OKRs break down strategy and execution into two parts: the Os (Objectives) and the KRs (Key
Results).

Objectives – These describe the high level goals that your company wants to achieve and sets the
direction for your efforts.

Key Results – These define the measurable outcome required to achieve an objective. Key Results
consist of specific initiatives, which are projects and tasks that will help you achieve your Key
Results.
 OKR
OKRs are hierarchical. Employees set their goals and progress upward through the ranks. The idea
is that when employees achieve their goals then managers achieve theirs from bottom up.

Implementing OKRs can be done at various levels in your organization.

o A company-level OKR that’s based on the mission and vision of your entire business;

o A department-level OKRs, which are more specific to the functions of each department;

o And a team-level OKRs, which can be used for more specific projects.

OKR methodology seeks to establish a few goals, typically between three and five and then
assigns the same number of objectives to measure and analyse performance.
 OKR
Main characteristics of OKRs.

1. OKRs are implemented and evaluated typically on a quarterly basis, with weekly check-ins to make sure
the business is on track.

2. These Objectives are planned bi-directionally. Some call this a bottoms-up approach, but it also includes a
bilateral approach to strategy making. Everyone in the team is involved in setting OKRs and initiatives

3. Achievability doesn’t matter – the loftier the goal, the better. OKRs push employees to go above and
beyond what they can imagine being “easily achievable.” So even if they don’t meet their Objectives, they
are still working towards a higher goal. Seventy percent completion is already considered a good (and
recommended) result.
 OKR

❑The OKR framework allows a lot of flexibility. So it’s common for organizations and teams to
misuse the framework, and turn it into something entirely different.

❑OKRs also require a certain level of discipline for an organization to extract its true value. This
includes regular and timely status updating (of Key Results), as well as check-ins with managers (to
monitor the progress of Objectives).
 OKR
Objective Key Results Initiatives
Become the #1 fashion e-commerce retailer Resolve 20% more customer service queries Create and deploy an AI-based chatbot
in Southeast Asia in terms of customer service than in 2020

Reduce average customer call times by one Host more training programs for the customer
minute service team

Decrease time-to-resolution of support tickets Create more support channels for customers
by 30% and support reps to communicate on
 BALANCED SCORECARD
The BSC is a strategic performance management tool that was developed to help decision-makers
in understanding and obtaining the strategic objectives, by translating missions and strategies into
objectives and measures.
The BSC was built on a careful selection and implementation of four perspectives, it sets out a
company’s top strategic priorities across four areas that are considered critical to any businesses’
success, namely:
▪ Financial
▪ Customer
▪ Internal-business-process
▪ Learning and growth.
 BALANCED SCORECARD
These BSC four perspectives authorize kind of balance between short term and long-term
objectives, the demanded outcomes and the performance supporter of those outcomes, and
between hard objectives measures and more subjective measures.

Both financial and non-financial measures have a great and strong link between them, it is in the
cause-effect-relationship between both the financial and non-financial drivers.
Organizations must then identify the core (1) objectives, (2) measures, (3) indicators, and (4)
initiatives for each of these areas.
 BALANCED SCORECARD
• It looks at organizational performance
through the lens of human capital,
culture, technology, and infrastructure.
• considers how well information and
knowledge are captured and
implemented by employees to create a
competitive advantage
Learning
Are your employees using and
your technology stack to growth
execute tasks and manage
processes? Does your
organization provide
adequate training and
resources? What steps are
you taking to remain
competitive?
 BALANCED SCORECARD
• It looks at organizational performance
through the lens of human capital, • Focuses on how well
culture, technology, and infrastructure.
• considers how well information and
your internal processes
knowledge are captured and are operating
implemented by employees to create a
competitive advantage
Learning Internal
and business
growth processes Are there gaps, delays, or bottlenecks
in the pipeline that need to be
addressed? How can you streamline
your processes for greater efficiency
and effectiveness? How quickly can
your organization adapt to changing
business needs or conditions?
 BALANCED SCORECARD
• It looks at organizational performance • Focuses on how well your
through the lens of human capital,
culture, technology, and infrastructure. internal processes are
• considers how well information and operating
knowledge are captured and
implemented by employees to create a
competitive advantage
Learning Internal
and business
growth processes
What is important to our customers and
stakeholders? how well are you serving
your customers and the stakeholders?

Customer

• Focuses on finding new customers,

building brand recognition and
trust, and increasing customer
satisfaction.
 BALANCED SCORECARD
• It looks at organizational performance • Focuses on how well your
through the lens of human capital,
culture, technology, and infrastructure. internal processes are
• considers how well information and operating
knowledge are captured and
implemented by employees to create a
competitive advantage
Learning Internal
and business
growth processes

Financial Customer
• Focuses on the organization’s financial state. Though
finances are lagging indicators of past decisions, • Focuses on finding new customers,
they are still an important part of any organization’s building brand recognition and
health and key to understanding overall performance
and creating strategies for the future. trust, and increasing customer
satisfaction.
 BSC
Objective Measures Indicators Initiatives

Finance Increase sales 25% increase in sales Financial statements Offer promos,
bundles, and discounts

Customer Improve customer Improve customer Resolve 20% more Create and deploy an
satisfaction satisfaction by 15% customer service AI-based chatbot
queries than in 2023

Internal Process Reduce costs of 15% decrease in Financial statements Negotiate with
customer service software costs suppliers
Learning & To have Have at least two Number of Hire more employees
knowledgeable and professionals with professionals with with Master’s degrees
Growth
qualified professionals Master’s degrees Master’s degrees
 COMPARISON
OKR MBO BSC
What is it Strategic Framework Strategic Framework Strategic Framework
Distinct Feature Agile and Flexible Top-Down Approach Covers 4 core business
areas
Key benefit Builds transparency, Provides clarity around Ensures organisations
accountability and employee performance think holistically about the
alignment across teams reviews and business
compensation
Key Limitation Requires discipline to Management centric Expensive and resource
update and monitor approach stifles intensive to implement
progress innovation and aspiration
Frequency Quarterly Annually Annually
Considers How Yes No Yes
Completion target 70%-80% 100% 100%
Linked to Compensation No Yes Yes
Risk appetite Aggressive Risk-averse Risk-averse
CASE STUDY
P Limited is an outstanding organisation. It is dedicated towards achieving the highest
possible standards for its customers, employees and owners: "exceeding every expectation"
is the firm’s motto. the CEO recently attended a training session on the Balanced Scorecard
(BSC). He is of the view that the BSC is something that could be used to enhance the
performance of the organisation, as little formal performance measurement exists. He
decided to introduce the technique during the coming year.
The company has been in existence for many years, distributing quality niche products to the
New Zealand plumbing and drainage industry. Among the company's products are high-
quality bathroom fittings, top of the line plumbing products and high-tech equipment for
water supply and drainage. Products are sourced from independent companies world-wide,
including New Zealand. Over the previous three years there has been a concerted effort to
broaden the range of product available, as market research indicated customers wanted
quality and innovation through new technology.
P Limited is serious about the effectiveness of its team of employees. It has a "results driven"
structure that is flat, with all people valued equally within the organisation. P Limited is
highly visible in the marketplace, supporting industry events through trade display
attendance, marketing initiative and networking with a team of experienced sales engineers
and product managers committed to visiting key accounts on a regular basis. P Limited has
the following core values: success, innovation and leadership
 DASHBOARD
A generic description of dashboards may be that of graphical user interface (GUI) that
contains measures of business performance to enable managers’ decision making.

A dashboard is a visual display of the most

important information needed to achieve one or
more objectives; consolidated and arranged on a
single screen so the information can be monitored
at a glance.
 DASHBOARD
Dashboards help managers to visually identify
trends, patterns and anomalies about business which
makes the issue of visual information design very
important

Dashboards do not only help to monitor data

but they enforce consistency across measures,
help with the planning of strategy, and
communicate to stakeholders the values of the
company.
DASHBOARD

➢ Aligning business process with latest information to provide business intelligence at

all levels of the company

➢ Using intuitive and easy to digest visuals for delivering information to busy

executives, visualize and navigate

DASHBOARD
Operational • Focus on Real-time monitoring of supply chain operations
• Tracking inventory levels, order fulfillment, transportation, and
Dashboards warehouse operations.

Strategic • Focus on Monitoring progress towards long-term supply chain

goals and strategic objectives.

Dashboards • Evaluating overall supply chain performance, cost reduction

initiatives, and supplier performance.

Analytical • Focus: Data analysis and trend identification to support strategic

decisions.

Dashboards • Analyzing demand forecasts, supply chain disruptions, and

optimization opportunities.
 DASHBOARD
The essence of dashboards consists in the communication of rich and dense information to decision
makers. If designed properly, dashboards can offer the solution for information overload
regarding reporting in companies.

Therefore, the complexity of dashboards comes from choosing the appropriate design that
enables the managers to easily and efficiently monitor the data.
DASHBOARD
Visual Elements
KPIs and Metrics • Charts and Graphs: Bar charts, line graphs, pie charts
to visually represent data.
• Prioritize the most critical KPIs that align • Heatmaps: Highlight areas of concern or high
with goals performance.
• Tables: Detailed numerical data for deeper analysis.
• Gauges and Indicators: Show performance against
targets and thresholds.

Design Principles:
• Simplicity: Avoid clutter and keep the dashboard easy
to understand.
• Clarity: Use clear labels, legends, and colour coding to
make data comprehensible.
• Interactivity: Enable users to drill down into data for
more detailed analysis
 DASHBOARD
Understand the Audience
Tailor the dashboard to the needs of managers, staff, and coordinators.
Ensure that the displayed data is relevant to the roles and responsibilities.

Focus on Key Metrics

Prioritize the most critical KPIs that align with goals.
Avoid information overload by limiting the number of metrics displayed.

Ensure Data Accuracy and Timeliness

Use reliable data sources and ensure that the data is up-to-date.
Implement automated data refreshing where possible.

User Training and Support

Provide training to ensure users understand how to interpret and interact with the dashboard.
Offer ongoing support to address any issues or questions.
DASHBOARD
Data Data
Integration Visualization Interactivity
Multiple Data Sources Charts and Graphs: Drill-Down:
Ability to pull data from various Different types of visualizations Ability to click on visual elements
such as bar charts, line graphs,
sources such as databases, pie charts, and scatter plots to to explore underlying data and
spreadsheets, cloud services, and details.
APIs. represent data.
Heatmaps: Color-coded Filtering
Real-Time Data Update representations to show data Options to filter data based on
Continuous data synchronization intensity or distribution.
to ensure the dashboard reflects various criteria such as time
the most current information. Gauges and Indicators: Visual periods, categories, or values.

Data Aggregation
indicators to show performance Dynamic Updates:
against targets and thresholds.
Consolidation of data from Interactive elements that allow
Tables: Structured representation users to change parameters and
different sources into a single of detailed numerical data for
view for comprehensive analysis. see instant updates to
granular analysis. visualizations.
Maps: Geographic information Hover and Tooltip
system (GIS) capabilities to Information: Additional context
visualize data geographically. or details displayed when
hovering over data points.
DASHBOARD
Customization and Performance Collaboration and
Personalization Monitoring Sharing
Custom Dashboards Users can KPI Tracking: Real-Time Collaboration
create and customize their own
dashboards based on their Monitoring key performance Multiple users can access and
specific needs and preferences. indicators (KPIs) relevant to interact with the dashboard
the business or specific simultaneously.
Widget Configuration Flexibility processes.
to add, remove, and configure Sharing Options:
various widgets (charts, graphs, Threshold Alerts: Ability to share dashboards
tables) on the dashboard.
Setting thresholds and with other users or teams via
Themes and Styles: Options to receiving alerts when metrics links, email, or embedding.
customize the look and feel of exceed or fall below
the dashboard with different predefined limits.
Comments and
themes, colors, and layouts. Annotations
User Preferences Trend Analysis:
Features to add comments,
Personalization settings to Analysing trends over time to notes, or annotations to
remember user preferences and identify patterns and specific data points or
display configurations. anomalies. visualizations for collaborative
analysis.
DASHBOARD
Reporting and Security and Scalability and
Exporting Access Control Performance Mobile Access
Automated Reporting: User High Performance: Responsive Design:
Scheduled generation and Authentication: Optimized for Dashboards
distribution of reports based
on dashboard data. Ensuring only authorized handling large designed to be
users can access the volumes of data accessible and
Export Options: dashboard.
Exporting dashboard data without compromising usable on various
and visualizations in various Role-Based Access: performance. devices, including
formats such as PDF, Excel, Configuring different desktops, tablets,
or image files. levels of access and Scalability: Ability
permissions based on user to scale up with and smartphones.
Snapshot and History: roles.
Capturing snapshots of increasing data and Mobile Apps:
dashboards at different Data Encryption: user demands, Dedicated mobile
points in time for historical Securing data transmission ensuring consistent
comparison and record- applications for
and storage with performance. accessing
keeping. encryption protocols.
dashboards on the
go.
DASHBOARD

Real-time Drill-down
notifications capabilities
and alerts

presentation
Scenario flexibility/
analysis format
selections
 DASHBOARD
Dashboards are used to monitor critical processes with key performance indicators (KPIs) that
trigger alerts when results fall below expected levels.

Dashboards are an option to improve the availability of information and make the decision-making
process more effective. With different levels of detail, information can be summarized or
aggregated according to the user's needs. It also enables root cause analysis of issues based on
different sources of information collected in a single tool.

(Eckerson, Malik 2005)

 TOOLS FOR CREATING DASHBOARDS
Business Intelligence (BI) Tools:
 Power BI, QlikView, Looker.
 Features: Data integration, visualization, and interactive reporting capabilities.
Supply Chain Management Software:
 SAP SCM, Oracle SCM, JDA Software.
 Features: Specialized modules for inventory management, transportation, and
supplier management.
Excel and Google Sheets:
 Suitable for simpler, more customizable dashboards.
 Features: Pivot tables, charts, conditional formatting.
 DASHBOARD
A restaurant booking company, which is setting up operations in Singapore is planning
ambitious growth in the city, and this quarter has written the following OKR:

Objective: become the third-biggest restaurant booking app in Singapore.

Key Result: Earn 5 million SGD in new revenue

Key Result: Acquire 1000 new partner restaurants

Key Result: Hire 50 new team members

DASHBOARD
This dashboard contains different Key Results from OKRs set in the Marketing team, Customer Support team and Operations
team.
PERFORMANCE MANAGEMENT
SCOR model

LI
THE SUPPLY CHAIN OPERATIONS REFERENCE
(SCOR)
Supply chain management (SCM) is a critical focus
for companies that sell products, services, hardware,
and software
A value chain covers the full range of an
organization’s upstream and downstream activities,
which encompass the full life cycle of a product or
service, from its conception to its end use.
 THE SUPPLY CHAIN OPERATIONS REFERENCE
(SCOR)
The supply chain operations reference (SCOR) model is designed to evaluate the supply
chain for effectiveness and efficiency of sales and operational planning (S&OP).

It's based on a static model that defines the supply structure along with supply chain metrics
and scorecards used to evaluate performance and identify areas for improvement

The SCOR model is intended to help standardize the process and create a measurable way
to track results. It works across industries using common definitions that apply to any supply
chain process.
 THE SUPPLY CHAIN OPERATIONS REFERENCE
(SCOR)
Originally developed in 1996 by management Research and consulting firm PRTM, SCOR is
endorsed by the Supply-Chain Council, which is now part of the Association for Supply Chain
Management (ASCM), formerly known as APICS.

The SCOR framework was designed to help streamline the language used to describe supply
chain management, categorizing it into four processes , two steps were added later. The most
recent version of the framework, SCOR 12.0, was released in 2017 by ASCM.
THE SUPPLY CHAIN OPERATIONS REFERENCE
(SCOR)
The updated version includes more “emerging drivers of supply chain success,” covering
topics such as omnichannel, metadata, and blockchain, according to the ACSM. The
framework was modernized so that best practices better align with digital strategies,
including new training information and integrated sustainability standards using the Global
Reporting Initiative (GRI).

This version shifts thinking from a linear supply chain model to a more synchronous network.
SCOR DS also updates processes, metrics, skills and practices to ensure coverage across
industries.
 THE SUPPLY CHAIN OPERATIONS REFERENCE
(SCOR)
Standardization
• Provides a common language and framework for supply chain
operations, facilitating communication and collaboration across
different departments and organizations.
Benchmarking:
• Allows organizations to benchmark their performance against
industry standards and best practices, identifying areas for
improvement.
 THE SUPPLY CHAIN OPERATIONS REFERENCE
(SCOR)
Process Improvement:
• Helps organizations analyze and optimize their supply chain processes, leading
to increased efficiency, reduced costs, and improved customer satisfaction.
Performance Measurement:
• Provides a set of standardized metrics for measuring supply chain performance,
enabling organizations to track progress and make data-driven decisions.
Flexibility:
• Adaptable to various industries and supply chain structures, making it a
versatile tool for supply chain management.
 THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
The SCOR reference model consists of 4 major sections:
 THE SUPPLY CHAIN OPERATIONS REFERENCE
(SCOR)
The starting point of the SCOR process model is understanding the scope of
Supply Chain Operations contained within the five value streams and a
category of enabling activities that support the management of the supply
chain.

It spans five key management processes: Plan, Source, Make, Deliver, and
Return, with a recent addition of Enable
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
PLAN Describes the activities associated with developing plans to operate the SC

Planning processes include determining resources, requirements, and the chain of communication for a
process to ensure it aligns with business goals.
Demand Forecasting, Supply Planning, Capacity Planning, Budgeting and Financial
Planning:

SOURCE Describes the ordering and receipt of goods and services

Source processes involve obtaining goods and services to meet planned or actual market demand.
These processes support the activities of ordering, delivery, receipt and transfer of raw material items,
sub-assemblies, finished products, or services.
This includes supplier selection, procurement inbound logistics
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
Describes the activities associated with the conversion of materials or creation
MAKE of the content for services
These process support the transformation of materials into semi-finished or finished goods. It defines when
orders need to be made to order, made to stock, or engineered to order and includes production
management and bill of materials, as well as all necessary equipment and facilities.
Production Scheduling, Manufacturing Execution, Packaging, Maintenance

DELIVER Describes the activities associated with the creation, maintenance and fulfilment
of customer orders
Any processes involved in delivering finished products and services to meet either planned or actual
demand fall under this heading, including order, transportation, and distribution management
Order Management, Distribution, Transportation, Warehousing
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
RETURN Describes the activities associated with the reverse flow of goods
These processes support the activities associated with the reverse flow of goods. Return processes are involved
with returning or receiving returned products, either from customers or suppliers.
This includes post-delivery customer support processes, identification of items that need to be returned and
deciding on the proper method of disposition, scheduling the return, shipping and receiving the return.
Return Processing, .Reverse Logistics, Customer Service, Recalls.

ENABLE Describes the activities associated with the management of the supply chain

These processes support and manage the underlying infrastructure and systems that enable the core
supply chain processes.
This includes activities such as data management, business rules management, performance
management, contract management, regulatory compliance management, supply chain risk mitigation.
Technology and IT Support, Performance Management, Risk Management, Compliance
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
 THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
These core processes are regarded as level one processes. The SCOR
methodology defines a total of four levels, each level representing a
deeper dive into each core process. These include:
❑Major processes
❑Process categories
❑Process elements
❑Improvement tools
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
Each level is further subdivided into multiple categories, enabling an
extremely detailed specification of supply processes according to
specific SCOR attributes that include:
❖Reliability
❖Responsiveness
❖Agility
❖Costs
❖Asset management
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
The performance section of SCOR focuses on the measurement and assessment of the outcomes
of supply chain process execution. A comprehensive approach to understanding, evaluating,
and diagnosing supply chain performance consists of three elements:
• Performance Attributes: Strategic characteristics of supply chain performance used to
prioritize and align the supply chain’s performance with the business strategy
• Metrics: Discrete performance measures, themselves comprised of levels of connected
hierarchy
• Process/Practice Maturity: Objective, specific descriptions used a reference tool to evaluate
how well supply chain processes and practices incorporate and execute accepted best-practice
process models and leading practices.
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
Performance Attributes
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
SCOR metric have unique identifiers:
▪ Reliability – RL
▪ Responsiveness – RS
▪ Agility – AG
▪ Cost – CO
▪ Asset Management – AM
Each metric starts with this two letter code, followed by a number to
indicate the level, followed by a unique identifier
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
The SCOR framework provides a variety of performance measures to evaluate supply chains arranged
in several levels of metrics associated with one of the performance attributes.

There are three levels used to measure supply chain performance. These levels help standardize supply
chain performance metrics so that companies can be evaluated against other businesses, even if they’re
operating differently.

There are over 250 SCOR metrics in the framework, categorized against the five performance attributes.
Businesses use these to establish requirements for the supply chain by figuring out which performance
attributes to prioritize and which areas the business can perform at an average pace.
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
 THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)

RL1.1 Perfect Order Fulfillment

The percentage of orders meeting delivery performance with complete and accurate documentation and no delivery
damage
Calculation : [Total Perfect Orders] / [Total Number of Orders] x100%
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
RS1.1 Order Fulfillment Cycle Time
The average actual cycle time consistently achieved to fulfill customer orders. For
each individual order, this cycle time starts from the order receipt and ends with
customer acceptance of the order
THE SUPPLY CHAIN OPERATIONS REFERENCE (SCOR)
RS1.1 Order Fulfillment Cycle Time
The average actual cycle time consistently achieved to fulfill customer orders. For
each individual order, this cycle time starts from the order receipt and ends with
customer acceptance of the order
SUSTAINABLE PERFORMANCE
MANAGEMENT

LI
INTRODUCTION

+1.65 billion results

DEFINITION
Its origins stem from the 1983 Brundtland commission, which first defined sustainable
development as “development that meets the needs of the present without
compromising the ability of future generations to meet their own needs.”

Sustainability consists of fulfilling the needs of current generations without

compromising the needs of future generations, while ensuring a balance between
economic growth, environmental care and social well-being.

In the broadest sense, sustainability refers to the ability to maintain or support a

process continuously over time. In business and policy contexts, sustainability seeks to
prevent the depletion of natural or physical resources, so that they will remain
available for the long term
DEFINITION
For a business, sustainability means operating without negatively impacting the
external environment, community, or society. A sustainable business strategy is one
that tries to create a positive impact on one or multiple of these groups.
In practice, a sustainable business strategy can take many different forms and is
unique to each organization. Companies can transition to using sustainable
materials for their packing, optimize their supply chains to reduce environmental
emissions, and even sponsor programming to benefit the local community.
• Climate change
• Income inequality
• Depletion of natural resource
• Human rights issue
SUSTAINABILITY PILLARS

ECONOMY
SOCIETY

ENVIRONMENT
SUSTAINABILITY PILLARS

People Prosperity Planet

SUSTAINABILITY PILLARS
SUSTAINABILITY PILLARS
Regulatory Pressure

Consumer Demand

Risk Management

Investor Pressure

Global Initiatives

Market Differentiation
TOOLS AND FRAMEWORKS FOR SUSTAINABILITY
PERFORMANCE MANAGEMENT
Global Reporting Initiative (GRI): A widely used framework for sustainability reporting.
Sustainable Development Goals (SDGs): United Nations goals that provide a blueprint for
achieving a better and more sustainable future.
ISO 14001: International standard for environmental management systems.
Carbon Disclosure Project (CDP): A platform for companies to disclose their environmental
impact.
 UN SUSTAINABILITY VISION
To gain an in-depth understanding of sustainability and its
implications, it is essential to mention the Sustainable Development
Goals and the 2030 Agenda. The 2030 Agenda is the successor to
the Millennium Development Goals and is structured through the so-
called Sustainable Development Goals (SDGs), of which there are a
total of 17 goals.
Accordingly, the United Nations (UN) publishes an annual report
analysing how each goal is progressing. Below is a brief outline of
current fulfilment of the SDGs based on the 2021 report
 UN SUSTAINABILITY VISION
1. Ending poverty. This goal has been impacted by the Covid-19 pandemic, since it has been calculated that in 2020, some 119 - 124 million
people fell into extreme poverty.

2. Ending hunger. The pandemic has also affected this goal, given that 70-161 million people around the world went hungry as a result of the health
crisis.

3. Ensuring good health and fostering the well-being of all age groups. After a decade of advances in this field, the pandemic has resulted in a
shortening of life expectancy. Additionally, it is difficult to measure the real impact of the pandemic due to a lack of data.

4. Ensuring inclusive and equitable quality education. Although the completion rates for primary and secondary education have increased, in
many countries, there is a lack of basic school infrastructure in terms of drinking water and electricity.

5. Achieving gender equality and empowering all women and children. In this area, more needs to be done, since women make up just 25.6%
of national parliaments, 36.3% of local governments and 28.2% of managerial positions.

6. Ensuring the availability and sustainable management of water and sanitation for all. According to UN data, 129 countries are not on track
to achieve sustainable water resources by 2030.

7. Ensuring access to affordable, reliable, clean and modern energy for all. In the world there are still some 759 million people without access
to electricity

8. Promoting sustained, inclusive and sustainable economic growth. Although the economic recovery is underway, the pandemic has meant a
loss equivalent to 255 million full-time jobs.
 CORPORATE SOCIAL RESPONSIBILITY
(CSR)
Corporate social responsibility (CSR) is a self-regulating business
model that helps a company be socially accountable to itself, its
stakeholders, and the public. By practicing corporate social
responsibility, also called corporate citizenship, companies can be
conscious of the kind of impact they are having on all aspects of
society, including economic, social, and environmental.
To engage in CSR means that, in the ordinary course of business, a
company is operating in ways that enhance society and the
environment instead of contributing negatively to them.
 CORPORATE SOCIAL RESPONSIBILITY (CSR)
CSR initiatives :
1. Donations and sponsorships
 You can donate time and/or money to causes that are meaningful for your business, employees and community.

2. Operational initiatives
 Operational CSR initiatives are often oriented around improving business efficiency or performance in ways that
also have positive social or environmental impacts in the wider community.

Environmental Social Workplace

deal with diverse, local and Improve workplace diversity,
Reduce your carbon footprint socially responsible suppliers equity and inclusion
and partners
Improve energy efficiency consult community Enhance workplace health
stakeholders about business and safety
Reduce waste, water use and decisions Develop a code of ethics for
emissions support community initiatives your business and eliminate
workplace harassment and d
iscrimination
 CORPORATE SOCIAL RESPONSIBILITY (CSR)
CSR initiatives :
1. Donations and sponsorships
 You can donate time and/or money to causes that are meaningful for your business, employees and
community.

2. Operational initiatives
 Operational CSR initiatives are often oriented around improving business efficiency or performance in
ways that also have positive social or environmental impacts in the wider community.

3. Strategic transformation
 Some CSR initiatives can involve a wholesale transformation in a company’s business strategy or model to
integrate social or environmental goals as a key priority.
 CORPORATE SOCIAL RESPONSIBILITY
(CSR)

Published in 2010 by the International Organization for Standardization, the ISO 26000 standards
establish the principles and guidelines of the concept of social responsibility. These standards also
offer guidance and suggestions on implementation methods for different kinds of organizations
(companies, NGOs, unions, etc) to start operating in a socially responsible way.
 CORPORATE SOCIAL RESPONSIBILITY
(CSR)
This standard is comprised of guidelines, not requirements. That is why it does not result in
certification, unlike other well-known ISO standards.

ISO 26000 clarifies what social responsibility is and helps organizations translate CSR principles
into practical actions. The standard is aimed at all types of organizations, regardless of their
activity, size, or location. And because many key stakeholders from around the world contributed
to developing ISO 26000, this standard represents an international consensus
 CORPORATE SOCIAL RESPONSIBILITY
(CSR)
Environment: the ISO 14001 standard.
This standard defines the generic requirements for an environmental management system to
identify and control the environmental impact of a company’s activities, products or services.
Social: the OHSAS 18001 standard.
This standard characterises the generic requirements for an employee health and safety
management system to identify and manage working conditions and health risks.
Quality: the ISO 9001 standard.
This standard aims to identify the generic requirements for a quality management system to
ensure and improve customer satisfaction.
CORPORATE SOCIAL RESPONSIBILITY
(CSR)
CSR is a self-regulated strategy employed by organizations to have a positive impact on
society which helps a company to:
▪Communicate its sustainability commitments

▪Build a responsible business reputation

▪Increase brand credibility

▪Increase customer loyalty

▪Attract and retain better talent

 ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (ESG)
Environmental, social and governance (ESG) refers to a collection of corporate performance
evaluation criteria that assess the robustness of a company’s governance mechanisms and its ability
to effectively manage its environmental and social impacts.
It is a set of standards measuring a business's impact on society, the environment, and how
transparent and accountable it is.
Capital markets use ESG to evaluate organizations and determine future financial performance.
While ethical, sustainable and corporate governance are considered non-financial performance
indicators, their role is to ensure accountability and systems to manage a corporation's impact, such
as its carbon footprint.
 ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (ESG)
1. Environmental
The Environment component of ESG covers how the business interacts with the natural environment,
the impacts of its operations, and the actions the company takes to mitigate negative effects
Environmental issues may include corporate climate policies, energy use, waste, pollution, natural
resource conservation, and treatment of animals. Considerations may include direct and indirect
greenhouse gas emissions, management of toxic waste, the firm’s overall resiliency against physical
climate risks (like climate change, flooding, and fires) and compliance with environmental
regulations.
ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (ESG)
Examples of environmental factors include:
• Air and water quality
• Biodiversity
• Deforestation
• Energy performance
• Carbon footprint, including greenhouse gas emissions
• Natural resource depletion
• Waste management and pollution
 ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (ESG)
2. Social

The social pillar refers to an organization’s relationships with stakeholders. Social aspects look
at the company’s relationships with internal and external stakeholders.

The Social component of ESG covers how an organisation’s activities affect people ; from its
own workforce to customers, local communities and those who work in its extended supply chain.

Examples of factors that a firm may be measured against include Human Capital Management
(HCM) metrics (like fair wages and employee engagement) but also an organization’s impact on
the communities in which it operates.
 ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (ESG)
• Community relations, including the organization's connection and impact on the local
communities in which it operates and serves
• Customer satisfaction
• Data protection and privacy policies and efforts
• Efforts to fund projects or institutions that help poor and underserved communities globally
• Employee diversity, equity and inclusion (DEI)
• Health and safety
• Human rights, including child labour and slavery
• Labour standards
 ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (ESG)
3. Governance
The Governance component of ESG relates to the policies, structures and procedures by which an
organisation or country is run. It explores the decision-making process and the distribution of rights
and responsibilities between elements of the organisation, including the board and senior
executives or, in national terms, the government, parliament and senior ministers.
Governance focuses on transparency, industry best practices, organization management and
associated growth initiatives.
ESG governance standards ensure a company uses accurate and transparent accounting methods,
pursues integrity and diversity in selecting its leadership, and is accountable to shareholders.
 ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (ESG)
The aim of ESG is to encourage businesses to improve their environmental and social credentials in order to
attract investment.

ESG went mainstream when the framework became an integral part of many institutional
investors’ playbooks. ESG was used as a tool by investors to identify businesses with the potential to deliver
better long-term returns.

There are a growing number of ESG rating agencies that assign ESG scores, as well as new and evolving
reporting frameworks, all of which are improving the transparency and consistency of the ESG information
that firms are reporting publicly
 ENVIRONMENTAL, SOCIAL, AND GOVERNANCE
(ESG)
Boston-based Trillium Asset Management uses a variety of ESG factors to help identify companies positioned for
strong long-term performance .Trillium looks for investments meeting the following ESG criteria:

Environment • Supports LGBTQ+ rights and encourages all forms

• Publishes a carbon or sustainability report of diversity
• Limits harmful pollutants and chemicals • Has policies to protect against sexual misconduct
• Seeks to lower greenhouse gas emissions and CO2 • Pays fair (living) wages
footprint
Governance
• Uses renewable energy sources
• Embraces diversity on board of directors
• Reduces waste
• Embraces corporate transparency
Social • Someone other than the CEO is chair of the board
• Operates an ethical supply chains • Staggers board elections
• Avoids overseas labour that may have
questionable workplace safety or employ child
labour
 ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (ESG)
In the ESG space, the terms “ESG standard”, “ESG framework”, and “ESG questionnaire” are often
conflated. But they refer to distinctly different tools for ESG reporting and management (and different
underlying ESG metrics):

ESG framework: A framework is broad in its scope, giving a set of principles to guide and shape
understanding of a certain topic. An ESG framework will guide the direction of ESG reporting, but will
not provide a methodology for the collection of information, data, or the reporting itself. It doesn’t
specify performance measures, but prescribes high level disclosures. Frameworks are useful to use
alongside ESG standards, or when a well-defined standard does not exist.
 ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (ESG)
ESG standard: Standards are specific in their focus. They contain detailed criteria explaining what needs to be
reported. In the context of ESG, this means standards dictate how information and data are collected, and how
a report needs to be produced (what topics and business areas to include). Standards make frameworks more
actionable by ensuring comparable, consistent, and reliable disclosure. They contains detailed disclosure criteria,
including performance measures or metrics.

ESG questionnaire, on the other hand, is a survey administered by a third-party to solicit company responses
with the goal of assessing its overall sustainability performance through an ESG rating or score. Questionnaires
are developed by the third-party, and a company’s participation is voluntary. Questionnaires ask very specific
information that is often aligned with existing standards and frameworks, but unlike standards and frameworks,
they are typically not accessible to the public and much less transparent in their methodologies.
 ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (ESG)
VOLUNTARY DISCLOSURE FRAMEWORKS
Under these frameworks, a company actively discloses its sustainability-related policies, practices, performance data, and
information related to ESG criteria. It’s common for these frameworks to take the form of a questionnaire. The most popular
voluntary disclosure frameworks:

✓Carbon Disclosure Project (CDP): The CDP asks for voluntary disclosures of non-financial data which includes
greenhouse gas emissions (GHGs) and company environmental performance. The CDP framework focuses on water
security, forest health and preservation, and an organization’s carbon footprint. Industry peers are used as a
benchmark, as companies are scored and ranked publicly. This information is available to the public.
✓Global Real Estate Industry Benchmark (GRESB): The GRESB is a framework that’s used for buildings. GRESB asks for
voluntary disclosures for building-related ESG data, assets, and real-estate portfolios. Results are publicly available.
✓Dow Jones Sustainability Indices (DJSI): The DJSI is another building-specific framework that provides a subscription-
based survey of building-related ESG data, assets, and real estate portfolios. Again, results are publicly available.
 ENVIRONMENTAL, SOCIAL, AND GOVERNANCE
(ESG)
GUIDANCE FRAMEWORKS

Guidance frameworks provide recommended methodologies and guidance to help

companies identify, manage and report on their ESG performance. The most popular
guidance frameworks:
✓Sustainability Accounting Standards Board (SASB)
✓Global Reporting Initiative (GRI): The GRI voluntary disclosures are broad in their aim. These disclosures
address a range of ESG topics that are deemed relevant to the organization and all related
management approach components. Reporting principles cover the inclusiveness of
stakeholders, sustainability, and integrity. GRI standards are divided into universal, sector, and topic-
specific standards that can be applied to companies depending on their industry and impact.
✓Task Force on Climate-Related Financial Disclosures (TCFD): TCFD provides voluntary disclosures
focused on target-related risks to financial systems. The TCFD was established in the wake of 2015’s
COP21, with the aim of developing recommendations for more effective climate-related disclosures.
✓Carbon Disclosure Standards Board (CDSB): This is an initiative of the CDP developed to create a
holistic view of a company’s performance – according to an organization’s financial performance and
impact on natural capital.
✓International Integrated Reporting Council (IIRC): The IIRC has been developed to accelerate the
adoption of integrated reporting. To this end, the IIRC merged with SASB in 2021, producing the Value
Reporting Foundation (VRF). The aim is to create a baseline for corporate sustainability disclosure that can
be used around the world.
ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (ESG)
Examples of ESG issues Examples of related performance measures or
metrics
Carbon footprint GHG emissions (tCO2e), and GHG emissions
intensity (tCO2e / $ revenue or full-time
equivalent)

Employee attraction and retention Voluntary employee turnover rate (%)

Diversity, Equity and Inclusion (DEI) Employees by age group categories or by
ethnic/racial group (# and %)
Ethical business practices Number of confirmed incidents of corruption,
monetary losses as a result of corruption cases, and
action taken by the company as a result
 COMMON ESG METRICS
Environmental Social Governance
▪Greenhouse gas emissions ▪Diversity and inclusion ▪Board composition
▪Air and water pollution ▪Corporate social responsibility ▪Management diversity
▪Biodiversity ▪Data protection and privacy ▪Shareholder rights
▪Business circularity ▪Labour standards ▪Executive compensation
▪Deforestation ▪Animal welfare ▪Accounting transparency
▪Recycling and waste management ▪Product safety ▪Reporting and disclosures
▪Water security ▪Responsible sourcing ▪Conflict of interest
▪Energy efficiency ▪Sustainable supply chain ▪Shareholder actions
▪Product carbon footprint ▪Conflict minerals ▪Investor relations
 COMMON ESG METRICS
Energy Emissions Social
▪Energy consumption, kWh / year ▪Toxic emissions ▪Workplace safety
▪Energy use in offices, kWh / m2 ▪CO2 emissions direct ▪% of innovations that include sustainability
goals
▪Energy saved due to implemented ▪CO2 emissions indirect
improvements, % ▪% sustainability awareness training
▪CO2 emissions from business travel per penetration
Water employee

▪Water consumption ▪Nitric oxide emission

▪Sulfuric oxide emission
Management
▪% of water recycled
▪% of suppliers reviewed in the context of
▪% of water reused Materials sustainability

Waste ▪% of non-renewable materials ▪% of suppliers that comply with

established sustainability strategy
▪Waste by type and disposal method ▪% of recycled materials used
▪Product recycling rate, %
▪Packaging materials recycling rate, %
 ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (ESG)
ESG reporting is the disclosure of data covering business operations related to the environmental,
social, and governance aspects of a business.

By disclosing this information in a report, a company’s progress related to these three fields can be
examined against benchmarks and targets. Once more, an ESG report is designed to provide full
transparency over an organization’s environmental, social, and governance impact across a
multitude of stakeholders, including investors, employees, and customers.
 ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE (ESG)
ESG reporting standards are a specific category of guidance that provides specific, replicable,
and detailed information on best practices for disclosing sustainability information.

Standards are key for sustainability reporting because they provide metrics and regularity to
the field, thus creating a common blueprint for making frameworks actionable.

Companies will typically announce the standard that they are using for their reports, but there is
currently no universal external verification for whether the standard has been applied well.

Some commonly used ESG standards are the ISO 26000, GRI , SASB, and CDP.
 GLOBAL REPORTING INITIATIVE (GRI)
The GRI is an international independent standards organization and currently issues one of the most well-
known standards for ESG reporting (GRI Standards).

GRI Standards provide best practice for reporting on a range of economic, environmental and social
impacts, and give companies specific guidance on what information they should report on. They allow
organizations to publicly report the impacts of their activities in a structured way that is transparent to
stakeholders and other interested part.

The GRI Standards are not mandatory. And while there is an increasing recognition of the need to set a
sustainability equivalent of the International Financial Reporting Standards (IFRS), to put financial and
non-financial information on the same footing, this has not been achieved yet.
 GLOBAL REPORTING INITIATIVE (GRI)
The newest GRI Standards developed three series (economic, environmental, and social)
of 34 topic-specific standards to help companies report on the most material issues to
their investors and other stakeholders.
GLOBAL REPORTING INITIATIVE (GRI)
GRI G4s is an additional tool to measure performance and actions to see the impact of the CSR approach.
They are based on 69 indicators that are broken down into two levels according to their degree of
importance:
✓Core indicators ;
✓Additional indicators.
All these indicators are based on 6 different areas:
✓the economy ;
✓the environment
✓human rights
✓social relations and working conditions
✓responsible products;
✓society.
 GLOBAL REPORTING INITIATIVE (GRI)
The GRI offers 30 environmental performance indicators that should be used as part of your
environmental sustainability report. These performance indicators are divided into nine primary
categories:

Materials: Energy: Water: Emissions, Effluents,

Biodiversity: Waste:
Includes raw • Includes direct • Covers the total • Includes total
and indirect amount of water • Provides
materials (natural information weight of direct
resources, energy withdrawn from and indirect
consumption, water sources and regarding
manufactured company impact emission of
chemicals, and renewable company impact GHGs, ozone-
energy amounts on those water on the
materials needed biodiversity of depleting
for used, such as sources, as well emissions, and
wind, solar, and as the adjacent/nearby
manufacturing) as protected areas NOx, SOx, and
well as geothermal, and percentage and other air
packaging efforts made to total volume of emissions by type;
materials and reduce energy water that is total water
recycled product requirements recycled or discharge by
content. through more reused. quality and
energy efficient destination;
processes.
 GLOBAL REPORTING INITIATIVE (GRI)
The GRI offers 30 environmental performance indicators that should be used as part of your
environmental sustainability report. These performance indicators are divided into nine primary
categories:

Products and Services: Compliance: Transport: Overall:

• Provides the • Provides the total • Describes the • Provides the total
percentage of monetary value of impact of values of
products sold and noncompliance fines transporting your environmental
packaging and number of materials and protection expenses
materials that are noncompliance finished products. and investments.
reclaimed/recycled. sanctions.
GLOBAL REPORTING INITIATIVE (GRI)
CSR AND ESG
Companies can run CSR and ESG programs simultaneously, but there are some major differences at play.
▪ESG Is Data-Oriented
The primary objective of ESG reporting and disclosure is often to satisfy the information requirements of
capital providers and key stakeholders. On the other hand, CSR activities (and even reporting based on
these activities) is often designed to engage employees, and build a positive corporate reputation in the
eyes of consumers and invested communities.
▪ESG Is Increasingly A Compliance Activity
In many parts of the world, for many types of companies, ESG reporting is no longer voluntary: it is an act
of corporate compliance. ESG disclosure requirements are quickly becoming more standardized and
regulated, which will push more companies to collect, track, and report ESG information. Meanwhile,
companies are not typically required to engage in CSR, if they do, they do so out of their own volition.
▪ESG Is More Quantifiable and Standardized
Although CSR initiatives can certainly involve quantifiable goals and reporting, ESG is the more data-
intensive of the two. Companies reporting on ESG metrics will need to collect and disclose significant
amounts of quantitative data,although qualitative data also plays a key role in ESG reporting.
Additionally, international frameworks, standards, questionnaires, and ratings offer some element of
standardization for comparable ESG disclosure and performance measures, whereas CSR outcomes and
reporting is generally developed independently by the company.
CSR AND ESG
CSR: a general sustainability framework, mainly used by companies.
To incorporate CSR think about the culture of the business

ESG: a measurable sustainability assessment, popular with

investors. To incorporate ESG, conduct audits, and set measurable
goals
CSR AND ESG
BSC
 BSC
Customer perspective:
 Have the interests of sustainability stakeholders been taken into account eg green consumers; local communities;
government regulators?

Internal process perspective:

 Have the environmental impacts of processes eg resource usage; waste and recycling; impact on water and air
been considered?
 Do HR processes take into account labour best practices around health and safety, diversity, equal opportunity
etc?

Learning and growth:

 How are training and development programmes helping to promote sustainability values and culture?
 How are innovations leading to more efficient use of resources and the reduction of waste, or leading to the
introduction of more environmentally friendly products?