Monday Dec 16, 2024
Monday Dec 16, 2024
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Sri Lanka is currently in the throes of economic and political turmoil. I believe that what we need immediately is a shared vision. Even if we improve our foreign reserve and debt situations through an infusion of IMF funding, IMF driven reforms and debt restructuring, sustainable development can only be achieved through all the stakeholders buying into a shared vision. Although achieving a 100% buy-in is an impossibility, I am convinced that we can get a near 75% buy-in, if our national leaders adopt the principles of IPM where the vision of the country is converted into action plans/outcomes agreed by all stakeholders through a combination of top-down and bottom-up approaches
The Daily FT met up with Coach, Mentor and Consultant Ronnie Peiris, to understand the contents and context of the workshop he will be conducting on ‘Integrated Performance Management’ on 24 April at the Ivy Room, Cinnamon Grand (www.ronniepeiris.com). Based on his 50 years’ multinational, corporate experience in positions such as the Group Finance Director, John Keells Holdings PLC, the Managing Director (before the Finance Director), Anglo American Corporation, (Central Africa) Ltd., Planning Manager at Lever Brothers (Ceylon) Ltd., and Board Member in large corporations, he highlighted the following in responding to our questions. Following are excerpts.
Q: What is Integrated Performance Management?
Let me start by emphasising that Integrated Performance Management (IPM) is hugely different to Performance Management. Performance Management is a poorly understood, fashionable term bandied in business circles today. Per my knowledge of many organisations in Sri Lanka, Performance Management, as practised by them, today, is, often, a stand-alone process lacking holism. The elements of a good Performance System are simple. However, integrating them into the organisation’s fundamental operating system is more difficult that what immediately meets the eye.
IPM is a deliberate and structured process through which leaders, and top management, drive focus and alignment across the organisation. It guides, and reinforces a sustainable way of doing the relevant things in the right way. Plenty are organisations which have carefully worded, heart endearing vision, mission and value statements in their glossy annual reports and other business promoting publications. But, how many of them sincerely live by them by translating such statements to a coordinated set of actions/outcomes/goals and objectives where all the employees, irrespective of rank and position in the hierarchy, from the chairman, senior management and middle management to executives, clerks and equivalent are aware of their individual roles in the organisation’s efforts to delivering its vision, operationalising its mission and living by its values.
Organisations regularly undertake business improvement programs by driving operational efficiency, making decisions based on analysed data, enhancing operating models by facilitating empowerment and autonomy and building competencies and capabilities in improving competitiveness – just to name a few. Empirical evidence shows that most such attempts, and endeavours, perform below expectations because of leaders’ failure to align management disciplines, business processes, organisational design, employee aspirations and enabling technology. IPM provides an agreed set of interconnected actions which contribute to company/person responsible measurable outcomes, the progress of which can be monitored against specific, time-lined goals and objectives.
Q: How is Integrated Performance Management relevant to Sri Lanka?
Sri Lanka is currently in the throes of economic and political turmoil. I believe that what we need immediately is a shared vision. Even if we improve our foreign reserve and debt situations through an infusion of IMF funding, IMF driven reforms and debt restructuring, sustainable development can only be achieved through all the stakeholders buying into a shared vision. Although achieving a 100% buy-in is an impossibility, I am convinced that we can get a near 75% buy-in, if our national leaders adopt the principles of IPM where the vision of the country is converted into action plans/outcomes agreed by all stakeholders through a combination of top-down and bottom-up approaches.
At John Keells Holdings (JKH) where I spent my last 15 years of formal employment, we adopted Hoshin Kanri (also called Policy Deployment), a method which ensured that the Group’s strategic goals drive progress at every level in all the companies within the JKH Group. Admittedly, driving such a program nationally is vastly more challenging than driving it within a group of companies. But – the principles are the same. There are examples of “out of the box” thinking national leaders who have succeeded in selling, and driving, shared visions. The problem in Sri Lanka is that most strategies are based not on what is good for the country but are based on what is good for the ruler and/or the ruling party. In recent Sri Lanka, a leader, once elected, becomes a master, and acts in a “I know it all” – “Take it or leave it” style. He does not tolerate different views, even from officials who are qualified and experienced in the discussed subject.
President Wickremesinghe has been talking about the formation of a National Planning Commission which, amongst others, would be formulating rolling long-term plans and annual budgets as a subset of the long-term plan, much like the Planning Commission of India which was first inspired by Subash Chandra Bose in 1938 and finally established in 1950 under the leadership of Jawaharlal Nehru. Sri Lanka has had similar initiatives such as “Regaining Sri Lanka- Vision and Strategy for Accelerated Development’’ (2002), and “Vistas of Prosperity and Splendour” (2020). Alas- neither gathered traction because of leadership changes and more, importantly, in my view, the lack of an IPM centred foundation.
Applied nationally, IPM can provide a cascading framework where the Operating and Governance units, and the persons employed under each of such units, are clearly informed of their role, however minor it may be, in contributing towards the country’s vision and in providing a base for accountability. IPM has the potential to guide the establishment of a sustainable way of doing the right things in the right way, driving focus and alignment across the country.
I have heard many people, including intellectuals, saying – “Sri Lanka is a lost cause – there is too much nepotism and corruption.” True as it is, we cannot be paralysed by such pessimism. I am an eternal optimist. These are just excuses for not attempting “big” change. It was Shiv Khera, the renowned Indian author who said: “Have a vision. It is the ability to see the invisible. If you can see the invisible, you can achieve the impossible.” Sri Lanka needs the right leadership to drive the seemingly “impossible”. An IPM system is, in my view, a must in Sri Lanka’s quest for political stability and economic growth.
Q: Can Integrated Performance Management be adopted in State Owned Enterprises?
Of course – it can. The implementation of IPM at State Owned Enterprise (SOE) level is much easier than implementation of IPM at a national level. However, like in a jigsaw puzzle, the SOE pieces must fit to creating the big picture.
SOEs are parts of an overall national strategy. Firstly, the SOE must fully understand its role in the national vision and then formulate its own vision and mission. Once that is done, it is just a matter of following a sequence of actions as described below;
IPM is an interrelated set of activities connecting the metrics, processes and systems in managing and monitoring business performance. Whether applied to the nation, government, SOE, company or association, the principles are the same. It must be noted that IPM can only succeed if the end goals are objective and meritocratic. There must be no politicisation. The organisation must have its goals and objectives detailed in the form of SMART KPIs. The SMART being specific, measurable, attainable, relevant and time-bound. An essential requirement is to have a visionary, and transformative, leader at the helm of the SOE; a leader who listens and possesses the leadership skills in rallying the troops in pursuing a shared vision. A natural output of an IPM framework is a set of KPIs which pinpoint, and force, accountability through well-defined measurable outcomes. Accountability, as we have learnt bitterly, is in short supply, particularly, at Government and SOE levels.
Q: “Accountability” – This is a hot topic. How does IPM facilitate that?
In today’s Sri Lanka, whether it be in government, in the public sector or in the private sector, accountability is one of the most referred to, talked about, but, yet poorly enforced, values. As the language defines, accountability is an obligation or willingness to accept responsibility or to account for one’s actions. Surveys reveal that organisations which create an accountable environment achieve their goals, objectives and targets, more regularly, because every single person knows what needs to happen and when it needs to get done.
IPM enables this most effectively. The focus, and – may I call it obsession, on timely deliverable of specified outcomes and the linking of achievements to recognition, reward, promotion, training and development, career planning, talent management, succession planning et cetera result in a strategy where the components dovetail in a productive manner to create a value-creating whole. But – most of all, IPM enables a culture where people not only take ownership of action, but where the consistency, and reliability, of achievement makes them trusted deliverers of products and services.
I wish to quote from an article which I did for FT in January 2023: quote – “The dismal failure of Sri Lanka’s citizens to hold their national leaders accountable is, in my view, the root cause of the country’s current economic and political woes. The mere fact that we, as if in a hypnotic trance, regularly re-elect persons who had, previously, abused their positions and mortgaged our country’s valuable resources to make merry today at the expense of tomorrow’s generations and the fact that there still exists a sizable number of citizens wanting the continuation and/or return of persons and parties who are clearly guilty of mismanaging our economy over several years, confirm that we, the voting citizens, do not understand the meaning of accountability and performance.”
Organisations work hard to attract the right people, and they work equally hard to support those employees’ development and growth within the company. Sometimes employees do not or cannot perform at the level needed. Accountability and employee support combine well in ensuring organisations and employees have a mutually beneficial relationship. Sharing of ideas, inspiration of a shared vision, regular performance review, informal/formal feedback et cetera, all add to creating an atmosphere of accountability. IPM has all these.
Q: How do we shake off the entitlement culture which currently pervades most of our citizens?
There are two observations which I wish to make in creating a backdrop to my answer. Firstly, socialism as practised in Sri Lanka has contributed heavily to the entrenchment of an entitlement culture, a culture where persons want to receive reward without working for it. In a truly democratic socialist society, people come together democratically to decide what kind of society they wish to establish, what needs take priority, what obstacles need to be overcome in providing such needs, et cetera. They would, then, work backwards to identify what actions must be set in motion in making their collective dreams a reality. IPM is a framework which combines, smugly and effectively, in facilitating these processes big-time.
Although I have a capitalist DNA, I must, on deeper reflection, admit that it is a system where economic elites profit, disproportionately, without sharing such profits in a fair manner with those who do the crunch work. In a twisted way, capitalism does have mechanisms which reward workers with a sense of pride if they spend their limited time, and days, in making profits for the Investor without grumbling. In most instances, the recognition of, and reward for, such efforts is not commensurate with the real effort, particularly in monetary terms.
Secondly, employees believe their organisations must keep their real purchasing power intact with pay increases which are in line with inflation. Even now, most organisations, in Sri Lanka, annually, increase the fixed income of employees by incorporating inflation factors to the fixed/guaranteed component of total remuneration. There is very little attempt made in reducing the fixed component as a percentage of total remuneration via incentive schemes where employees have the opportunity of making their new fixed plus performance-based variable be significantly higher than the current fixed + inflation increase + the very often blanket bonus given to all staff irrespective of their individual performance.
Most organisations fail to make it clear to employees that their competitive strategy is based on the effective cost of labour and not on cost of living. This failure creates unrealistic expectations on the part of employees when inflation rates do surge, as is the case in current Sri Lanka. They feel the impact of inflation immediately, and they understandably want it negated by increased gross income. However, it is not economically feasible, nor sustainable, to manage pay based just on inflation rates.
Performance based pay and performance based incentives give both employees and employers “win-win” possibilities whether it be in addressing the “entitlement culture” negativities, in enhancing employee fulfilment by creating opportunities to earn in excess of annual inflation and, in the case of employers/investors, the higher probability of earning sustainable economic value add. Pay for performance schemes have; >helped create more equitable profit share between investor and employees, >increased employee engagement in the success of the company, >catalysed the communication, and reinforcement, of the goals, values and motives of the company, > helped benefit value creators and, >employ/retain motivated employees working towards a common vision. IPM is a natural platform for enabling these.
Q: What is your personal experience of Integrated Performance Management?
Although Anglo American Corporation (Central Africa), where I worked for 25 years and ended as the Managing Director, used IPM in organising its journey towards its vision and mission, it was at John Keells Holdings PLC (JKH), where I had the opportunity of deep diving into both the structure, and the psychological nuances, of IPM. I was a key player in a JKH team which implemented IPM from A to Zee in circa 2007. The design, the marketing, and the implementation of the IPM Framework and the enforcing of the “consequence” actions which follow the information emanating out of an IPM had the benefit of extensive discussions JKH had with the Boston Consulting Group, Grow Talent, and Mercer.
However, the most fulfilling experience was the refinements, and enhancement, which the JKH Group Executive Committee regularly made as it learnt the “strengths” and “weaknesses” of the framework. It was a classic case of continuous evolution. JKH also identified the areas of management “gaming” and took remedial measures in minimising them. While opinions may differ, the facts are stubborn. In the period between 2002/2033 and 2017/2018, the JKH PBT soared from Rs. 973 million to Rs. 27,637 million. The period post 2017/2018, has been a tough one for Sri Lanka from a constitutional crisis, Easter bombing and COVID-19 to the current economic calamity.
Despite the aforesaid challenges, it is refreshing to note that the current JKH top management led by Krishan Balendra continues with an IPM philosophy which has been strengthened by an increased focus on digitisation and data analytics. It is also noteworthy that JKH has been recognised as Sri Lanka’s Most Respected Entity in 17 of the 18 years since its inception in 2005. Clearly, in my mind, the common factor behind all this is a well-oiled, tried and tested system of Integrated Performance Management.
