CMI Assignment 7002 Strategic Performance Management

Strategic Performance Management

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Course Number: Unit 7002 Program/Major: CMI L7 Diploma in Strategic Management and Leadership Submission Date: August 2009 Date Course was Started: April 2008 Date Program was Started: April 2008 Type of Course: (Practical) Practical Problem: (setting, agreeing and monitoring team performance within an organisation) Number of Words in the Body of the Course Paper: 3,500 (includes the Title Page and Executive Summary but not the Appendixes. Lecturer: Fayyaz Alam Resources: Management Occupational Standards D2, Developing productive working relationships with colleagues and stakeholders; D4 Plan the workforce; F3 Managing business process & F12 Improve organisational performance and CMI Pathway series 7002 Reasons for taking this course: developing understanding of how team performance contributes to meeting strategic objectives

Table of Contents 1 Setting performance targets to meet strategic objectives ................................................................4 1.1 The link between team performance and strategic objectives...................................................6 1.1.1 Organisation’s strategic objectives.....................................................................................6 1.1.2 Workforce requirements that are capable of achieving the organisation’s objectives.......6 1.2 Tools and techniques available to set team performance targets...............................................7 1.2.1 Processes that deliver outcomes based on organisational goals and aims..........................8 1.2.2 Appropriate methods for evaluating performance..............................................................8 1.2.3 Review capacity and capability of current workforce........................................................8 1.2.4 Plans that meet long, medium and short term requirements...............................................9 1.2.5 Communicate workforce plans...........................................................................................9 1.2.6 Improvements made are in line with the organisation’s vision and objectives..................9 1.2.7 Improvements to reduce gap between what customers and stakeholders want................10 2 Agreeing team performance targets to meet strategic objectives...................................................10 2.1 Required performance targets within teams against current performance..............................10 2.1.1 The type of skills, knowledge, understanding and experience required to undertake current and planned organisational activities............................................................................11 2.1.2 Systems for collecting and assessing information on the overall performance of the organisation to identify opportunities for improvement............................................................11 2.2 Encourage individual commitment to team performance in achieving organisational objectives.......................................................................................................................................11 2.3 Context of delegation, mentoring and coaching to achieve organisational objectives............11 3 Monitor activities to improve team performance...........................................................................12 3.1 Monitoring team performance.................................................................................................12

3.2 Evaluation of team performance against agreed objectives....................................................14 4 Contribution of influence and persuasion to team dynamics..........................................................14 4.1 Methodologies to gain commitment to action.........................................................................14 4.2 Impact of individual dynamic on securing commitment to action..........................................15 Conclusion........................................................................................................................................16

Performance Management at TESCO

Introduction The following assignment explores Tesco in four dimensions as set out by learning outcomes pertaining to performance management module. The four learning outcomes (LO) would measure,

LO1: Setting Tesco performance targets to meet strategic objectives LO2: Agreement on team performance targets and subsequent contribution to meet those objectives. LO3: Monitoring and control process for the goals LO4: Politics of personal interaction of Sir Leahy. A discussion on his leadership, persuasion and influencing skills. In order to achieve these learning objectives, the author has drawn upon from his practical work experience together with the primary and secondary research through various resources. This article would primarily be divided into two segments within the domain of learning objectives as defined above. The division would be between Performance Management and Performance Measurement. Performance management creates the context for — and the measures of — performance. Performance is defined as the potential for future successful implementation of actions in order to reach the objectives and targets. The article takes the view that performance is constructed by the management system and by managers from his own experience of working at Tesco local store and taking a more macro view of the organisation. Performance management precedes performance measurement and gives it meaning. (Lebas, 1995)

1 Setting performance targets to meet strategic objectives Tesco is a UK-owned supermarket company with revenue of £47 billion (about £33 billion in the UK) (Tesco, 2008a). Tesco was founded in 1919 by Jack Cohen in East London. Tesco uses a mix of different performance management tools. In this assignment we would be discussing score card methodology that Tesco has modified and has aptly named it as ‘Steering Wheel’. Tesco’s steering wheel is an extension of Kaplan and Norton (1996) such that it has been extended and the element of community lies at the heart of it. (Talking Tesco, 2009). This is not a strategic scorecard based

upon a corporate-level strategic vision. Tesco’s ‘Steering Wheel’ is used by corporate executives to achieve Tesco’s core purpose which is summarised in Table 1. The wheel in itself is shown in figure 1. It has four dimensions or segments and each segment has its own set of objectives. The author, having worked in Tesco knows that every store would measure these objectives by green, amber and red colour coding. Where green stands for targets achieved, amber stands for the target that needs attention and red denotes the outright failure of the targets. For example the target for waste in the store where author works is set at 5% of revenue. If it is below 4% then on Steering Wheel, the target would be colour coded as green if it is over 5% then red and so on. It is claimed that the purpose is not visionary (witcher et al, 2008). The argument that Witcher et al produced in 2008 is that it is not meant to take Tesco to a newer position or state rather it instils and measures the values , which are fundamental to manage ‘purpose’ in the stores. The primary aim of the steering wheel is to link every employee’s personal objectives to corporate values and to help staff balance these values effectively in the daily management of work. The wheel has the four Kaplan and Norton perspectives, but also an additional perspective, added in 2006 as a ‘community’ perspective (Tesco, 2008b).

Figure 1 - Source: Tesco.com

Wheel encapsulates all the performance targets which Tesco needs in order to achieve its objectives.

1.1 The link between team performance and strategic objectives If the team performance on the steering wheel is green then the strategic objectives would be attained whereas if it is red then it won’t. The greener the steering wheel the close that Store is to achieve its objectives. The same principle is used at strategic level. 1.1.1 Organisation’s strategic objectives Tesco is one of Britain's leading food retailers, with 519 stores throughout England, Scotland and Wales. There are also 105 stores in France operated by Catteau, and 44 in Hungary operated by Global. Tesco is committed to:  offering customers the best value for money and the most competitive prices  meeting the needs of customers by constantly seeking, and acting on, their opinions regarding innovation, product quality, choice, store facilities and service  providing shareholders with progressive returns on their investment improving profitability through investment in efficient stores and distribution depots, in productivity improvements and in new technology  developing the talents of its people through sound management and training practices, while rewarding them fairly with equal opportunities for all  working closely with suppliers to build long term business relationships based on strict quality and price criteria  participating in the formulation of national food industry policies on key issues such as health, nutrition, hygiene, safety and animal welfare  supporting the well-being of the community and the protection of the environment Source: from tesco.com 1.1.2 Workforce requirements that are capable of achieving the organisation’s objectives On the store level, Tesco uses the classical hierarchical management. Depending on the size of the store, it is divided into six sections usually they are, front end (check outs), produce and fresh, merchandising, stock control, administration, personnel and ambient. All sections have operational staff who are supervised by a team leader. This team leader reports back to sectional manager and sectional manager in return report to store managers. Who are answerable to area managers. Operational level staff do not require any skill but training starts from there onwards. There are 380,000 Tesco employees worldwide. As Tesco is venturing out into more markets such as financials or property market, the need for expertise is ever more increasing.

1.2 Tools and techniques available to set team performance targets The following core purpose has been directly derived from two resources, Tesco’s own website and witcher et al, 2008. The operational performances of Tesco stores on the wheel’s objectives are reported and reviewed quarterly at board level and afterwards a summary report is sent to the top 2000 managers to cascade to staff in the stores. The steering wheel is customer or people based at the heart and uses a performance based approach as opposed to strategic score card approach which was originally suggested by Kaplan et al, 1996. It concentrates on objectives which are diagnostic in nature (Witcher et al, 2008). It allows a daily performance measurement which could also be used for the long term strategic purposes. Daily, weekly and monthly targets are reviewed regularly. The remuneration of senior management is shaped by the wheel’s objectives, with bonuses varying according to the level of their overall achievement. The Group reviews how the wheel has worked annually and the objectives may be changed and modified, depending on prevailing circumstances, to ensure that they remain consistent with the needs of Tesco’s stakeholders. An important consideration is to make sure the objectives remain appropriate and robust measures of performance in the stores. The purpose, vision and the steering wheel go hand in hand and complement each other in managing the corporate performance. Therefore, it is imperative to understand Tesco ‘purpose’ statement when studying their ‘Steering Wheel’. Table 1. Tesco’s core purpose

Tesco’s core purpose is to create value for customers to earn their lifetime loyalty. Tesco’s success depends on people. The people who shop with them and the people who work for them. The idea is If customers like what they offer, they are more likely to come back and shop with them again. If the Tesco team find what Tesco does rewarding, they are more likely to go that extra mile to help their customers. This is expressed as two key values:

 No-one tries harder for customers, and Treat people as we like to be treated. We regularly ask our customers and our staff what we can do to make shopping with us and working with us that little bit better. This is our Every Little Helps strategy.

Shopping trip Customers have told Tesco what they want — clear aisles, to be able to get what they want at a good price, no queues and great staff. Tesco calls this their ‘Every Little Helps Shopping Trip’ for customers and uses it every day to ensure they are always working hard to make Tesco a better place to shop, at home and abroad. A great place to work Tesco has learnt from their staff what is important for them — to be treated with respect, having a manager who helps them, having an interesting job and an opportunity to get on. Tesco recognises that it helps achieve what is important to staff will help Tesco to deliver an Every Little Helps Shopping Trip for customers. The way Tesco works The way Tesco works is how it delivers Every Little Helps to make Tesco a better place to shop and work in. They use simple processes so that shopping is Better for customers, Simpler for staff and cheaper for Tesco. Source: Extracted fromTesco (2009) & Witcher et al, 2008 1.2.1 Processes that deliver outcomes based on organisational goals and aims Tesco uses balanced score card methodology throughout its organisational operations. Every department has tweaked the balance score card according to their needs. These performances are measured during team meetings at store level and waste is discussed at strategic level. 1.2.2 Appropriate methods for evaluating performance Every staff has a PDP (Personal Development Planning) folder, this folder contains all the performance appraisals, the training already done and the future training needs, some departmental performance data for example if it is front end then the number of people served or mystery shopper check etc. Again, colour coding of steering wheel helps identify the progress made on people, community, finance customer and operations level. 1.2.3 Review capacity and capability of current workforce Using the current work force Tesco has become the largest retailer and employer in UK private sector. Despite the tough construction laws imposed, Tesco is still expanding by leaps and bounds. The UK market has enough labour to cater for the recruitment at UK level. However, for international operations, the capability to recruit from UK diminishes, the recruitment is carried out

at local countries. With the current workforce of 280,000 people in UK alone Tesco is more than capable to sustain itself against any future expansion plans. 1.2.4 Plans that meet long, medium and short term requirements Some of the Tesco plans include, moving into the property markets within the next year, build a unique mp3 store by next year, plans to create 11000 new jobs within the next 5 years, Tesco plans to train its staff in Macro 4 to deliver ongoing benefits, including fewer CPU upgrades and reduced systems software, Tesco plans to centralise IT applications across...strategy which began five years ago, Tesco plans to centralise its Oracle Financials...reduce staff travel costs, Tesco plans to roll out fixed-mobile technology within the next 5 years, Tesco plans to extend its use of XML later next year to give each customer a tailored Web site that will reflect their specific needs, and eventually within the next 2 years it plans to operate its online business as a separate entity (Tesco, 2009). All of these plans meet the objectives criteria and are in alignment with the growth.

1.2.5 Communicate workforce plans Tesco communicates above mentioned plans through its staff briefings, pamphlets, staff benefits periodical, staff’s own website, intranet, films and advertising. The use of flexi hours is very popular in organisation at Tesco due to the nature of people doing part timer jobs at operational end therefore each department maintains a rota and extra hours available folder through which employees can communicate and leave message for each other along with using staff message boards. 1.2.6 Improvements made are in line with the organisation’s vision and objectives The following figures show the improvements, which are in line with the organisations set goals and objectives. £46.6bn Tesco sales last year, more than the GDP of Egypt £6,912m Profit earned by Tesco every day last year £4,800 Profit earned by Tesco every minute last year 6 The number of Tesco stores in Bicester, Oxon (pop 29,000) £1 Opening day's profit at the first Tesco store in London in 1919 2,700 Number of Tesco stores worldwide

£1 in 3 Tesco's share of Britain's grocery market 1,500 Number of Tesco stores in the UK 380,000 Number of Tesco employees worldwide, equivalent to the population of Bristol 260,000 Number of employees in UK, making Tesco the biggest private sector employee 24m sqft Total sales area in UK stores 17m Number of goods sold each week in the UK 17p The price of Tesco value baked beans £3,299 The price of Sony 46inch TV in Tesco

1.2.7 Improvements to reduce gap between what customers and stakeholders want The success of the Tesco means that the stakeholders at all levels are very happy with the Tesco performance. Tesco’s share is considered to be the most reliable on the market. Tesco rolls out cheap brands and lines monitor which keeps track and competes with the competitors on prices. Thus keeping customers happy. The gap between customer and stakeholders is substantially reduced by keeping the community and different stakeholders at the heart of scorecard where the progress is checked on recurrent basis. 2 Agreeing team performance targets to meet strategic objectives This sections aims to look into the team performance targets at store levels which match with the ultimate strategic gains.

2.1 Required performance targets within teams against current performance It is required of local stores to engage with the community and find out about their local shopping preferences. Teams are urged to be polite, helpful and cordial . Every store has Seasonal (Christmas, Easter etc.) and weekly targets. These targets are compared with the year on year, season on seaon and like for like weekly targets. All the section managers and staff have the access to the relevant information and these targets are reiterated through an internal communication channel which is called ‘Team 5’. Every single staff working at Tesco has to sign Team 5 once every week, ultimately agreeing or not agreeing on the targets set.

2.1.1 The type of skills, knowledge, understanding and experience required to undertake current and planned organisational activities At operational level, there is not much need for high skills required but along with the increment in the hierarchy of the management, the relevant skills are also increased. For example, sectional managers have to be versed in time keeping and management of rota, store managers are more project oriented and have to be more financially aware. Tesco’s PDP help identify the training needs of its staff. As the Tesco is becoming more technologically oriented, Tesco is investing a lot in the training of XML, Macros and other systems such as self help check outs monitoring and online reporting. Tesco employees can manage their own profile these days online and have their personnel related matters sorted through this channel. All this need to be communicated and people are trained through Tesco Academy. 2.1.2 Systems for collecting and assessing information on the overall performance of the organisation to identify opportunities for improvement Tesco relies heavily on digital ways of collecting and assessing information. Although, it does engage with community through local leaflets and local surveys but on strategic level it engages through CSR (corporate social responsibly) initiative. It has found out that It needs to invest in greener and more fair trade products. Every transaction on Tesco front end is stored for 5 years, this hige amount of data helps analyse and compare sales data on the overall performance of the store. Tesco loyalty club card helps understand particular individual buying, shopping patterns allowing Tesco to do targeted marketing.

2.2 Encourage individual commitment to team performance in achieving organisational objectives Every little helps motto lies at the core of gaining commitment from staff. Staff are encouraged through motivational techniques such as staff value awards competition, employee of the month and encouragement for every staff to become team members. Such techniques help raise the staff morale ultimate resulting in getting individual’s commitment. 2.3 Context of delegation, mentoring and coaching to achieve organisational objectives The concept of mentoring is used at graduate training schemes where graduate recruits get their mentor for a year or so period. Operational staff tend to get more coaching and any limitations in their skills are catered for locally in the staff training room. At grass root level there is not much of delegation involved, more or less the operational teams do the jobs that they are asked to do with a very little chance of job rotation.

3 Monitor activities to improve team performance A strategy implementation to improve team performance process has to be a top to bottom approach. Communication lies at the heart of strategy implementation. If the top management doesn’t have the required motivation coupled with strong communication channels then it would be hard to monitor any strategic systems and processes. (Mabey 2002). Therefore, Tesco has adopted various channels for the smooth flow of information and introduced various checks and balances so that the balance score card is measured according to the objectives set. For example, at store level, a document called ‘plan and review’ is used by every staff member which enables them to think and measure their performance against the five segments of the ‘steering wheel’. This whole process encompasses the involvement of supervisors, team leaders and other managers during staff appraisals which are conducted twice a year. (Talking Tesco, 2009). Employees are encouraged to take part in Tesco’s development programme which is labelled as personal development planning (PDP). Every employee develops his own objectives and how he will carry these out in ways that are consistent with the needs of the steering wheel. The progress is monitored through PDP folder and staff appraisals. Identification of the work objectives, key dates and support materials are provided by the management and also at their daily and weekly staff meetings so that staff can measure their contribution to the steering wheel. The steering wheel is considered to be used for organisational fitness for the purpose and is classified as the in-out approach to controlling strategic performance. Steering wheel helps strengthen the core competencies of an organisation and enables workforce to sustain the competitive advantage in the market. (Prahalad and Hamel, 1990; Teece et al., 1997).

3.1 Monitoring team performance Following a resource based review of the adopted balance score card methodology at Tesco, Witcher et al (2008) devised a strategic performance model specifically for Tesco. It encapsulates the daily, monthly, quarterly and annual strategic control and the steps through which it is controlled and monitored as described in the figure 2 below.

Figure 2 Source: Witcher et al, 2008

According to Witcher et al (2008), Tesco’s score card focuses on alignment and integration of the human activity factor with the operations. It conditions how people work instead of directly trying to influence people (employees and community) what they should achieve. The steering wheel helps review the objectives and progress through all structures of management and at all levels. The figure above uses a classical principal PDCA (Plan Do Check Act) proposed by Deming (1986) which further puts an emphasis on review at all levels. Kaplan et al (1996) stress that the executive review is of tremendous importance in the management of the score card and should be operational on all levels using Kaizan principle, i.e. continuous improvement. Tesco recurring operational issues are discussed at weekly or monthly basis whereas, the strategic issues come up more often at managers meetings on quarterly basis. This is in alignment with the classical view of the balance score card evolution. From its advent in Japan to its newest models in western organisations such as Tesco (Witcher et al, 2008).

3.2 Evaluation of team performance against agreed objectives Team performances are evaluated through 360 feedback, team briefings and by adopting Deming’s PDC approach. The areas of improvement are colour coded and are communicated at once through Team 5 exercise. Mystery shopper findings are of real importance as this is the ultimate test of customer satisfaction and the helpfulness of the staff. 4 Contribution of influence and persuasion to team dynamics Since the evolution of different management theories, the modern business world uses a mix of all these. Employee motivation through monetary means is still a bigger factor behind better labour output. The contribution of these motivational techniques to influence the team dynamics is measured in this section. 4.1 Methodologies to gain commitment to action Tesco management uses a combination of Taylorism and Maslow theory of need such that it enriches the job satisfaction by really involving its staff into decision making allowing them to become a part of the organisation and by giving them monetary incentives through bonus and other performance related pay increments. This is a proven methodology to gain Tesco Staff’s commitment in achieving the targets. Tesco employs over 260,000 and all of them take part in Staff Question Time Sessions which enables the Tesco management to obtain a valuable feedback about the work conditions (Talking Tesco, 2009). This is a 360 degree exercise such that it not only gives feedback to employees but also enables staff to share their experience and opinions to help serve customers better. Another example of healthy inter departmental relationship is strengthened by a good communication channels exercised between Usdaw (union of Shop, Distributive and Allied Workers) and Tesco. The Tesco and Usdaw partnership is considered to be the biggest trade union agreement which sees the biggest staff forums in private sector. The partnership meetings are held thrice a year and provide hugely important direct feedback from both sides. Staff Training and development is another successful tool that Tesco uses to engage with its staff and to enrich their experience of working with them. A good CPT programme such as Tesco’s own PDP (Personal Development Programme) is highly effective in experienced staff retention. Staff retention and loyalty is a trademark of every successful organisation. According to Tesco’s website (2009) it invested in over 2,000 new management and 4,500 team Leader roles last year to continue to deliver their ‘Every Little Helps’ message across customers. Tesco motivates its staff through profit sharing and ownership sharing through subsidised share schemes for employees such as ‘Save As You Earn’ and ‘Buy As You Earn’. According to tesco.com (2009), 65% of Tesco staff owns shares in the company and in May 2006 £78 million worth of shares were given to 180, 000 staff as part of their scheme. Along with Tesco’s three

shares schemes Tesco also operates an award winning pension scheme. Tesco pays the double of the amount that the staff contributes. Such schemes allow employees to regard highly of their employer and become a loyal staff. 4.2 Impact of individual dynamic on securing commitment to action The impact of the chief executive on securing its staff ‘s commitment to action is distilled at all levels of tesco organizational structure. For any strategic action has to be channelled through effective top level management. Tesco’s current boss has earned industry as well as its employee’s respect by achieving various awards and taking Tesco success to an unprecedented level. Sir Terry Leahy joined the company in 1979 and the man behind the first giant success of introducing and devising the club card (loyalty card) scheme. He is a figure who captures every employee’s imagination as he originated from the humble beginnings within the Tesco. He started as a mere marketing executives and rose to ranks. He commands a great respect in the Britain Business industry. He was selected as ‘Business Leader of the Year’ in 2003 (Manchester, 2009). Guardian newspaper once rated him as the most influential non-elected person in Britain in 2007. He is widely regarded as visionary leader among his colleagues and that shows in the performance management methodologies incorporated in his organisation (Tesco, 2009b). His troops do whatever he commands them to do. Perhaps the most significant decision ever made by a retail giant has been the introduction of loyalty card and loyalty schemes. Before this, Tesco used to trail behind Sainsbury and Marks and Spencer (Tesco, 2009). Introduction of a scheme which was never used before in Tesco organisation required a lot of influencing and persuasion skills. It is not only that but the securing or commitment of its entire work force is an uphill task altogether which Sir Terry Leahy performed wonderfully. Since 1997, under the leadership of Sir Leahy Tesco has expanded into non food, telecoms, financials and remains the leading supermarket in UK. These efforts were duly recognised by CMI (Chartered Management Institute), which awarded gold medal for the visionary and pragmatic leadership of Sir Terry Leahy. Jo Causon, director, marketing and corporate affairs at the Chartered Management Institute says: “The pace of change and the drive to build global brands has had a major impact on the nature of management and leadership. Sir Terry Leahy’s vision and determination to maintain high service levels for customers the world over is indicative of his energy for business and a real commitment to deliver effective results.” (CIM, 2009)

Conclusion

The above assignment has tried to explore Tesco within four learning outcomes as specified above and has found that due to visionary leadership and innovative performance management measures, Tesco has secured a top notch in the retail industry and continues to grow to date. The four learning outcomes inspected setting of performance targets through the purpose and balance score card methodology adopted by Tesco. Tesco further uses various controlling and monitoring mechanism together with it’s ‘Steering Wheel’ to help implement its objectives. Different motivational techniques are used to build up the morale and generate higher labour output by the team members. These teams include enrichment of employees experience through training and development, sharing of success through shares and profits incentives. And eventually, the all important strategic leadership has been discussed. It is argued that without the visionary leadership of management Tesco would not enjoy the benefits that it is enjoying today. Despite being the leading supermarket, Tesco continues to expand into more diversified portfolio and the author of this article, having worked in one of the stores, feels confident that the trend would continue in the foreseeable future.

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