2-D-2 Develop performance criteria and evaluate supply management staff performance
A major function of management is to clearly establish business objectives for the organization and to evaluate the performance of the supply management employees at all levels. Some of the good practices used in supply management performance and measurement state that the measures must be:
• Aligned vertically and horizontally - Measures are aligned with key corporate objectives, individual performance objectives, strategic objectives of business units and strategic objectives of functional groups.
• Comprehensive - Measures cover all areas where supply management can impact marketplace success.
• Dynamic and aggressive - Measures are adjusted regularly for changes in priorities and represent a challenge to the organization, though an achievable one.
• Transparent and broadly communicated - Measures are clearly and broadly communicated to ensure that they are used to drive decision-making.
• Tied to incentive compensation - Measures are tied to meaningful performance based incentives.
• Backed with resources - Measures are supported by resources to set meaningful targets and to measure performance.
• Championed by strong leadership - Supply management is committed to a performance measurement process that identifies the right measures and targets. The measurement -process meets the targets and is used to set budgets, plans and resource allocation. It brings savings to. the bottom line or it is reinvested appropriately. (Mosconi and Carter, 2004.)
1) Issues in the evaluation of employees
When evaluating employees, care must be taken to objectively measure their contributions to the organization's goals. In addition to quantitative measures, subjective factors such as employee behaviors can also be taken into consideration for an overall evaluation.
A) Align employee objectives to organizational goals -The supply management department's goals should be developed at the most senior executive levels to ensure that they are consistent with the overall business model and the strategic direction of the organization. These goals are then cascaded through the organization so that each supply management professional can develop personal business objectives. It is the supply management professional's responsibility to ensure that each of the employee objectives supports the organizational goals.
B) Determine criteria for success -The criteria for success are a direct result of the organization's mission, strategies and objectives. Supply management departments must identify how they can contribute to the organization's objectives, and then develop measurements that will move the function in a direction that will reinforce those objectives. For example, if the organization's objective is to be the low-cost producer, the supply management department criterion will be to find low-cost suppliers without negatively impacting other organizational objectives, such as quality and delivery.
C) Determine appraisal factors -There are many factors which go into the appraisal/assessment of employees. A starting point would be the essential functions of the job. Given the significant responsibilities and impact to business, quantitative as well as qualitative factors should be considered when assessing the contribution of supply management professionals.
1.0 Quantitative factors- Quantitative factors are those performance elements that can be measured numerically, such as cost, quality and delivery performance.
2.0 Qualitative factors- Qualitative factors are those performance elements that are more subjective to measure, such as teamwork, creativity, responsiveness to change and customer focus. When considering these factors, care should be taken to apply solid judgment in the overall assessment.
D) Conduct interviews/provide feedback -One of the most critical processes of evaluating supply management employees is to provide effective feedback to employees. Clear feedback to employees as to how effective they have achieved their personal business objectives should be provided. In addition, it is important that the supply management professional provide input to the employee on how they can improve their overall contribution to the organization. Equally important is for the employee to listen openly to suggested improvements so that continued improvements can be made by the employee and subsequently by the organization.
As part of this process, effective two-way communication is vital. Clear, open and honest dialogue in a non-confrontational and non-defensive manner is essential.
E) Sources of feedback - Input from multiple sources on employee contributions is an important element of properly assessing their contributions to the organization. Valuable input will be gained through direct interaction and review of the supply management professional's results. Since the perception of employee's contribution and behavior can be different among managers, peers, clients and suppliers, seeking input from multiple sources can allow for a more effective assessment.
1.0 Team and/or peer input -Team and/or peer input are often the most valuable as this group has daily interaction with each other. They experience daily the contributions from their peers and knowledge of how they handle the ongoing challenges and opportunities.
2.0 Self assessment- Self assessments can be done by the supply management professional or as an organization. Periodic reviews of processes and results can also provide valuable input. In addition to allowing for immediate corrective actions to a process, if necessary, it is one source of input for the employee's effectiveness.
3.0 Internal customer input- Internal customer input allows the supply management professional to assess how responsive the employee is to the client's needs and how clearly the requirements are understood.
4.0 Supplier input - Supplier input, through periodic surveys or direct input, provides still another perspective of the employee's effectiveness. The buyer/ seller relationship can be complex so input from a supplier can provide valuable information.
F) Employee accountability (for example, performance improvement plan) -As part of the performance assessment process, employees should understand how they can improve their overall contributions to the business. In the case of low performing employees, a clearly documented improvement plan that defines specific areas, metrics and dates should be established. This plan should also clearly state the consequences of not achieving and sustaining improved performance.