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Using the stages from the performance management process, suggest the key processes that DSM needs to provide with its system in order to successfully link its key success factors (KSF). Provide a rationale for your suggestion.
In 1902, Dutch State Mines (DSM) originated as a state-owned mining company. Its evolution took the company from a coal mining business, to a petrochemical business to a commodity chemicals business, to its more recent endeavor, a specialties company. The company became publicly listed in 1989, and by 2003 the company had more than 20,000 employees and spread across 40 countries. The company had decentralized organizational structures that were constructed around numerous business groups empowered to execute all business functions. DSM was able to reinvent and redesign their business, and until the early 1990s, DSM operated a “traditional strategic planning process with planning and budget cycles taking place throughout the year.” After a while, the company’s management wasn’t satisfied with the process due to the broad range of purposes that it served. The company acknowledged that their strategic development was not that of good quality, the link between strategy and performance was blurred, and its strategies mainly focused on reducing cost. To augment the quality of strategy development process, DSM introduced a new approach called the Business Strategy Dialogue (BSD). This strategy led to Corporate Strategy Dialogue (CSD) that proposed improvement of the corporate development processes. Once the priorities wee in place, the strategic plans were implemented.
There are key processes that DSM needs to provide with its system in order to successfully link its key success factors (KSF). By linking the organization’s goals with individual goals, the performance management system reinforces behaviors consistent with the attainment of organizational goals. Moreover, 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 (Smither& London, 2009). Regarding this case, the key processes include performance planning, performance execution, performance assessment, performance review, and performance renewal and recontracting. In the initial process of planning, DSMs goals are linked to KSFs . The performance planning stage has the goal for employees to have a thorough knowledge of the performance management system. In fact, here is where a discussion is made to go over what needs to be done and how it should be done. This performance planning discussion includes a consideration of results, behaviors, and a development plan. In the Execution stage, the planning goes into action and the responsibilities include observation and documentation, updated, feedback, resources, and reinforcement. Additionally, the performance review all business risks are reviewed through the company’s Annual Strategic Review (ASR) to discus updated financial projections and updated sensitivity analysis. Finally, the last stage is the performance renewal stage which is used to provide insight and information gained from the previous processes in order to set up achievable and realistic goals for forthcoming evaluations.
Select three drivers and examine the central manner in which DSM management has aligned its business strategies to performance management.
Aligning business strategies to performance management is one of the most important factors to an organizations success. With regard to order to the issue of alignment within the organization, DSM introduced Vision 2005: Focus and Value and focused on three aspects of business to help with alignment to performance manangemnt:
- Accountability as basis for financial control –DSM implemented Value based Business steering since the company was initally driven by the finance department.
- Alignment of strategic business planning processes to develop promise for performance –DSM was tasked due to the company’s the inability to tansform their vision into logical goals and procedures. To handle to issue of alignment
- Introduction of a new financial business steering metric –DSM creaed incentves that help develop emplyees and achieve goals. A short-term incentive program was introduced that included reward of 20 to 30 percent on top of base salary. Executive compensation was linked both to personal targets and to financial performance measures. Finally, a personnel share option scheme was added alongside the existing management option scheme.
Critique or defend DSM’s competitive advantage by using three of the six assessments from the textbook.
Companies with effective performance management programs tend to guarantee that their strategic business goals align with acquisition and talent development plans. However this can only happen if the approach is ongoing rather than annual/ semi annual. There are assessment points that can help companies perform an in-depth evaluation of their performance management systems.
In defense of DSM’s competitive advantage, analyzes the first assessment point organizational precursors. It assesses how much support organizations give to individual change and development and the extent to which current effective performance management behaviors are present. The data will determine training emphasis. DSM gathered new initial information needed to determine current status and what was needed to achieve the new goals and objectives set. DSM did a broad study of the company’s current situation and the possible outcomes for the business over the next few years.
Furthermore, the performance management training evaluation assessment shows that DSM is following the performance management training; training evaluation will take place at the reaction and learning level. According to the case study, DSM could have done a more in-depth training evaluation at the reaction level. As a result of the lack of enforcement on the business group level, the company implemented the SVC’s to hold them accountable for monitoring. Finally, the individual and department evaluation is a formal end of year appraisal. Each business group conducted the review well to make sure responsibilities were met for the year.
- Bioemhof, M. (2004). Strategy and performance management at DSM. Retrieved from http://content.xanedu.com/cases/insead/5165.pdf?ID=0.00951426716438064
- Smither, J. W., & London, M. (2009). Performance management: Putting research into action. San Francisco, CA: Jossey-Bass.
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