The search method based on the strategic information plan is inherently top-down oriented. This approach features a systematic and consistent downward translation of the organization’s policies at each level. The indicators are ‘designed’ by a small group, such as the board of directors or the management team that is responsible for that. The strong point of this approach is that management can contribute to this policy consistency. This ‘integral’ route is a logical choice, especially, when the top management wants to sail a new course and would like to adjust all departments to this course. In order to be able to monitor the performance and consistency of the new policy, a business intelligence system can also be set up.
The risk of a top-down approach
Following the top-down approach leads to the rule, where the employees are limited and have relatively late influence. That poses a serious risk, as no necessity for the plans is seen or no understanding of the relevance of the indicators is present at the workplace level. Also, a lack of involvement and distrust among employees is not imaginary at all. In fact, the influence of employees on policies and plans is minor, while they still have to do “extra work” to provide the information, which the management will use to evaluate their performance. It would then be witless to turn off antennas designed to receive signs of discontent. To support this, we have developed a performance management training, in which you learn to deal with these situations.
Involvement of the organization in the policy
Many managers think that the elaborating actions to achieve the indicators target values is the only or the best possibility these methods provide to delegate an influence to staff. However, this possibility is limited to the final implementation step of the strategy or policy. However, there are also possibilities to involve the organization in the elaboration of policies on earlier stages, thus increasing trust among employees. This allows delegating the policy implementation to the lower levels as much as possible. Subsequently, those levels can work out consequences for the Information Plan by themselves. The motto is, “The top sets the policy, the line works it out and designs action plans.”
Bottom-up: Problems and Solutions
Search Field Determination on the basis of the operational information plan suits well with developing bottom-up indicators. This encourages employee engagement. Indicators are developed close to the staff, whose performance is going to be measured with those indicators. These two approaches are called the ‘local route’. Indicators are developed close to the staff, whose performance is going to be measured with those indicators. The following case is an example:
De Laddercentrale Case
De Laddercentrale is a fast-growing manufacturer of aluminum ladders and staircases. Fifteen years ago, the factory started in a small production hall with ten employees, now consisting of three large production halls, with twenty employees each. They experienced a breakthrough five years after they had started. Back then, the half of their current workforce was formed by immigrants. The founder, Mr. Pareira, is very excited about Improvement Groups and encourages employees to form this kind of groups. Improvements Groups have their meetings partly in their own time, and partly in their work time. They map the processes, analyze them using simple techniques and then come up with proposals for improvement. For any training proposal there is a reserved round.
The production halls 2 and 3 are excited to work with their own improvement group. Especially, the staff in the third production hall, which was built last, come up with numerous plans. The immigrant workers are offered language classes. Other employees are interested in commercial trainings, because they would like to work in the range from the factory to the field service. Furthermore, ‘Performance gauges’, which provide a weekly ‘performance profile’ for each employee have been launched in this production hall, too. The employees want to spend two work hours a week to work on this profile. In the second production hall, they concentrate on reducing errors, material shortages and coordination of the various production components together. Each time they come up to solve the problem of the supply from the first production hall taking place every month, rather than on a continuous basis. This results in excluding certain types of ladders from production at the end of the month.
The importance of groups
Mr. Pareira has already organized a separate meeting for the first production hall to convince its employees of the importance of groups. However, ‘Production Hall 1’ is not willing to change its approach and certainly is not going to gather in improvement groups ‘in their own time’. The groups from the second production hall have now jointly developed their own indicators. However, they are about to get discouraged because their own goals cannot be achieved without the help of the first production hall’s groups.
The ‘local’ route is clear about the indicators intent not to require management input and about importance of the staff expertise. This is the case if the management deliberately chooses not to fundamentally change the structure of the primary process, but to further optimize the process or to work more with the customer needs as the starting point in order to be more customer-oriented. In both cases, the employees are the best experts: they are closest to the daily practice and have the most contact with the customer. The advantage of this route is that employees have a direct view of the elaboration and use of key performance indicators, which increases the motivation and commitment.
Experimenting with performance management
The ‘local route’ is also used by department managers, who want to experiment with performance management, while the organization (still) introduces a system of integrated performance management (see for instance Chang & Morgan, 2000). If more managers do that regardless of each other, the connection between these indicators becomes missing. After some time, it turns out that it is necessary for the organization, as a whole, to bring consistency and establish a steering group. So, all the three production halls are on different tracks with different pace in this case, while each production hall depends on each other for their own success.
Importance of steering groups
The need for a holistic approach applies, in particular, to ‘customer focus’ which requires a strong coordination. Such a structure, however, can often form a bottleneck in the progress in practice. All departments that are “represented” in the steering group will exert their influence on their representative to bring their own interests into the limelight. It is therefore recommended for the steering group not to be ‘too tough’. Control of the activities has to be carried out mainly with a clear objective set out by the board and by clearly indicating conditions for indicators to be met. This shows that the distinction between top-down and bottom-up methods is not always black and white. In practice, hybrid forms are always needed. The primary top-down approach is thus complemented by a little bottom-up one. If the approach is primarily bottom-up, as in this case, then some additional top-down control is needed.
The difference between top-down and bottom-up methods
Although the distinction between top-down and bottom-up is not strictly black and white, there are specific risks associated with each of these methods. The change management approach to follow is largely determined by these risks. It should be noted that many companies and nonprofits that apply performance management, would do so because they want to be “strategy focused”. They want to translate their strategy into all parts of the organization and to make the strategy implementation measurable with an organization Cockpit or Balanced Scorecard. Or: they choose the vertical approach.
The management style here is top-down. That is a perfect timing to increase the acceptance of performance management at the workplace level in order to obtain commitment on a later stage. It has already been pointed out that the workplace can do more than merely naming activities to achieve indicator values. They could also play a role in the choice of performance indicators if the top management turns off the policy frameworks. The acceptance can be greatly enhanced by the behaviors that managers demonstrate in their daily activities.