A company may use its information system to store objectives and performance. It must determine how to manages personnel performance.
The objectives of vertical management
- Sales need to sell a certain quantity of certain price
- Purchasing needs to buy a certain amount at a reasonable cost
- Production produces at a “set” cost
- Maintenance must maintain (the factory) within certain budget limits
The objective is to make a profit, pay costs and invest in development. The company may have some higher social goals or purpose. All areas of the business require objectives and performance measurement. The overriding objective is for the system to improve.
The information system stores performance
- It calculates objectives and performance
- It can replace middle managers
- Management compare actual performance against objectives
- Management input their goals, employees, do their jobs.
The essential part is the evaluation, determining actions based on measurement. Management has set objectives as follows and the measured performance results are presented against objectives:
Management of performance results
- What is the attitude of management towards people?
- How does the improvement cycle loop?
- How is under-performance handled?
- Was the objective valid?
- What was the reason for coming in under objective?
- Were the reasons for coming in under objective valid?
- What are the consequences and actions to take?
Determine the financial consequences for the company:
- What are the effects of coming in under objective for the company?
- How can the situation be rectified?
Objectives may be downgraded if the initial target is unachievable. What are the consequences for the rest of the company?
- must do better the next time
The consequences of under-performance in sales may require cost reduction.
Over-performance may permit financial provisions for potential future under-performance.
Compare objectives stored in the central information system with performance as part of the process of measuring the appropriateness of strategy and (continuous) improvement.
Personnel will fear the negative consequences of under-performance if objectives are not clearly stated and recorded.