I was dealing with a power generation company. The company had quoted a very low price of power generated in the Government auction to win a mega power generation project. The company was not able to achieve the efficiencies to be profitable. The Chairman realized that the problem was with performance management of the team. He wanted me to meet the CEO and CHRO to understand the root cause of the problem and find a solution.
The next morning I met Sanjeev, CHRO of the company for breakfast before meeting Srinivas, the CEO. As we sipped the tea, I asked him, “What is the PLF (Plant Load Factor – a measure of plant utilization in power plants)?”
Sanjeev: “It is 60 to 70%. Srinivas will be able to tell you exactly”
ME: “What was the planned PLF when we quoted for the power tariff in the auction?”
Sanjeev: “I don’t know. I am new to the system. We will need to check with Rao, the CFO.”
ME: “What is the target of the plant head?”
Sanjeev: “To run the plant efficiently and meet all O&M (Operations and Maintenance)
parameters of the plant”
ME: What these parameters are and are they quantified?
Sanjeev: “We trust our top management. They know their job and they work accordingly. How can we give them targets?”
ME: “I completely appreciate your point of view. How do you set the targets for the middle management and front line team?”
Sanjeev: “Please understand it is a process plant and not a sales organization. The plant runs on its own. We have defined jobs of all the individuals. They do their job.”
ME: “How do you assess their performance during appraisal”
Sanjeev: “They do their self appraisal and write down what they have down during the year. It is then assessed by their managers. We have a skip level assessment system to eliminate manager baises. The skip level manager assesses the performance. The proposed ratings are then reviewed and moderated by the leadership team of the plant. We have a very robust system.”
ME: “Yes. I can see that you have a very robust performance management system. How do you assess the performance of the plant leadership team and the pant head?”
Sanjeev: “The plant leadership team is assessed by the plant. He usually use his judgement and there are no forms filled at this level. We trust his judgment. For the plant head the rating is proposed by the CEO and moderated by the Vice Chairman. I am not involved in this process.”
By now Srinivas had come to the office. Sanjeev and I walked into his office.
ME: “Hi Srinivas, hope you had a good night sleep. ”
Srinivas: “Boss I left at 1 am. That is usual. How do you expect me to have a good night sleep.”
ME: “Why is that you have to work so late every day?”
Srinivas: “Performance pressures. Our largest plant is not making money and we have multiple reviews and new ideas every day.”
ME: “With all the reviews and ideas what is the PLF that you are able to achieve?”
Srinivas: “We are at 67%.”
ME: “What is the planned PLF at which you will make profits and can sleep well? (Smile)
Srinivas: “Planned PLF is 95%.”
ME: “I am sure we have been able to identify what each individual in the plant starting from the plant head to a shift engineer needs to do to achieve 95% PLF.”
Srinivas: “Well! Broadly yes. But if you are asking me that is it quantified and put in the goal sheets of people? Then NO. Despite my repeated insistence Sanjeev and Rajesh (Plant Head) have not done it. But this may still not solve the problem. The best plant in the world has achieved a PLF of 88%. At this price we will never make profits. We need to do something about the price.”
ME: “Well! Can we at least achieve 88% PLF and cut our losses? The rest you may try to bridge with the price negotiation.”
Srinivas: “That sounds like a plan. You think if we do a proper goal setting and we measure people performance against the goals, we will improve our PLF from from 67% to 88%?”
ME: “Yes definitely! (Smile). As long as Rajesh and you know what should you do to reach a PLF of 88%. Considering that Rajesh, Rao, and other leaders along with you had visitied the Chinese plant achieving 88% PLF, I believe that knowledge exists.”
Srinivas: “Yes! (Smiles)”
We concluded the discussion and moved out of his office.
I thought this business was hitting the ball in any direction and placing the goal post around the point the ball crossed the boundary and called it a goal. So they achieved what could be achieved with some random motion. No wonder they were making such hefty losses and the CEO, Vice Chairman and Chairman are having sleepless nights.
I worked with Sanjeev, Rajesh and Rao to set the goals and cascade them to the last mile. Eventually Rao took over as the CEO of the plant and introduced a monthly review process.
In India at least 50% organizations do not have goal setting. It exists only in manuals. People are encouraged to perform their jobs. At the end of the year the achievements of people become goals leading to significantly lower performance. Everyone is rated as high performer and paid out near equal increments and bonuses. This encourages people to do less in the following year and still be rated as high performer, as there is no incentive to out-perform.
© Prashant Srivastava. First published on Blogger - TheOther 2 Thirds. All rights reserved.
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