Strategy and Performance Management at DSM

Strategy and Performance Management at DSM

HRM 538 Performance Management

Using the stages from the performance management process, suggest the key processes that DSM needs to provide within its system in order to successfully link its key success factors (KSF). Provide a rationale for your suggestions.

In 1902, Dutch State Mines (DSM) was founded. In the beginning, it was simply a state – owned mining company. Since being founded, DSM has evolved from a petrochemicals Business Company to a commodity chemicals business company. Now it has established itself as a specialties company. It has an annual net worth of $9 billion, and it is currently active in fields of health, nutrition, and materials. Up until the early 90s, DSM operated with a more traditional planning process which included both planning and budget cycles. Over the course of some years, this outdated process became too much of a routine and was in need of serious correction. From the beginning, it was understood that their strategic development was not up to par and would not be around if things did not change. Therefore, to enhance and improve the quality of strategy development process, a new technique was introduced known as the Business Strategy Dialogue (BSD). This approach led to Corporate Strategy Dialogue (CSD) which proposed the improvement of the corporate development processes. This initiative was part of company’s “Vision 2005: Focus and Value” campaign (Aguinis 2010).

An effective performance management process will form a common ground between an organization’s strategies that assist in achieving those goals. Performance management has established some essential processes that DSM can apply or provide in its current system to ensure that the KSFs of the organization are properly linked. These appropriate methods are:

The first process is planning. It is the step for adapting KSFs of DSM. All employees of a company should decide how the processes should move forward. For this small, sensible and achievable objectives should be created for the organization. Also, a decision should be taken on which resources should be dedicated to which objective (Gale 2012).

The second is the execution stage. Here the planning is put into action, the goals and objectives are decided for the organization. DSM should apply the strategy of observing and also record the progression on implementation what is going on. This process will help the leaders of DSM to know if the plan is being executed in the right way. This process, also helps in modifying the processes or strategies to ensure processes are working efficiently. The next process that DSM should apply is the analysis of the gathered information. Analysis of the accumulate information from various processes will help in preparing information that can be distributed to employees on current progress, what is being successfully achieved and what is not being done effectively. Based upon the prepared information, this process should be applied, as not to create more problems (Prezi 2014). This process is the review of the performance. Reviewing its current processes helps organizations to know how the performance of the organization has met the goals and objectives and enabled them to know which procedure to correct and which to motivate. After the review process, the final process to take into account by DSM is the renewal and re-contracting. This stage uses the insights and information gained from the other processes to set realistic goals for upcoming reviews (Bloemhof 2004).

After a detailed review of DSM case study, we can say that the organization has done an excellent job in applying all processes of performance management. The new process of business strategy development was successful because of the approach that company followed in planning, implementation, analysis, and reviewing the processes. Firstly, the organization should take the time that is needed and perform a detailed review of the processes that are now becoming old and outdated. The implementation was not post-haste but rather step by step and company did it with patience. The implementation stage was completed in different phases over a period of six years starting the first episode in 1994, the second in 1997, and the third and final phase in 2000 (Smither 2009). Organization assessed the business system from a macro as well as a micro level to ensure that the new process will be successful and would be beneficial for the organization from all angles of the business. All business groups participated in the Annual Strategic Review and comprised of a progress report on the implementation of BSD, an update or reassessment of major business risks, an updated sensitivity analysis and updated financial projections.

Select three drivers and examine the central manner in which DSM management has aligned its business strategies to performance management.

A significant factor, in the success of DSM strategic implementation is what it effectively aligned business strategies to performance management. There are some key drivers that help distinguish alignments with an organization. DSM had a big challenge with one of those drivers. It was struggling in the translation of their vision and strategy into clear, understandable measures and goals. To address the issue of alignment within the organization, DSM introduced Vision 2005: Focus and Value (Gale 2012). Company focused on three aspects of business to help with alignment:

Accountability for financial control,

Alignment of strategic business planning processes to develop promise for performance and

Introduced a new financial operating metrics.

With these three aspects, DSM creates an internal value-creation measure that could be easily applied to the business group level and lower levels. The organization also faced a challenge of acceptance of the vision, strategy, and goals among those who personnel who were responsible for implementing them. DSM created Strategic Value Contracts (SVCs) to address this challenge. SVCs forced the initiation of the strategy throughout the organization and all business levels. Another improvement that DSM implemented was incorporating meaningful incentives to encourage employees to develop or deploy sufficient capabilities to achieve set 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 (Aguinis 2010).

Critique or defend DSM’s competitive advantage by using three of the six assessment points from the textbook. Justify your response.

There are some points for assessment points that can help in performing an in-depth evaluation of an organization’s performance management systems. One of these assessment points is organizational precursors. It helps in gathering a baseline measure of current performance management behaviors and to determine what should be emphasized during the training phase of the performance management system (Bloemhof 2004). DSM did a great job in gathering required preliminary information for determining the current status and what was required to be done to achieve the new goals and objectives set. DSM did an extensive requirement study for current situation and the all possible outcomes for the business within the next few years. The company created new strategic approach in 9 months and then applied the same over the period of 6 years in different stages. Programs and policies were introduced to hold accountability among employees and also to encourage compliance with the new business strategy development process in the organization, a new incentive – based compensation system was also introduced. Also, then assessment of the training sessions was done at the reaction and learning levels. DSM could have done a more in-depth training evaluation at the reaction level. Also to overcome the challenge of enforcing the implementation of the new business strategy development process at the business group level SVCs was introduced to hold them accountable for implementing and monitoring the process of BSD.

References:

Aguinis, Herman. (2010). Performance Management, 3rd edition. Prentice Hall

Bloemhof, M. (2004). Strategy and performance management at DSM. Retrieved from

http://content.xanedu.com/cases/insead/5165.pdf?ID=0.00951426716438064

Gale, S. F. (2012). How to build a performance management program. Retrieved from

http://www.workforce.com/articles/how-to-build-a-performance-management-program

Prezi. (2014). Copy of DSM strategic management. Retrieved from

https://prezi.com/u3vctmgqbqsl/copy-of-dsm-strategic-management/

Smither & London. (2009). Performance management: Putting research into action. San

Francisco, CA: Jossey-Bass.