1.0 Introduction

Performance management is essential to organisations as it helps them to align their operations with the strategic. Strategic performance management provides a clear plan on how the organisation can attain its objectives by indicating the objectives as well as the metrics to be used to determine whether the objective was attained or not. It helps organisation to keep track of their performance and identify issues that could hinder attainment of their strategic goals.  The success of any enterprise lies in its capacity to undertake performance management in order to evaluate the business performance against the set standards and identify whether the enterprise attained its goals or not. The company of interest in this report therefore is Wahaha Group which is a leading beverage and nutrition food manufacturing company in China. The company headquarters are located in Hangzhou and currently employs over 6000 employees (Li et al, 2011). The company sells other products that include bottled water, milk flavoured tea, milk products, canned food and flavoured beverages (Wahaha Group, 2017).  The main stakeholders of Wahaha Group are the shareholders who include Chinese government, the founder and employees who have some stake in the company. The Wahaha Group are in business in order to meet their shareholders aim of expanding their operations and increasing dividends for the shareholders. The aim of this report is to critically analyse performance management strategies employed by Wahaha Group and make recommendations on how the company can improve its performance management strategies. This report is structured in four parts. After the introduction, the second part of this report explores the literature review used in performance management. The third part is the methodology and the fourth part discusses the findings concerning the performance management methods used by Wahaha Group. It also includes conclusion and recommendations.

 

2.0 Literature review

Strategic performance management is the process in which an organisation matches its resources and capabilities with the needs that are in the external environment in order for the organisation to have competitive advantages (Henry 2011).Therefore strategic performance management is the process in which organisations align their resources to the market needs so that they can identify and develop competitive edge over their competitors. Strategic performance management enables firms to make informed decisions that can help to improve firm’s performance management.

Strategic performance mostly focuses on the tools that can be used to measure performance in organisations. Kolehmainen (2012) has noted that there are various tools that can be used to measure performance in organisations and they include tools such as KPIs and Balance score card. The KPIs highlight the most important characteristics and aspects of the business which can influence the organisation’s success.  There are no standard KPIs because KPIs differ according to the nature of organisation because different organisations have different critical success factors (Parmenter, 2015). The focus of KPIs is to assess the performance of critical success factors of the organisation. The KPIs used by most businesses include customer satisfaction, revenues, and employees performance. However, KPIs are limited by the fact that they usually addresses one or two critical success factors and ignore other factors and issues which are necessary to the performance of the organisation in the long term (Wilkes Yip and Simmons, 2011).

The other tool that is used in the strategic performance management is the balance score card. These tools indicate that the organisation should assess its performance on four main areas which are the most critical aspects of the organisation and they are the employees, customer satisfaction, finances and internal processes of the organisations (Certo and Certo, 2009).  However the main challenge with balance score card is stakeholder acceptance because all of stakeholders have to be involved in its success ad it is always a challenge to have all stakeholders accept the challenge (Henry, 2011).

3.0 Methodology used

The report uses primary research to investigate the strategic performance management sued in Wahaha Group. When using primary research method there are two methods that can be used which are the interview or questionnaire instrument (Johnson, Onwuegbuzie & Turner, 2010).  The interview tool was preferred in this research because the nature of this research was exploratory and hence a lot if in-depth information was required in order to identify the strategic performance strategies used by the organisation (Goncharuk, 2014).. Ten respondents will be chosen for the interviews and each of the respondents will be representing the various departments in Wahaha group which are the human resource management, manufacturing, marketing and sales, finance department, logistics and procurement department and research and development departments. The senior managers of each of the department will be selected to participate in the study. The departments were chosen because they had insider knowledge and first hand experience on how Wahaha group carried out its strategic performance management. They also had knowhow on the advantages and demerits of the various strategic performance tools (Denscombe, 2010). The limited number of participants was selected because it was not possible to interview all stakeholders in Wahaha group.  To collect the data the researcher first wrote to the management of Wahaha requesting for the interviews. Once permission was granted, the researcher sought for Wahaha group’s departmental executives and requested for a phone interview which was o be conducted at the executive’s convenience.

4.0 Data analysis findings

4.1 Strategic performance management in Wahaha Group

Strategic performance management focused on aligning the operations of the company with the strategic objectives of the organisation. To investigate whether there was strategic performance management. The report asked the interviewees to indicate the tool which was used by the company and highlight the key areas which were subject to strategic performance management. The interviewees indicated that the main tool that was used in strategic performance management was the Key performance indicators.  The main area of focuses was on the financial performance, employee performance and operational performance (Slack, Chambers and Johnston, 2012).

The tool was used to assess the revenues of the company and the expenses of the company. When assessing finances using the KPIs, historical financial data was used to assess and compare current performance. It was necessary in determining whether there improvements in financial performance (Dossi and Patelli, 2010).

To assess employee performance, the interviewees indicated that employee performance was mostly measured through productivity based measures where employees performance was assessed by examining the number of quantifiable results produced by the organisation.

However, these key performance indicators were not fully effective because they did not take into consideration the external business environment especially customers who were crucial component of the strategic success of the business (Li et al, 2011). Failure to assess customer satisfaction meant the company risked producing products that could not satisfy customer needs. Also the metrics mostly focused on employee productivity but not employee satisfaction which could lead to employee satisfaction because the performance did not take into consideration employee satisfaction with their jobs.

 

4.2 Performance management activities and environment

Wahaha Group is a leading beverage and nutrition food manufacturing company in China. The company main activity is the manufacture of its own beverages which include Wahaha Smoothie, Carbonated beverages and Nutri Express. The company operates in the food and nutrition sector Other than this the company sells other products that include bottled water, milk flavoured tea, milk products, canned food and flavoured beverages (Wahaha Group, 2017). The company’s other main activity is the sales and distribution of food and nutrition products throughout China. The company works in collaboration with wholesalers and retailers to distribute its products throughout the country.

There are four performance management environments which are aspirational, partitioned, efficient and connected contexts. The aspirational context is usually people oriented context and its emphasis is on people performance more than the process. Aspirational contexts focus on empowering the employees and people who work within the company by creating a conducive work environment that enables employees to be fully engaged in their work. However, it has little emphasis on processes. It is considered appropriate for people oriented services such as the hotel sector. The other context is the partitioned context where performance management does not focus on either the process or the people (Henry, 2011).  The focus of portioned is unit results. It works in instances where business model is simple and does not involve a lot of stakeholders.  The other performance management environment is the connected environment. This environment focuses on assessing the performance of both the people and the processes. It works in organisations that value customer focus and information based decision making.  The fourth performance management context is the efficient context. This context emphasises the process more than the people (AIPM, 2011). It works in instances where is necessary to improve processes cut on costs and increase efficiency.

The most ideal performance management context for Wahaha Group would be the ideal context. This is because Wahaha Group products and services need both process and people for the company to have competitive edge in the nutrition food product segments. The business requires people aspects of performance management because nutritional foods are highly regulated foods products which require handling with care. In addition performance management is essential to Wahaha group to enable the company manage and optimise human resources. According to xx the human resources are a special component in the industry because there is a lot of competition for experienced employees in the nutritional sectors especially from multinational companies such as Danone which are strong competitors of Wahaha. Therefore to keep and retain talent that is crucial to the company, the company has to ensure that its strategic performance management takes into consideration the employees.  Without appropriate strategy in place, it would be very difficult for the employees to provide foods with high quality standards. In addition efficiency is required in production to ensure that foods products are produced on time and at the low costs. Nutritional food sectors has a lot price wars from competitors which makes it necessary for companies such as Danone to have an costs efficient operations so that they can compete with the competitors on the basis of price. The company has to keep its costs low and this can only be done by ensuring that the performance managements takes into consideration the processes especially internal processes such as manufacturing, logistics and sales and marketing.

The performance management context of Wahaha Group Company was noted to be more focused in the process rather than the people. The Company’s performance management mostly evaluated the manufacturing processes and how the manufacturing processes can be improved in order to manufacture more products at a lower cost and at a higher quality (Li et al, 2011). In line with the efficient context, the company has invested in research and development as well as in the latest technologies as way of enhancing the production processes. According to the interviewees the performance management of Wahaha Group was measured based on the key performance indicators which were finances especially costs, employee productivity and efficiency of the processes especially production machines.  The interviewees identified that there was little on emphasis on employee satisfaction or customer satisfaction. This meant that the performance management of Wahaha Group fell short of the ideal context. It failed to focus on people aspects of performance management yet people were instrumentals in ensuring that the company had high standard nutritional foods that could be trusted by the customers. According to Wilkes, Yip and Simmons (2011) this was a challenge to the company has it made it difficult for the company to increase employee productivity because the employees were not satisfied.

4.3 Performance management to Improve Decision-making of Wahaha Group

4.3.1 Business strategy of Wahaha Group

There were three business strategies that could be applied by a company in its work and these were cost leadership strategy, differentiation strategy and focus strategy (Certo and Certo, 2009). According to the interview, Wahaha Group used cost leadership strategy. The company endeavoured to provide beverages at the lowest cost possible to its customers. The company also endeavoured to provide nutrition products at a lower cost than the competitors in the same market (Duaxe Consulting, 2016).  The low costs strategy was attained through companies capacity to automate most of the manufacturing processes which lowered the labour costs. In addition the company has an efficient and effective relationship with suppliers which enabled the company to obtain raw materials at lower costs compared to the competitors. This has been advantageous to the company because it has improved its profits and markets share.

The company formulates its strategy by first identifying its resources, strengths and weaknesses and then compare them to those of the competitors in the market. In the case of Wahaha Group the company assessed its strengths and weaknesses and then compared them with those of competitors such as Danone as way of identifying its resources (Li et al, 2011). The second step in the strategy formulation process was identifying the firm’s capabilities (Porters, 2011). In the case of the Wahaha some of the things that the company had were financial resources (Wahaha Group, 2017). The third step is that of appraising rent generating capabilities and resources (Goncharuk, 2014). It entails evaluating whether the capabilities had the desired return on investments. This included forecasting the demand and cash flow to ensure that the capability and the opportunities were profitable to the company. The fourth step is the selection of the business strategy. This is the strategy that can help the company exploit its resources and capabilities. In the case of Wahaha the best strategy that has been identified is the low cost strategy. The fifth step is to identify the resource gaps that needed to be met (Porter, 2011). This included investing in equipment upgrade, software upgrade and employee training to help the firm upgrade its capabilities and fill the resource and capabilities gaps identified through the performance management processes.

 

 

4.3.2 Performance management objectives

In order to determine the success the performance management of Wahaha Group the following were the performance management objectives:

1. To reduce manufacturing costs by 10% within the next one year (cost)
2. To increase responsiveness to customer issues by 5% within one year (dependability)
3. To increase distribution of Wahaha brand products by 5% in the next one year (speed)
4. To increase product quality standards by 5% within the next one year (quality)
5. To increase product innovation by 10% within the next one year (flexibility)

In regard to whether the performance matched the expectations the interviews indicated that the company had managed to meet expectations on costs as the as the company expected to cut costs by 20% but had cut more than 25%. The company also had good speed actual performance on its ability to deliver products to customers conveniently was 30% while expected performance was 15%. However the expected performance did not match the expectations in regard to quality as the actual quality was lower than the expected quality. Also the flexibility had lower actual performance compared to the expected performance dependability was the only metric where the expected performance matched with the actual performance.

 

4.3.3 Tools to inform its decision-making through performance

The KPI tool was noted that as the tool used to measure performance in Wahaha group. The KPIs helped the company to identify its performance and therefore helped the management to make informed decisions regarding areas of operation where prerace should be improved or maintained (Certo and Certo, 2009).

The KPI tool was advantageous because it helped the company to assess the performance of critical success issues of the organisation. The KPIs tools helped the business to focus on the most crucial aspects of the organisation by showing (Slack, Chambers and Johnston, 2012). For instance the critical success factors for Wahaha Group were revenues per subsidiary, number of manufactured products, time taken in the manufacturing as well as cost saved. The KPIs were considered to be advantageous to the company performance management because they helped to identify problems in the company’s processes.  In addition KPIs provided the company with feedback regarding its revenues, processes and level of efficiency in its production The KPIs also helped to identify cost cutting opportunities by tracking expenses to ensure costs were low and that processes were operating optimally (Wilkes, Yip and Simmons, 2011).

However, the KPI tool was limited by the fact that it only focused on the results only. The tools was not effective in measuring the processes that led to an outcome which meant that it did not take into consideration the environment in which the employees wore working in and resources availed for the productivity. The tool was also concerned with operational issues such as productivity but not on customer oriented issues. Despite this limitation the tool was effective for companies which used low cost strategy because it did not use a lot of resources (Parmenter, 2015).

 

4.3.5 Areas of improving Wahaha Group Key performance

There were two critical areas which Wahaha Group needed to improve on in order to meet its performance objectives. The first area was that of the performance indicators were very broad. According to the interviewees the KPIs only assessed the revenues of the company as whole as opposed to specific aspects of the company such as subsidiaries products and unit performance.

The other challenge was that KPIs communication. Sometimes the managers failed to provide the employees and other stakeholders with the feedback and suggestions for improvement. This meant that event after identification of performance there was no improved performance due to lack of communication (Dossi and Patelli, 2010).

The other challenge was lack of cooperation from all stakeholders. Employees whose department performance was part of KPIs management felt unfairly targeted. This created animosity and lack of cooperation among employees (Certo and Certo, 2009).

4.6 Conclusion

4.1 Critical evaluation of the impact of performance management

The company was identified to have operated in an efficient performance management environment where much emphasis was attached to process and production rather than on people. Key performance indicator tool was used in performance management. The tool was preferred due to its capability to measure key aspects of the company performance such as revenues, number of products manufactured, and new product sold. However, this tool omitted other important components of performance such as customer satisfaction processes, and employee performance. The study also assessed how performance management affected decision making process of Wahaha. The report indicated that the performance management of Wahaha affected by providing information on areas of the company which were essential to the success of the company. However there are problems which were identifying with use of KPIs in performance which included lack of feedback from the supervisors and lack of cooperation from employees who were subjected to performance reviews.

4.2 Recommendations

Despite the Wahaha Group’s use of performance indicators to measure performance management and therefore improve its decision making, there are areas where the company should endeavour to improve its overall decision making. The performance indicators of Wahaha Group could be improved. Some of the areas that could be improved was revenues aspect of performance indicators, instead of assesses revenues from subsidiaries, the company could assess revenues based on the products produced by the company.  According to Goncharuk (2014) one of the key performance indicator is the product performance which evaluated the performance of the company based on the sales made per product. This could help the company to identify the products which had high receptivity in the market as well as products which had high consumer demand.

The other aspect which needed to be improved in the performance management was that of the communicating the performance feedback to the relevant stakeholders. According to Kaplan and Norton (1996) one of the aspects which the company needed to improve its performance management was employee performance and this had to be achieved through effective communication to employees about their performance.  In addition all stakeholders should be involved in the performance management. This includes involving customers in the performance by asking them to review products and services offered by the company (Duaxe Consulting, 2016).

 

4.3 Implementation plan for any changes and improvements

Recommendations	Actions	Schedule	Resources required
Aligning the performance objectives with the business strategy of the company	Training the members of the board about the company’s business strategy and how they can use business strategy to set performance objectives	November 2017	Board members and stagey consultants
Train managers to give feedback to employees	Have trainings for the senior executives on communicating feedback	December 2017	Performance management experts, finances to cater for the training
Seek cooperation of all stakeholders	Incorporate the customers feedback in the quality assessments to ensure that products are satisfactory to customers Include all employees in performance management	January 2018 – February 2018	Finances for quality assessments and  improvements Website where cusoers can provide feedback

 

 

 

 

 

 

 

 

 

References

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Denscombe M. (2010) Good Research Guide : For small-scale social research projects. 4thedn. Berkshire: Open University Press.

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Parmenter, D. (2015) Key performance indicators: developing, implementing, and using winning KPIs. London: John Wiley & Sons.

Porter, M. (2011) ‘Creating Shared Value’, Harvard Business Review, 5(11), pp. 212-215.

Slack, N. Chambers, S. and Johnston, R. (2012) Operations Management. 7thedn. Harlow: Pearson Education Ltd.

Wahaha Group. (2017) About us. Available at: http://en.wahaha.com.cn/aboutus/index.htm (Accessed 10 October 2017).

Wilkes, J. and Yip, G. and Simmons, K. (2011) ‘Performance Leadership: Managing for Flexibility’, Journal of Business Strategy, 32(5), pp 22-34.