Practitioner Interview: Frank Hajdinjak
In 2018, the Performance Magazine editorial team interviewed Frank Hajdinjak, CEO at E.ON Romania. His thoughts and views on Performance Management are presented in detail below.
I think that […] everybody should understand that in today’s business environment, it is not about choosing between creativity (with less rules) and numbers (performance management systems, strict analyses and so on). The future belongs to the ones which can have both and can make them enable each other.
- Which were the key trends in Performance Management, from your point of view, as seen in 2017?
For many businesses, last year was marked by an increased effort to put the customer centricity philosophy into practice, as a means to gain competitive advantage. Well, this trend is not new, but in 2017 the rate and the speed of changes determined by it and other factors, like digital transformation, grew significantly. And this impacted the approach and use of performance management. Nowadays, to have visibility and awareness throughout the entire organization on what determines its success is critical.
In my opinion, one important trend is changing the focus of PM from individual to teams. Team work and autonomous teams allow organizations to be more agile, to learn and quickly adapt themselves to the fast-changing environment. The performance management cycle is now shorter and it is enhanced by the use of Operational Excellence methodologies, Design Thinking and Agile Way of Working. For instance, we now have performance dialogues on a weekly and monthly basis, depending on the management level. Each discussion is held around KPIs updated in real time, and those related to customers are always a priority.
Digital transformation is another major trend I want to point out, as it transforms industries, markets and our way of living. Many companies are using software platforms to boost the performance management process. We are using the Balanced Scorecard methodology with the support of an EPM platform, which helps us not only to link strategy to operations, but also provides us with the necessary framework for frequent meaningful real-time discussions, immediate feedback, problem detection and actionable insights. Last but not least, it allows our employees to interact, learn from each other, find mentors and solve problems.
- What are your thoughts on the integration of Performance Management at organizational, departmental and employee level?
I think that a successful organization needs employees that clearly understand not only individual and team objectives, but also how they fit in the strategic business objectives, so they can swiftly adjust course as business needs evolve. An integrated PM has a strong motivational dimension, as each employee can see his/ her contribution in achieving company’s objectives, and they are recognized and rewarded accordingly.
In our company, the project for implementing the Balanced Scorecard, which is our PM IT tool, is part of the Cultural Change Programs along with Operational Excellence and Customer Experience. In this way we ensure an integrated approach in our business in order to achieve our aim – to be a customer centric, performance driven organization, which relies on leaner and more efficient processes.
Why Cultural Change Programs? Because, in the end, it’s about changing the mindset of our employees at all organizational levels – to focus on what our customers expect, to make our processes as lean as possible in order to be able to deliver on these expectations and last but not least, to track the performance and see where we stand from a larger perspective (customers, employees, cost and processes).
All these need to go hand in hand if you want to make a change in the way of working. And let’s face it, no long term profitability can be achieved without employees who have a clear understanding of their role and how they can contribute to the process. Also, by having BSC (Balanced Scorecard) in place, employees benefit from improved transparency, they can learn from each other by sharing best practices among peer teams and also a competition between teams is encouraged.
- Which will be the major changes in managing performance, in the future?
As we can see, business environment constantly changes at a more increasingly speed. Performance Management will accompany these changes, in order to better serve the business needs and the workforce needs as well. It will focus more on enabling better decision making at all levels in an organization in order to create more value at a constant pace.
Digital transformation and new technologies will impact the PM more and more, because the organizations need them to help navigate through the complex, volatile and uncertain world, and focus on what is essential to reach their goals.
So, in my opinion, the classical PM process will be switched to a more agile approach, which will integrate different methodologies and tools, to help the management of the organization empower teams and employees to become more autonomous in managing and improving their performance. Frequent fact and data based discussions, coaching and constant feedback will be at the core of PM. In some organizations these changes have already begun.
- What aspects of Performance Management should be explored more through research?
The emerging and developing of new technologies, like Blockchain and AI, are already impacting our business environment and will affect future PM development. I believe that this aspect should be explored through research.
There is also room for improvement through research for PM practices aiming at developing and strengthening talent teams, as creativity and innovation are essential ingredients of success today and will also be in the future.
Considering the trends in PM and the necessity of finding solutions to better manage the performance in the VUCA (volatile, uncertain, complex and ambiguous) world, I think that it is worthwhile to also explore more on how the implementation of a coaching-based performance model into organizations can affect their bottom line.
- Which organizations would you recommend be looked at, due to their particular approach to managing performance, and their subsequent results?
Enhancing performance management begins with finding an effective way to define and measure organizational-performance metrics, and by using processes that empower people to do their best work.
In today’s customer-centric environment, more likely that performance can be defined by the way a company can offer a wow experience to their customers and potential customers. This means that an organization requires a certain level of flexibility and agility to meet the higher and higher expectations of the customers.
In this context, I believe that there are some top performers in their domains which changed or adapted the business models in order to offer an outstanding experience for customers and also for their employees. In this regard, I can name: Netflix, Amazon, Zappos, Google or ING for the banking sector, etc.
In business there is no room for modesty, therefore I believe E.ON has gained its place considering the transformation we are going through, from an utilities’ company to an innovative organization.
- Which of the existing trends, topics or particular aspects within Performance Managementhave lost their relevance and/or importance, from your point of view?
Overtime, financial performance has been the only management driver and the key topic of all steering discussions and there are still companies managed in this manner. But practice has proved that it is not enough. Employees’ performance, operational processes’ performance and customers’ satisfaction and loyalty should be in focus, as the profit is the result of all business attempts. In fact, companies should balance their efforts to develop on these four perspectives: learning and growth, internal processes, customers and finances.
Other element of PM that I think is constantly losing ground is the annual individual performance cycle appraisal. This process alone is no longer enough by itself. As I have already mentioned, companies need to become more agile, more sensitive to market changes and this is not possible if employees receive detailed feedback on their performance only once per year. In the current context, even the individual objectives have to be reviewed more frequently, and with the help of constant feedback and coaching, employees’ knowledge level increases and their performance implicitly.
- Which are main challenges of Performance Management in practice, today?
Normally, Performance Management shares a part of the main challenges of the businesses. I would begin with the need for PM processes to cover all the relevant perspectives of the business, allow flexibility, while ensuring the alignment between strategy and execution. And all of these processes must be correlated with markets’ dynamics.
Another challenge we faced was making people understand that performance management system is not designed to punish the low-performers, but on the contrary, provides a tool which helps discovering the areas/ processes where there are problems and need to be reviewed in order to be improved. It is not a tool for top management only, everybody, at all levels shall own their KPIs and performance dialogues.
In this respect, the organizational culture is very important, as it is a very powerful enabler, to make people change the way they work and challenge themselves to perform better.
- What should be improved in the use of Performance Management tools and processes?
As we become more digital, PM should adapt quicker to this trend using IT tools to collect real-time data, in order to help the steering process. Thus, PM tools need to be connected with the other enterprise management platforms in order to reduce human intervention and time assigned for data processing.
Moreover, PM systems should benefit more from the Artificial Intelligence, both for improving customer support and workforce management. As I mentioned, frequent fact and data based discussions to detect and solve problems in due-time, coaching and constant feedback should become a routine in this field.
- What would you consider as a best practice in Performance Management?
When talking about best practices in PM, I am thinking of the process of cascading vision & strategy from top management level to the individual one, in a manner that ensures both employees and managers’ buy-in. It provides a good framework and right directions for daily activities. Still, one must make sure it is properly linked with the needs of the organization – if the monitored KPI’s are poorly selected or not relevant, it can easily become an useless exercise.
Performance Management, in order to be successfully deployed, must be backed up by a solid culture. In our case, when we introduced Balanced Scorecard, the success factor was that we made sure the organization is prepared for the change. Having Operational Excellence instruments in place (e.g. Performance Boards and weekly Performance Meetings), it was very easy to transform our organization into a performance driven one, from the frontline to the Top Management.
In general, the implementation of Lean methodology (OE) and also implementations of BSC have a success rate of less than 50%. We introduced Lean 5 years ago and Balanced Scorecard 3 years ago. Due to the fact that we successfully made them work together and enable each other, we are now able to further build upon this basis – we work now with Design Thinking methodology, we are currently running an Agile Transformation program, we even set up a new 100% digital supply company, E.ON Flash. They all rely on a strong Performance Management system.
More than this, we have introduced in the Balanced Scorecard the 5th perspective, the HSE perspective; because we consider that the safety of our employees has top priority, beyond any business strategy. I know that usually the safety perspective is included in the processes part, but I personally wanted to emphasize the importance of Safety for everyone in E.ON Romania. Your performance management system tells everybody in the company and outside it, which things are really important. If an objective is not outlined there, then clearly it is not that significant for anyone.
- Which aspects of Performance Management should be emphasized during educational programs?
On educational level, the switch from objective-based performance to value-based performance should be emphasized. We should learn how to invest our “resources”, not only to “check” activities, but also to create value.
It is also important to inoculate the culture of continuous improvement in all life aspects. Even if you have the best KPIs, I think that a very important aspect is how you discuss them with your team, how you communicate the objectives, the targets and the achievements, how you can make everybody contribute if there is a gap in performance. Educating employees to have proper performance dialogues has the same importance as choosing the right KPIs to monitor.
I think that another aspect is to make everybody understand that in today’s business environment, it is not about choosing between creativity (with less rules) and numbers (performance management systems, strict analyses and so on). The future belongs to the ones which can have both and can make them enable each other. You need to work with the customer in a creative way if you want to increase profitability.
You need to focus your creativity on making those products that your analysis of customer insights tells you that are requested by the market.
For example, at E.ON Romania, we train our employees in Design Thinking, to make them more aware how to develop things that are really needed by the market. Numbers can only show you if you go in the direction that you have chosen, but employees need also to be trained to find easily the right objectives and set the proper targets.
- What are the limits that prevent practitioners from achieving higher levels of proficiency in Performance Management?
I think that these limits are generated by the current PM systems and practices, leadership styles used and the organizational culture in place. Not having access to relevant research findings and best practices in the field usually hinders the practitioners from achieving higher levels of proficiency in PM.
Also at leadership level, we as leaders need to make the step back and empower our employees to own the numbers, to find root causes for problems that are shown by the KPIs, to discuss their performance.
When I have Performance Dialogue at Board level, I try to talk as little as possible, not to give advice or jump to solutions, but ask “why”, challenge solutions, offer support, if needed.
- What is your opinion on the emerging trend of measuring performance outside working hours, during our private time?
I find that measuring performance during my private time is motivating and it is helping me to take a better care of my health, but I don’t let this rule my life.
- What personal performance measurement tools do you use (i.e. gadgets that track blood pressure, steps taken, heart rate, burnt calories or tools that help with one’s finances or personal skills)?
I am wearing a device for measuring blood pressure, heart beat rate, number of steps made and other similar metrics.
Specialization Specific Question
14c. Practitioner Point of View: Which were the recent achievements in generating value from performance management in your organization?
Our organization operates in a very competitive and complex environment. Using our performance management system helped us to have the whole picture of the business and to detect both problems and opportunities in due time. For instance, by tracking and analyzing what drives our customers’ satisfaction, we were able to find solutions to meet their expectations.
One example from our organization is E.ON Flash – our new 100% digital gas and energy supply company. By understanding our customers’ needs for digitalization, information and transparency, we came with a brand new concept of handling energy anytime and from anywhere – without paper work or any ques. As a matter a fact, as a recognition for our innovative processes, E.ON Flash was included in the top of innovative companies in Romania at Energynomics Gala Awards 2017.