Management Evaluating Management Practices through Performance Management The management practices deployed by an executive and the effectiveness

of these practices can be analysed through Performance Management System and other operational data. Performance Management System works efficiently when all the elements upon which the management practices apply (including employees, companys financial performance and employee satisfaction) are taken into consideration in an appropriate proportion. Performance management is a complete process which throws light on the overall organization performance to the departments and at the employees level. In addition to this, performance management also focuses on the processes which are involved in product development or service delivery of an organisation. Prior to this, the swing in performance management to the employees from organisation structure was proposed by a researcher, as an approach to achieve better performance (www.grantadesign.com, pp. 1-2). The Employee Performance Management system is a comprehensive method. This method is based on the performance of the workforce and how it leads to achieving the organizational objectives at all levels. The underlying concept of performance management is to align the organizational objectives, with employee skills and capabilities. Moreover, performance management system also emphasizes on the improvement and development of the overall organisational system. In frequent instances, performance management is confused with performance appraisal; however, the fact is performance management is an on-going system of to measure the effectiveness of organisations management practices in achieving the strategic objectives set forth by the management. According to researchers, there are only a handful of organisations

which tells their employees about their strategic objectives. In most of the cases, performance management is used to analyse the effectiveness of management practices in achieving the objectives which the organisations set. The actual theme is performance management, no matter, whatever business the organisation is engaged in. For instance, in quality based organisations, the effectiveness of management practices is measured by how successful these practices remained in fulfilling or achieving the organisational objectives, instead of establishing quality standards. Rewards and recognition strategically goal setting, individual accountability and developing performance management system, are amongst the major elements used in performance management and are considered for identifying the effectiveness of management practices. Apart from this, the performance management, by determining the degree of involvement of employees, management, customers and suppliers, identifies the effectiveness of management practices set by an executive. The effectiveness of management practices depends on how well the manager understands his or her strategic objectives and how well the manager aligns these objectives with the skills of the employees. This entails telling employees what is expected of them and how they must fulfil their job responsibilities (Kuei, et al, 2001, pp.864-872). The manager, who identifies performance elements, makes easier for employees to know what they are supposed to do and how they should perform. Although, performance elements for each organisation may vary, ranging from objectivity, productivity, effectiveness and so forth. The performance standards measured through performance management include various objectives, which the employees must attain. The performance standards which are attainable, calculated, challenging and fair, included in the performance management system, also gives a clue of effective management practices. According to researchers, if the following elements are

included in the performance management system than effectiveness of the management practices can be identified. These elements include performance elements, critical and non-critical elements. Critical elements or activities are those for which an individual is assigned for, noncritical are those which have no direct impact on the performance measurement of employees, but play a crucial role while performers perform in some group or team activity. The basis of additional performance management is only on group performance and not on accountability for every employee. Managers who are committed to having outstanding performance have a seemingly strong association with sound management practices, and thus, it is rational to expect every organisation to keep effective management practices on the top of their list of priorities. The tactics of effective management practices are available in a wide array and can be accessed through a number of channels. Despite this, a large number of firms remain unsuccessful in deploying such management practices with which their employees can easily align themselves. A group of researchers has conducted a study to identify the causes of this failure by evaluating the organisations perception on their own performance. The subjects of this study were asked to evaluate the overall performance of their firms management on a scale of one to five. To evade false reticence, the personal performance of the subjects was not included in the calculation. The answers of the subjects, on this question never had a correlation with the researchers score of management practice or their own organisations performance. The situation remained unchanged in every region; regardless, whether the firm is a poorly managed or a decent one (Pugh, 2001, pp. 75-80). The researchers found this dearth of self-awareness as unusual. The researchers concluded that this implies to the lack of interest firms have in comparing their management

practices with those which are acceptable or even with the firms operating in its particular sector. As a result, of this, a number of organisations miss out on numerous chances of developing and improving their organisations and the reason behind this is simple and clear that they do not understand the poorness of their own management practices (Casadess, 2005, pp. 345-357).

Management Practices at Rolls Royce and their Evaluation Based on Various Models The strategy of Rolls Royce is to: 1. Invest in technology, capability and infrastructure. 2. Grow market share and installed base. 3. Develop a competitive portfolio of products and services. 4. Capture substantial aftermarket service opportunities 5. Address four global markets. To address these strategic objectives, Rolls Royce has established various management practices. Rolls-Royce's key metrics for operational performance are Quality, Cost and Delivery. In a mature and consolidating industry, it seeks to retain customers, as well as do so profitably. Therefore, the operational objectives for a supplier are customer response oriented (quality and on-time delivery), as well as efficiency oriented (product costs and labour productivity). Given the fact that the aerospace suppliers compete on these parameters, the operating model is designed to drive forward to excel at these operational objectives (Lazonick, 2005, pp. 3-25). Rolls-Royce operates with an engineer-to-order business model, and its supply chain is geared to support that product manufacturing and delivery structure. Using Simchi-Levi's model of push versus pull based strategy, Rolls-Royce uses a pull-based strategy since it operates in an uncertain demand environment in its orders products, and they each engine produced is one of a

kind, with no mass production of a particular design. The strategic positioning of Rolls Royce ensures minimal investment of capital and reduces the capital at risk in raw material and workin-process inventory, which is also assisted through the use of JIT principles as well as through a reduction in need by shortening manufacturing lead times (Kingsley, 2000, pp.61-63). The assembly and testing cycle time for an AE 3007 engine was reduced from 13.8 days in 2000 to 1 1.5 days in 2001 and to 6.5 days in 2002. The quality, delivery performance and customer satisfaction improved while inventory fell significantly. Rolls-Royce shared the resulting monetary benefits among managers and workers, creating a sense of responsibility and ownership among workers, thus setting in place incentives for a virtuous cycle of continuous improvement. Rolls-Royce's primary supply chain initiatives 40-day Engine is a key exercise that focuses on quality, cost and delivery. It has the following six objectives: 1. Simplify the gas turbine as a product, which would also simplify its manufacturing, impacting quality, cost as well as the ability to deliver on time. 2. Synchronize the supply chain activities across the organization so that all departments execute to a common plan. 3. Manage the supply chain at the correct level of detail (choosing what to manage). 4. Reduce variability in manufacturing and supply chain processes. 5. Implement pull signals throughout the supply chain to manage materials in the product flow line.
6. Optimize the entire value stream from suppliers to customers, so as to meet the common

supply chain goals i.e. what is needed, where it is needed and at what price is it needed (Tiwari, 2005, pp. 15-25).

These steps strongly impact the quality, cost and delivery measures. Other initiatives such as the Rolls-Royce Production System are also designed specifically to improve these parameters. Using Hammer's model to understand the metrics, that are important to Rolls-Royce, the role of the supply chain in delivering to these metrics, and, therefore, to understand the role of these objectives on its strategy, it is clear that the company's operational excellence efforts maximize the activities related to quality, costs and delivery. As a result, Rolls-Royce has been able to maintain as strong a supply chain as any in the industry and has been able to compete and gain market share by strengthening its capabilities to perform well on these measures. The role of business practices that impact the strategy, operating model and operational objectives as can be understood by studying the key business initiatives and practices at RollsRoyce, and how they impact its operational objectives. Using Porter's model to understand the unique set of activities that create a competitive advantage for Rolls-Royce, we study the role of business practices in fulfilling key operational objectives. Low labour costs and ability to expand or contract the labour force in accordance to production levels is a key element of having the flexibility to react to a cyclical market while minimizing costs. The labour cost share of total costs depends on the complexity of the structure and the equipment being used. The companys focus on labour flexibility, because a lack of restrictive labour laws and contracts, is considered a competitive advantage (Lazonick, 2002, pp. 34-40). Rolls-Royce has a policy to outsource 70% of its manufacturing. That ensures that it only keeps the highest value added operations in-house. This enables it to achieve highest returns from its expensive labour force, while outsourcing, low value manufacturing to suppliers that have lower labour costs 106 to reduce its workforce. The company has been able to reduce

employee base from 43,300 in 2001 to 36,100 by the end of 2003, while increasing revenues per worker from $203,000 in 1999 to $280,000 by the end of 2003. It has also been negotiating with its unions, to allow the flexibility, to react to demand changes. Therefore, Rolls-Royce is making its supply chain lean and flexible to compete well on this key parameter. Supplier Network Management Rolls-Royce has among the best supplier management practices in the industry, and it considers itself a pioneer in the field Supplier involvement in product design and development. Rolls-Royce integrates key strategic suppliers early in the product design and development phases to ensure that maximum value is delivered throughout the product lifecycle. Strategic collaborations with suppliers are managed by 'System Integrators' at Rolls-Royce who are at a high level of management hierarchy. Continuous improvement in supplier base: Rolls-Royce establishes joint-targets (such as 7% annual cost reduction goals), and then institutes rewards when the goals are met. These rewards include benefit sharing schemes which focuses of creating win-win situations and further incentives to improve. They also ensure that lean principles are continuously being practices and improved upon by using metrics to drive network-wide performance, including its own. This practice further drives collaboration and sharing of risk with RRSP, and makes more capital available for investment in its suppliers in a virtuous cycle of further integration with suppliers. To summarize, Rolls-Royce competes not just with its internal operational capabilities, but, also leverages a symbiotic management structure with the capability of its suppliers. It has learned new principles, techniques and practices from its collaboration with MIT's Lean (www.supplychainview.com).

Aerospace Initiative from benchmarking against its competitors and other industries such as the automobile industry, as well as its suppliers: It has used this knowledge to design business practices that fit well with its business strategy, its supply chain operating model and key operational objectives. These initiatives have had a positive impact on its enterprise-level performance in the recent years, as well as on the performance of its supplier network. The results of these improvements are on-going and are expected to continue in the future. Indeed, Rolls- Royce has demonstrated its competitiveness by gaining market share in a mature industry since the late 1990's by using a variety of operational techniques and innovative initiatives that have made its supply chain excellent. Keeping into consideration the agency theory, the establishment managers of Rolls Royce must have led to a waste of the organisational resources, instead of leading the organisation towards superior performance.

Strengths of Management Practices of Rolls Royce Strong margins Because the organisation has aligned its strategic objectives with the employee capabilities and skills, it has been successful in generating high profit margin since the last few years. From the period of 2002, the annual operating profit of Rolls Royce increased 42.5 per cent moving from 168 million in 2002 to 692 million in 2006. After that, the companys profit started to grew with a net profit margin and average operating profit reaching up to 5.3 per cent and 7.3 per cent respectively. Thus, these higher profit margins and strong financial performance of the company reflects the efficiency of management practices of creating high profitability and an advantageous cost structure (Data Monitor, 2008, pp. 1-28).

Strong aftermarket services The company has maintained a strong focus on its aftermarket services and offers its customers a complete array of aftermarket services. The most significant is maintenance service for engine, ranging from full engine overhauls to line maintenance. The company has 16 dedicated sites, in four continents, to provide its customers with the overhauling and repair services. These sites have the capability of overhauling 40 forms of engines. Moreover, the company has also established a joint venture with Singapore, Hong Kong and Dallas to overhaul the engines of large commercial airlines. This is not the end; Rolls Royce also has also initiated an e-business, which offers the customers online repairs, one-stop, while providing overhauling information over the internet, simultaneously. The after services revenue of the firm is increasing, accounting for approximately 53 per cent of the companys total sales. Hence, a robust focus on the aftermarket services offers robust revenues to the firm.

Areas of Improvement There are two key areas of improvement for Rolls Royce: 1. Control the increasing inventory, which is causing the company to loss million pounds sales, while increasing inventory on hand. Not only this, it may also lead the company to come under risks of pricing pressure from the competitors. 2. In the United Kingdom and in Africa, the company has substandard performance. As a result of this, the revenue of the company has been fluctuating. The company needs to focus on this issue, because these two regions contribute to approximately to 15 per cent of the total revenues of the company.

Action Plan for Addressing the Areas of Improvement Purpose The purpose of this action plan is to address the areas which require immediate attention and improvements.

Directions 1. This action plan will help in developing a work plan to address the areas of improvement identified in the preceding discussion 2. A copy of this form must be distributed to the employees of the concerned areas. 3. The copies of this action plan must be kept handy so that employees can bring it to meeting the purpose of updating the management. Goal The goal is to correct and/or improve the loop holes in the identified areas and to streamline these areas with the organisational objectives.

Results/Accomplishments Action Steps What Will Be Done? Responsibilities Who Will Do It? Timeline By When? (Day/Month) Resources A. Resources Available B. Resources Needed (financial, human, political & other)

Step 1: In order to improve the inventory levels, the lead times

It is the responsibility of the supply chain department to look into the

This must be started immediately, as the company is

A. Human capital and Financial B. Political support may be required for parts which are shipped from other

must be reduced

matter and come up with ways of reducing the lead times It is the responsibility of top management; however, the managers must prepare a briefing for them, as to what the company is losing, as a result of this weak performance

already falling behind its competitors in inventory management Must be started within a months time

countries

Step 2: To address the issue of weak performance in the UK and Africa, the company must focus on establishing strategies for attaining profit from these two regions

Same as above

This plan must be implemented immediately, in order to save the organisation from going into further losses and to prepare it to work in those markets where it is not performing well.

References

Casadess, M., de Castro, R. (2005), How improving quality improves supply chain management: empirical study, The TQM Magazine, Vol. 17 No. 4, pp. 345-357. Data Monitor, (2008), Rolls Royce, Retrieved, Jan 29, 2012, from, http://favormall.net/clientimages/38996/avileadcomp-rollsroyce.pdf, pp. 1-28 Data Retrieved, Jan 29, 2012, from, http://www.grantadesign.com/download/pdf/Aerospace-andDefense.pdf pp. 1-2 Data Retrieved, Jan 29, 2012, from, http://www.supplychainview.com/blog/2007/08/10-ways-toreduce-inventory-and-improve-service-%E2%80%93-part-1/ Kingsley-Jones, M. (2000), Threes a crowd, Airline Business, March, pp.61-63. Kuei, C., Madu, C., Lin, C. (2001), The relationship between supply chain quality management practices and organizational performance, International Journal of Quality & Reliability Management, Vol., 18 No. 8, pp.864-872. Lazonick, W. (2002), The Theory of Innovative Enterprise, in M. Warner, ed., International Encyclopaedia of Business and Management, Thomson Learning: 3055-3076, pp. 34-40 Lazonick, W., (2005), Sustaining the Innovation Process: The Case of Rolls-Royce plc, pp. 3-25 Pugh, P. (2001), The Magic of a Name: The Rolls-Royce Story, Part Two: The Power Behind the Jets, 1945-1987, Icon Books, pp. 75-80 Tiwari, M., (2005), An Exploration of Supply Chain Management Practices in the Aerospace Industry and in Rolls-Royce, Massachusetts Institute of Technology, pp. 15-25