If Running a Business Is like Sailing a Ship, Then Performance Management, According to Logica Executive Director Royston Hoggarth, Is the Corporate Equivalent of Trimming the Sails or Touching the Tiller
If running a business is like sailing a ship, then performance management, according to Logica executive director Royston Hoggarth, is the corporate equivalent of trimming the sails or touching the tiller.
Individually, the subtle nudges to operation and direction that flow from regular employee performance reviews at Britain's biggest IT services company make little difference to a global business with a pound sterling1.1bn turnover. But, taken together, they have had an enormous impact on Logica's speed of progress and its position as one of Britain's most successful software firms.
"It's difficult to give examples, but by directing staff towards value-added, mission-critical business, it's fair to say we've become much more commercially focused," explains Hoggarth, who is the company's head of marketing.
In other words, since the arrival of chief executive Martin Read from Marconi eight years ago, Logica has undergone a minor cultural revolution. Employee habits and objectives have been steadily redirected towards commercial rather than strictly scientific results.
Costly research for its own sake - the speciality of many software start-ups - has been swept aside in favour of clear strategic goals that favour profit as much as innovation.
"It's about balancing technology with our financial objectives. Now we say that if you can't do it profitably then don't do it at all," Hoggarth says.
The approach has paid dividends. Last month, Logica reported a 60% rise in underlying pre-tax profits, the eighth successive annual increase. Unlike its rivals in the downtrodden technology sector, its order book is flourishing and last year, for the first time, company turnover pushed through the pound sterling1bn barrier.
Revenue from its mobile networks division grew by 65%, while sales of software to utility and energy companies, one of its key markets, rose by 54%.
But guiding Logica's 5,000 UK staff towards more profit-related goals takes time and skill. Its performance management system involves an annual appraisal where employees meet their managers to review their achievements and to set new goals. In each case, staff are graded on their financial, technical and interpersonal skills, their ability to win and keep clients, their own career development and their contribution to the overall Logica business.
Defined targets, in terms of both business outcomes and personal development, are set for seven separate seniority levels within the company. Junior employees are expected to be able to agree and meet objectives and understand Logica's overall corporate strategy, while staff at Logica's "level six", just below the board, must demonstrate dynamic and significant leadership based on shared objectives.
Managers set what business schools refer to as "smart" goals in that they are specific, measurable, agreed by both bosses and their staff, realistic and, above all, trackable. "Of course it involves human judgment, but it's quite a detailed grid so it's less subjective than it might be," says Jonathan Miller, Logica's director of management development.
"What comes with the performance management system is a very strong culture of achievement. …