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DSM Melamine Company’s Strategy and Performance Management

Introduction

Performance management is frequently underestimated by managers who consider it a waste of time. However, as practice shows, performance management plays a crucial role in building the organizations’ success and strengthening their image by getting the employees motivated and interested in their company’s development. The case study of DSM shows that there is always a place for improvement that should be used by the managers to reach the highest potential.

Suggested Key Processes to Link with DSM’s Key Success Factors and Rationale

Based on the needs of three strategic groups, DSM has the following key success factors (KSFs): customer loyalty for the “local for local” players, low cost and security of sales for the merchant players, and cost competitiveness in production for captive players (Bloemhof, 2004).

In order to link its KSFs in an advantageous way, DSM needs to provide the following key processes within its system: performance planning, execution, assessment, review, and renewal (Smither & London, 2009). Each of these processes contributes to linking the organization’s KSFs. Performance planning and execution help to guarantee the security of sales and provide cost competitiveness. Regular assessment and review make it possible to analyze customers’ feedback and win their loyalty (Morden, 2016). Performance renewal is similar to planning in that both of these processes require thinking about the next stages of the organization’s development.

The rationale for my suggestions is that they will make it possible for the management team to create the most beneficial environment for the development of the company’s KSFs.

The Central Manner of DSM’s Management’s Alignment with Performance Management

An important place in performance management belongs to alignment. This process is defined as the degree of employees’ understanding and devotion to the company’s vision and strategy (Smither & London, 2009). Smither and London (2009) outline seven major drivers of high alignment. For the current analysis, three of the drivers will be used: (1) a clear strategy and vision, (2) acceptance of the goals, strategy, and vision by the employees, and (3) adequate capabilities to supply the way of behavior necessary for attaining the goals.

The first driver analyzed is a clear strategy and vision. Concerning this driver, DSM has a high alignment degree. The company’s vision, as defined in 2000, expressed ambitious plans for the next five years, including the rise of annual sales by nearly 60 per cent (Bloemhof, 2004). Moreover, DSM’s vision expressed the organization’s endeavor to raise its market capitalization as the management team considered the stock to be depreciated.

The next driver is the acceptance of the goals, strategy, and vision by the employees. As well as the first one, this driver works in favor of DSM’s development. Employees were well aware of the organization’s strategies. However, the system of business strategy dialogues (BSDs) also presented some challenges (Bloemhof, 2004). The phase of translating the BSDs into performance management was not entirely successful.

The third driver of alignment discussed is concerned with the adequate capabilities to supply the way of behavior necessary for attaining the goals. At DSM, there were the necessary resources to reach the purposes of the organization.

Taking into consideration the company’s attitude to the three chosen drivers, it may be concluded that the central manner of DSM’s management alignment is rather positive. The vision and strategies are clear to all employees, the people’s acceptance of these strategies is rather high, and there are sufficient capabilities to provide the needed behavior for reaching the goals. Even though some of the drivers presented difficulties, in general, DSM’s alignment was developed in a positive way.

Defense of DSM’s Competitive Advantage

The company’s competitive advantage is measured by its profitability in correlation with the competitors’ profitability (Hill, Jones, & Schilling, 2015). When the organization manages to keep its profitability at the above-average level for several years, it may be considered to have a sustained competitive advantage. Since competitive advantage is closely connected to the company’s strategy, it is necessary to evaluate these issues in close relation. The analysis of DSM’s competitive advantage will be based on the following three assessment points suggested by Smither and London (2009):

  1. organizational precursors and the present performance management methods evaluated by organizational precursor scale (OPS),
  2. performance management training assessment,
  3. individual precursors.

Organizational Precursors and the Present Performance Management Methods Evaluated by OPS

The main purpose of OPS is to evaluate the level of encouragement and support given by the company to personal growth and change of the employees (Smither & London, 2009). Therefore, according to OPS, the competitive advantage at DSM may be considered successful. The strategic management in DSM was organized in business strategy dialogues (BSDs). Based on this structure, the system of “facilitators” and “challengers” was organized at DSM (Bloemhof, 2004, p. 5).

The employees belonging to these two groups were chosen by the Corporate. The group of facilitators was responsible for developing the strategy development process, whereas the mission of the challengers was to question the facilitators in regard to their planned measures.

Performance Management Training Assessment

The next assessment point of DSM’s competitive advantage is the evaluation of performance management training. This issue is closely related to the previous one. In order to provide the successful operation of the teams of facilitators and challenges, the company had to offer them training with the aim of reaching the desired outcomes. Facilitators were chosen from the top 350 executives (Bloemhof, 2004).

These people were trained to analyze the time schedule, discuss who should belong to the core team, and planning the most crucial issues to be included in the strategic plan. People in the second group – challengers – were chosen from the top 100 managers in the company (Bloemhof, 2004). These employees were trained to oppose the ideas of the facilitators and question their methods. As a result, both groups of employees that participated in the performance management training contributed to the organization’s development and simultaneously received valuable training.

Individual Precursors

The third assessment issue is individual precursors. These are the indicators of the employees’ readiness to evolve and grow professionally (Smither & London, 2009). As DMS’s case study demonstrates, the employees were ready to take part in various projects aimed to enhance their professionalism and bring benefits to the company. Therefore, a competitive advantage at DSM may be considered rather high.

Conclusion

While some of the performance management issues at DSM presented challenges to the managers and employees, the majority of decisions were aimed at creating a positive vision and beneficial strategies for the company’s growth. DSM’s competitive advantage is rather high in spite of some minor drawbacks. The key success factors are multidimensional. In general, DSM’s experience with performance management may be considered successful.

References

Bloemhof, M. (2004). Strategy and performance management at DSM. Fontainebleau, France: INSEAD.

Hill, C. W. L., Jones, G. R., & Schilling, M. A. (2015). Strategic management: An integrated approach (11th ed.). Stamford, CT: Cengage Learning.

Morden, T. (2016). Principles of strategic management (3rd ed.). New York, NY: Routledge.

Smither, J. W., & London, M. (2009). Performance Management: Putting research into action. San-Francisco, CA: Jossey-Bass.