Chapter 1 Introduction to Performance Management 2.

Employee Development and Empowerment

Performance Management (PM) is a strategic and systematic This principle focuses on providing employees with opportunities
process that aims to improve organizational effectiveness by for growth through skill development, training, and autonomy.
ensuring that individual and team objectives align with the Empowerment encourages employees to take initiative and
organization’s overall goals. It involves setting clear expectations, contribute meaningfully to organizational success.
monitoring progress, providing regular feedback, and fostering a Example: Google provides employees with development
culture of continuous improvement. By integrating performance opportunities through programs like "Career Guru" and "Googler-
metrics with organizational strategies, PM enables businesses to to-Googler (G2G)." These initiatives allow employees to mentor
adapt to dynamic environments and maintain competitiveness. one another and access personalized coaching, fostering both
According to Armstrong and Baron (2005), performance technical and leadership development. Empowering employees
management is defined as "a process which contributes to the through such initiatives has led to innovative projects like Gmail
effective management of individuals and teams to achieve high and Google Maps, which were created during their "20% time"
levels of organizational performance. As such, it establishes a policy, allowing employees to work on passion projects.
shared understanding about what is to be achieved and an approach 3. Values Alignment
to leading and developing people which will ensure that it is Aligning individual and organizational values ensures that
achieved." This definition underscores PM as both a developmental employees are motivated to contribute towards common goals. This
and a performance-oriented tool. principle fosters a sense of purpose and cohesion.
Example: At Patagonia, the company’s commitment to
Key Objectives of Performance Management environmental sustainability aligns closely with the personal values
1. Aligning Individual Goals with Organizational Strategy: of its employees. By involving staff in initiatives like product
Ensuring that employees' tasks contribute to the organization’s recycling programs and activism against environmental
mission and vision (Kaplan & Norton, 1996). degradation, Patagonia creates a workforce driven by shared goals
2. Continuous Development: Providing opportunities for and principles. This alignment has also enhanced employee
employee growth and capability enhancement (Fletcher, 2001). retention and brand loyalty.
3. Fostering Accountability: Encouraging employees to take 4. Congenial Work Environment
ownership of their roles and responsibilities (Buchner, 2007). A positive workplace culture promotes collaboration, creativity,
4. Enhancing Organizational Agility: Creating a feedback- and engagement, making employees feel comfortable and
driven environment that allows organizations to adapt and innovate. supported.
Performance management is not just about evaluating outcomes but Example: Salesforce is renowned for its focus on a congenial work
also about fostering a supportive and collaborative environment environment. Through initiatives like “Ohana Culture” (family
where employees feel motivated and empowered to succeed. culture), Salesforce encourages collaboration, mutual respect, and
Studies by Pulakos (2009) highlight the importance of linking inclusivity. Their offices include wellness zones and meditation
performance feedback to employee development to achieve rooms, fostering a sense of well-being. The congenial work
sustained organizational success. environment at Salesforce contributes to high employee satisfaction
With its emphasis on communication, engagement, and alignment, and strong organizational performance.
performance management has become a cornerstone of modern 5. External Environment Consideration
human resource practices and a critical driver of organizational Organizations must remain agile and responsive to external factors
performance. like market trends, economic changes, or regulatory shifts that can
Types of Integrations in Performance Management impact performance.
1. Vertical Integration: Aligns individual performance Example: During the COVID-19 pandemic, Unilever adjusted its
objectives with the organization's strategic goals, ensuring performance management system to reflect the challenges of
that all levels of the organization work cohesively towards remote work and employee well-being. The company redefined
common objectives. performance metrics to emphasize adaptability, virtual
2. Functional Integration: Ensures that various departments collaboration, and employee health. This responsiveness to external
or functions within the organization collaborate effectively, conditions helped Unilever maintain productivity while supporting
aligning their processes and performance metrics to support its workforce during a global crisis.
overall organizational goals.
3. Human Resource Integration: Integrates performance Features of Effective Performance Management
management with other HR processes such as recruitment, 1. Continuous Feedback
onboarding, and training to ensure a cohesive approach to Providing regular and constructive feedback ensures employees
managing and developing talent. stay aligned with organizational goals and continuously improve
Goal Integration: Involves setting clear, aligned goals across the their skills. It encourages ongoing communication between
organization, ensuring that individual, team, and departmental employees and managers, enabling course corrections when
objectives support the broader organizational mission. needed.
Example: At Adobe, the annual performance review was replaced
Basic Principles of Effective Performance Management with with a continuous feedback system called “Check-In,” where
Examples managers and employees have regular conversations about progress
1. Transparency and development. This shift has led to higher engagement and better
Transparency in performance management involves open performance outcomes.
communication about expectations, evaluation criteria, and 2. Clear Objectives
performance outcomes. It fosters trust and reduces confusion or Setting SMART (Specific, Measurable, Achievable, Relevant,
ambiguity. Time-bound) goals provides employees with clarity about
Example: At Netflix, transparency is embedded in their culture. expectations and reduces ambiguity. Clear objectives also serve as
They maintain open communication by clearly defining goals, benchmarks for evaluating performance.
conducting regular one-on-one check-ins, and openly sharing Example: Microsoft uses OKRs (Objectives and Key Results) to
performance metrics. Employees have access to business goals, set clear and measurable goals that align individual contributions
enabling them to see how their contributions align with company with company-wide objectives, ensuring accountability and
objectives. This approach has cultivated a high-trust environment alignment across teams
where employees feel valued and informed. .
3. Fair Evaluation
Fair performance evaluations require unbiased and consistent Why Measuring Organizational Performance Is Important
appraisal methods. Using multiple data sources and clear criteria Measuring performance helps organizations understand the
minimizes subjectivity and builds trust in the evaluation process. effectiveness of their strategies, make informed decisions, and
Example: IBM employs AI tools to analyze employee identify areas for improvement. It also fosters accountability and
performance data, ensuring evaluations are based on measurable transparency within the organization.
outcomes rather than subjective opinions. This approach has helped
reduce bias and improve trust in the appraisal system. Parameters to Measure Organizational Performance
4. Recognition and Reward 1. Financial Performance
Acknowledging high performance motivates employees and Metrics such as profit margins, return on assets (ROA), and return
reinforces desired behaviors. Rewards can be monetary (bonuses, on investment (ROI) provide insight into the financial health of an
raises) or non-monetary (public recognition, additional organization.
responsibilities). Example: Coca-Cola evaluates its financial performance by
analyzing quarterly earnings, operating margins, and ROI across
The Process of Performance Management global markets.
1. Planning 2. Product Market Performance
Defining roles, responsibilities, and expectations ensures alignment Indicators like sales volume, market share, and customer
between employees' tasks and organizational goals. acquisition rates gauge success in the competitive marketplace.
Example: During onboarding, companies like Deloitte provide Example: Nike measures product market performance by tracking
employees with a detailed roadmap of their roles and how these its market share in athletic footwear and apparel across different
align with broader business objectives, setting the stage for clear regions.
expectations. 3. Shareholder Return
2. Monitoring Metrics like total shareholder return (TSR) and economic value
Regularly tracking progress and offering feedback ensures that added (EVA) reflect the value created for investors.
employees stay on course to meet objectives. Example: Microsoft tracks TSR to ensure it delivers consistent
Example: General Electric (GE) utilizes a digital performance value to shareholders, as seen in its substantial growth in stock
tracking system to monitor real-time progress and facilitate value over the years.
immediate feedback through micro-conversations, enhancing
agility and responsiveness. Parameters to Measure Organizational Performance
3. Developing Measuring organizational performance involves evaluating various
Offering training and development opportunities helps employees dimensions of success to determine how well an organization
acquire the skills needed for current and future roles. achieves its objectives. Key parameters include:
Example: PwC invests in leadership development programs and 1. Financial Performance
digital upskilling for its workforce, ensuring they remain Metrics such as profit margins, return on assets (ROA), return on
competitive in a fast-changing business environment. equity (ROE), and earnings per share (EPS) assess financial health.
4. Rating Example: Apple Inc. monitors its gross profit margins and
Performance assessments help determine whether employees meet, quarterly revenue to ensure consistent growth and shareholder
exceed, or fall short of established standards. satisfaction.
Example: Amazon uses a “Stack Ranking” system to rate 2. Product Market Performance
employee performance, ensuring that high performers are identified Indicators like sales growth, market share, and customer acquisition
and rewarded while underperformers are coached for improvement. reflect competitiveness and customer satisfaction.
5. Rewarding Example: Amazon tracks customer retention rates and
Recognizing and rewarding employees reinforces positive Prime memberships as indicators of product market success.
behaviors and motivates continued high performance. 3. Operational Efficiency
Example: Starbucks offers rewards like stock options and tuition Metrics such as cost-efficiency, inventory turnover, and process
reimbursement to employees, which enhances loyalty and optimization measure resource utilization and productivity.
engagement. Example: Toyota uses lean manufacturing principles to
minimize waste and improve production efficiency.
Keys to High Performance 4. Employee Performance
1. Building Trust Employee engagement, turnover rates, and productivity metrics
Trust is the foundation of strong employee-manager relationships. provide insight into workforce contributions to organizational
Open communication and consistent actions build credibility. success.
Example: Southwest Airlines builds trust by empowering Example: Google tracks employee satisfaction and
employees to make decisions that enhance customer satisfaction, retention rates through regular surveys and feedback tools.
fostering a high-trust culture. 5. Corporate Social Responsibility (CSR)
2. Encouraging Change Metrics like environmental impact, community involvement, and
Promoting adaptability and openness to new ideas ensures that ethical practices measure the organization’s social contributions.
organizations and employees stay competitive in evolving markets. Example: Patagonia measures its carbon footprint and
Example: Procter & Gamble (P&G) fosters innovation by sustainability initiatives to evaluate its CSR performance.
encouraging employees to explore new ideas through its “Connect
+ Develop” program, which has led to successful product DSMC/ATI Performance Improvement Model
innovations. The DSMC (Design-Select-Measure-Control) and ATI
3. Measuring What Is Important (Analyze-Test-Implement) models are systematic frameworks for
Identifying and focusing on key performance indicators (KPIs) driving performance improvement in organizations.
ensures resources are allocated to areas with the most significant
impact. DSMC Model
Example: Tesla focuses on KPIs like production efficiency, 1. Design: Identify performance gaps and design improvement
battery performance, and customer satisfaction to drive its success strategies.
in the electric vehicle market.
2. Select: Choose the most effective solutions based on
feasibility and impact. 1. Lack of Objectivity
3. Measure: Track progress using relevant metrics. Subjective assessments can create perceptions of unfairness.
4. Control: Maintain improvements by implementing Example: A poorly defined appraisal system may result in
monitoring systems. favoritism, demotivating high-performing employees.
Example: General Electric (GE) used the DSMC model in 2. Inadequate Feedback
its Six Sigma approach to improve production processes and reduce Generic or overly critical feedback leaves employees feeling
defects. undervalued.
Example: Employees at XYZ Corp. reported feeling
ATI Model demoralized when feedback lacked actionable improvement
1. Analyze: Identify root causes of performance issues. suggestions.
2. Test: Experiment with potential solutions on a small scale. 3. Overemphasis on Weaknesses
3. Implement: Roll out successful solutions organization- Focusing on deficiencies instead of achievements can reduce
wide. morale.
Example: Procter & Gamble (P&G) uses the ATI model in Solution: Adobe emphasizes strengths and developmental
product development to analyze market needs, test prototypes, and opportunities in its “Check-In” feedback process.
implement full-scale launches. 4. One-Time Focus
Annual reviews lack the frequency needed to support ongoing
Sources of Multi-Source Feedback in Performance improvement.
Management Example: GE replaced annual reviews with frequent
Multi-source feedback, or 360-degree feedback, collects “Touchpoints” to keep feedback relevant and constructive.
performance evaluations from diverse stakeholders for a holistic
perspective. Who Should Do Performance Evaluation?
1. Peers Effective performance evaluations involve multiple perspectives
Colleagues provide insights into collaboration and teamwork. for a comprehensive assessment.
Example: At Microsoft, employees participate in peer 1. Direct Managers
reviews as part of the performance management process. Managers understand job responsibilities and individual
2. Managers contributions.
Supervisors assess performance against organizational goals and 2. Peers
responsibilities. Peers provide insights into teamwork and collaboration.
Example: Unilever uses structured manager evaluations to 3. Subordinates
provide feedback on leadership development. Subordinates evaluate leadership effectiveness and communication.
3. Subordinates 4. External Stakeholders
Employees evaluate managers on leadership and communication Customers and clients assess service quality and satisfaction.
effectiveness. 5. Self-Assessment
Example: Deloitte includes upward feedback in its Encourages employees to reflect on their achievements and areas
leadership development initiatives. for growth.
4. Customers
Customer feedback highlights service quality and satisfaction.
Example: Zappos uses customer satisfaction scores as part
of its employee performance evaluations.
5. Self-Assessment
Employees reflect on their achievements and areas for
improvement.
Example: IBM incorporates self-evaluations into its
performance appraisals, encouraging employees to take ownership
of their growth.

Performance Evaluation of Employees

Employee performance evaluations assess individual contributions
and align efforts with organizational goals.

Purpose
 Identify strengths and weaknesses.
 Provide development opportunities.
 Recognize achievements.
Example: At Accenture, performance reviews focus on personal
growth and aligning individual goals with organizational strategy.

Approaches
 Objective-based evaluations: Metrics like sales targets or
project completions.
 Behavioral assessments: Examining competencies such as
teamwork and adaptability.

Why Employee Evaluation Can Be Demotivating in

Organizations
Performance evaluations can demotivate employees when poorly
executed.
 Chapter 2 Practices in Performance Management 4. Robbery at a Convenience Store: A store clerk is
Overview physically harmed during a robbery incident while working the night
Practices in Performance Management refer to the systematic shift.
processes and strategies organizations employ to evaluate, improve, 5. Retaliatory Attack in an Educational Institution: A
and sustain employee performance in alignment with organizational dismissed teacher returns to the school premises and physically
goals. These practices encompass setting clear objectives, regular confronts the administrator who terminated their contract.
performance appraisals, continuous feedback, coaching, and Empowerment
recognizing and rewarding achievements. Effective performance Empowerment is the process through which individuals or groups
management ensures that employees understand their roles and gain the ability, authority, and confidence to make decisions, take
expectations while fostering skill development and engagement. It control of their lives, and achieve personal or collective goals. It
integrates tools such as key performance indicators (KPIs), 360- involves fostering autonomy, self-efficacy, and access to resources
degree feedback, and personal development plans to address and opportunities that enable people to overcome limitations and
performance gaps and enhance productivity. Ultimately, these exercise their rights. Empowerment can occur at various levels—
practices aim to create a culture of accountability, growth, and individual, organizational, or societal—and is often associated with
alignment between individual and organizational success. promoting social justice, equity, and inclusivity. As noted by
Zimmerman (1995), empowerment is both a process and an outcome,
Workplace Privacy encompassing the development of critical awareness, participation in
Workplace privacy refers to the rights and expectations employees decision-making, and the capacity to effect meaningful change in
have regarding the protection of their personal information, one's environment.
communications, and activities within the workplace. It involves
balancing the need for employers to monitor and manage their
Motivational Monetary Examples of Motivation
workplace operations with employees' rights to confidentiality and
1. Performance-Based Bonuses
dignity. Workplace privacy can cover areas such as the use of personal
A sales team receives quarterly bonuses for exceeding sales targets,
and professional data, monitoring of emails and computer usage,
encouraging consistent effort and high performance.
surveillance through cameras, and searches of personal belongings or
2. Profit Sharing
workspaces. While privacy expectations may vary depending on
A company like John Lewis Partnership in the UK distributes a
organizational policies, job roles, and the legal framework of a
portion of its annual profits to employees, making them feel invested
specific jurisdiction, the concept emphasizes transparency, fairness,
in the organization’s success.
and adherence to laws that protect individual rights while ensuring
3. Salary Increments
organizational security and productivity.
Employees at a manufacturing company receive annual merit-based
salary increases, recognizing their hard work and improving
Case 1 Right to Privacy
financial stability.
In the landmark case of Pollo v. Chairperson Constantino-
4. Gift Cards and Cash Rewards
David (G.R. No. 181881, October 18, 2011), the Supreme Court of
Employees at a retail chain are rewarded with gift cards or cash for
the Philippines addressed the issue of workplace privacy. Briccio
their exceptional customer service during peak seasons.
"Ricky" A. Pollo, a government employee, faced administrative
5. Stock Options
charges, leading to a search of his office computer by his employer.
Tech companies like Google and Amazon offer employees stock
Pollo contended that this search violated his constitutional right to
options, aligning their interests with the company’s long-term
privacy. The Court applied the "reasonable expectation of privacy"
success.
test, which examines whether an individual's expectation of privacy is
Non-Monetary Examples of Motivation
both subjectively genuine and objectively reasonable.
1. Flexible Work Schedules
In this instance, the Court determined that Pollo did not have a
Employees at Microsoft have the option to choose hybrid work
reasonable expectation of privacy concerning the contents of his
arrangements, enabling them to balance their professional and
office computer. Factors influencing this decision included the
personal lives.
government's ownership of the equipment, the absence of measures
2. Recognition Programs
taken by Pollo to maintain privacy (such as using passwords), and
An employee-of-the-month program at Starbucks celebrates
existing policies that permitted employer access for monitoring
outstanding contributions, offering public acknowledgment and
purposes. Consequently, the Court ruled that the search was justified
certificates.
and did not infringe upon Pollo's right to privacy.
3. Learning Opportunities
Companies like IBM provide access to courses and certifications,
Workplace Violence
allowing employees to expand their skills and advance their careers.
Workplace violence refers to any act or threat of physical violence,
4. Wellness Programs
harassment, intimidation, or other disruptive behavior that occurs in a
Google offers free fitness classes, on-site gyms, and mental health
work setting. It includes actions such as verbal abuse, physical assault,
support to prioritize employee well-being.
or even homicide, which can arise between employees, employers,
5. Job Enrichment
clients, or other individuals in the workplace. This behavior threatens
At Toyota, employees are empowered to suggest innovations on the
the safety, health, and productivity of workers and the work
production line, giving them a sense of autonomy and responsibility.
environment.
Feature of Performance Management
1. Goal Alignment
Five Short Instances or Scenarios in the Philippines:
1. Verbal Threats in a Government Office: An irate citizen  Clearly defines individual, team, and organizational
objectives.
verbally threatens a government employee after being dissatisfied
with the delay in processing a document.  Ensures employees understand how their roles contribute to
the company's overall mission
2. Physical Assault in a Manufacturing Plant: A heated
2. Continuous Feedback
argument between two factory workers escalates into a physical
altercation, resulting in injuries to both parties.  Facilitates regular communication between employees and
managers.
3. Workplace Harassment in a Call Center: A supervisor
persistently yells and belittles employees during meetings, creating a  Encourages timely corrections, recognition, and guidance
to improve performance.
hostile and stressful work environment.
3. Performance Appraisals
 Involves periodic evaluations of employee performance  Disadvantages: Success heavily depends on the quality of
using set criteria. goal-setting and the clarity of objectives.
 Identifies strengths, weaknesses, and areas for 4. Behaviorally Anchored Rating Scales (BARS)
improvement. Combines elements of graphic rating scales and critical incidents by
4. Development-Oriented assigning numerical ratings to specific job-related behaviors.
 Focuses on employee growth through training, mentoring,  Advantages: Provides clear and objective criteria for
and skill development. evaluation.
 Encourages a culture of learning and adaptability.  Disadvantages: Complex and resource-intensive to
5. Use of Key Performance Indicators (KPIs) develop.
 Tracks and measures performance using quantifiable 5. Forced Ranking (or Stack Ranking)
metrics. Employees are ranked relative to each other, often into categories
 Provides a clear framework to assess achievements and like top performers, average performers, and low performers.
gaps.  Advantages: Encourages competition and identifies top
6. Two-Way Communication talent.
 Promotes open dialogue between employees and  Disadvantages: Can create unhealthy competition and
management. demotivate lower-ranked employees.
 Encourages employee participation in setting goals and 6. Critical Incident Method
decision-making. Focuses on documenting specific instances of exceptionally good or
7. Fair and Transparent Processes poor performance throughout the appraisal period.
 Uses standardized criteria and objective evaluations. Advantages: Highlights impactful events and provides concrete
 Ensures employees perceive the system as unbiased and examples for evaluation.
equitable. Disadvantages: May overlook day-to-day performance and require
8. Recognition and Rewards meticulous record-keeping.
 Recognizes high performers and motivates employees 7. Self-Appraisal
through rewards (monetary or non-monetary). Employees evaluate their own performance, often as part of a larger
 Reinforces desired behaviors and achievements. appraisal process.
9. Performance Improvement Plans (PIPs)  Advantages: Promotes self-awareness and
 Offers structured plans to address underperformance. encourages reflection on strengths and areas for growth.
 Focuses on specific goals, timelines, and support to help  Disadvantages: This can lead to either overly
employees improve. positive or overly critical assessments.
10. Integration with Organizational Strategy 8. Checklist Method
 Aligns individual and team efforts with the strategic The evaluator uses a checklist of traits, behaviors, or outcomes to
objectives of the organization. assess employee performance (e.g., "Yes" or "No" to specific
 Acts as a bridge between day-to-day tasks and long-term criteria).
goals.  Advantages: Easy to use and understand.
11. Use of Technology  Disadvantages: Limited in providing detailed or
 Leverages performance management systems (e.g., SAP, nuanced feedback.
Workday) for tracking, analytics, and documentation. 9. Peer Review
 Improves efficiency and accessibility of performance- Co-workers at the same level evaluate an employee's
related information. performance based on their interactions and observations.
Performance Appraisal  Advantages: Provides insight into teamwork and
Performance appraisal is a formal evaluation process in which an collaboration.
employee’s job performance is assessed against predefined criteria,  Disadvantages: Can be influenced by workplace
objectives, and organizational expectations. It aims to identify dynamics or personal biases.
strengths, weaknesses, and areas for improvement while serving as a 10. Essay Method
basis for decisions on promotions, compensation, training, or The appraiser writes a detailed narrative about the employee’s
corrective actions. performance, covering strengths, weaknesses, and
Performance Appraisal Methods recommendations for improvement.
1. Graphic Rating Scale Method  Advantages: Provides rich, descriptive feedback.
Employees are evaluated based on specific traits or behaviors, such  Disadvantages: Time-consuming and subject to
as punctuality, teamwork, and job knowledge, using a numerical or bias or inconsistency.
descriptive scale (e.g., 1–5 or "Excellent to Poor").
 Advantages: Simple to implement,
provides a quick overview of employee performance.
Disadvantages: May be subjective due to varying interpretations of
the criteria.
2. 360-Degree Feedback
Collects performance feedback from multiple sources, including
peers, supervisors, subordinates, and even customers.
 Advantages: Offers a well-rounded view of the employee's
performance and interpersonal skills.
 Disadvantages: Time-consuming and may include biased
or inconsistent feedback.
3. Management by Objectives (MBO)
Employees and managers collaboratively set measurable goals and
assess performance based on the achievement of these objectives.
 Advantages: Increases employee involvement and
accountability.
Chapter 3 Organization Structure Example: Gcash continuously innovates to adapt to the fintech
An organization is a structured arrangement of people industry.
working together to achieve common goals. The structure of an 6. Formal and Informal Communication
organization defines its hierarchy, responsibilities, and Communication channels facilitate smooth operations.
processes, ensuring efficiency and productivity. This module Example: ABS-CBN Corporation uses formal communication
explores the fundamental concepts and properties of an for corporate decisions but also encourages informal teamwork.
organization, supplemented with examples of companies in the 7. Hierarchical Structure
Philippines. A chain of command ensures clarity in decision-making.
Example: Metrobank has a well-defined hierarchy for financial
I. Concepts of Organization services.
Organizations can be understood through various concepts that define 8. Innovation and Change
their formation, functioning, and effectiveness. Organizations evolve to remain competitive.
1. Formal and Informal Organizations Example: Shopee Philippines frequently updates its e-commerce
strategies.
 Formal Organization: A structured, rule-based entity
where roles and responsibilities are clearly defined. Example: SM Chapter 4 Industrial Restructuring
Investments Corporation follows a hierarchical structure with clear Definition and Scope of Industrial Restructuring
job roles.
Industrial restructuring refers to the process of reorganizing
 Informal Organization: A network of personal industries or companies to improve efficiency, financial stability,
relationships and social interactions that influence work. Example: and competitiveness. This transformation can occur due to
Employees at Jollibee Foods Corporation may form informal market shifts, technological advancements, regulatory changes,
workgroups to collaborate beyond official structures. or economic downturns. Restructuring can take various forms,
including workforce adjustments, operational efficiency
2. Organizational Structures enhancements, financial restructuring, and technological
 Functional Structure: Employees are grouped based on upgrades. The scope of industrial restructuring extends beyond
specialization. Example: San Miguel Corporation has divisions individual companies to entire industries, where shifts in
such as finance, marketing, and operations. production methods, global supply chains, and market dynamics
 Divisional Structure: The organization is divided based on lead to large-scale transformations. Governments,
product lines or geographical areas. Example: PLDT Inc. operates organizations, and policymakers often facilitate restructuring to
separate divisions for wireless and broadband services. foster economic growth and sustainability.
 Matrix Structure: A hybrid structure where employees Importance of Industrial Restructuring
report to multiple managers. Example: Ayala Corporation integrates
different business units with shared resources. Industrial restructuring is crucial in maintaining a company’s or
 Flat vs. Hierarchical Structure: Companies with fewer industry’s ability to compete in a fast-changing global
management levels (flat) promote faster decision-making, while environment. By optimizing resources, eliminating inefficiencies,
hierarchical structures maintain clear chains of command. and adopting new technologies, companies can stay ahead of
Example: Globe Telecom follows a hierarchical structure to ensure their competitors. Restructuring also helps businesses manage
operational efficiency. financial challenges by reducing operational costs and
improving profitability. Additionally, it allows companies to focus
3. Organizational Theories on core competencies, ensuring sustainable growth. Without
 Classical Theory: Focuses on hierarchy and clear chains of restructuring, industries risk stagnation, loss of market
command. relevance, and potential collapse. Countries with proactive
 Human Relations Theory: Emphasizes employee restructuring policies often experience stronger economic
satisfaction and motivation. growth and workforce adaptability, reducing the negative impact
 Contingency Theory: Suggests that the best organizational of economic downturns.
structure depends on external factors like industry and competition.
Relationship Between Restructuring and Performance
Management
II. Properties of Organization
Organizations exhibit various properties that determine their Performance management plays a vital role in industrial
effectiveness and sustainability. restructuring by providing measurable indicators of success. A
1. Goal-Oriented well-structured performance management system ensures that
Every organization has defined objectives. restructuring efforts align with business objectives, financial
Example: The Bank of the Philippine Islands (BPI) aims to goals, and workforce productivity. Key Performance Indicators
provide accessible financial solutions. (KPIs) such as revenue growth, cost reduction, employee
2. Division of Labor engagement, and operational efficiency are essential in
Tasks are divided among individuals based on expertise. evaluating the effectiveness of restructuring. Without an
Example: Meralco separates its workforce into engineering, integrated performance management framework, restructuring
customer service, and corporate management. initiatives may fail to deliver intended outcomes, leading to
3. Authority and Responsibility uncertainty and instability within an organization.
A clear delegation of power ensures accountability.
Example: Cebu Pacific Air has structured management layers I. Types and Strategies of Industrial Restructuring
for operations, safety, and customer service.  Workforce Downsizing and Rightsizing
4. Coordination and Integration  Workforce downsizing involves reducing the number of
Departments work together to achieve efficiency. employees to align with business needs and improve financial
Example: Robinsons Retail Holdings integrates logistics and performance. While this strategy helps in cost-cutting, it also
supply chain operations for seamless distribution. presents challenges such as employee morale issues, loss of
5. Adaptability and Flexibility institutional knowledge, and potential reputational damage.
Organizations must respond to market changes. Rightsizing, on the other hand, is a more strategic approach
 where companies reassess workforce needs and optimize Balancing Organizational and Employee Performance
employee allocation rather than merely cutting jobs. For Goals
example, Ford Motor Company restructured its workforce by  Restructuring can create tension between organizational goals
laying off thousands of employees while investing in electric and employee well-being. Transparent communication,
vehicle manufacturing, ensuring long-term sustainability despite reskilling programs, and performance incentives can help bridge
short-term layoffs. this gap. Organizations must ensure that while financial goals
are achieved, employees remain motivated and productive.
Business Process Reengineering (BPR)
Tools & Techniques for Performance Monitoring
 Business Process Reengineering (BPR) involves the  Several tools are available for performance monitoring during
fundamental redesign of business processes to achieve restructuring. The Balanced Scorecard framework ensures a
dramatic improvements in performance. Unlike incremental holistic view of performance by measuring financial, customer,
improvements, BPR focuses on radical changes that often internal process, and learning perspectives. Lean Six
require technology adoption, automation, and elimination of Sigma techniques improve efficiency by identifying and
redundant processes. A classic example is Amazon’s eliminating waste in operations.
transformation of its supply chain and warehouse IV. Financial & Operational Aspects of Restructuring
management through robotics and AI-driven logistics, Cost Optimization & Revenue Growth Strategies
reducing delivery times and operational costs significantly.  Cost optimization is a primary goal of restructuring. Companies
achieve this by reducing overhead costs, improving supply chain
Mergers & Acquisitions (M&A) efficiency, and renegotiating supplier contracts. Revenue growth
 Mergers and acquisitions (M&A) serve as key strategies for can be pursued by entering new markets, launching new
industrial restructuring by enabling companies to consolidate products, or forming strategic partnerships.
market share, improve economies of scale, and enter new Financial Risk Management
markets. Mergers involve the joining of two companies into a
single entity, while acquisitions involve one company purchasing Financial risks such as liquidity crises, debt burdens, and
another. Disney’s acquisition of 21st Century Fox is a prime declining revenues must be proactively managed during
example, as it allowed Disney to expand its streaming services restructuring. Diversification, cost-cutting, and improved
and content portfolio, strengthening its competitive position in financial planning are key risk mitigation strategies.
the entertainment industry.
Improving Operational Efficiency
Divestitures and Spin-offs
Companies often use process automation, digital
 Divestitures involve selling off non-core assets or business units transformation, and lean management techniques to streamline
to focus on strategic priorities. In contrast, spin-offs occur when operations. For example, Toyota’s lean manufacturing approach
a company separates a part of its business into an independent has helped it maintain cost efficiency and high-quality production
entity. For example, eBay’s decision to spin off PayPal allowed standards.
both companies to grow independently, with PayPal focusing on
Industrial restructuring is a critical component of long-term
digital payments and eBay on e-commerce. Such restructuring
ensures that businesses remain agile and better positioned for business sustainability and competitiveness. By
market opportunities. integrating performance management systems with
restructuring strategies, organizations can navigate
Digital and Technological Restructuring challenges effectively, ensuring financial stability,
 With the rise of artificial intelligence, cloud computing, and digital operational efficiency, and workforce adaptability. The
platforms, companies are restructuring to adopt new future of restructuring will be increasingly driven by digital
technologies. This form of restructuring often includes shifting transformation, sustainable business models, and
from traditional business models to digital-first strategies. strategic workforce management. Companies that
Netflix’s transformation from a DVD rental service to a digital proactively restructure with well-defined performance
streaming giant is a successful example of how technological frameworks will have a higher probability of success in an
restructuring can lead to industry dominance.
evolving global economy.
III. Performance Management in Restructuring
Designing a Performance Management Framework during
Restructuring
 A performance management framework is essential for
guiding employees and stakeholders through restructuring.
It ensures that restructuring objectives are clearly defined
and measurable. The framework should include strategic
goals, performance metrics, accountability measures, and
continuous evaluation mechanisms.
Setting Key Performance Indicators (KPIs)
 KPIs help measure the effectiveness of restructuring efforts.
Financial KPIs such as cost savings, profit margins, and return
on investment (ROI) determine financial stability. Operational
KPIs like production efficiency and lead time reductions assess
process improvements. Employee performance KPIs measure
engagement, productivity, and skill development, ensuring that
workforce restructuring does not negatively impact morale.