Performance Management Practices in Volkswagen

Introduction:

Volkswagen, shortened to VW, is a German automaker founded in 1937 by the German Labor Front, a Nazi labor union, and headquartered in Wolfsburg. It is the flagship marque of the Volkswagen Group, the largest automaker by worldwide sales in 2016 and 2017. Volkswagen means "people's car" in German. Its current tagline is Das Auto (The car in English).

Performance Management:

• Performance Management is a systematic process of improving organizational performance by developing the performance of individuals and teams.
• It is a process of directing and supporting the employees work as effectively and efficiently as possible in line with the needs of organization.
• Performance management is a continuous process.

Performance Management Practices in Volkswagen:

Volkswagen is the biggest German automaker and the third largest one in the world. Its goal is to become the world’s leading automaker by 2020 – both economically and ecologically. In order to achieve this goal, the company has implemented a strong Performance Management (PM) system. Volkswagen has outlined four target dimensions that their strategy will revolve around:

1.  Excited customers
2. Excellent employer
3. Role model for the environment  and Safety & integrity
4.  Competitive profitability. 

Its performance is measured through the use of both financial and non-financial KPIs, because Volkswagen wants to improve throughout all areas and along the entire value chain.

1. Excited Customers:

This dimension focuses on the diverse needs of its customers. Volkswagen aspires to exceed customers’ expectations and generate the maximum amount of benefits. It also wants to win over new ones and retain their loyalty, in the long-term, to foster word-of-mouth communication.

The strategic KPIs for this dimension consist of Net promoter score,  Conquest rate and KPIs that are related to loyalty, satisfaction and quality. These KPIs are very essential for the company, because the Conquest rate, for instance, shows the rate of prospects who looked at rival dealers, but are then convinced to buy from the company’s dealership. Net promoter score is an important aspect in nurturing long-term loyalty, because it measures the willingness of customers to recommend the company’s product to others.

2. Excellent Employer:

    Volkswagen wants skilled and dedicated employees. It wants to promote employee satisfaction and motivation by means of equal opportunities, as well as an attractive and modern working environment. It wants to retain its core workforce and attract new talent.

The strategic KPIs for this dimension cover internal and external employer attractiveness measurements, determined by means of an opinion survey, an external employer ranking, as well as a diversity index. It identifies the effectiveness and efficiency of your employees’ working abilities and the productivity of the company.

3. Role Model for the environment, safety and integrity:

Volkswagen pays attention to the use of resources and the emissions of its products, sites and plants, with the goal of continuously improving its carbon footprint and lowering pollutant emissions. It aims for transparency and being a role model for its customers.

The strategic KPIs that are used here include the De-carbonization index and other KPIs like: emissions figures, compliance, process reliability and a culture of dealing openly with mistakes. These KPIs are useful for measuring the company’s current level of sustainable manufacturing and ensuring the company complies to emission regulations and laws.

4. Competitive Profitability:

Volkswagen makes investments by looking to achieve profitable growth and strengthen its competitiveness, with the ultimate goal being to become the leading benchmark in the entire industry.

The strategic KPIs in this dimension are related to Operating returns on sales, Return on investment (ROI) in the automotive division and Sales revenue. These KPIs are measured to see how much a company gets back from its investments and if the investment was favorable or unfavorable.

When taking all the KPIs that have been mentioned above from a car manufacturer like Volkswagen, we can observe that most KPIs are related to four elements: customer and employee satisfaction, sustainability processes and financial data. These elements, when combined, make the performance management strategy of Volkswagen complete.