Analysis of Articles about Performance Measurement - Book Report/Review Example

Running Head: PAPER ANALYSIS Paper Analysis Performance Measurement Paper Analysis: Performance Measurement Strategic control: meshing criticalsuccess factor with the Balanced Scorecard by Paula van Veen-Dirks and Martin Wijn The authors of the article emphasize an increasingly recognised importance of non-financial criteria in performance measurement and offer as an emerging strategic tool a combination of two popular approaches - the Balanced Scorecard and Critical Success Factors. They argue the given combination can serve effectively as "a system for strategic validation and learning", eliminating some of the drawbacks of both models used separately. The proposed model has been successfully implemented in Netherlands at 15 companies operating in different industries. The approach used by the authors corresponds to the contemporary trend of re-examination and attempts to improve vast variety of performance measures currently developed: As a result of the performance measurement revolution many organisations have numerous measures of performance but often with significant weaknesses in the way that these measures are identified, integrated, communicated and acted upon. First generation performance measurement frameworks have partly contributed to this as none of the approaches addresses the full range of criteria important for performance measurement success. Users of these frameworks often become model bound and loose sight of the measures that are most important for the organisation and the associated stakeholders. (Jack 2004) The research conducted may increase popularity of the Balanced Scorecard model which is very well known, but as Monica Franco-Santos and Dr. Bourne (2004) point out not so wide-spread in the UK: "Key Performance Indicators (KPIs) are by far the most commonly used performance measurement (60% of companies). Our results suggest that in the UK the Balanced Scorecard is popular, but not as widely used as KPIs". By proposing the combination model the authors intend to establish an appropriately designed relationship between formulation and implementation of strategy: This link is not unlinear or straight-forward: they form interrelated parts of the strategy process. This process cannot be properly understood unless one understands the context within which the process has emerged and this context cannot be properly understood unless one studies it over time. (Cumming & Wilson, 2003) The issue of time and context alongside with the challenging task of Critical Business Processes and Critical Success Factors determination is an obstacle for the efficient and wide-spread implementation of the proposed model. Also, as is noted in the article, the combination model is most suitable for the companies operating in an extremely dynamic environment. Companies that face more stable environment can be better off by means of implementing the Balanced Scorecard only. Beyond the Balanced Scorecard: refining the search for organisational success measures by Alan Maltz, Aaron Shenhar and Richard Relly While performance measurement can offer insights into the strategies that are being pursued by the organisation and its competitors "one of the most difficult aspects of strategic analysis is to work out specific ways of measuring how well an organisation is performing" (Haberberg & Rieple 2001). In the article a new model, a Dynamic Multi-Dimensional Performance framework, is developed and introduced. After summarisation of few prominent approaches and the pros and cons of their implementation the authors propose twelve chosen potential success measures across five major success dimensions. The strength of the model stems out of its reflection of multiple factors influencing the performance without disregarding important aspects and structured easy-to-understand description. With regard to reflection of multiple aspects and their interdependence the model can be seen as close to the value-based management approaches. Value-based management refers to the integration of business processes, performance measurements, and compensation practices to increase focus on creating, managing and monitoring shareholders' value. (Ernst & Young 2003) However, the proposed framework has significant drawbacks. Firstly, the research conducted through interviewing has historical and descriptive nature; no empirical testing has been done. Therefore, the perspectives of efficacy of practical implementation are very unclear. Secondly, as the authors admit "one set of measures can not fit all the organisations" and the wide variety of measures to be assessed lead to ambiguity of the model. Moreover, as the proposed performance measurement framework would be of interest mostly for large companies, the process of measures' selection and evaluation would be even more complicated: Performance measurement issues are especially relevant to strategy implementation in large, diversified firms. . . In corporate wide strategies that span and link multiple subunits, managers should be evaluated and rewarded in part on overall corporate performance, and on a subjective measure of each individual's effort to assist other units (Pitts & Lei 1996). Measuring the strategic readiness of intangible assets by Robert S. Kaplan and David P. Norton The 1980's and 90's saw the worldwide use of a range of performance management and measurement frameworks. However, the overall result has undoubtedly been a widening in the scope and number of performance measures in use within organisations (Jack 2004). However, just a few of the measures frameworks became widely known and successfully implemented. One of them is the Balanced Scorecard model introduced by Robert S. Kaplan. It is believed to be the first model to effectively link financial and non-financial measures of effective performance, combine qualitative and quantitative sides of business strategy evaluation. Not only does use of solely qualitative measures lead to excess ambiguity, but also there are some potential problems associated with using quantitative criteria for evaluating strategies: First, most quantitative criteria are geared to annual objectives rather than long-term objectives. Also, different accounting methods can provide different results on many quantitative criteria. Third, intuitive judgments are almost always involved in deriving quantitative criteria. (David 1995) The authors point out that the intangible assets that are hardly estimated in financial terms play an extremely important role in successful business enterprises today. This article further develops the concepts Human, Informational and Organisational Capital and strategic readiness that formed the base for the Balanced Scorecard model. The authors raise the issue of importance of intangible assets' alignment to the companies overall strategy and reintroduce strategy map. In spite of its generalist nature, the introduced concepts can be effectively applied to the real business practices as illustrated by a specific example of an organisation capital readiness report across four dimensions (culture, leadership, alignment and team work). Though the approach does not provide quantitative estimates, it gives a very useful for conceptual thinking framework for estimation of intangible assets and is of high academic importance. References Cumming, S., & Wilson, D. (Eds.). (2003). Images of strategy. Oxford: Blackwell Publishing. David, F.R. (1995). Concepts of strategic management. London: Prentice Hall. Ernst & Young : Fast Facts. Perfomance measurement in transition (2003) Retrieved November 27, 2005, from www.corp21.com/PerformanceMgmt030827.pdf Franco-Santos, M., & Bourne, M. (2004). What are the benefits of linking Strategic Performance Measurement systems to executive pay Evidence from the UK. Retrieved November 27, 2005, from www.som.cranfield.ac.uk/som/research/centres/ cbp/downloads/Franco%20Bourne_%20exeutive_pay-final.pdf Haberberg, A., & Rieple, A. (2001). The strategic management of organisations. Harlow: FT Prentice Hall. Jack, A. (2004). Value mapping - a second generation performance measurement and performance management solution. Business Excellence International. Retrieved November 27, 2005, from www.valuebasedmanagement.net/articles_jack_ value_mapping_second_generation_performance_management.pdf Kaplan, R.S., & Norton, D.P. (2004). Measuring the strategic readiness of intangible assets. Harvard Business Review, February, 319-332. Retrieved November 27, 2005, from http://harvardbusinessonline.hbsp.harvard.edu Maltz, A., Shenhar, A., & Relly, R. (2003). Beyond the balanced scorecard: refining the search for organisational success measures. Long Range Planning Journal, 36, 301-318. Pitts, R.A., & Lei, D. (1996). Strategic management: Building and sustaining competitive advantage. New York: West Publishing Company. Veen-Dirks, P., & Wijn, M. (2002). Strategic control: meshing critical success factor with the Balanced Scorecard. Long Range Planning Journal, 35, 289-300. Read More