The Performance Prism

A Dynamic Performance Measurement System for Global Organizations

Ree Paranjape, Dept. of Engineering, A.N.U.

Scope

Definitions

49,800,000 web sites on Google search Inherently interdisciplinary Contributions from academics from Harvard, Cambridge, MIT Sloan Still maturing, still evolving

Performance measurementprocess of quantification of efficiency & effectiveness of action. Performance measure- metric used to quantify the efficiency and/or effectiveness of action. Performance measurement system- a set of metrics used to quantify both the efficiency and effectiveness of actions. - Neely et al. (1995)


PMS - A set of metrics used to quantify both the efficiency and effectiveness of actions (Neely et al., 1995) Performance measurement framework PMS Individual measures Individual measures

Individual measures Individual measures


The environment

Goals – –

Development of a comprehensive set of traits/attributes for generic performance measures Design of a dynamic (adaptive) Performance Measurement System (DPMS)

Research / Establishing Concepts

Research / Empirical Studies 1. Global business processes

A study of reporting and feedback structures as per literature

A study of existing PMS – BSC, Performance prism

A study of key business processes within CANON’s division(s), analysis of current reporting and feedback mechanism within CANON

2. Analysis of Existing PMS

Analysis of existing PMS in CANON (global, national & local???) - results for input to Stage 4

Research on process-based performance measurement

3. Process Identification (individual; team; organisational)

Key processes, their determinants/ important dimensions Inclusion of PM, review & revisal as routine business activities Designing measures that are dynamic, adaptable – avoiding over quantification, automation, ROI considerations

E-teams, v-teams, - measures that work for individuals AND teams

Process-based approach for design of a dynamic PMS?

4. Establishing Traits for Performance Measures

Addressing the question of “How to measure?” Mapping CANON’s measures against established framework of traits – i.e. testing the performance of the Canon PMS. PMS redesign for CANON – a forerunner to Phase 5

5. Design of a dynamic PMS (for global orgs)

6. Case Study – implementation Ree Paranjape, Dept. of Engineering, A.N.U.

Design of a dynamic PMS (with efficient feedback loops) – How to implement, How to review & revise PMS This phase will begin the process of testing the designed dynamic PMS. Given the long time-scales for results from new PMS – outcomes will not be included in this thesis

The Balanced Scorecard (Kaplan & Norton, 1992)

“David

and I are experts in what to measure – not in how to measure.”

•Most popular and influential network for the last decade •High emphasis on strategy •Operational difficulties •Negligible successful implementations •Many criticisms Ree Paranjape, Dept. of Engineering, A.N.U.


The Performance Prism (Neely et al.,2002)

•Strategy, in today's dynamic environments is a response to stakeholders wants and needs. •Emphasis on stakeholders •Introduces checks at all points •Can handle mergers and acquisitions

Criticisms: •Too wide a framework •Very few known implementations


TYPES OF MEASURES/ASPECTS/DIMENSIONS OF PERFORMANCE FRAMEFRAMEWORK

Product/Process related Financial

Customer

1. Keegan et al, 1989

Yes

Yes

2. Fitzgerald et al, 1991

Yes

3. Azzone et al, 1991

Yes

4. Lynch & Cross, 1991

Yes

5. Kaplan & Norton, 1996

Time

Quality

Yes

Competitor aspect

Resource /Infra/Infrastructure

Agility /Flexibility

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

6. Brown, 1996

Yes

Yes

Yes

7. Neely et al, 2002

yes

Yes

Yes

Yes

Learning & growth/ innovation

Strategy/ Vision

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Employee /People

Yes

Yes

Yes

Yes

Yes

Authors agree


Yes

Yes

Yes

Characteristics of a PMS

Should provide a balanced picture of the business Should give a concise overview of the organizational performance Should be multi-dimensional Comprehensive Should provide vertical and horizontal integration Integration with business processes Should measure results and their drivers Should be dynamic Should enhance learning and growth Should be consistent with management techniques and improvement initiatives Should be cost effective-consideration of over quantification and automation issues Should be pro-active Should be easy to implement


Some interesting observations Frameworks – a means of categorising measures None of the existing PMSs satisfy characteristics outlined No dynamic PMS Emphasis on financial measures is still very much in practice Designing, implementing and refreshing measures are still problematic areas Evolutions in existing PMSs is still going on BSC still the most popular framework – as per a 2005 review ROI on PMS – one of the great unanswered questions in performance measurement


Goals behind proposed Framework Strategy or stakeholders? Both. Simple Dynamic Should enable design / selection of

specific and relevant measures Global organization focus


Dimensions for measuring performance 1.Processes Sub processes Activities

2.People 1.Cross functional teams 2.Individuals within teams

3.The Edge Factor 1.Competencies-people 2.ICT & other technologies 3.Infrastructure & other facilities


Why these three dimensions? Efficient business processes+ competent people +highly sophisticated technologies /other infrastructure = unique edge over competitors. Global organizations - business processes are executed by cross-functional teams (often virtual or semi-virtual), by utilizing highly efficient technologies /infrastructure. Ree Paranjape, Dept. of Engineering, A.N.U.

Why start with processes? •“A business process is the complete and dynamically coordinated set of collaborative and transactional activities that deliver value to the customers (Smith & Fingar, 2003;p.47).” •Processes are characteristically dynamic, responding to customers demands as well as changing market conditions. •Strategic goals and stakeholder satisfaction is achieved through business processes. •A process has an identified, goal (as per strategy) stakeholders, cross functional teams and established hierarchy. •Is already integrated with other business processes. •In order to provide true dynamism and full integration with other business systems, PMS should be an integral part of the ERP platform (Bititci, 2000). •Process based PMS leads to better integration with ERP platform (Berretta, 2002).


start

Designing specific and relevant measures

Product bookbook-ins

Within Warranty? Yes

No

Customer agrees to quote? Yes

Repair

Dispatch

End


No

To product pilepile-up

Key elements of a PMS A set of procedures for collecting and processing data Timetables and protocols for distributing information about performance to users within and outside the organization An organisational learning mechanism to identify what actions can be taken further to improve performance A review process to update the PMS regularly Reward system Ree Paranjape, Dept. of Engineering, A.N.U.

Insights – Components/considerations for a dynamic PMS practice reviews Process Schedule/ Mechanism to approach

Collection/ Analysis of data Integration with business processes

protocols

Be dynamic

Learning process Performance measures

Review process Focus on virtual teams & global org.

Vertical and Horizontal integration Automation

Reward system?


Next Step Designing the measures at a microcosmic level within Canon to test the framework in practice.
