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Emerald Group Publishing Limited
Copyright © 2004, Emerald Group Publishing Limited
In this issue of Measuring Business Excellence we look at the softer side of performance measurement, the measurement of intellectual capital, evaluating board performance and the culture aspects of implementing performance measurement systems.
For many people, this softer side is illusory. Hard tangible measures of performance are what matters and the rest is just academic fluff! But when we really look at the "hard" measures of performance we do need to be careful. The way we calculate costs is not fixed. We have to work within rules, but allocation of overheads makes the final cost figure far from an undisputed figure. Similarly, from recent happenings, the size of oil reserves appears also to be open to interpretation. Even sales figures are not sacrosanct, with one company we know having six different figures for sales. In fact there are very few figures in a businesses performance measurement system of which one can be absolutely certain, and yet we claim that some of these figures are much "harder" or more reliable than the rest.
Granted, the softer measures are much more difficult to quantify. How do we measure employee commitment? A survey may give us some feedback, but then if we start to go further and think about how we measure the development of intellectual capital, life becomes more problematic. We can create some proxy measures, but capturing intellectual capital as a whole is not easy. Yet there are strong indications that it is these softer issues that are the drivers of longer term performance. The things that are the hardest to measure may be exactly those things that have the largest impact.
This edition starts with a paper by Monica Franco-Santos, Mike Bourne and Russell Huntington on reward and performance measurement practice in the UK, reporting the latest results of a survey of large UK HR and compensation directors. The results show that the linking of reward to performance measurement systems is much higher than has previously been reported. It also suggests that the use of the balanced scorecard is not as wide spread as others have suggested, with the vast majority of companies using key performance indicators as their strategic performance measurement system.
The second paper by John Collier addresses the subject of measuring and evaluating the performance of company boards of directors. At Post Enron and Worldcom there is increasing scrutiny of company reporting processes, but this scrutiny is irrelevant if the board itself does not function properly. John is a main board non-executive director headhunter, and he takes this perspective to describe some of the issues and one approach that is being taken to evaluate board performance.
Kaplan and Norton (the original promoters of the balanced scorecard) have published their latest book. The scorecard is constantly evolving and has developed significantly from their original 1992 Harvard Business Review article. However, Bernard Marr and Chris Adams take them to task on their recent evolution of the "innovation and learning" scorecard perspective. This perspective has been the most troublesome and least used of the four perspectives with many companies treating it as a "people" perspective, and other frameworks, such as the performance prism, replacing it with competence and resources. In their latest book, Kaplan and Norton replace their fourth perspective with a learning and growth perspective, and introduce an unconventional view of intangible assets. In our third paper, Bernard and Chris criticize this approach for ignoring much of the last ten years' research in this field. In particular, they are concerned that "relationships" are being ignored, and given the importance of relationships in intangibles, they argue that this is a serious omission.
The next two papers look at the softer issues in the design and implementation of performance measurement systems.
In our fourth paper, Umit S. Bititci, Kepa Mendibil, Sai Nudurupati, Trevor Turner and Patrizia Garengo look at the interplay between performance measurement, organizational culture and management style, reflecting on a series of performance measurement interventions. Their results suggest that culture has a big impact on implementation success, but the use of measurement systems needs to be underpinned by a supportive management style to promote greater buy-in at all levels of the organization. They reflect on how performance measurement builds, achievement culture and the dangers of being functionally focused.
In our fifth paper, Keith Sneyd and Jennifer Rowley describe the process of developing a performance measurement system in AstraZeneca. This paper goes beyond the usual description of the design process as it describes how the methodology used to roll out the performance measures evolved through use, and highlights a series of lessons learnt during this process.
In the final paper, Marla Hacker and Marvin Washington ask the question "how do we measure the implementation of large scale change?" Evaluating large-scale change is not easy, but essential given the record of failure in this area. Marla and Marvin provide a tool to measure large-scale change implementation, and demonstrate the use of the tool based on the implementation of a performance management system in the government of Botswana. They conclude that such an approach has benefits in enabling implementation to be monitored, depoliticizing the situation and providing an understanding of how the organization is functioning.
So in this edition we have addressed a whole raft of issues concerned with the softer aspect of performance measurement, from how we measure difficult concepts to the softer side of design, implementation and reward. As we develop our understanding and use of performance measurement, these issues will become increasingly more important if the measurement and management systems are going to deliver the benefits we expect.
Mike BourneDr Mike Bourne is with the Centre for Business Performance at Cranfield School of Management.