The state-of-the-art in performance measurement in Spain

Citation

Heras, M. (2005), "The state-of-the-art in performance measurement in Spain", Measuring Business Excellence, Vol. 9 No. 3. https://doi.org/10.1108/mbe.2005.26709caf.005

The state-of-the-art in performance measurement in Spain

The state-of-the-art in performance measurement in Spain

Reflections on performance measurement practice in Spain

I write from my experience on the Esprit 26736[1] Research Project, “Desarrollo de un Sistema de Indicadores para la Calidad Total” (Development of an indicators system for total quality(, and from informal surveys administered to managers taking part in my courses. These include the open course strategy execution through scorecard implementation and full-length senior management courses within the ESADE Executive Development Programme and Senior Executive Programme, where I teach the module on indicators and scorecards. I feel that the introduction of performance measurement systems in Spain is still very much restricted to large companies with more than 250 employees, often subsidiaries of multinationals. In addition, most of the Spanish organizations best placed to establish performance measurement systems do not keep strictly to any specific model. Those who do can be divided into those who use the balanced scorecard model and others who adopt the EFQM excellence model as frameworks for their indicator systems.

Some examples of best practice

One best practice observed is the introduction of an indicators system as deployed through processes, as in Kemira Ibérica, a Swedish multinational manufacturer and distributor of water treatment products. This company set up their strategic and process maps by linking each strategic indicator to its most influential process, and implementing the cascading of strategic to operational indicators through the process hierarchy. The impact on the organization has been very positive, in that the approach brings together the EFQM excellence and balanced scorecard models, correcting deficiencies of both models as regards relationships between strategic and operational indicators, and the deployment of strategic indicators through operational indicators. The key to success in implementing this performance measurement system was the strong commitment and involvement of the management team in general, and the general manager in particular.

Current issues in performance measurement facing business

Reflecting on my experience, there are a number of current issues in performance measurement in Spanish companies:

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  The choice of suitable indicators. This is something that concerns company management. The choice must ultimately be made by the management team, and depends on their expertise, business know-how and forward vision.

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  Managing the organizational change linked to bringing in an indicators system. The initial perception of staff on the introduction of a performance measurement system can be summed up in two phrases: “more control” and “more work”. To deal with this reaction, the way people are brought into the process of change and become involved in the introduction of a scorecard is crucial.

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  Methodological approach. This issue comes into play when carrying out the cascade from strategic to operational indicators and establishing relationships between lead indicators and lag indicators, or when defining early warning indicators for other measurements. We often find companies with a scattering of predominantly financial indicators on the top, a jungle of operational indicators further down, and the two groups are left completely unrelated. Failing to enact the deployment described above means that only strategic indicators are defined while preserving the original operational indicators. This often creates a lack of alignment between the two, resulting in strategy implementation being thwarted.

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  Having too many indicators, causing distraction and lack of focus in actions they require from staff at different organizational levels.

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  Linking indicator systems to the budget, and structuring the systematic review of the measures.

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  Design and implementation of the incentive system linked to the performance measurement system.

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  How to choose the best software system for the performance measurement system to suit individual companies.

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  How to integrate the performance measurement system’s design and introduction with business process management, the EFQM excellence model, customer relationship management, etc.

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  Cost of the design, introduction and maintenance of indicators. Problems often arise when an indicator is selected that, whilst felt to be desirable, is not currently present in the organization. The desire so expressed is therefore not supported by any company database to carry out the necessary calculations. Rectifying this problem often requiring installation of very costly software and possibly making the adoption of the new measure untenable.

A look to the future

As regards the future evolution of indicator systems, we foresee a trend towards increasing integration of the balanced scorecard, the EFQM excellence model and the business process management approach. The EFQM excellence model contributes four results categories – customer, people, society, and key performance results – to distinguish the four strategic perspectives of the performance measurement system. The balanced scorecard defines the phases in building a strategy map and strategic indicators. Finally, the business process management approach provides a high level processes map and each strategic indicator will be linked to its most influential process. Deployment of strategic indicators through operational indicators is then related to process hierarchy. Taken together, all this facilitates the linking of operational and strategic indicators and a cascade of indicators to help align the efforts of the whole of the organization’s staff with its strategy. This means the organization is simultaneously making headway in implementing its performance measurement systems and its process approach, processes and indicators being two sides of the same coin: the creation of value for customers.

A strategy with no indicators is wishful thinking, and indicators not aligned with strategy are a waste of time and effort. Indicators systems assist and optimise a resource in short supply in all companies: the energy of their management teams, also contributing to its cohesion. But this will require the deployment of the organizational approach of our century: business process management.

Notes

1. This is a project that integrates research and development with implementation in a single programme, facilitating collaboration with companies, the end customers. Led by Professor Miguel Ángel Heras, ESADE, it was carried out by a consortium formed by ESADE, BiT, a British software company, Cranfield University, Universidad Jaume I and tile sector companies in the Gres de Nules/Keraben Group and Wendel Email. The project was subsidized by the European Commission.

Miguel HerasProfessor in the Department of Operations Management and Innovation at ESADE Business School, Barcelona, Spain and Director of the ESADE Programme “Implementing Strategy with Scorecards”. His first degree was in Industrial Engineering (from Universitat Politècnica de Catalunya) and his MBA at ESADE. Prior to his academic career, he held different executive positions in Philips before becoming Director of the executive consulting firm, Roland Berger. He now consults on the design and implementation of performance measurement systems and business process management. Through his research he has directed the Esprit International Research Project “Development of a Performance Measurement System for Total Quality Management”, which analysed the performance measurement systems of 200 Spanish companies and he writes frequently on the balanced scorecard and related subjects.