Lecture 10 - Performance packages Flashcards
(!) Describe performance measurement systems, purposes & consequences
General:
- Focus on past
- Quantitative & qualitative
- Specify broad, abstract goals & missions
- Enable evaluation
- Implement firm strategy
- Influence behavior & performance
- Ensure achieving ends by means
- Measures seen over time
- Indicators (proxies) vs. measures
Purposes:
- Plan
- Predict
- Communicate: Interaction btw. superior & subordinate
- TM control
- Monitor
- Motivate
- Evaluate: Feedback
- Stewardship: Supervise
- Reward
- Learn
- Improve
- Optimize
- Effectivize
- Allow TM control
- Interaction btw. superior & subordinate
Consequences:
- Standardization
- Reduce abstract knowledge
- Risk less individual usefulness
- Risk social relations
- Dysfunctional behaviors
(?) Describe performance measurement packages
General:
- Financial & non-financial measures
- Decentralized & loosely coupled measures into package
- Ref. Incompleteness
__________
Packages:
__________
Narrow methods:
General:
- Focus on measures
Packages
- Tableau de Bord
- KSF
- Likert
- Performance pyramid
__________
Intermediate methods:
General:
- Integrate strategy & external stakeholders
Packages:
- BSC
- Performance Prism
__________
Holistic methods:
General:
- MC approach
Packages:
- Otley & Ferreira
- Broadbent & Lauglin
- Rouse & Putterill
- Malmi & Brown
(!) Describe the tableau de bord
General:
- Top-down
- TM tool
- No rewards
- Actions w. hierarchical, cross-functional coherence
- Req. deep firm knowledge
- Measures req. reference standard: Eg. Benchmark
- Min. one PM for each objective
- Ensure coherence toward strategic objectives
- Incl. learning by cause & effect. Single loop: Cause & problem solved. Double loop: Path questioned
- Apply rules loosely
Objecties:
- Depend on action variables
Action variables:
- Outline action plans
- Must be controllable
Must have significant effect
- Manager must be aware of effect.
- Eg. Mat. lead time
Action plans:
- Eg. Employee training
Critique:
- Risk conflict & uncertainty
- Don’t establish routines
- Not popular
Describe the Likert model
Causal variable:
General:
- Management style
- Different effect on employees
- Eg. Org. structure, policies, DM, strategies, skills & behavior
Exploitative/authoritative:
- Top-down
- Hierarchical
- Punishment
- Fear
- Threats
Exploitative/benevolent:
- Top-down
- Upward info-flow
- Feedback & rewards
Consultative:
- Partly participative involved: Small DM
- Rewards as incentive
- Up-ward info-flow
Participative:
- Fully involved in DM
- Strong upward info-flow
- Teams
- Rewards
___________
Intervening variable:
- Predict end-result
- Employee condition
- Eg. Loyalty, attitude, motivations, goals
End result:
- Financial performance
Describe critical success factors
- Obj.: Key areas of responsibility in firm
- Specify actions to achieve obj.
- PM´s indicate achievement of actions
- Both fin- non-fin & qualitative
- Cluster of supporting measures for each obj.
- Fit for purpose
- Eg. Create good supplier relation
- Eg. Attract new customers
Describe the structure of the performance pyramid
General:
- Structured approach
- Horizontal link: Support vision
- Vertical link: Coordinate. Mutual benefit
- Low levels foundation for above
- External effective by internal efficiency
(!) Describe the balanced scorecard
General:
- Fin- & non-fin measures
- Cause-&-effect relations
- Both ST & LT
- Lagging indicator: Outcome measure. Result of strategy
- Leading indicator: Driver measure. Seek results & influence behavior
- Link objectives to LT targets & budgets
- Vision & strategy in the middle
- Based on Porters view: No ress. based
- Ref. Hanne Nørreklit: Finality
- Since limitations in financial measures
___________
Perspectives:
Learning & growth:
- Often non-financial
- Sustain innovation, change & improvement
- Link to business process per.
Business processes:
- Often non-financial
- Value drivers
- Link to customer per.
Customer perspective:
- Often non-financial
- Customer perception
- Link to financial per.
Financial perspective:
- Often financial
- Mostly accounting based
- Ref. Shareholders
___________
Steps:
Step 1:
- Clarify & translate vision & strategy to specific objectives & measures
Step 2:
- Comm. vision & strategy
- Translate obj. & measures to employees
- Create link btw. PM & rewards
Step 3:
- Set targets
- Align strategy w. objectives
- Link budget to LT plans
Step 4:
- Strategic feedback
- Learning
Describe the performance prism
General:
- Stakeholder approach
- Implementing business model
- Stakeholder satisfaction vs. contribution
Stakeholders:
- Investors
- Employees
- Suppliers
- Customers
- Regulators
- Communities
__________
Dimensions:
General:
- Areas needing measures
Shareholder satisfaction:
- Stakeholders wants & needs
Strategies:
- Strategy to satisfy wants & needs
Processes:
- Critical processes to operate & enhance strategies
Capabilities:
- Capabilities needed to operate & enhance processes
Shareholder contribution:
- Stakeholder contribution to maintain & dev. capabilities
(?) Describe how to implement a PMS
- Define strategy
- Define measures & goals for strategy
- Implement measures in management system
- Evaluate & review measures continuously
(!) Describe the pitfalls of PMS
- Fin. & non-financial measures not connected
- Focus on financial measures
- Neglect updating measures
- Too many measures: Loose focus
- Lack understandability of meaning & intentions
(!) What is included in performance management systems?
- Planning & expectations
- Continual monitoring performance
- Dev. capacity to perform
- Periodically rate performance
- Reward good performance
- Often used in HRM
(?) What are the five questions for a holistic view on performance management instead of measurement?
General:
- Otley 1999
- Key succes indicators:
- What are the key successful indicators?
- What determines firms success?
- Key objectives?
- How achievement of obj. are evaluated - Strategies, plans & processes:
- What strategies & plans exist?
- Req. supporting processes & activities? - Performance level & targets:
- What level of performance is required?
- How are appropriate targets set? - Rewards/penalties:
- Rewards and/or penalties if achieve or fail targets? - Info flows:
- Which needed info flows?
- Learn from experience
- Adapt to contextual changes
Describe the Ferreira & Otley framework
General:
- General& holistic
- 12 Questions
- 8 Q about PMS
- Initially 4 Q about culture & context
- Today only 9 & 10 about underlying nature of PMS
- Incl. Simons levers
- Heuristic tool
- Diff. Qs important at diff. levels
Question 1.
- Mission, vision & how this is brought to attention
- Ends
Question 2.
- KSF for future succes.
- Ends.
Question 3.
- Strategies & plans: Incl. processes & activities required.
- Means
Question 4.
- Org. structure: Incl. Its impact on design & use of PMS so as strategy implementation.
- Means
Question 5.
- Key PM from key objectives, KSF, strategies & plans: How to measure & assess it
- Ends
Question 6.
- Needed performance level for each question & how to set appropriate targets for it
- Ends
Question 7.
- Evaluation processes: Individual, group & firm. Formal vs. informal.
- Consequences of this evaluation system.
- Means
- Ref. HRM
Question 8.
- Reward or penalty: Targets
- Financial or non-financial
- Means
- Ref. HRM
__________
Question 9:
- Feedback & feedforward info
- Info-flows for performance monitoring & adapt behavior
- Types of feedforward flows to foster learning, new ideas & recreate strategies & plans
Question 10.
- Interactive or diagnostic control used of feedback or feedforward info flows
Question 11.
- Change dynamic or org. & its environment.
- On expectations & responses to stimuli
Question 12.
- Strengths & coherence of links of PMS
(!) Describe elements of the Broadbent & Laughlin model
General:
- Extend question in Ferreira & Otleys model
- Rationalize: Intentionality & reason > Random events
- Intention: Clear means to ends relation
- Important context
Means:
- Strategy & plans
- KSF for means
- Structures
- Performance evaluation systems
- Reward systems
Ends:
- Vision
- Mission
- KSF for ends
- Performance indicators
- Targets
__________
Context:
General:
- Internal & external
- Decide questions to answer
Organization or environment:
- Eg. History, purpose, tech., people, environment
- Disaggregated vs. divisionalized firm
Finance or accountability:
- Control intentions
- Financial transfers
- Req. from key intervening instrument
- Compare PMS & actual performance
__________
Two models of rationality:
General
Instrumental rationality:
- Mechanic
- Performance indicator: Formal rationality
- Means: Theoretical rationality. Concepts & mental understanding of world
- Stakeholder involvement: Low
- Authority structure: Legal rationality. Fixed.
Communicative rationality:
- Dynamic
- Performance indicator: Practical rationality
- Means: Substantive rationality. Mental & physical understanding of world
- Stakeholder involvement: High. Extensive consultation on means to ends
- Authority structure: Reflexive. Non-fixed
__________
General:
- Continuum
- Categorize PMS
- Defined by outcome of the other
- Levels in org. may differ
Transactional:
- Extrinsic
- High specificity of mean & ends
- Often projects & contracts
- Often defined period of time: ST
- Rules of behavior
Relational:
- Intrinsic
- Means & ends subjectively chosen & understood
- Choice & ownership of specific means & end by stakeholders
- No defined time period: LT
- Less precise
Describe background for the Micro-Macro perspective by Rouse & Putterill
General:
- Since firm today highly integrated
- Since large data volume
- Since processes continuous
- Since intense competition
- Since dynamic environment
Two aspects:
- Micro-macro view: Holistic
- Performance characteristics: Technical aspects: Evaluation, measures & analysis
___________
Models:
DuPont model:
- Only financial view
Anthony model:
- Simple & hierarchical: Strategic planning, MC & operational control
Fitzgerald et al:
- Measures relating to results: Finance & competitiveness
- Measures related to causes: Quality, ress. utilization, innovation
Kaplan:
- The Balanced Scorecard
Otley:
- MC focus
- Tie measures to firm elements
Beer:
- Viable systems model/VSM
- Prod. units can be own system or part of larger system
- Focus: Reciprocal monitoring & strategic intelligence gathering
Nanni et al:
- Integrated dynamic PMS
– integrate different firm levels
Flamholtz:
- Meta perspective on control systems
- Core control system, org. structure, org. culture & org. environment
Describe steps in the Rouse & Putterill model
General:
- Introduce performance triplet: Evaluation, analysis & measures
- Basic process core elements
- Inputs –> Activities –> Outputs
- Incl. Performance norms & measurements
- Micro figure - Planning evaluation & ress. achievement
- Incl. Ress. utilization, plans, outcomes & evaluation
- Horizontal & vertical view start to emerge
- Time dimension & past evaluation added
- Incl. Feedback & feedforward info
Malleret service model:
- Output vs. outcome
- What customer value as result of activity
- Relation btw. output & outcome determine effectiveness
- Input to output = Efficiency
- Outputs = Flows
- Outcomes = At particular point in time
- Broader organization context
- Integrate organizational context, culture & strategic outcomes & views
- Incl. Ress. capacity, objectives, strategic outcomes & org. culture / structure
- Prod. capacity must be in place - The overall framework
- Integrate vision, goals & stakeholder expectations
- Incl. Contributions, vision & goals, benefits & stakeholder expectations
(!) Describe the new model
General:
- Acknowledge context
- Consider limited knowledge
- Acknowledge mistakes during analyzing firm
- Consider ST pressure
- Consider bias: Values, ideology, beliefs & self-fulfilling prophecies
- Unintended consequences when assumption differ from reality
- Incorrect assumptions = unfit control mechanism
- Advise having both enabling & directive systems
__________
Goal alignment:
- Trade-off btw. own vs. firm
- Low: Opportunistic behavior
Goal uncertainty:
- Accuracy of predictive models
- Uncertainty in predictive model
__________
Situations:
Directive PMS
- Low + low:
- Rely more on cont.
- Good in highly programmed & well-understood situations
Enabling PMS:
- High + high:
- Enabling control
- Risk free-riding if eg. only applied partly
Hybrid PMS:
- High & low:
- Either most enabling or directive
