Overview

 

Performance management systems represent information-based routines and procedures fornally expressed that managers use to maintain or alter patterns in organisational activities (Simons, 2000). More and more organizations are implementing new and alternative performance management systems in order to obtain better organisational results.

 

These systems focus on reproducing financial and nonfinancial information that is relevant for decision making and managerial action. The recording, analyzing, and distributing of this information is embedded in the rhythm of the organisation and is often based on predetermined practices at preset times in the business cycle (de Waal, 2003).

 

Implementation principles

Though there is no standard formula in order to implement successfully a performance management system, some aspects should be considered:

1.        Implementation of PMS depends on organisational preconditions and human factors (behavioral aspects) that should be considered before initiating any system usage.

2.        Purpose - the system can be used for measurement for control and/or for learning. However, the most influential reasoning for measurement and PMS implementation should consider its characteristics.

3.        Integration - choosing a system should consider the fit with the strategy, structure and culture. The performance management system should support and reinforce the strategy regarding the performance, rewards and recognition, future directions etc.

 

List of Performance management systems (PMS)

 

New frameworks, most notably the Balanced Scorecard and the Business Excellence Model, have taken the business community by storm. Self assessment frameworks, such as those underpinning the Baldridge Award ans the European Foundation for Quality Management Award have generated significant industrial interest and activity (Neely, 2002).

 

The list of performance management systems presented bellow aims to assess the most common out of them, without having the expectation of being considered as a complete list:

 

Performance management system

Brief description

Balanced Scorecard (BSC)

Represents a strategic management tool, used in strategy formulation, organisational alignment and performance management.

 

More than providing information on whether or not business targets are achieved, Balanced Scorecard also clarifies the impact on corporate strategy. This way, the BSC is a source of business intelligence, used in various organisational decision making processes, such as its initiative generation and prioritization.

 

BSC structures the KPIs used in four perspectives: financial, customer, internal-business processes, learning and growth.

Performance Prism

Represents a three dimensional model, with five facets – the top and bottom facets are Stakeholder Satisfaction and Stakeholder Contribution respectively, as the three side facets are Strategies, Processes and Capabilities. It aims to offer an exceptionally clear picture of who their key stakeholders are and what they want.

Total Quality Management

Represents a management concept aiming to reduce the errors produced during the manufacturing, production or service process, to increase customer satisfaction and to assure optimization within the supply chain management. TQM can be easily associated with the development, deployment, and maintenance of organisational systems that are required for various business processes.

Management by objectives (MBO)

Aims to align goals and subordinate objectives throughout the organization, including ongoing tracking and feedback in process to reach objectives. MBO's are often perceived as a form of planning.

Value Based Management

Represents a management approach that ensures that organizations are management consistently on value, mostly maximizing the shareholder value. It includes the creation of value through strategy, managing for value (e.g. governance, change management, organizational culture) and measureing for value.

Total Performance Scorecard

Represents a concept of improvement and change management, based on a set of rules that form the basis for continuous process and individual improvement. It aims  to reach an optimum level of using the organisation's internal capabilities for achieving higher levels of performance.

 

References

  • de Waal, A., A. (2003), The Role of Behavioral Factors in the Successful Implementation and Use of Performance Mangement SystemsManagement Decision, Vol. 41, No. 8, pp. 668-697.
  • Neely, A. (2002), Business Performance Measurement: Theory and PracticeCambridge University Press, UK.
  • Simons, R. (2000), Performance Measurement and Control Systems for Implementing Strategy: Text and Cases, Prentice Hall, Upper Saddle River, NJ. 

Integration : Systems

 

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