Operational Performance Management
Performance management at operational level is linked to operational management, as its focus is the achievement of departmental, project or group objectives. Although it is aligned with corporate strategy, its focus is more functional.
In the first decade of the 20th century, Frederick Taylor developed the concept of scientific management (Drenth et al., 2001). This was based on the analysis of existing work methods through observation and measurement. Radnor & Barnes (2007) say that Taylor’s ideas were advanced by many others including Frank and Lillian Gilbreth, who developed the concept of time and motion studies, which required the measurement of every single movement undertaken by a worker in the course of their work. This newly developed discipline which came to be known as work study, incorporated the study of work methods and the measurement of work.
In the early 1920s, DuPont and General Motors experimented by introducing decentralized divisional structures with profit centers. As support for these reorganisations they also introduced the DuPont chart and with it the concept of Return On Investment (ROI). This meant that management was now also held responsible for the achievement of budgeted ROI and therefore not only focused on measures such as margin and net income (de Waal, 2002).
The “tableau de bord” has been quite popular in France ever since its introduction in 1930s, as a “dashboard" used by managers to monitor the operational performance of their organisations (Bessire & Backer, 2005). Although the majority of the large companies in France were using it, due to the limited availability of translated literature it had a minimal overseas diffusion (Bontis et al., 1999).
Over time, as internal and external operating environments became more complex, organisations started to look at non-financial indicators of performance. This made the connection with operations management and other aspects of the general management discipline. The Japanese quality management philosophy emerged in early 1950s to form the roots of today’s performance management theories and rules (Busi & Bititci, 2006). Statistical techniques were based on the work of a number of Americans – most notably Deming (1982), Juran (1980) and Shewhart (1980) – who had been largely ignored by their compatriots, but whose ideas had been enthusiastically taken up in post war Japan. The advent of Total Quality Management (TQM) increased Operations Management’s concern to improve effectiveness and responsiveness. This, in turn, lead to the introduction of customer-based measures. Such an example is the General Motors system of performance measures, the development of which culminated in the 1970s (Johnson & Kaplan, 1987). It included several non-financial indicators and can be seen as the forerunner of the Balanced Scorecard approach (Brudan, 2010).
- Brudan, A. (2010), Rediscovering performance management: systems, learning and integration, Measuring Business Excellence, VOL. 14 NO. 1, pp. 109-123.
- Bessire D. & Baker R. (2005), The French Tableau de bord and the American Balanced Scorecard: a critical analysis, Critical Perspectives on Accounting, Vol. 16, No. 6, 645-664.
- Busi, M. & Bititci, U. (2006), Collaborative performance management: present gaps and future research, International Journal of Productivity and Performance Management, Vol. 55, No. 1, p.7-25.
- Bontis, N., Dragonetti, N., Jacobsen, K. & Roos, G. (1999), The knowledge toolbox: A review of the tools available to measure and manage intangible resources, European Management Journal, Vol. 17, No. 4, pp 391-402
- Drenth, J.D., Thuerry, H. & Wolff, C.J. (2001), Handbook of work and organizational psychology, 2nd Edition, Psychology Press, Hove, East Sussex, UK.
- de Waal, A. (2002), Quest for balance: the human element in performance management, John Wiley and Sons, New York, NY.
- Johnson T.H., Kaplan R.S. (1987), Relevance lost: the rise and fall of management accounting, Harvard Business School Press.
- Radnor, Z.& Barnes, D. (2007), Historical analysis of performance measurement and management in operations management, International Journal of Productivity and Performance Management.