Implementing a strategic plan in a business can be a complex process, involving many components, both inside and outwith the business. This includes the management a number of groups of people (including managers, employees, shareholders, other stakeholders, etc.) who will have an interest in the performance of the organisation’s . In addition the plan will include projects and activities that need to be management , as well as possible changes to culture, processes, procedures, and much more. In addition, strategic plans are often “based on assumptions that are often wrong and, as a result, the strategy has unintended outcomes that could be potentially damaging to the organisation” (see our article entitled ‘Prescriptive Vs Emergent Strategies‘).
With so much going on, it is essential to have performance measures in place that test strategic assumptions, monitor the outcome of strategic activities and projects and provide information to the organisation’s various interested parties.
The problem is that measuring performance has a cost associated with it (relating to data capture, analysis, reporting, etc.) so there is a tendency for an organisation to try to develop a generic set of performance measures intended to satisfy these disparate groups and their differing requirements. The danger is that such an approach produces a generic set of performance measures that are not linked to the strategic plans and consequently do not provide any information that helps with the implementation of the organisation’s strategy.
What is required is a cost-effective approach that can be adapted for the different needs of the different groups and is integrated with the organisations’s strategic plan. The Balanced Scorecard provides such an approach.
The diagram below shows a simplified planning process and the performance measurement and feedback elements that are required at different levels, at different stages and for different groups.
At the operational level, feedback on performance is required for managers and staff to allow them to link the service results achieved to the implementation of service plans, often on a day-to-day basis. Differences, or deviations, between actual results and those planned need to be identified and acted upon. These performance measures are largely required for control purposes: controlling performance and service delivery to meet standards, targets and objectives.
A feedback loop is also required to the service planning stage so that both management control and management learning can take place. Management and organisational control links to continuous improvement, so that in the next planning cycle learning and experience from the last set of planned and achieved service results can used to improve performance further.
The same control and learning feedback must also occur at corporate level so that progress on corporate goals can be reviewed. In addition, the continuing appropriateness of these goals can be assessed and informed decisions can be made about priorities and resource allocation.
What are the wider issues in performance measurement?
There are a number of wider issues relating to effective performance measurement: