White Paper Series
Wilson Fyffe, Singapore, 1 April 2011
Purpose – The purpose of this paper is to examine why and how firms find resistance to performance measurement in the presence of proliferation of the same, leaving very valuable management information potential unrealized. Design/methodology/approach – The paper presents a framework for organizing performance measures into a manageable hierarchy, suitable for computerization and easily maintained as the organization changes. Findings – The prime cause of resistance to performance measurement is the reluctance to be measured against outcomes which are beyond the control of the individual being measured. Practical implications – The approach enables firms to prepare for redesign of their framework for performance measurement, in particular where there are implications for compensation. Originality/value – The ideas presented provide a means of achieving rapid progress in the overall design of a performance management solution. Keywords Performance measures, Quality
Paper type Research paper
This white paper gives a high level view of the issues faced by organizations finding that they have a proliferation of performance measures and need to arrive quickly at a means of focusing them in an easily managed and maintained framework. 2.
The KPI Hierarchy
The Chart of Accounts
Accountancy is the basic form of performance measurement used in all organizations, both private and public. Most organizations are required to appoint an external auditor to provide the shareholders and other stakeholders with an assurance that the periodic financial statement present a ‘true and fair view’ of the status and activities of the organization in financial terms. The external auditors need to comply with standard forms of reporting and are thus greatly assisted if the Chart of Accounts employed by a client organization is in a standard format. Thus the major accountancy software developers, such as SAP, Oracle, IBM, etc offer such standard formats as a first choice. However, the external audit format for financial statements is of little help to business process managers. They need a Chart of Accounts that faithfully represents the process flows of the organization. This issue is addressed by techniques such as Management Accounting and Activity Based Costing. The Organization Chart
In order to manage spans of authority, organizations publish organization charts, showing who reports to whom, bottom to top. These assist greatly in managing succession and responsibility. Windows Explorer
As the software products have been developed to support the various levels of transaction recording, managers have become familiar with products like Microsoft’s Windows Explorer, which shows a hierarchy of computer file folders in an expandable / contractible way. The technique is easily applied to charts of accounts, organization charts and other frameworks for managing information. The Ideal Solution
The ideal solution, in our experience, for a framework for managing KPIs organization-wide is one based on a Windows Explorer style hierarchy. This allows easy aggregation of the lower levels of data into the higher levels. 3.
The Types of Data
In measuring performance, there are several types of data encountered, for example, common ones are: * Dollars
* Time (hours, days, months, etc)
* Quantities (eg, SKUs, tons, litres, kilometers, customers) A performance measurement system needs to be able to make sense out of mixtures of different types of data. (There is an old saying in counting data “you can’t mix apples and oranges”. Our response to that is yes, you can: 5 cases of apples + 5 cases of oranges = 10 cases of fruit. It all depends on the context and the purpose of the measurement. 4.
The Problems of Scoring
In measuring performance, we usually wish to measure what...
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