Performance Measurement in Managers

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Table of Contents

Introduction
Review of Author’s Arguments
Methodology Chosen
Summary/Critique
Works Cited

Introduction

The assigned article titled, “Designing, Implementing and updating performance Measurement Instruments” addresses issues involved with updating, implementing and designing performance measurement instruments. With a focus on manufacturing companies in the United Kingdom (UK), the authors proposed a theoretical framework for implementing performance measurement instruments (Bourne et al. 754). They also used the same framework to review three longitudinal case studies that formed the basis for the development of the study’s findings. The theoretical foundation was used to categorize and describe how companies use management processes to implement performance measurement instruments. The authors also highlighted how the processes influenced the design of performance measurement tools, their execution strategies and the updating process. Comprehensively, their work explains the design, implementation, and updating processes highlighted above using three companies in the United Kingdom (UK) as examples.

Indeed, the focus of the paper is about explaining the managerial challenges that these companies experience when implementing and updating performance measurement instruments. By doing so, the paper demonstrates that specific processes are often involved in making sure that performance measurement objectives always align with corporate strategies (Bourne et al. 754). The authors also propose that combining these processes with a well-defined model could yield good results for the organization (Bourne et al. 754). Here, the best result would be the enhancement of the strategic management process using the strategic measurement system (Corporation for National and Community Service 3-5).

The process involves challenging existing assumptions and the strategy itself. Part of the discussion highlighted in the paper revolves around how managers update their performance measures. The discussion also involves reviewing the usefulness of the theoretical framework mentioned above and its implications on performance measurement in general. In this paper, I review the article with the aim of explaining its advantages, limitations and contribution to the research issue.

Review of Author’s Arguments

It is clear from the abstract of the article that the topic of discussion is a complex one, especially considering it is dynamic and incorporates the evolution of different tools of performance measurement. The first paragraph of the article is fairly detailed in the sense that it provides a short history of the concept of performance measurement and explains how the concept has evolved over the decades. A significant portion of the literature also shows the interest that this area of study has elicited in the business field considering it has drawn attention from academicians, economists, and commentators alike.

In the article, the authors detail their views of performance measurement by explaining the background of the topic and its evolution (over the decades) to create a sophisticated and detailed comprehension of the concept (Bourne et al. 754). Costing and accounting are two fields of business that have spearheaded the evolution of performance measurement tools (Corporation for National and Community Service 5). Although contemporary tools of performance measurement have digressed from these two fields of management, traditional performance measurement tools are solely reliant on them (Epstein and Manzoni 157-160).

In the first section of the paper, the authors talk about different performance measures that have traditionally been used by different types of researchers in the management field. They highlight different criticisms that explain why traditional performance measures have been disregarded for newer types of assessment tools (Bourne et al. 756-758). The paper then goes on to explain the theoretical foundation that companies use to implement their performance measurement processes. From this background, the authors point out a clash between the use of systems reporting tools and management tools (Bourne et al. 754). They also argue that financial principles traditionally informed the development of performance measurement tools, particularly in the United States and the United Kingdom, provided the impetus for the development or improvement of the concept exist (Bourne et al. 754).

Some observers have criticized the focus on financial principles to inform performance measurement tools (Epstein and Manzoni 157-160). To overcome some of these criticisms, Bourne et al. (754) say that developments of contemporary tools have strived to provide a balanced view of performance measurement. Consequently, new frameworks of performance measurement are becoming non-financial based because past frameworks were often hooked on financial-based metrics (Spitzer 110-112). When explaining the performance measurement process, Bourne et al. (754) say that the first stage of engagement (for managers) is identifying performance measurement goals for an organization. The second step is defining the framework they should use to achieve these goals. Implementation and embedding processes in performance measurement hinge on the success of identifying the right framework (Bourne et al. 754). One critical issue that the authors try to espouse in their argument is the different phases involved in implementing performance measurement tools (Bourne et al. 754). They explain these stages as the design, implementation, and use of performance measures (Bourne et al. 7555-756). The researchers further break some of these stages into smaller segments. For example, they say the design stage involves the process of identifying the implementation objectives and designing the measures to be used (Bourne et al. 7555-756). There is a strong consensus among many researchers highlighted in the paper who say that the performance measures chosen should merge from the strategic choices of the company (Bourne et al. 7555-756). Spitzer (110-112) also shares this view. However, what many of these authors struggle to answer is what should be measured?

In their article, Bourne et al. say, “The phases involved in developing a performance measurement system include system design, implementation of measures, the use of measures to assess the implementation strategy, and use of measures to assess strategic assumptions” (7555-756). The system design process includes design measures and the identification of key objectives. The implementation of measures stage includes collection, collation, sorting, analysis and distribution phases (Bourne et al. 7555-756). Comparatively, the use of measures to address implementation strategies involves the processes of measurement, review, and identification. Ibrahim (31) supports this view. The last phase, which involves the use of measures to challenge strategic assumptions, involves a reflection of the performance measurement instruments. The third phase of the performance measurement system involves a review of the company’s targets. This phase also links with the first phase (system design) through a review of existing measures. The last phase involves challenging the main strategy and reformulating the first phase (Bourne et al. 7555-756). Regardless of the order of the processes outlined above, the article emphasizes that most companies must observe the four phases of performance measurement systems.

Additionally, the authors contend that the process of implementing performance measurement is not complete after the design phase (Bourne et al. 756-758). Managers need to do more after this process because companies have experienced significant obstacles in the implementation of these performance measures after this phase (Ibrahim 28- 31). Typically, from the case studies highlighted in the assigned paper, companies require between 9 and 12 months to fully implement their performance measurement instruments (Bourne et al. 756-758). However, this long period is attributed to Information technology infrastructure challenges that emerged in the case studies cited. A general resistance to measurement also adds to this delay and the distraction of managers from the goal of implementing the performance measurement standard contributes to the problem. Based on these issues, the authors proposed that increased efforts in implementing performance measurement should be geared towards reducing the implementation time so that companies start to benefit from the advantages of performance measurement early in the implementation process (Bourne et al. 756-758). In their view, Bourne et al. (754) say that this is a good strategy for making sure that the project implementation process is not overtaken by other events. The authors also say that the implementation process for performance measurement is mostly a cognitive process because it involves translating the views of all stakeholders in terms of organizational goals and developing a framework for measuring them (Bourne et al. 756-758).

According to Bourne et al. (754), the implementation of performance management tools is the most important aspect of designing and updating them. The complexity of the process has forced the authors to recommend the use of classic project management tools (Bourne et al. 758). They also say that the process should involve different groups of professionals early in the implementation phase to have a high level of success and a low level of resistance to the process (Bourne et al. 754). For example, the involvement of IT specialists early in the implementation phase could guarantee the support of performance measurement tools and its implementation process (Schwerdt and Wendland 36-38). The application of data retrieval and manipulation tools would also go a long way in improving the process of implementing and updating the performance measurement tools (Schwerdt and Wendland 37-39).

The article also points out the fact that use of measures to evaluate project goals is a problematic area of study because there are inadequate tools available for allowing managers to execute the process (Bourne et al. 757). Nonetheless, the article shows that this is a “soft problem,” as it does not fundamentally change how organizations conduct their operations (Bourne et al. 757). In other words, the application of project management techniques is not enough to realize the goals of performance measurement.

One of the challenges highlighted by Bourne et al. (754) when adopting performance measurement instruments is the potential of resistance from different groups of employees during the implementation stage of performance measurement tools. First, they point out that management, which should be spearheading its implementation, could be conflicted when applying the tool because performance measurement techniques redistribute information flow, thereby eroding the power that they would ordinarily have (without the change) (Schwerdt and Wendland 36). This is partly the reason why the author reported some resistance in the adoption of performance measurement instruments in the case studies. Bourne et al. (754) also highlighted the importance of developing skills in the performance measurement process because developing and commenting on the associated tools requires advanced skills on the part of the associated workers (Schwerdt and Wendland 36-38). However, the authors were not naïve to assume that such developments could take place in a short time; instead, they recognized that it may take a long time, especially for the “old guard” to leave the organization before allowing new people to have adequate space to develop new skills and competencies (Bourne et al. 756-758). The authors also recognized that the rate of change itself may be slow.

Here, it is important to note that the framework for designing, implementing and responding to performance measurement challenges is critical to the entire exercise. For example, managers could divide different operational processes into unique stages and have different approaches for managing each of them. There has been a lot of academic literature available to explain the design phase of the project; however, there is little information available to explain the implementation and updating phases of performance measurement. Nonetheless, according to Bourne et al. (756-758), four stages are involved in reviewing and updating performance measurement tools. Evidence from the case studies analyzed revealed that the goals and measures involved in the process could evolve, depending on the types of instrumentations used and the organizations in question (Bourne et al. 756-758). However, there is a need to evaluate the extent of this evolution because if left unchecked, it could lead to a deviation from the intended goals. One of the case studies highlighted this problem because some managers review a strategy without a similar review of the performance measurement process (Bourne et al. 756-758). The problem that arises in this context is in reverse because the new strategies may conflict with the old performance measurement objectives.

Overall, the authors argue that the phases of design, implementation and performance measurement were useful in their analysis because these phases allowed managers to split the “whole” into smaller and manageable segments of analysis (Bourne et al. 756-758). The authors also noted that. from an academic viewpoint, there was not enough research to address the findings of an analysis of the last two phases (implementation and use of performance measures) (Bourne et al. 756-758). Although most of their discussions focused on the above-mentioned three phases, they also explained that updating the performance measurement instrument required four additional phases. The case studies sampled in the assigned articles revealed that targets and measures could significantly change and evolve depending on the measurement instrument (Bourne et al. 756-758). However, as mentioned in this study, a change of strategy could influence these targets as well. The process of management accounting also emerged as a key tenet of the authors’ discussions because as they pointed out, in the past, it was important to align performance measures with a company’s profit plan (Bourne et al. 756-758). They associated this concept with the influences of accounting in performance measurement and went further to explain this assertion by giving evidence of the operational procedures of Company A.

Generally, the case studies highlighted by the researchers showed how easy it was for performance measurement to change the basic assumptions that underlie it. This fact was guided by the fact that the different groups of management had found a reliable measure for evaluating success. Similarly, this tool was important in highlighting a reliable way for implementing strategy (Epstein and Manzoni 158). The more clearly defined the strategy is, the easier it is to identify the execution plan. Based on this understanding, the authors argue that having a mental model is the first step to creating a testable strategy for implementing performance management instruments (Bourne et al. 768). The second step, as highlighted by the authors, is creating a process that could link the performance measurement system and the corporate strategy in question (Bourne et al. 756-758). Nonetheless, the authors remind us that the measures need to be constantly updated. Comprehensively, the authors also remind us that the credibility of the performance measurement process mostly depends on the updating process. The growing body of literature surrounding this research topic shows that there is enough academic interest on the topic, but the consistency of research findings surrounding the topic shows that all involved parties increasingly understand the aforementioned topic.

Methodology Chosen

Bourne et al. (754) chose to investigate their research issue by undertaking a longitudinal study of the activities of different manufacturing firms in the US and the UK. Initially, the authors intended to review the performance measurement processes of six companies. However, in the end, they only managed to review three companies for the study because they executed the performance measurement process from the inception stage to the end (Bourne et al. 757). They named these companies as “A” “B” and “C.” I find the anonymity chosen by the researchers in naming these companies as a professional style of undertaking the longitudinal study because the anonymity of the companies is important in protecting their processes and operations plans.

The authors used three sources to support their findings. The first source was directly being involved in the implementation of the design process. The second source was participant observation, which occurred by observing the companies’ performance measurement processes. The third source (relied on by the researchers) was the use of post process semi-structured interviews to evaluate the performance measurement instruments introduced by the management boards of the companies sampled (Bourne et al. 756-758). From the use of the three sources, the authors discovered one important observation – the companies studied took a long time to transition from the design stage to the implementation stage.

The longitudinal studies undertaken by the researchers evaluated key components of the organization’s processes, including system design, implementation of measures, the use of measures, and an evaluation of the obstacles to implementation (Bourne et al. 756-758). The next step that the authors took in the longitudinal studies was evaluating the updating process of the sampled companies. Before explaining the details of the process, the authors had initially focused on the design, implementation and use of performance measurement tools in their work. Since this insight was complete, the updating process was the next logical step to focus on in their analysis (Bourne et al. 756-758). When analyzing the updating process of the case studies, the authors mostly focused on Company A because it had the most advanced system (for updating performance measurement instruments). I find this approach to be exclusionary and biased because even though companies B and C never had advanced updating systems, the authors could have still reviewed them to have a holistic conception of how the sampled companies operated their updating systems.

Nonetheless, in Company A, the authors documented four sections of the company’s updating processes. The four sections were financial perspective, innovation and learning perspective, internal perspective, and customer perspective (Bourne et al. 756-759). The financial perspective constituted profitability, cash generation, order intake, and invoiced sales. The internal perspective analysis included order quality assessment tests, improved forecasting, review of the size of supplier base, and warranty returns (Bourne et al. 756-758). The innovation and learning perspectives included an analysis of timely appraisals, employee communication surveys, research and development, and the time spent on research. Lastly, in the customer perspective segment, the authors analyzed customer complaints, on-time delivery, new customer inquiries, quotations, sales activities, lost orders, and order conversion rates (Bourne et al. 756-758). The authors used these reviews to supplement some of the findings they got from the longitudinal studies. This approach was detailed in the sense that the study was dissected into small segments of analysis, giving the readers and in-depth view of the research issue.

Summary/Critique

Broadly, I find that most of the arguments presented in the assigned article are credible and elaborate because the authors outlined the processes used to come up with the research findings. However, I find that the use of three companies as the main longitudinal basis for reviewing the research issue created a narrow focus of the study topic. The researchers made a positive step planning to use six companies to analyze the research issue, but the ultimate focus on three companies only made it difficult for me to see the findings as satisfactory, far-reaching and comprehensive. In other words, I find that the findings presented in this analysis have a low generalizability standard because using three companies to evaluate the implementation of performance measurement instruments is not enough to provide an industry-wide analysis of the research issue. I believe that future studies should focus on expanding this scope of companies to create more variety in the types of companies that use performance measurement tools.

One positive thing that the authors highlighted in their work, and that I found appealing, was the importance of implementing performance measurement instruments as the “hammer and saws” of performance measurement. Companies need these instruments to measure their program services and understand the impact of their outputs and the alignment of their organization’s practices with their goals (Corporation for National and Community Service 3). From the findings reviewed, we have also seen that there is no all-purpose tool, to undertake the above tasks; especially because the authors pointed out that, the use of performance measurement instruments involved several steps of implementation, such as the design and updating stages. Nonetheless, the authors did a good job explaining the importance of the updating stage because they noted the difficulty of undertaking proper performance measurement processes without consistently updating the tools involved. They also did a good job at explaining the importance of having accurate performance measurement tools because it is the best instrument that gives managers control over the process.

Lastly, the authors made a positive step in highlighting some of the challenges of updating performance measurement instruments because they recognized that not everybody could embrace some of the insights presented in the article. In fact, they said that management itself could be an obstacle in the implementation of performance measurement instruments because the adoption of this measurement tool changed the flow of information and power structures in companies. The merits of this paper show that the arguments presented in the study are well organized and have a good flow for any reader to understand. They lack the complexity associated with articles from other authors who have had vast knowledge on the subject area. Therefore, the article stands out as a useful resource in the designing, implementation and updating of performance measurement instruments.

Works Cited

Bourne, Mike, et al. “Designing, implementing and updating performance measurement systems International.” Journal of Operations & Production Management, vol. 20, no. 7, 2000, pp. 754-771.

Corporation for National and Community Service. Developing Performance Measurement Instruments. National Service. 2003. Web.

Epstein, Marc, and Jean-Francois Manzoni. Performance Measurement and Management Control: Measuring and Rewarding Performance. Emerald Group Publishing, 2008.

Ibrahim, Osman. Handbook of Research on Strategic Performance Management and Measurement Using Data Envelopment Analysis. IGI Global, 2013.

Schwerdt, Wolfgang and Marcelle Wendland. Pricing, Risk, and Performance Measurement in Practice: The Building Block Approach to Modeling Instruments and Portfolios. Academic Press, 2009.

Spitzer, Dean. Transforming Performance Measurement: Rethinking the Way We Measure and Drive Organizational Success. AMACOM Div American Mgmt Assn, 2007.

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