2. Literature survey
2.5. Business value
2.5.2. Evaluation of performance
Chapter 2: Literature survey
Chapter 2: Literature survey
effectiveness of the alignment process is reflected in how well executives are able to provide strategic reporting that demonstrates progress made in achieving strategic initiatives. Chau (2008) says that strategic performance management can take place at top management, middle management or strategic operations level and their impact on team strategy, company performance and organisational effectiveness can be regarded as a special phenomenon termed “strategy team performance management”.
Strategic performance management is considered as an enabler of the steering of the organisation through the systematic definition of mission, strategy and objectives in order to be able to take corrective actions to keep the organisation on track (Chau, 2008). He adds that many senior managers are removed from the on-going daily activities of their organisation and this leads to more disconnect between senior management and the rest of the organisation. The problem is becoming increasingly difficult to address as involving senior management on strategic activities proactively at the operational level is not carried out effectively, which may be due to poorly implemented performance management frameworks (Chau, 2008). The key to enabling the organisation to perform as intended is to build in the performance measures during the strategy planning phase so that they may be cascaded into the strategy execution and evaluation phases.
It is through the integrated approach that the leaders of the organisation could drive the logical or intended thinking and expected performance outcomes. Flitman (1996) highlights that whether the strategic initiatives have been developed from a traditional planning process or a less formalised thinking process, it is still important to monitor progress towards the goals. He adds that providers of management reports have struggled to develop focused reports which directly summarises the strategic progress of an organisation. He also indicates that other problems encountered include the derivation of measures for all areas of strategic progress and the provision of timely, quality information at a cost the organisation can live with. This is another area which the study seeks to contribute.
The activities that are taking place at operational level need a tracking and monitoring process to assess progress made. Flitman (1996) clarifies that the key to reporting strategic performance is to identify which metrics will, between them, adequately describe progress towards a strategic target. He cautions that it is necessary to ensure that information coverage is sufficient while not falling into the trap of producing too much information. Monitoring progress should be balanced and requires qualitative and quantitative measurements of progress, while recognising the limitations of the traditional quantitative methods using strategic planning activities (Flitman, 1996).
Flitman (1996) shares that to achieve balance one needs to define different measures:
those measures that concentrate on inputs (efficiency measures) and those that concentrate on outputs (effectiveness measures).
However, organisations tend to experience problems with the quality of information that is captured as work is done. It is at times not considered that the information forms
Chapter 2: Literature survey
part of a corporate performance system, which will inform decisions on what should be done, areas that the organisations must focus on, and the resources that are required to drive the delivery of the expected outcomes. Flitman (1996) says that quality of information depends not only on what is reported but also on how it is reported and adds that it is vital that the different forms of information presented are combined to enhance the overall information content and be consistent with management needs.
Performance management is a critical tool to measure the progress made in strategy execution. The review of the literature indicates that a number of researchers have conducted work to gain insight on the best way to not only measure and report on the performance of the organisation but to also identify performance measures that are representative of the progress made in realising the strategy of the organisation. The work done by Srivastava & Sushil (2015) indicate that rich literature is available on performance measurement and management systems but there is limited studies showing how performance measurement systems ensure effective strategy execution.
They clarify that there are also debates on identifying right combination of Strategic Performance Factors (SPFs) that balance competing perspectives such as financial and non-financial measures, short- and long-term approaches, lead and lag factors.
They also add that many frameworks have addressed these challenges but attempted in limited ways to integrate SPFs in their performance measurement and management system. This is another area which this study seeks to contribute.
When the organisation is focused on the goal (expected benefits and the value that must be realised), then motivation and drive to realise the benefits is stimulated. The objective is to see the desired outcome and this focused effort would inform the actions that are taken to realise the expected benefits. Benefits realisation is an approach, which organisations could adopt to focus their efforts and to achieve the results they are targeting. Esteves (2009) says that benefits realisation management is an important approach to ensure that corporate initiatives deliver what they promise: it provides focus, demonstrates value for money, reduces the risk of failure and maximises benefits achieved.
In addition, Breese (2012) provides guiding principles from the scientific approach, which could be adopted to enhance how organisations manage the achievement of the desired performance through benefits realisation management:
“Logic: by applying logic to the decision-making process a good outcome can be derived”;
“Linear thinking: the benefits realisation management process involves a prescribed series of procedures for the chosen timeframe”;
“Quantification: to compare different proposals, benefits need to be quantified as far as possible”;
“Cause and effect: causal links between activities and the benefits to be gained can be established”;
Chapter 2: Literature survey
“Reductionism: amongst all the different impacts, some can be isolated as the most important ones for decision-making”;
“Split between thinking and doing: there is a distinction between the benefits planning process and the implantation of the activities which will lead to the benefits”;
“Control: The appraisal process is a means of achieving management control over resources”.
The importance of an effective corporate performance system in driving strategy execution cannot be overemphasised. It needs to support the strategic management process from strategy planning through to evaluation and review. It is the seamless integration of the different phases of the strategy process as well as the measurement of performance at each phase that would shed light, through the information that is gathered, on where the organisation is doing well and the areas that need improvement.