Phase 2: Qualitative Study
III. Performance and Engagement Appraisal and Feedback
8.2 RECOMMENDATION TO THE ORGANISATION
The business world is in constant flux. Changes in the social, economic and political environment, as well as new innovations in technology, nature of work and the social trends have necessitated the need for organisation’s to adapt and change. In order to ensure an organisations competitive advantage, organisations need their people to drive these changes.
Whilst the organisation in the current study has a performance management system, the question arose around the value of that system, that is, are the employee performance goals aligned to the organisational goals. The BSC has successfully been used to drive employee performance, and hence organisation performance. It has also resulted in an increase in employee motivation. The BSC was first “conceptualised by Kaplan and Norton (1992)” and has successfully evolved from performance measurement, performance management, to eventually becoming a “globally recognised best practice for strategic management” currently (Johnson, Beiman & Collaborative, 2007, p.5).
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The statistical analysis indicated that the BSC successfully resulted in an increase in sales and customer service, and a decrease in inventory loss and manageable expenses. This, in turn, led to an increase in the store managers overall employee performance. However, the BSC did not lead to an increase in organisational performance. This was indicative of a misalignment of the BSC and organisational strategy. Some of the store managers interviewed also indicated that there was a misalignment of the BSC KPI’s and their performance goals. Other factors such as gross profit margin, and credit sales were also highlighted as possible reasons why the increase in employee performance did not lead to an increase in organisational performance.
The BSC also did not lead to an increase in intrinsic motivation. The quantitative analysis indicated that there was some inconsistencies in the way the BSC was implemented and cascaded into the organisation. Many of the store managers who felt that the BSC communication plan, and support of top and senior management was good, also felt motivated.
This, in turn, led to some of them successfully changing the way their store and staff operated.
Others, who felt that the BSC communication plan and their top and senior manager’s support was inadequate, were indifferent motivationally or felt a decrease in motivation. Decoene and Bruggeman (2006, p.444-445) similarly found that the “lack of strategic alignment negatively impacted managers' intrinsic motivation to improve organisational performance”. According to these authors, this was the direct result of a lack of cascading which led middle-level manufacturing managers to perceive that “their performance measures in the manufacturing- level BSC were uncontrollable”. In addition, these authors suggested that in order to “create positive motivation for higher levels of organisational performance, corporate and manufacturing objectives and managers, the BSC must be strategically aligned i.e. top management must be actively involved in a BSC design and implementation process”. Also, according to these authors, it is the responsibility of managers to ensure that instructions on how to achieve performance objectives are cascaded to employees during the cascading process; this will empower managers and improve organisational performance.
8.2.1 Align the BSC to the Organisational Strategy
It is imperative that the BSC perspectives and KPI’s are aligned to the organisation’s strategy.
As shown in this study, the increase in employee performance did not lead to an increase in
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organisational performance. According to Behrouzi, Shaharoun, and Ma’aram (2014), the choosing of the BSC perspectives is dependent on what is best to achieve an organisation’s strategy. These authors conducted an analysis of the BSC perspectives and KPI’s, and suggested that organisations should choose fewer KPI’s, but most importantly, ensure that the KPI’s selected are customized to encompass all strategies. Too few KPI’s may not measure the organisation performance or reflect all strategies, while too many KPI’s may lead to complexity and a cost to measurement, analyse and interpretation processes (Behrouzi. et al., 2014).
The alignment of the BSC to the organisational strategy may also lead to an increase in motivation. Decoene and Bruggeman (2006, p.444-445) suggested that in order to “create positive motivation for higher levels of organisational performance, corporate and manufacturing objectives and managers, the BSC must be strategically aligned” i.e. senior management has an important role to play in the BSC design and implementation process. As indicated by the qualitative analysis, some of the managers felt that there was no alignment between the BSC KPI’s and the organisation’s goals. This, in turn, affected some of their motivational levels adversely.
This study indicated that the BSC did in fact increase employee performance. However there was no impact on organisational performance and motivation due to a lack of strategic alignment between the BSC KPI’s and the organisational strategy. The qualitative phase offered a comprehensive perspective on the implementation of the BSC, and how it was perceived to improve business processes, practices and systems, as well as its perceived impact on motivation. The qualitative findings indicated that even though the quantitative finding showed that there was no relationship between the BSC and motivation, some of the managers did feel motivated by the use of the BSC. A deeper analysis into the qualitative finding showed that managers were more motivated when they felt that their goals aligned to the BSC KPI’s, when they received good management support and when the BSC communication plan was good. This is turn, resulted in many of them improving their business processes, practices and systems.
As indicated above, a key finding in the study was the misalignment of the BSC KPI’s to the organisation’s performance (as measured by the trading profit). Two business imperatives were
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highlighted as important KPI’s that needed to be included in the BSC, namely gross profit margins and credit sales. The study clearly highlights the need for top and senior management to ensure that the performance indicators of employees drive the performance indicators of the organisation. Any misalignment creates a false perception that if the employee performs well, then the organisation automatically performs well.
8.2.2 Ensure Top and Senior Management Support
In order for the BSC to be effective in any organisation, it needs the support of its most senior managers. Weir, d’Entremont, Stalker, Kurji and Robinson (2009) suggested that the involvement of management and front line managers are important for the implementation of the BSC. According to Weir et al. (2009), this involvement may increase the likelihood of understanding, uptake and sustainability with regard to the BSC. Northcott and Taulapapa (2012) similarly highlighted the lack of top management support as a concern. In the study examining the use of the BSC as a performance management tool, these authors suggested that top management support is essential for promoting the BSC, providing resources to sustain it, as well as to encourage employees to engage with it.
As indicated by the qualitative data, some of the managers did not feel that top and senior managers played a crucial role in the implementation of the BSC. This, in turn, affected some of their motivational levels. Chi and Hung (2011) also highlighted the supportive importance of top management. For example, these authors found that top management support was reinforced by the fact that the General Manager (GM) in their study showed a clear commitment to the implementation of the BSC by attending in person the BSC implementation and instruction meetings (Chi & Hung, 2011). While the support from top and senior managers were evident in some of the responses in the qualitative analysis, it was not consistent. As highlighted by Kaplan and Norton (2001, p.147), top management support is “a critical factor in the successful implementation of the BSC”. A recommendation to the organisation is that their senior and top managers prioritise the importance of supporting their employees in understanding and delivering on the BSC objectives. This support can only enhance the effectiveness of the BSC in the organisation. It will create better buy-in into the process, and more importantly into the business strategy.
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8.2.3 Formulate a Comprehensive BSC Communication Plan
The way the BSC is communicated to the organisation is critical to its success. The BSC communication plan plays a vital role in ensuring that the same message is cascaded down to all employees. A study by Chi and Hung (2011) highlighted the importance of a proper BSC communication plan. According to these authors, one of the reasons why the BSC was successful was the organisation’s BSC communication plan. According to Chi and Hung (2011), the BSC was properly implemented in the organisation by engaging with BSC consultants prior to the BSC implementation. These consultants prepared the BSC implementation plan through an analysis of the organisation in line with strategy guidelines, maps and targets, as well as performance evaluation and the reward system (Chi & Hung, 2011). The organisation also focused on communication and feedback regard the BSC.
According to these authors, the company’s GM and Deputy GM held regular meetings describing the company’s vision and strategy, and the criteria for targets to ensure that the employees fully understood and supported the BSC system and its implementation.
Furthermore, feedback on the implementation and execution of the BSC was discussed at all levels as a core issue, and employees were given the opportunity to express their concerns to their management or the Deputy GM.
Organisations must be also be cognizance of the fact that different levels of management will perceive the BSC differently. This was evident in the qualitative data, which revealed that some managers felt that the BSC was not easily explainable to non-management. According to Biggart, Burney, Flanagan and Harden (2010), the management level at which managers lie in the organisation affect their perceptions of the BSC. For example, lower level employees perceive aspects, such as results and accuracy as most important, while senior managers place a higher value on financial benefit and performance measures (Biggart et al., 2010). Therefore, the BSC communication plan needs to address all employees in the organisation, regardless of management level. These authors suggested that top or executive management should create a common feedback process for communicating that cascades across all levels of the organisation, and should ensure that all employees are well versed regarding the relation between the organisations strategy and the BSC.
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As shown by the qualitative findings, not all the managers felt that the BSC communication plan was good. A significant shortcoming related to the level of the communication plan, in other words, the communication plan was too high level and was not user-friendly to non- managers. One recommendation to the organisation will be to ensure that the BSC communication plan adequately addresses the purpose, expectation, outcomes and timelines/targets to both management and non-management, at an adequate an easily understandable level.
8.2.4 Ensure a Quick and Efficient Relationship between the Financial and Non- Financial Perspectives
Retail is a fast paced industry. Managers are aware of their sales figures on an hourly basis. In order to align the financial perspective and non-financial perspectives, activities and reporting related to the non-financial perspectives need to be quick and efficient. According to Biggart et al. (2010, p.11), the primary financial measurement for managers is “sales data, and the use of non-financial measures generally delays the reporting results relative to the sales-based financial measures”. These authors suggested that organisations may mitigate this concern by increasing the speed at which non-financial reports are produced.
In this study, for example, customer service data could only be provided on a quarterly basis as the ‘mystery shopper’ initiative only happened four times a year. Thus, managers were only made aware every quarter in terms of how their store is perceived from a customer perspective.
Inventory audits is another example, as these were also conducted every quarter. Regular inventory audits would give managers a clearer indication of their opportunity areas, and thus more time to put together proper action plans. However, one of the reasons why inventory audits and customer surveys are not done regularly relates to the costs of these initiatives.
Biggart et al. (2010) also suggested that organisations also need to be cognizant of the costs associated with increasing the frequency of non-financial activities as the costs may be greater than the savings.
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Retek has invested well in certain data reporting technologies. However, these technologies are underutilised. Feedback on inventory loss, stock integrity, sales, customer service and manageable expenses are provided on a monthly basis. For the BSC to be most effective, this feedback needs to be provided weekly, and in some cases even daily, to ensure that managers are proactive in addressing opportunity areas.