Achieving the vision through tracking the deliverables

A new system of performance measurement is set to revolutionise management in both the private and public sector.   This innovative flexible system enables managers to identify and focus on the parts of their organisation or company which has the biggest impact on their productivity and success.

The new system – ValueMapping® and ValueNetwork™ – was developed and refined over five years by Dr Andrew Jack and his team with support from the Small Business Service section of the Department of Trade of Industry.  In this article he looks at the reasons for performance measurement and what this new system can achieve for an organisation or company.

The Growth of Performance Measurement

In 1992 Kaplan and Norton published their seminar paper on a new performance measurement framework, The Balanced Scorecard, designed to focus managers on a select group of balanced measures. Since then many organisations across the globe have adopted a scorecard as a way of tracking and reporting performance measures.   Although the UK has lagged behind the US in the pace of adoption of the scorecard this year many public and private sector organisations are developing and implementing them. 

In tandem with this focus on scorecard systems, government and management boards are placing more and more emphasis on key performance indicators (KPI’s) as a way to report the performance of business units, departments, projects etc. Whilst there is no denying the importance of measurement it is the objectives behind the measurement that should be paramount

Understanding the why of measurement

The following question is worth asking about any existing or planned measurement system:

Why do we want the measures?

For a measurement system to be effective it has to be relevant to the context, and as the question above shows there are a number of contexts which could all form part of the one system. The system has to therefore have a flexibility that allows the measures to adapt to the needs of the user group and context whilst also supporting the greater whole i.e. the strategic and overall results of the organisation.

The design and use of measures in one context (scorecard) that are then isolated and not linked to the business critical issues can be a problem with the use of scorecards. The opposite is also true, where scorecards are cascaded down (embedded) with pretty much the same set of measures in each. This then disenfranchises the bottom up users who see no relevance in the measures to their specific day to day needs.

Understanding the Value Relationships of Measures

To achieve business critical issues requires the performance measurement and management system to align with and support strategy and business outcomes. First and second generation frameworks for this, such as the Balanced Scorecard, have built on process map and value chain (Porter 1982) thinking. They stress the importance of the strategy focused organisation and the alignment of measurement to the strategy maps of the organisation. This tends to still be done in a hierarchical or nested way where scorecards cascade down through the organisation.

A different way to view the organisation is as a network where the measures in the measurement system are not simply hierarchical but form constellations of related measures that impact together to support the desired end result.

For example, consider the delivery performance on a building contract. Nested scorecards might track the number of defects on a manufacturing line, impacting on the number of orders delivered on time, impacting on the build time on contract.   While this shows a linear value chain the reality for the contract is a great number of activities and assets across suppliers, contractors, and the main contractor interacting over time to deliver the end result of completing the build to contract standard. What is needed is a network of measures that show how a barrier or weakness in related parts of the network can then cause a negative impact on the contract delivery. 

While this network can begin to be represented through linked scorecards (but is rarely done as nesting and chains is the more common approach) there are more flexible and dynamic ways to form these relationships. Just as in a living thing what is needed are flexible building blocks that can interact to produce the desired structure.    This is the approach which has now been developed.  Information on existing Balanced Scorecard systems can be captured and translated into a related network, called the ValueNetwork™.

How ValueMapping® and the ValueNetwork™ Works

A problem with many interpretations of scorecards is that the measures are often out of date and very historical by the time they are looked at or acted upon. What is needed is a more forward looking approach that better understands the relationships of measures and allows for real time modification and evolution of strategy.

ValueMapping was developed as a methodology that allows measures to be assessed in terms of their position within the ValueNetwork and their usefulness in supporting desired strategy and outcomes. The concept includes four key building blocks of the business critical network which are;

1) Where you are going        Desired Outcomes/Results (Often thought of as strategic objectives)

2) Direction to get there       Strategic Drivers

3) Support focus                    Value Drivers

4) Main Actions                     Actions

These four building blocks, which are in essence the activities and assets (both tangible and intangible) of the organisation, link to form strategic value maps that in turn link within your ValueNetwork.

The why of performance measurement is then answered by seeing which of these activities and assets need to be tracked or reported using a numerical measure or a qualitative assessment.

The wisdom of measurement

In July 2004 the office of the Deputy Prime Minister wrote to all CEO’s of Local Authorities introducing the new set of key performance indicators and emphasising that the goal was to further reduce the number required to be tracked.  However, the issue for the public and private sector is not just the number of measures but rather the value that each measure is adding to the users of the measure and the organisation as a whole.

ValueMapping includes a tool that helps managers to assess the usefulness of each measure within the map in relation to its impact upon the critical business and strategic issues. It also allows for the context of measurement to be addressed within each map giving flexibility for the employees to have context specific measures for their parts of the organisation as well as the networked measures.

As is the case with the world around us the whole is greater than the simple sum of the parts.  Learning how these activities and assets interrelate is a large part of designing and maximising your measurement system.

To find out more about ValueMapping and how it can be used to measure overall performance or for an individual project contact Ralph Leishman at 4-consulting.

Ralph Leishman is a director of 4-consulting, click here to view his profile.