Content area
Full Text
Business strategy, in most companies, is set by senior management behind closed doors. Technical and functional management usually does not understand the corporate strategy and, in many cases, isn't even aware one exists. The lack of communication between the boardroom and middle and lower management results in decisions that are out of sync with the company's strategic direction. The situation is amplified in decentralized companies where top management is removed from day-to-day operations. Tactical decision making without regard to strategy can be very costly and can result in a noncompetitive position or, worse, a complete shutdown. Consequently, performance measures should be implemented as a means of articulating strategy and monitoring business results.
Integration planning for performance measures identifies the critical tasks and actions required to meet the success factors developed from stratagy. Integration planning narrows the focus of performance measures and begins to identify what must be controlled, who is responsible, and what objectives are to be achieved.
The thread that integrates vertically up and down the organization chart and horizontally across functions is performance measures. Performance measures and corporate strategies tend to be global at the corporate level. Performance measures are interrelated throughout the organization; however, they become more specific, have shorter planning horizons, and are more functional as they are articulated down the organization. Performance measures tend to remain multidisciplined or cross functional until they reach their lowest level in the organization. Even then, in many cases, they remain cross functional. Linkage to strategy becomes very important as performance measures are pushed down the organization. Performance measures consistent with corporate strategies are not developed easily -- they need to be linked to ensure they support and do not inhibit strategy implementation. A major consumer products manufacturer developed a strategy to improve customer satisfaction throughout the corporation. Seven performance measures were developed to support the strategy and provide feedback of customer satisfaction. They included customer loyalty index, product satisfaction survey, sales and service satisfaction survey, warranty frequency, customer complaints index, order response time, and on-time delivery performance. Performance measures must be derived from strategy, be developed to support business objectives, be collected and reported at numerous levels in the organization, and be linked cross functionally.
DERIVED FROM STRATEGY
The performance measurement system design includes...