Presented by

Faiza Majid- 1221132

Maria Shahid- 1221138

SZABIST ISLAMABAD

Introduction:- Strategic Performance Measurement System (SPMS)?

• SPM is a system that focuses the company on those goals and activities that will make a difference down the road.

• SPMS is important in formulating strategy , implementing it and reformulating it (if needed).

• SPMS compensate each and every department and individual in organization.

• PMS is a tool or a technique to measure performance.

Introduction Cont.

Strategic performance measurement

Functional dysfunctional

Asset Liability

+ive impact on organization performance

-ive impact on organization performance

If organizations are to realize value and become more sustainable, it is crucial to

understand how appropriate SPM practices deliver improved performance

Article Methodology

• The call for papers attracted 77 extended abstracts; related to strategy, management accounting and control, and operations.

• Following the review of the abstracts then asked for 25 full papers. Of these, eight were subsequently selected.

• These 25 articles Presented in a workshop organized at IMD, Lausanne on 24/25 January 2008. After a further three rounds of review, four papers were selected for publication.

Paper 1:

Are performance measurement systems mere tools to implementstrategy, or could they play an active role also in strategy reviews?

SPMS 4 attributes by Gimbert, Bisbe and Mendoza

1. Integration of long term strategy & operational goals.

2. Presence of multi perspective indicators.

3. Inclusion of cause effect linkages.

4. Presence of sequence of goals-target-action plans.

Paper 2:

Through an enhanced use of non-financial indicators, SPMSs could contribute more effectively

to strategic alignment and organizationallearning

• Establishment of dialogue between headquarter and subsidiary is important for long term success.

• Non financial indicator is positively associated subsidiary profitability

Paper 3:

Systems which combine alignmentand empowerment, and make appropriate use of performance targets and indicators over time, could prove an effective means

of implementing changes in strategy and promoting intended behaviors.

• flexible SPM system for companies operating in dynamic environment.

• high empowerment with high alignment is useful in such environment.

Paper 4:

Non financial indicators are always welcome while measuring performance but they also build rigidity in the

culture which restrict organizations to move on.

CASE STUDY discussed :

“Large Multinational Home supplies Firm”

Discussion • Comparability and generalizability of research findings

• The ‘diagnostic and interactive’ use of SPMS

• Authors of the selected papers considered SPM as a means to: • implement and reformulate strategy; • communicate key objectives and corporate priorities; • provide strategic alignment; support process improvement; and • encourage incremental innovation.

• Previous studies have looked at other roles of SPM, such as: • promoting specific behaviors and attitudes at different organizational levels;• responding to rules and regulations; • providing greater accountability within and between organizations;• communicating financial and non-financial results to key stakeholders,

The different roles of SPM

• SPM can be used to gather data about past performance, but also to implement strategic objectives.

• Headquarters seeking dialogue with local managers

SPMS: static systems for dynamic environments?

• Criticism: SPM can create ’ossification’

• When an SPMS is reviewed and redesigned to support a change in strategy, it can push the organization in a direction opposite to the one intended

SPMS: A powerful tool or a tool for power?

• For performance measurement to be used as an effective ’tool for power’, it is important that performance indicators are linked with strategy

The plurality of roles of SPM indicates the importance of defining from

the outset the roles of every performance indicator and the SPMS as a whole.

Conclusion

Key questions managers should ask themselves

• Why is the organization introducing (or reviewing) an SPMS?

• Which roles do we want it to play?

• Will its characteristics be consistent with its aims?

Introduction • Performance measurement has become important for nonprofit

organizations due to competition , all competing for scarce donor, foundation, and government funding.

• Financial considerations can play an constraining role but will rarely be the primary objective.

• Profit companies have recently recognized that financial measurements are inadequate for measuring and managing performance.

• Financial reports measure past performance but communicate little about long-term value creation.

• Kaplan and Norton (1992, 1996) introduced a new performance management system called the Balanced Scorecard.

Cont’d • This system retained financial measurements but complemented these

with measures from three other perspectives: customer, internal process and learning and growth.

• Its initial focus and application was the profit (private) sector. But the opportunity was to improve the management of nonprofits.

• In this article the results from a multiyear action research program to apply the Balanced Scorecard to several nonprofit organizations has been discussed.

Literature review • The subject of performance measurement for nonprofit organizations is

extensive but generally inconclusive (Forbes, 1998).

• Herzlinger (1996) argues that nonprofit organizations should disclose nonfinancial quantitative measures of services but does not offer guidance of measures.

• Kanter and Summers (1987) reinforce the importance of reflecting the outcomes for multiple constituencies and the need to have both long-term measures (outcomes) and short-term measures (processes and activities performed).

Cont’d• Balanced approach would provide the data to help the organization

know whether it is ‘ doing well’ on any of the dimensions of performance with which an active constituency might be concerned.

• Sheehan (1996) revealed that the organization had an impact on its mission. In effect, the organizations has no way to distinguish whether their strategy was succeeding or failing.

• The gap between mission and measures eventually led to the adoption of a much more balanced set of measures, better linked to its organizational mission.

The Balanced Scorecard

Research method • The research agenda on the applicability of the Balanced Scorecard to

the non profit sector was launched in 1996.

• The program conducted a survey and learned that executives and board members of nonprofits consistently rated performance measurement as one of their top three management concerns.

• Several nonprofit organizations in 1996 had multidimensional measurement systems, derived their measures from strategy and mission or organized their measures using the multiple Balanced Scorecard perspectives.

Thank you !