Performance measurement in the 21st century From performance measurement to performance management

Citation

Jarrar, Y. (2004), "Performance measurement in the 21st century From performance measurement to performance management", Business Process Management Journal, Vol. 10 No. 5. https://doi.org/10.1108/bpmj.2004.15710eaa.001

Performance measurement in the 21st century From performance measurement to performance management

About the Guest EditorYasar Jarrar is a Visiting Research Fellow at the Cranfield School of Management, UK and Visiting Lecturer in Bradford School of Management, UK, Visiting Professor in the Universita Degli Studi Della Basilicata, Facolta Di Ingegneria, Potenza, Italy. Yasar is currently the Head of Government Policy and Strategy unit in the Dubai Government Excellence Programme. Working on overall improvement and development programmes for the Government of Dubai. He is also a Visiting Research Fellow at the Centre for Business Performance, and worked on applied research for various sponsoring organizations including DHL, Bank of Scotland, Arla Foods, BTCellnet, Greggs of Yorkshire, DTI, and Accenture. Major research areas include Performance Measurement and Management, Process Improvement and Six Sigma where he authored numerous reports and papers. He is also currently an Honorary Visiting Fellow in Total Quality Management at the European Center for Total Quality Management, University of Bradford, UK, and has been an invited speaker in numerous national and international events. He also previously worked as a Quality Management Consultant and Industrial Engineer in the Middle East. Recent international speaking engagements are: 3rd Annual Balanced Scorecard Implementation Forum, Keynote Speaker, IIR, Dubai, UAE (February 2003); the International Quality Congress, Keynote Speaker, IIR, Dubai, UAE (January 2003); creating Public Value: challenges or Participation, Partnership, Performance, and Productivity in Public Service, Warwick University, UK, November 2002; “Key Performance Indicators for The Public Sector” conference, Asia Business Forum, Kuala Lumpur, Malaysia, August 2002; “Six Sigma: The Impact on the Bottom Line” Conference, Cranfield School of Management, UK, February 2002. Recent publications are: Closing the Gap 3 – Benchmarking UK Industries. Department of Trade and Industry, UK, June 2002; REACTE Report – Benchmarking the Member States of the European Union – A Report to EU Policy Makers, Department of Trade and Industry, UK, April 2002; Guest Editor – Business Process Management Journal, Emerald, UK – Special Issue on Performance Measurement in the 21st Century – Due in 4th quarter of 2003; Guest Editor – Benchmarking: An International Journal, Emerald, UK – Special Issue on Benchmarking in the Knowledge Era – Due in 1st quarter of 2004. For more information, visit the Web site: www.som.cranfield.ac.uk/som/cbp/

Performance measurement in the 21st century From performance measurement to performance management

As the pace of change accelerates in the 21st century as a result of technological opportunities, liberalisation of world markets, demands for innovation, and continually decreasing life cycles, organisations are finding that they have to continuously re-adjust and re-align their operations to counter all these challenges. This pace of change has increasingly forced organisations to be more outward looking, market oriented, and knowledge driven. These pressures have clearly driven the subject of performance measurement high up the management agenda.

In order to be successful, today's companies need to look at their internal and external environment and generate a vision of where they want to be in three, five and ten years from now. Providing focus in the organisation by translating this vision into a clear strategy and visualizing the latter one by identifying the performance areas is the next step towards success. By defining metrics for core processes and linking them to the present key performance areas, organisations can align their resources and their efforts to the overall strategy, in turn driving the organisation towards fulfilment of its future goals.

Performance measurement systems have always played an important role in effective planning and efficient running of a business. By measuring performance in a constructive way, some profound improvements can be made to overall performance of an organisation. An effective measurement system enables the managers of an organisation to determine if the activities occurring within a facility are, in fact, supporting the achievement of objectives, and whether these objectives move the organisation closer to the stated vision.

A good performance measurement system helps an organisation to establish its current position, communicate direction to its people and stimulate action, facilitate learning and influence behaviour. However, on the downside, a badly constructed performance measurement system will destroy performance by encouraging emphasis on the wrong activities and the lack of harmony between the organizational strategies, management and overall organizational culture.

At the heart of this growth, in interest, in performance measurement is the belief that the “way we measured business performance so far, is simply not good enough for today's business environment”. Traditional performance measures, developed from costing and accounting systems, have been criticized for encouraging short term-ism, lacking strategic focus, encouraging local optimisation, encouraging minimization of variance rather than continuous improvement, not being externally focused and even for destroying competitiveness. In an attempt to overcome these criticisms, performance measurement frameworks have been developed to encourage a more balanced view. Various approaches have been developed over the past decade including the Economic Value Added, the Performance Prism, and the Balanced Scorecard.

It is in this ethos that the papers for this special issue have been selected. Performance measurement has developed in two dimensions over the decades, and it is these two dimensions that the special issue attempts to portray:

1. 1.

   Performance measurement has moved from focusing merely on the financial aspects. Traditionally, management accountants have provided financial results, which aim to gauge the health of the business. Over the years, these results have become short-term in perspective, e.g. return on capital employed. Therefore, performance measures and management techniques/strategies that have more predictive power and are result oriented with a long-term perspective are needed. Companies must adopt a more enlightened approach to assessing and managing company performance. At the heart of this shift from focus on financials to wider views is the measurement of intellectual capital and intangible assets. Measuring these assets is the focus of two papers in this special issue exploring Key Performance Indicators for organizational knowledge assets and measuring employee assets.

2. 2.

   Performance measurement has also developed and progressed from merely focusing on measuring things to actually thinking about the extended value chain of how to use these measures for performance management and improvement – organisations are now trying to focus on managing with measures. This is explored in three papers in this issue, which shed some light from three different angles. The first explores the move from process measurement to performance improvement using basic principles from Complexity Theory, Psychology and Management Theory to demonstrate that many traditional methods of identifying performance measures may not result in improvements in overall performance. Another papers explore the use of performance measures in production systems and propose an analysis approach. Finally, and at a macro level, the final paper reflects on issues facing performance measurement in the Supply Chain as a whole.

Yasar JarrarGuest Editor