Performance measures - time to rethink: reflections from Malaysia

Citation

Krishnan, S.K. (2005), "Performance measures - time to rethink: reflections from Malaysia", Measuring Business Excellence, Vol. 9 No. 3. https://doi.org/10.1108/mbe.2005.26709caf.003

Performance measures - time to rethink: reflections from Malaysia

Performance measures – time to rethink: reflections from Malaysia

Introduction

Performance measurement in general is not a new practice at the present time. The term, “performance measures” might sound novel in research literature but the idea itself of measuring all aspects of performance has been there for a long time. However, over time, one cannot deny that numerous unforeseen events have taken place and the world has changed accordingly to what it is seen now.

There’s certainly no doubt that most of the systems (including individuals themselves) are trying to function in the right way in order to perform a given task but that will not be adequate in a business (or any given) process. One (individual, process or a system in a whole) must always understand on how well we functioned before, during and after the execution of a given task. This is where performance measures of various types in a myriad situations will be used as a monitoring tool.

Even after having all the right outputs of a particular process, one should realize that the ultimate outcome should also be monitored. Failure to close the loop of an entire process could lead to numerous unexpected circumstances, which normally will be viewed as a separate (or detached) problem all over again. One such example would be the new graduate students from universities, where we often find unemployed or unemployable graduates, though Malaysia’s workforce consists of more 15 percent of foreign workers, both skilled and unskilled. The monitoring could have been fine within the organization (the university) but failure to monitor the needs of the job market has further contributed to the high number of unemployed graduates. This is the difference between output and outcome. We may have the desired output based on the right inputs but can we be sure that the output also has created the desired outcome as well?

The commitment

In view of all these, there’s certainly an urgent need to have a good measuring and monitoring system put in. In Malaysia, the use of performance measures has always been there and further development and refinement of its usage is definitely on-going. Even the country’s leadership, headed by Prime Minister of Malaysia, Dato’ Seri Abdullah Haji Ahmad Badawi, has emphasized the creation of National Performance Culture[1]. The key ingredients of the National Performance Culture, which consist of three levels of strategic development priorities, are listed as follows:

1. 1.

   public sector performance: a commitment to fiscal discipline and a better public service delivery system;

2. 2.

   corporate sector performance: a commitment to productivity improvement and enhanced global competitiveness; and

3. 3.

   human resources performance: a commitment to “software” (computerised using nationwide system integration) on the human capital development.

Two months before the launching of the National Performance Culture, the Prime of Malaysia, who is also the Finance Minister, gave priority to fostering the Culture of High Performance in his 2005 Budget Speech[2]. Currently the Malaysian government is certainly committed into inculcating a culture of high performance as part of the national agenda. It is undeniable that to create and infuse such an important culture in the minds of the Malaysian people is certainly an uphill task. In line with this idea, the Malaysian government has also launched the Key Performance Indicators (KPIs) and Performance Linked Compensation (PLC) programmes for Government-linked companies (GLCs). Here the GLCs are seen to play an important role in creating the culture of high performance as they are involved in many strategic and core sectors such as energy, telecommunications, finance and transport. So, all GLCs will be required to fully adopt the KPIs and PLC programmes as a compulsory step to move forward. The KPI concept was also implemented in the public agencies to improve their performance. Beginning August 2004, six agencies have implemented the KPIs on a pilot basis, which includes the Immigration Department and the National Registration Department of Malaysia. This shows the importance of having performance measures in order to move forward and in dealing with the ever-changing global environment that Malaysia faces.

The reality on the ground

There have been many situations, which the author has seen personally on various occasions, in regards to difference in measurements and misunderstanding of performance measures implementation.

Here are some of the problems that must be eliminated in order to totally realize the contributions of any performance measure initiative. Listed below are the reasons for failure in the implementation of any performance measurement initiative:

• •

  Failure to understand what to measure.

• •

  Vaguely understand the tool itself, e.g. balanced score card (BSC).

• •

  Whatever statistics generated are just accepted and filed, no further analysis is done.

• •

  Data are collected without knowing the reason, that is why a lot of unnecessary measures are also reported.

• •

  A lot of statistics collected for reporting purpose only.

• •

  Collected data are not used for decision making.

• •

  Lack of management commitment in this area.

• •

  Poor communication regarding the performance measure implementation from top-down hierarchy.

• •

  There is also fear (among leaders) that the measures will bring out the hidden truth.

• •

  Poor application of statistical analysis, where only very basic descriptive statistics are used, e.g. percentage, simple average, etc.

• •

  Inadequate resources such as staff, hardware and software.

• •

  Lack of knowledge on existing technology that can be exploited to easily accomplish task of measuring performance.

• •

  There’s no total participation of all staff.

• •

  Poor interface between departments.

• •

  The idea of measuring and monitoring is not focused holistically in the entire organization, which means only certain people are important for the measure.

• •

  Unrelated or irrelevant measures being utilized.

• •

  Data are collected and then transcribed onto recording means, which is extremely time-consuming and provides room for error.

• •

  Existence of other internal organizational conflicts that interrupt the implementation of a performance measurement initiative.

• •

  Failure to close the entire loop of a process during monitoring process.

After looking at the common errors incurred in real-life practice during the implementation of performance measure, one must take considerable action to eliminate the causes that contribute to the failure of the performance measure implementation, which could further dampen the creation of the performance culture.

Concluding discussion

Every day there are all kinds of issues relating to the problems and challenges faced by everyone, as an individual or society as a whole (including in Malaysia), which are normally portrayed in the local and foreign media. When studied further, the question that comes to the rational mind would be “where is the monitoring process a priori before it turns out to be a problem?”.

Whatever is said and done, one must accept the fact that measuring and monitoring is here to stay. All organizations have, in one way or another, been involved in monitoring their performance; however the focus of such measures is still not balanced. There are organizations which focus more on the financial performance, and there are others which place more emphasis on non-financial measures. What should be understood here is that there is a very clear link between financial and non-financial measures. If a number of the non-financial measures, which are mainly used in monitoring the production process of a product (tangible or intangible), indicate some failure events then these collective failure events can be converted into monetary form (cost of nonconformance). It certainly will be clear later on how much it affects indirectly (and later directly) the financial measures. An equal emphasis on these measures can create an environment in the organization that not only looks into sustainability in business but also into continuously moving forward.

One other way to avoid any deviation from the actual intended use of performance measures would be to look into the industry’s best practice. This approach would also reduce the resistance faced during the implementation process of a performance measures. Again, one should bear in mind that one may or may not be the pioneers in coming up with various types of performance measures, which means there are many avenues for us to learn from other people’s failed approaches around the globe. Here one must also understand that a performance measure should not only be used to monitor the immediate situation but also to learn more about the future. This is where the idea of looking at a process more holistically, right from its input, output and also the outcome, plays a very important part. With all this in mind, the effort from the Malaysian government will certainly bear fruit.

Notes

1. Dato’ Seri Abdullah Bin Haji. Ahmad Badawi, at the The MIER National Economic Outlook 2005 Conference, 07-12-2004

2. The 2005 budget speech by Dato’ Seri Abdullah Bin Haji. Ahmad Badawi, Prime Minister and Minister of Finance, Introducing the Supply Bill (2005) in the Dewan Rakyat (Parliament), 10-09-2004.

Dr Suresh Kumar KrishnanManagement Consultant with QPIC Consultants Sdn. Bhd, Kuala Lumpur, Malaysia. He is a trained Lead Auditor for the Quality Management System and currently he is actively involved in the ISO 9000 certification issues in Malaysia.