Integrated Performance Management: A Guide to Strategy Implementation

Citation

Verweir, K. (2006), "Integrated Performance Management: A Guide to Strategy Implementation", Strategic Direction, Vol. 22 No. 8. https://doi.org/10.1108/sd.2006.05622hae.001

Integrated Performance Management: A Guide to Strategy Implementation

A round-up of some of the best book reviews recently published by Emerald.Integrated Performance Management: A Guide to Strategy Implementation

K. Verweir, L. Van den Berghe (Eds),Sage Publications

Integrated Performance Management: A guide to Strategy Implementation is the result of the collaborative work of a large team of academics associated with Ghent University and the Vlerick Leuven Gent Management School. A total of 21 contributors joined forces to tackle the problems of designing an exhaustive, competent, and robust performance management framework.

Performance management is without doubt a rising business and administration discipline. New academic journals, “performance management” job openings, and a broad range of recently-published books are testimony to the increasing attention paid to the concept of performance management. The discipline, however, remains fragmented as researchers attached to different sub-disciplines (e.g. operations management vs accounting) research the issue of performance management in a differentiated way. Owing to this book, it is likely that operations managers and accountants working on performance management in isolated silos will become a thing of the past, as a clear effort is made to unite the field of performance management.

The book starts with a review of the most traditional performance management frameworks. It should be noted that the focus of the book is exclusively on performance management frameworks rather than on performance measurement per se, and thus one should not expect to find in this book a treatise on performance measures. Instead, readers will find relevant information about how sets of performance measures can be put to good use.

The concept of financial performance, and especially of economic value added (EVA), is reviewed in the first chapter. This is followed by the popular balanced scorecard model (Kaplan and Norton, 2001), the traditional operations management frameworks for quality management and time-based competition. The first part of the book is completed by a review chapter on risk management frameworks.

In the second part of the book, the authors draw on their consulting experiences and their review of traditional performance management frameworks, to introduce their integrated performance management framework. The concept is relatively simple: performance management is an activity that crosses departmental boundaries and lines of responsibilities. Thus it is essential to identify the key components of a performance management system which will be distributed across these departments and to explore how these components can be integrated. Integration means strategic alignment, i.e. the purpose of the framework is not only to show where to act to manage performance, but also to show how to co-ordinate these actions for performance management to be effective.

The authors’ framework includes five key components. Direction and goal setting is the first component and is described in a chapter dedicated to a review of the literature on the strategy formation process. Operational processes form the second component of the framework and a variety of operations concepts and techniques suitable for managing “alignment” to a performance target are reviewed (e.g. supply chain management, world class manufacturing). Support processes are the third component, and a chapter discusses how to achieve strategic information systems alignment. Evaluation and control form the fourth component, and are discussed in a review of the literature on management control systems. Finally, the last component, organisational behaviour, receives more attention with one chapter on organisational design for performance management, one chapter on human resource management for performance, one chapter on leadership, one chapter on reward and incentives, and one chapter on change management. Although the weight given to the fifth component may seem disproportionate, given the emphasis of the book on strategy implementation this choice makes perfect sense.

Chapter 15 wraps up the second part of the book with a review of management publications, specifically discussing the theme of integration. The authors show that their framework is always as good as, or better than, existing performance management frameworks when it comes to guiding managers toward strategic alignment. A comparison between the Balanced Scorecard and the proposed framework convincingly makes this point.

In the third part of the book, the authors move onto the truly innovative part of their model, and show that there is more to their framework than is perceived at first sight. Two key extensions of their model are discussed.

The first extension is the introduction of the concept of maturity alignment. What is stressed in the earlier part of the book was that companies should integrate the five components of performance management in order to achieve strategic alignment. Performance management practices, however, will vary with the level of maturity of the firm. Control practices can evolve from being very informal to being very formal; to eventually evolve towards a balanced trade-off between formality and flexibility. The argument put forward by the authors is that strategic alignment is a necessary but non-sufficient condition for successful performance management. What is also needed is to check “maturity alignment”, i.e. each of the component used should be at the same maturity level. With this approach, the authors depart from the traditional approach of only describing best practices. Their point is that lessons learnt from the best in class will not necessarily help a company to understand why their implementation is faulty, whereas a maturity alignment analysis will. The authors provide a number of common implementation “pathologies” based on maturity misalignment. For example, a company with a very immature strategy formation process but a very mature control system is doomed to paralysis! The argument is novel, illustrated with case studies, and very compelling.

Having established that managers should focus on maturity alignment, the last chapter moves onto the more contingent issue of determining what is the optimal level of maturity for a company. They describe an organisation’s adaptation process, that results in the more mature firms being the only ones being able to combine sustainability and flexibility simultaneously. Finally, they draw a parallel between the well-known cost of quality model and suggest a cost of performance management model which could be used by managers to determine the optimality of their decisions regarding performance management.

The book is a commendable read for at least two reasons. First, it is a clear departure from the typical edited academic book where the link between the different papers is often quite tenuous. Verweire and Van Den Berghe, the editors, have made an impressive job of ensuring seamless integration throughout the book. The book benefits from a large-scale literature review executed by a team of experts, and the resulting synthesis forms a robust and convincing framework. Academic works of this type inscribe themselves in the research agenda set by the growing interest in systematic literature review (Tranfield et al., 2003) by joining forces, learning from one another, and seeking to capitalise on the existing literature, key knowledge contributions can be made. The second reason for recommending the book is that it sets a strong research agenda for performance management. As the empirical evidence supporting the model is thin, and limited to anecdotes in the book, the usual set of critical comments (subjective, inconclusive, concerns about generality, etc.) could doubtlessly be formulated. However, even the most critical readers will have to admit that strategic alignment, maturity alignment, and context alignment, the three tenets of the book, are critical problems that have been overlooked in performance management research, and that the book has the merit of presenting these problems clearly and taking a first step toward a feasible solution.

In terms of audience, the book is an ideal research reference book, and researchers will find the multitude of literature reviews included in the book very concise and useful. The book would also be an interesting text for a capstone class in business studies, as it truly draws on a variety of disciplines and brings them together. However, instructors would have to supplement the book with additional case materials as the anecdotes are sometimes a bit too bland to make good teaching material, at least in the short and confidentiality-correct fashion in which they appear in the text. Finally, other approaches to structure or improve the logic of performance management frameworks would have to be brought in as additional teaching material to give a more general perspective to the third part of the book. The book is also an ideal reader for practitioners, who will enjoy its conciseness, clarity, and its breadth.

As a concluding comment, the authors should be recognised for their inspired sub-title: A Guide to Strategy Implementation. Performance management in the workplace could be perceived as another of these abstract academic pursuits which are fine theoretical pursuits that unfortunately never result in a bottom line change in real life. This is clearly not the case with this book which is fully geared toward making change happen and that provides invaluable insights to understand how performance management can drive change, the role of alignment in this process, and a set of diagnostic tools that can be used to understand why change did not take place as expected.

A version of this review was originally published in the Journal of Manufacturing Technology Management, Volume 17 Number 1, 2006.