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The document reviews various performance review systems and their major dimensions. It discusses Kaplan and Norton's Balanced Scorecard, Keegan's performance measurement matrix, Fitzgerald's results and determinants framework, Du Pont pyramid of financial ratios, Brown's framework, Lynch and Cross's framework, and the Business Excellence Model. Each framework considers different aspects of organizational performance such as financial measures, customer satisfaction, internal processes, innovation, and learning. The frameworks are tools for measuring and managing business performance.

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46 views

Assignment - 3

The document reviews various performance review systems and their major dimensions. It discusses Kaplan and Norton's Balanced Scorecard, Keegan's performance measurement matrix, Fitzgerald's results and determinants framework, Du Pont pyramid of financial ratios, Brown's framework, Lynch and Cross's framework, and the Business Excellence Model. Each framework considers different aspects of organizational performance such as financial measures, customer satisfaction, internal processes, innovation, and learning. The frameworks are tools for measuring and managing business performance.

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karthik
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SCM Assignment 3

Rahul Kumar Thakur


20163096
Q. Explain in detail the review of various performance review systems along with its major
dimensions.

: Performance measurement is process of ensuring that an organization’s strategy is successfully implemented


to obtain the set objectives. It is about monitoring an organization’s effectiveness in fulfilling its own set or
planned goals or stakeholder requirements. A company must perform well in terms of cost, quality, flexibility,
value and other dimensions. The performance measurement systems reviewed in the given papers are as
follows:
• Kaplan and Norton’s Balanced Scorecard
• Keegan’s performance measurement matrix
• Fitzgerald’s results and determinants framework
• Du Pont pyramid of financial ratios
• Brown’s framework
• Lynch and Cross’s framework
• Business Excellence Model

Kaplan and Norton’s Balanced Scorecard:


A balanced scorecard is a performance metric used to identify, improve, and control a business's various
functions and resulting outcomes. It was first introduced in 1992 by David Norton and Robert Kaplan. A balance
scorecard identifies how various internal functions affects external results. It helps organization reach its defined
objectives. There are four specific area of Balanced Scorecard:

Financial perspective: It mainly deals with financial performances and checks whether they are on track to reach
defined objective. It deals with sales, expenditures, and incomes are used to understand financial performance.

Internal business perspective: In business performance how certain tasks are performed in the organization. Like
how the manufacturing or delivery processes are being done. Is there anything which can be improved? Track
any gaps, delays, bottlenecks, shortages, or wastes are determined and necessary improvements are done.

Innovative and learning perspective: In this it is determined how the training of employee are going on and are
they learning and adding value as planned. It deals with mainly how well employee are learning new things and
using the learned things into adding competitive advantage over the industry.

Customer perspective: The scorecard also look at how the enquires, complaints and feedback of customer are
handled by the company.
Balanced Scorecard method deals mostly with management of organization rather than with measurement of
performance, thus it is more referred to as a management tool rather than a measurement tool. KPMG widely
uses the balanced scorecard method for performance evaluation of both itself and its clients.

Keegan’s performance measurement matrix


Performance measurement matrix integrates financial, non-financial, internal and external aspects of business
performance. Performance measurement matrix (PMM) was developed by Keegan et al. in 1989. It helps in
understanding relation between different internal and external aspects and support improvement collaboration
performance by evaluating the collaboration. It also shows the weakness and strength of organization in market.
Fitzgerald’s results and determinants framework
The result and determinants framework consits of six performance dimensions classified under two categories.
The six dimensions are further classified into two categorized into two headings : Result and Determinants.

Results: They are also called the factors which describes why the organization is lagging behind. Result has
further two dimension of performance:
Competitiveness: These describes position of organization in market i.e its customer base, market share,
position in market, growth in sales etc.
Financial performance: These describes financial factor of organization like : its profit, capital investment,
market ratio, etc.

Determinants: They are also called the factors which describes why the organization is leading. There are four
determinants dimensions of performance:
Quality: Reliability, Comfort, Friendliness, Communication, Competence, Access, Availability, etc.
Flexibility: Flexibility of volume, delivery, specification, etc.
Resource utilization: Productivity and Efficiency of organization
Innovation : Innovation in performance of individual or innovation in process.
Du Pont pyramid of financial ratios
The DuPont is a framework for analyzing fundamental performance . DuPont pyramid of financial ratios is a
useful technique used to decompose the different drivers of return on investment (ROI). The decomposition of
ROI allows investors to focus on the key metrics of financial performance individually to identify strengths and
weaknesses.

Brown’s framework
Brown developed a structural framework which attempts to define differences between input, process, output
and outcome measures. He describes the framework by giving example of baking a cake to explain this. Input
measures would be related with amount of flour, eggs, how the motivated and skilled the employees are, how
much money we have invested etc. Process measures would be related with what deciding factors will be in the
process like oven temperature and length of baking time. Output measures would be defined by the quality of
the cake. Outcome measures will be the satisfaction of the customer with the cake.
Lynch and Cross’s framework
Lynch and Cross’s framework is also known as The Strategic Measurement Analysis and Reporting Technique
(SMART). This framework was developed to eliminate the disadvantages associated with traditional,
performance measurement systems which were focused on finance. The right-hand side of the pyramid reflects
internal efficiency measures and the left-hand side of the pyramid reflects external effectiveness measures.
Business Excellence Model:
The EFQM’s Business Excellence model is a framework, which links the key performance results of an
organization to the decisions made by leadership and process involved. The Model is based on nine criteria. Five
of these are 'Enablers' and four are 'Results'.

The main goal of this framework is to achieve stronger financial performance, create inspirational leadership,
motivate innovation in products and services, give emphasis on customer service and satisfaction, increase
market penetration and revenue and to demonstrate stakeholders that the organization has a structured and
systematic approach to improving and achieving best practice and excellence.

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