A Performance System Based on the BSC Approach for Measuring Performance in a Business Environment G

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A Performance System Based on the BSC Approach
for Measuring Performance in a Business
EnvironmentG. Vardangalos Fifth IEEE Symposium
on Computers and Communications (ISCC 2000)

• POSMIS
• Jongyi Hong

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Introduction

• BOPS (Back Office Performance Support)
• European project
• Creating an environment that fosters the learning
  enterprise supports employees in improving best
  practices through continual learning
• EPSS (Electronic Performance Support System)
• Allowing corporations to implement the BOPS
  concept of business performance support for their
  customer-related services
• Using BSC approach
• To define performance measure that are linked to
  business strategy
• To provide feedback about the performance of
  operations
• To set target that are guided for improvements
• To provide a strategic comprehensive context
  for decision making
• To focus on key areas of performance

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Introduction

• Three Rs of performance
• Considerations for analyzing goal, service
  program

R
R
Reach Breadth depth of influence over which we
wish to spread our resource
Results The impact on the groups reached by the
resource used
R
Resource The amount of time, money and
energy exerted and the type of resources used
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Introduction

• BSC
• Instruments for translating vision to performance
  measures

Perspective
Mission
Measure
Objective
Financial Perspective
Customer Perspective
Vision Strategy
Internal Process Perspective
Learning Growth Perspective
Developing a New Measure (Olve et al., 1999)
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A Balanced Performance Scorecard

• Advantages of Balanced performance scorecard
  based on the Three Rs
• Allowing for performance-oriented strategic
  operation planning
• Providing a tool for quality management
  continuous improvement
• Broadening all participants performance
  perspective
• Providing an understanding of the trade-off
  inherent in decisions
• Example

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General Overview

• An overview of steps of implementing the BSC

Initial interview in an executive workshop
Assisting management in the methods for
deploying performance improvement goals
Assessing opportunities scope of BSC by
identifying CSFs
Drafting performance measures by evaluating
relationship of CSFs
Facilitating goal setting
Finalizing BSC in an executive workshop
Providing BSC implementation support
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PMS Architecture

• Objectives
• Providing a forward looking vision, Changing
  peoples behavior
• Encouraging communication, Promoting focusing
  alignment
• Reason of EIS failures
• Narrow focus

PMS succeed when they provide relevant facts
data about current performance show what needs
to be improved
The full scope of PMS should be defined
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PMS Architecture

• The architecture of the PMS components

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PMS Architecture

• Two different view in the PMS components
• Definition view
• Defining the functions of the performance
  scorecard module
• Aggregating KPIs that will be supported by the
  PMS
• Selecting KPIs that comprise a specific scorecard
• Assignment of a relative importance to each KPI
• Defining external data that will be used to the
  PMS
• Analysis view
• Analyzing result of the performance measures of
  the company
• Analyzing result of specified time periods, with
  a variety of graphical formats

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PMS Architecture

• The functions of the PMS
• KPI Definition
• Defining the aggregate KPIs per perspective
• Including worst results, actual results, and
  normalized scores
• Aggregating all of the KPI scores per perspective
• Definition of the BSC
• Selecting the KPIs that comprise the specific
  scorecard
• Assigning relative importance to each KPI
• View of the BSC
• Providing different views that can be seen using
  the PSM
• Providing specification of time periods for
  performance target
• Analyzing performance results over time compare
  current performance with past performance

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Conclusions Future Work

• Contribution
• Architecture design detailed technical
  specification of the performance system
• Web based application that covers the functions
  need to create a performance data mall,
  measurement tools associated visual interfaces
• Future works
• Detailed implementation of data mall
  measurement tools
• Detailed description of the referred functions

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SPMS Strategic Performance Management
Systembased on BSC
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Introduction

• Managing strategy Four process (Kaplan Norton,
  1996)
• SPMS
• SPMS enhance organization's strategic
  competitiveness (Rovert, 2005)
• Effective performance measure must be able to
  assess the firms progress on strategic
  initiatives (Ittner Larcker, 2001 Langfield,
  1997 Moon Fitzgerald, 1996)
• Issues relating to implementation of multiple
  performance measures remains unsolved (Hemmer,
  1996)

Clarifying Translating the vision Strategy
BSC
Communicating Linking
Strategic Feedback Learning
Planning Target Setting
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Introduction

• Limitations of SPMS
• Widespread use of multiple measures raises
  several implementation issues including the
  likelihood of ineffective spreading of managerial
  effort (Lillis, 2002)
• ineffective achievement process of strategy
• Limited resource
• The influence of specific performance measures is
  not clear (Lillis, 2002)
• Difficult to define key measure
• Normalized method reflecting characteristics of
  performance measure is ambiguous (Abran
  Buglione, 2004 Kim et al., 2002)
• Objectives
• To provide a strategic comprehensive context
  for decision-making
• To focus key areas of performance

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Literature Review

• Literature related with BSC
• Instrument for translating an abstract vision
  strategy into specific measures goals
• IS (Matinson et al., 1999)
• Fundamental measure (Malz et al., 2003)
• Multi-layer evaluation process (Milis Mercken,
  2004)
• Relative satisfaction level (Kim et al., 2002)
• Relationship between corporate strategies,
  environmental force, and the weighting of the BSC
  performance measures(Shon et al,. 2003)
• Study on deriving total score
• Cost performance model (Geisler, 1995)
• QEST nD model (Buglion Abran)
• Method to Consolidating the BSC performance
  measures
• QEST nD model (Abran Buglione, 2003)
• EPSS (Vardangalos Pantelis)

Considering only Measure
Normalization Process is insufficient
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Methodology

• Three phase
• Collection phase
• Collecting data from database, survey
  literature
• Determining weight of each performance measure
• Deciding type of each performance measure
• Calculation phase
• Calculating desirability value of each
  performance measure
• Drawing total score by using geometric means
• Decision making phase
• Analyzing total score of time periods
• Analyzing importance-score diagram
• Extracting key performance measures
• Developing strategies based on results

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Performance measures
COLLECTION PHASE
Determine
Determine type
LTB, STB
NTB
Extract
Extract
Decide r
Decide s t
CALCULATION PHASE
Construct the desirability function
Draw total score
DECISION MAKING PHASE
Analyze total score of time periods
Analyze importance-score diagram
Extract key performance measures
Establish strategy
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Collection Phase

• Determine weight
• The relative weights for performance measure can
  be calculated using the Analytic Hierarchy
  Process (AHP) (Saaty, 1980, 1982, 1990)
• It is essential to check a consistency ratio (CR)
  because CR which is smaller than 0.1 is normally
  considered to be acceptable
• Determine type of each performance measure (Kim
  Lin, 2001)
• A larger-the better (LTB)-type objective
• A smaller-the better (STB)-type objective
• The nominal-the-best (NTB) type
• Determine Yi, Ymin, Ymax
• Data source such as DB, secondary reports, survey
  and interview

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Collection Phase

• Decide r, s, t
• The value of the factor r, s, and t are decided
  by the user and experts.

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Calculation Phase

• Construct desirability function
• Equation 1
• LTB
• Equation 2
• STB
• Equation 3
• NTB
• Draw total score
• Equation 4

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Decision Making Phase

• Analyze total score of time periods
• Analyze importance-score diagram
• Extract key performance measure
• Establish strategy

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Case Study

• Collection phase

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Case Study

• Calculation phase

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Case Study

• Decision-Making phase
• Importance-score diagram

Total Score 0.9342
Key Performance Measures The total of members
of specific event Ordinary profit Revisit
possibility Security level of transaction
conducted Usability Attractiveness Avg. visit per
day Avg. page view per day Navigation efficiency
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Case Study

• Decision-Making phase
• Establish strategy
• Advertisements
• Events
• Mileage
• Usability experts
• Firewall

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Case Study

• Decision-Making phase
• Importance-score diagram

Total Score 0.9808
Key Performance Measures Usability Navigation
efficiency
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Conclusion

• Contribution
• To provide a compass for informing strategic
  achievement of company
• To provide focal points for achieving strategy
• To provide specification of time periods for
  performance target
• Future works
• System Implementation
• Broad case study