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Business Performance Measurement - past, present and future
Business performance
measurement (BPM) is a fast
evolving and diverse research field which features highly on the
agenda of academics and
practitioners from functions
including general management,
accounting, operations research,
marketing, and human resources.
Utilizing a citation analysis this
paper identifies the following
challenges for the field of BPM.
One challenge is the fact that the balanced scorecard seems to be the most influential and dominant concept in the field.
Researchers are encouraged to
further test and discuss its
theoretical foundations and
research methodology. The second challenge is to create a cohesive body of knowledge in the field of BPM
Towards a Definition of a Business Performance Measurement System
Scholars in the field of performance measurement tend to use the term business
performance measurement (BPM) systems without explaining exactly what they mean by it. This lack of clarity creates confusion and comparability issues, and makes it difficult for researchers to build on each other’s work. The purpose of this paper is to identify the key characteristics of a BPM system by reviewing the different definitions of a BPM system that exist in the literature. This work aims to open a debate on what are the necessary and sufficient conditions of a BPM system. It is also hoped that a greater level of clarity in the performance measurement research arena will be encouraged.
Automating the Balanced Scorecard - Selection Criteria to Idenfify Appropriate Software Applications
Research suggests that about half of large US firms have already adopted the BSC and many more are considering implementation. An organization-wide implementation of a BSC requires IT support and numerous software vendors have taken he opportunity to build software solutions to support a BSC implementation. The problem
executives face today is that there are over two-dozen application-providers to choose from, each of them claiming that their solution offers unique and important features. Selecting
the wrong solution can undermine the entire BSC development effort and the credibility of the performance management system. This article addresses the issue of BSC software by (1) explaining why organizations might need software to support their implementation and (2) by developing a framework to assist organizations in this important decision making process.
Automating Intellectual Capital - Integrating Measures for Intangibles into Corporate Performance Management Applications
All organisations are measuring aspects of their performance and today they increasingly automate their metrics management using software applications. These range from simple spreadsheets to sophisticated performance management software solutions. Many of these application import data from existing electronic sources. However, as this research shows, this could be a barrier to including the important information about intangible performance drivers, as this information is often not readily available in existing data repositories. In the first part of this paper we develop ten key requirements for software applications in order to cope with intangibles; in the second part, these are then contrasted with empirical evidence collected from the 5000 largest firms in the USA.
Defining Intellectual Capital: A Three-dimensional Approach
The purpose of this paper is to provide a three-dimensional framework to facilitate future
definitions of intellectual capital (IC). The concept of IC is often ill-defined and there is a multitude of different definitions for the construct of IC. The lack of a common platform for dialogue has negative
implications for research and practice in the field as it has hinders cross-disciplinary learning. This paper aims to presents a flexible framework in order to make important differences explicit and therefore, if adopted, facilitates the creation of a cohesive body of knowledge.
How a Knowledge-based Approach might Illuminate the Notion of Human Capital and its Measurement
Human capital measurement and accounting has been under discussion for years without any satisfactory methodology emerging. The economic significance of today’s knowledge-intensive organizations makes better HC measurement more pressing. We draw on insights
from the knowledge-based theory of the firm and conclude we can only make sense of its human capital by looking in detail at its practices.
Human capital is the value added at the level of the work practice—as traced by activity-base accounting. Overall the firm’s human capital totals into its goodwill. The human capital can be estimated and then managed by allocating the goodwill to the activities taking place, a complex distribution process but one precisely complementary to that of activity-base accounting.
Intellectual Capital - Defining Key Performance Indicators for Organizational Knowledge Assets
Measuring intellectual capital is on the agenda of most 21st century organisations. This paper takes a knowledge-based view of the firm and discusses the importance of measuring organizational knowledge assets. Knowledge assets underpin capabilities and core competencies of any organisation. Therefore, they play a key strategic role and need to be measured. This paper reviews the existing approaches for measuring knowledge based assets and then introduces the knowledge asset map which integrates existing approaches in order to achieve comprehensiveness. The paper then introduces the knowledge asset dashboard to clarify the important
actor/infrastructure relationship, which elucidates the dynamic nature of these assets. Finally, the paper suggests to visualise the value pathways of knowledge assets before designing strategic
key performance indicators which can then be used to test the assumed causal relationships. This
will enable organisations to manage and report these key value drivers in today’s economy.
Intellectual Capital and Knowledge Management Effectiveness
Building on the complexities of
organizational knowledge creation
the paper explores the alignment
of knowledge management
practices with the epistemological
beliefs of individuals or groups in
organizations. A pan-European
research project investigated
individual’s philosophy about
truth, knowledge and the optimum
approach of knowledge creation.
These individual viewpoints and
requirements are then contrasted
with the knowledge management
practices implemented in
organizations. The results
highlight significant misalignment
between knowledge management
requirements in epistemological
terms and individual’s perception
of organizational knowledge
management activities. The paper
claims these differences lie at the heart of problems companies
experience with extracting value
from knowledge management
initiatives. The paper suggests
ways of identifying and evaluating
resource transformations in
organizations, in order better to
understand and manage knowledge creation to grow the intellectual capital of organizations.
Intellectual Capital at the Crossroads: Managing, Measuring, and Reporting IC
This introductory editorial to the special issue “IC at the crossroads: theory and
research” explains the rationale and background to the studies. In addition it outlines reasons why
the field of intellectual (IC) capital is at the crossroads. It seems that awareness of the importance of IC has been created. It is now the role of researchers as well as practitioners to move to the next
level. This next level involves issues around taxonomies as well as research methodologies. In order to move on, precise definitions of concepts such as IC, better justifications of why organizations need to measure and manage IC, and increased clarity about terms such as measurement,
assessment, or valuation are needed. In addition, more rigorous research methods are needed in order to test and validate existing theories in the field.
The importance of intellectual capital (IC), as a prime value driver in today’s knowledge-based economy, is undisputed. Benchmarking is seen as a tool for identifying, understanding, and adopting best practices in order to increase operational performance. The paper explores techniques of benchmarking the operational management of IC. The research is based on a longitudinal action and case research in an R&D organization. The failure to benchmark IC management practices between two seemingly identical subsidiaries has implications for the measurement and benchmarking of IC. The research concludes that it is critical to understand the context, organizational epistemology and value-creation pathways before organizations start any attempt to compare or benchmark IC.
Successful managers need to know the levers they must pull to ensure superior performance of their organization in the future. Today, more often than not, these levers are their organization’s intangible value drivers. Measuring and managing these elusive drivers of performance is critical for all organizations. This article outlines how managers can develop meaningful indicators that will yield real management insights.
Performance Management in Call Centers: Lessons, Pitfalls and Achievements in Fujitsu Services
This paper provides an overview of Fujitsu's sense and response approach towards performance management. It is demonstrated using a case example of call center performance as part of Fujitsu Services. Call centers (or contact centers) are often used as case examples of how not to measure and manage performance. An operational bias towards efficiency measures often fails to provide the customer focus needed and even has dysfunctional consequenses. This case study demonstrates how Fujitsu moved away from the efficiency trap, and completely redesigned their performance management system to focus on their customer needs and the intangibles drivers of value creation. It will highlight the lessons learned, the pitfalls as well as the achievements.
Reporting on Intellectual Capital: Why, What and How?
Intellectual capital is an important value driver in today's organizations. Traditional financial statements do not provide the relevant informations for managers or investors to understand how their resources - many of which are intangible - create value in the future. Intellectual capital statements are designed to bridge this gap by providing information about how intellectual resources create future value. Intellectual capital statements can be uded as tools to communicate the knowledge-based strategy externally but it can also be used as an internal management tool.
The Balanced Scorecard and Intangible assets: Similar Ideas, Unaligned Concepts
This article discusses how well the concept of intangible assest is aligned with the balanced scorecard. Kaplan and Norton argue that the intangibles belong in the 'learning and growth' perspective of the balanced scorecard and classify them into human capital, information capital, and organizational capital. This article outlines how this attempt to categorise intangibles produced an inconcistent, incomplete, and potentially very confusing classification of intantible assets.
The Dynamics of Value Creation: Mapping Your Intellectual Performance Drivers
The paper highlights the importance of visual representations of strategic intent in order to understand how organizational resources – especially intangible assets and intellectual capital – are used to create value. Based on the literature the paper provides a taxonomy of organizational value drivers. Grounded in the resource-based view of the firm, which argues that organizational resources or assets are bundled together and interdependent, it then highlights shortcomings in the strategy map approach based on the balanced scorecard. The paper then introduces the value creation map that utilizes both direct and indirect dependencies to map value creation. It is suggested that this approach complements the strategy map approach by extending its view of value creation from direct to both direct and indirect dependencies. Subsequently, the paper presents a case study of how the value creation map was applied to understand the new product development process in a leading furniture manufacturing firm.
The Future Scorecard: Combining External and Internal Scenarios to create Strategic Foresight
The purpose of this paper is to provide a new and systematic approach towards strategic foresight by combining traditional external scenarios (market-based approach) with internal scenarios (resource-based approach) into a future scorecard, which can be used to describe alternative internal
development paths for an organization. The paper combines thinking of the market-based and the resource-based view of the firm in order to provide a new tool to supplement most static measurement approaches with a
tool that monitors the future developments – externally and internally.
It is now generally believed, within the current literature, that an academic and practitioner focus on intellectual capital (IC) is important and that the measurement of a company’s intangibles provides real business benefits. However, it is essential for researchers in the
field of IC to be able to justify these newly formed theoretical assumptions through rigorous
empirical testing. This paper reports on the results of a systematic investigation into the theoretical underpinnings of why firms measure their IC and existing empirical evidence that helps to prove that the measurement of IC is really worthwhile. The paper then critically reviews the state of
research evidence in the field. The major finding of this paper is that the majority of research
within the IC measurement field is at the theory building stage, and that very little of the proposed measurement theory has yet been fully tested. This paper outlines possible avenues scholars might pursue in order to further the development of the IC measurement field.
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