Int. Journal of Business Science and Applied Management, Volume 7, Issue 2, 2012

Managing change in performance measures – An inter-company

case study approach

Mohammed Salloum

Volvo Construction Equipment, Technology, Department of Finance and Business Control

Smedjegatan 37, 632 20 Eskilstuna, Sweden

Telephone: +46 760 50 16 54

Email: Stefan.cedergren@mdh.se

Abstract

The field of performance measurement and management (PMM) is well filled with frameworks, models and

guidelines addressing what to measure and how to design a performance measurement system (PMS). However,

what has been less examined so far is how to ensure that PM evolve in tandem with their environments. Further,

the few approaches available today are prescriptive and outlines how or what practitioners should do in order to

the company is global with operations and sales spread out over the world. The findings suggest that all three

companies have processes in place for managing change in PM. However, the approaches differ in design and

context. Even though the case companies had different approaches in place to manage change in PM, they

shared several commonalities. Commonalities were shared in the way of execution, process input and challenges

in IT and culture. Furthermore, employee involvement seemed to be the biggest challenge for all three

companies. The findings put forward in this paper are limited as they are confined to three companies from the

same company-group. More studies, both from within and outside the company-group, are needed in order to

establish a solid base of empirical data for generalisation. However, this paper makes a contribution both

through describing how three companies manage PM change and through elaborating on the underlying factors

affecting functionality.

Int. Journal of Business Science and Applied Management / Business-and-Management.org

2001), support goal achievement (Tapinos et al., 2005) and provide information on strategy implementation

(Neely, 1999). Regardless of the reason to why PM are deployed, it is widely recognised in the literature that

PM need to be aligned with the strategic priorities, as well as the internal and external environments of the

organisation (Neely et al., 1996; Bourne et al., 2000; Bititci et al., 2001; McAdam and Bailie, 2002; Hass et al.,

2005; Lima et al., 2009). However, as these strategies and business environments are dynamic in nature

(Simons, 1995), organisations need to ensure that they are capable of managing change in their PM (Bititci et

al., 2000; Kennerley et al., 2003). Sticking to your PM for too long has been described by Likierman (2009) as

one of the five traps of performance measurement.

The field of performance measurement and management (PMM) is well filled with frameworks, models

and guidelines addressing what to measure and how to design a performance measurement system (PMS)

take on the challenge today. Thus, a gap exists in understanding how organisations manage change in their PM

in practice (Bourne, 2008). This gap is further amplified by the fact that only a few organisations have

procedures in place to manage the change of their PM (Neely, 1999; Bititci et al., 2002).

With this background in mind, the purpose of this paper is to outline and compare the approaches of three

case companies for managing PM change. The motive for the paper is to bridge the knowledge gap, by

contributing to the understanding of how PM change is managed in practice and assist in the development of

adequate theoretical models by shedding light on the problems encountered in practice. The paper is divided into

six sections. The following section presents the theoretical background. The third section outlines the

methodological approach and presents the case studies. This is followed by a presentation of the empirical

findings. The succeeding section then contrasts the empirical and theoretical findings through a cross-case

abolished and indispensable PM are fine-tuned continuously. For this purpose, an audit with 10 questions is

provided within their Performance Prism framework. Kennerley and Neely (2002; 2003) list a process that that

reviews, modifies and deploys PM as one of four critical factors in their framework for keeping PMS up to date.

Neely et al. (2002a) argue that PMS are often allowed to expand to the extent that they become unmanageable

and thus a PM review process needs to be in place. It is underlined that the understanding of the process evolves

over time. Medori and Steeple (2000) concurs and lists periodic maintenance as the last step in their framework

for auditing and enhancing PMS. They argue that a periodical PMS review is required as PM relevant at one

particular moment in time may become redundant at another point. Meekings (2005) has developed a set of

requirements for a functional review process, including a defined structure, connection throughout the

organisation, deliver value and PM change management. Kaplan and Norton (2005; 2008) argue that two

priorities to business units, processes, and activities using performance measures are required.

Besides the review process, the role of organisational culture is emphasised in the literature. Waggoner et

al. (1999) underline the impact that organisational culture can have on PMS evolution. They argue that a culture,

which discourages risk taking and innovation, can block steps that are essential for successfully changing a

Mohammed Salloum and Stefan Cedergren

PMS. Kennerley and Neely (2002; 2003) concur and underline the need of a culture within the organisation that

ensures that the value of measurement, and the importance of maintaining relevant and appropriate PM are

appreciated (Table 1). Salloum and Wiktorsson (2011) argue that in order to realise a dynamic PMS, a culture is

needed that encourages organisational involvement, openness, information sharing, and resource availability.

Farris et al. (2011) identified two critical factors for a supportive organisational culture in their investigation of

change has to be driven by the leader, from the top of the organisation. Kennerley and Neely (2002; 2003) argue

that management commitment and training are two factors needed in order to facilitate PMS evolution. Further,

Kennerley et al. (2003) highlight the risk of management inertia towards PM as a barrier for evolution. In an

empirical study conducted at a large manufacturing unit, it was concluded that management commitment, style,

competence, and politics are factors that have a high impact on the dynamic abilities of a PMS (Salloum and

Wiktorsson, 2011). Kennerley and Neely (2002; 2003) further stress the availability of flexible information

technology to enable the collection, analysis and reporting of appropriate data as crucial for the evolution of a

PMS (Table 2). Wettstein and Kueng (2002) argue that IT capabilities are pivotal for initiating and accelerating

PMS change. They argue that IT consistently offers new opportunities to automate processes, enhance

communication, and develop data analysis sequences. In the integrated model forwarded by Bititci et al. (2000),

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studies (Waggoner et al., 1999) and models for how manage PM change (Bititci et al., 2000). Some frameworks

(Neely et al., 2002a; Bourne et al., 2000) elaborate on the responsibilities of such a process but provide little

direction on how it might take shape in practice. Others (Kennerley and Neely, 2002; Neely et al, 2002a) debate

and argue more on the design by outlining important factors to consider, questionnaires to deploy, and

management tools to implement. From a behavioural perspective, the role of senior management, culture and

In order to fulfil the purpose of the paper, the data presented has been collected through the deployment of

case studies (Table 3). The choice of case studies as means for data collection stems from the possibility of an

analysis (Yin, 1994) in all three cases has been the way of working for managing change in PM. Three factors

have guided the selection of case companies; the existing procedures for handling PM change at each case

company, the knowledge about the company practices that the researcher could obtain before the case execution

and the possibility to get unrestricted access to interviewees and databases.

All three case companies belong to the same company-group that operates within the transportation

industry. The industrial footprint of the company is global with operations and sales spread out over the world.

Mohammed Salloum and Stefan Cedergren

execution and context. Each approach is presented in the sections below from two aspects, structural and

behavioural. The structural aspect focuses on how the case companies report that they ought and want to work

with PM change. The behavioural aspect focuses in contrast on how the intended ways of working have

unfolded. The distinction between the structural and behavioural sides provides a useful contrast of how the case

companies want to work vis-à-vis how they actually work.

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Table 4: Findings per case company summarised

4.1.1 Structural aspect

Management system documentation and management interview results revealed that CC1 deployed a

process labelled the KPI review. Interview responses from managers across the organisation exhibited that the

process was based on a set of meetings initiated and closed by the top-management team. The inputs to the first

meeting of the process are outlined in Table 4. Once the top-management finished their review meeting, the

function management did the same exercise with the above hierarchy’s (top-management) output as input. This

interlinked chain of meetings was meant to continue down to the production teams in order to create alignment

in the goal and PM review. Once all the review meetings have been executed a set of meetings referred to by the

top-management interviewees as the agreement/feedback meetings were initiated. The purpose of these

meetings was to foster consensus of the goals and PM for the coming year and was held between members of

process was an established way of working at CC1 as 16 of the 20 interviewees acknowledged it. It is notably

however that the four employees not recognising it came from the lower levels of the organisation. In order to

enhance the communication and promote the use of PM, a payback tracker was publicly accessible at the

intranet. The tracker communicated the financial effects of the PM to the organisation. Moreover, all PM were

Mohammed Salloum and Stefan Cedergren

connected throughout the hierarchical levels of the organisation through the use of publicly available KPI-trees

(Figure 1). The general manager explained: “…And then we do have these KPI-trees that show how everything

is related throughout the organisation… I think that they [the KPI-trees] can play an important role in

explaining that yes it [the measures] matters”.

Figure 1: Example of one measurement tree for the cost, delivery and quality PM at a department.

4.1.2 Behavioural aspect

Even though interview results, especially from the top-management team, made it explicit that the intention

an attempt had been made to involve the teams but it was deferred as many others things came up that needed to

be dealt with. The general manager described the attempt as “half-hearted”. However, all six top-management

interviewees still believed that the KPI review was important and supported it. One of the managers argued that

the attempt failed due to the lack of management understanding regarding how to make the organisation to want

to get involved. The consequences of not involving the masses in the KPI review were believed to be negative

and were best expressed by the production engineering manager who argued that the involvement of the teams

was crucial for the ability of the whole organisation to get something worthwhile out of the PM. Further, another

contributing factor to the lack of involvement was the culture of the organisation. The production manager

argued: “ Here at this plant, to engage your employees equals to inform them and nothing else. No dialogue or

feedback exists. You must always control that things are getting done. This is fundamentally wrong and in order

an operator/assembler became a team-leader. The team-leaders highlighted that the education was important for

their understanding of the PM. Moreover, direct observations and interview results indicate that that CC1 had

problems with their inflexible and disintegrated IT-systems. All five top-management interviewees underlined

that the IT-system was inflexible in regards to what they wanted to measure. High levels of manual impositions

for collecting and compiling data encroached on the time for analysis, limited the measurement scope and

amplified the risk for human errors. The general manager explained that it sometimes felt like a project to just

start measuring a new PM.

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4.2 Case company 2 – The dual process approach

PM process documentation and interview responses exhibit that CC2 deployed two processes for managing

PM change. The first process, labelled at CC2 as the business plan and goal steering process (BP&GS) adopted

a top-down approach and was confined to all the main strategic and operational PM. In converse, the second

process, named the operational development process (OD) was designed as a bottom-up approach with focus on

management team had finished their BP loop and updated the strategic material and main PM, the objectives

and PM of the organisation were reviewed through the GS loop. The BP loop was thus the first process step and

was confined, participation wise, to the top-management. Process material and interview responses exhibit that

the GS loop was executed in a chronological fashion with output of higher hierarchical levels serving as input

for the lower dittos. Moreover, the output was meant to become more specific and detailed the further down the

GS loop was drilled (Figure 2). At, first-line management level specific actions were meant to be assigned to the

PM and goals through the development of local business plans. The GS loop was concluded once the lowest

levels of CC1 had reviewed and updated their PM and goals for the coming year.

Figure 2: The BP&GS loops and their outputs.

of the company by selecting one common strategic focus. Once the focus was set it was broken down into goals,

PM and action lists within all OD teams. Then, the output and progress was monitored through revised action

lists, recurrent team meetings and creation and finalisation of PM. The OD teams had full authority of creating

the goals, PM and action lists as long as they supported the strategic focus. It was believed by interviewees

across CC2 that all employees were members of at least one OD team. Further, all employees had been given

training in the OD philosophy and how to work within the OD teams by the internal consultants. The final step

of the process purposed to use gained insights as part of the input for the next loop of the process and to improve

it. Educational material and interview responses underline the role of the internal consultants played. From

helping the general manager with the strategic focus to support the OD groups with their PM, actions and

improving the process.

Mohammed Salloum and Stefan Cedergren

Figure 3: The OD process. The process steps are highlighted in rectangles and the outputs in spheres.