Transcript of "INTEGRATED PERFORMANCE MANAGEMENT: LINKING STRATEGIC ..."
INTEGRATED PERFORMANCE MANAGEMENT: LINKING
STRATEGIC, OPERATIONAL AND INDIVIDUAL PERFORMANCE
eab group, University of Melbourne, Australia
Performance management is a ubiquitous term in today’s business
environment. It is embedded in the body of knowledge of various disciplines
and it is used at all organisational levels. However, due to the constructivist
evolution of performance management theory and practice and its
multidisciplinary nature, there is a high degree of fragmentation in this field.
Things have started to change in the last 15 years, with the coalescing around a
central question concerning the link between strategy and measurement, a
turning point in the establishment of performance management as a standalone
discipline. This conceptual paper aims to clarify the concept of performance
management, track its evolution at strategic, operational and individual level
and outline the implications of integrating the governance for managing
performance at all these levels, while proposing new directions for the research
agenda in this field. It starts by clarifying the definition of performance,
performance management/measurement and briefly outlines the three levels of
performance management in organisations: the strategic (entire organisation),
operational (functional team or group) and individual level. It follows the
evolution of performance management at each level and outlines an integrative
approach to performance management in organisations. New directions such as
systems thinking, learning and integration are presented, along with a series of
emerging research questions to grow the knowledge base of performance
management as an emerging discipline. Overall, the paper contributes to a
better understanding of the performance management concept and its evolution
by both practitioners and academics and provides a platform on which to build
further, based on the proposed research directions.
Keywords: strategic/operational/individual performance management, performance
measurement, integration, discipline evolution, research agenda
Relevance to the themes identified for the conference
• Holistic Performance Management, showing the links and inter-dependencies
• Organisational Structure/Responsibility Centre Design and Accountability
• Managing Organisational Performance
• Disciplinary/Functional Perspectives on Performance
• Managing Performance Measurement Systems (PMSs)
• Measuring Different Dimensions of Performance
Research question being investigated
As a conceptual research paper, the focus of enquiry is on identifying patterns in a vast set of
data and proposing new ways to look the discipline of performance management.
The following research questions will be addressed:
• How is performance management defined in today’s business environment?
• What are the patterns in the evolution of performance management as a discipline at
strategic, operational and individual level?
• What is the value and what are the implications of integrating the governance for
strategic, organisational and individual performance in organisations?
• What are the future directions that inform the research agenda for this discipline?
The paper is a result of an ample literature review that tracks the evolution of performance
management in time, from antiquity to the 21st century. It is based on a mix of secondary
research and direct practitioner observations captured while implementing organisational
performance management systems in both the public and private sector.
This preference is based on the assumption that action and constructive research, as well as
case studies are the most appropriate and widely used approaches in operations management
research. One of the benefits of the constructivist approach is that it combines knowledge
from previous research with experience from the organisations involved. Social
constructionism emphasizes that the most important part of management involves making
sense of ambiguous and complex situations through conversations and dialogue.
Indication of the findings and conclusions
The conclusion of the paper is that that an integrated view to performance management is
preferred as it will enable better outcomes for organisations and it will act as a catalyst for the
establishment of a stand alone discipline that in turn will accelerate advances in academic
research. A research model that can be used to further explore integrated performance
management approaches in organisations is also proposed:
Bridging the gap
New approach to
Strategic/Organisational • Systems thinking focus Intervention at organisational level
Performance Management • Learning as a key driver
Systems theory Integrated Performance Management Approach
Goal setting theory 1. Performance Management for learning
and goal achievement
2. Performance education
Operational/Functional/Team 3. Use of the Performance Management
Contingency theory Office for integration and alignment
Systems theory 4. Combination of systems and command
Goal setting theory and control approach to performance
Individual Social learning theory
Agency Theory Performance Management
Goal setting theory
Figure 1: Integrated Performance Management Research Model
A large number of publications was analysed part of the literature review, tracking the
evolution of strategic, operational and individual performance in time.
Individual performance management evolution
Individual performance management is perhaps the level with the longest evolution in
history, as it mirrors the level of organisational maturity. As in early times organisations were
loosely defined, the performance management focus was on the individuals performing tasks
as part of a group. In time, more complex approached emerged, mainly driven by the
military, public administration and industrial companies. They all needed a system of
monitoring the performance of numerous individuals to ensure a streamlined progression in
the organisational hierarchy. The chronological evolution of individual performance
management in illustrated by a selection of citations in the table below:
Timeline Event – Comments Source
Antiquity The ancient Egyptians had to ‘encourage’ their workers to build the great unknown
pyramids – and, unwittingly, they utilized performance management
systems to do so. Their system revolved around whipping those workers
who did not perform as required, to achieve their goals. This worked
effectively for them as evidenced by the splendid pyramids that they built.
Important to note: slavery in those times provided nominally free labour
governed by expectations on both sides.
206BC - Performance appraisals can be traced back to the Han Dynasty Wright (2002)
221AD- The precise origin of performance appraisals is not known but the practice Banner & Cooke
265AD dates back to the third century when the emperors of the Wei Dynasty (1984); Coens &
(221-265AD) rated the performance of the official family members. Jenkins (2000)
Fairness of raters was questioned since the third century by the Chinese Patten (1977) as
philosopher Sin Yu who reportedly criticised a rater employed by the Wei cited in Banner &
Dynasty:“the Imperial Rater of Nine Grade seldom rates men according Cooke (1984)
to their merits, but always according to his likes and dislikes”
1540- A procedure to formally rate members of the Jesuit Society was Whisler & Harper
1560 established by Ignatius Loyola. (1962)
1648 In 1648, it is reported that the Dublin (Ireland) Evening Post evaluated Hackett (1928),
legislators by using a rating scale based upon personal qualities. Wiese & Buckley
18th In both Britain and America in the 18th-19th centuries there is evidence of Furnham (2004).
century early forms of performance appraisal and most Western armies did
appraisals in the 19th century.
late 18th Performance management theory and practice in the United States started Pratt (1991).
century with the Industrial Revolution in the late 18th century. The earliest
performance appraisal programs during the Industrial Revolution were
relatively crude and simple. Workers were evaluated and paid primarily
on the basis of quantity output -- the number of "pieces" they satisfactorily
turned out. Frequently, management provided for bonuses and other
tangible rewards to recognize employee contributions to the company.
1800- Performance appraisals in industry were most likely initiated by Robert George (1972), as
1817 Owen in the early 1800s. Owen monitored performance at his cotton mills cited in Banner &
in Scotland through the use of "silent monitors.” The monitors were Cooke (1984);
coloured cubes of wood with different colours painted on each visible Wiese & Buckley
side. They were displayed above the workstation of each employee. At (1998).
day-end. The colour of the visible side of the cube was associated with a
rating to indicate performance. At the end of the day, the block was turned
so that a particular color, representing a grade (rating) of the employee’s
performance, was facing the aisle for everyone to see. White indicated
“excellent” yellow indicated good, blue was used to indicate “indifferent”
while black indicate “bad”. Anecdotal evidence indicates that this practice
had a facilitating influence on subsequent behavior.
1813 Performance appraisals were formally implemented in the United States Bellows & Estep
military in 1813. This is generally looked upon as the start of formal (1954),.
performance appraisal in the United States. In contrast to “silent monitors” Wiese & Buckley
used by Owen, Army General Lewis Cass reported to the US War (1998).
Department on individual ratings of officers using descriptions of each Lopez (1968) as
officer. He used phrases such as “a good natured man," “a knave despised cited in Banner &
by all", and so on in his descriptions of his officers. According to Banner Cooke (1984);
et al., the military was in the forefront in developing performance
appraisal techniques such as forced-choice, ranking and trait-rating scales.
1840s In the 1840s and 1850s, the US Congress required efficiency ratings of White (1954) as
and clerks which contained information on competence, faithfulness and cited in Wiese &
1850s attention However, these reports were not used for selection, retention or Buckley (1998).
promotion which continued to be at the discretion of the bureau head and
Secretary of the department.
Late 19th In the late nineteenth and early twentieth century, performance appraisals Wiese & Buckley
century – were used primarily by military and government organizations – due to (1998).
early 20th their large size, hierarchical structure, geographic dispersal, and the
century s necessity to promote the top performers to higher organizational levels. At
this time, most private organizations used informal measures to evaluate
individual performance and Graves, (1948);
make subsequent administrative decisions. Lopez, (1968);
Petrie, (1950) as
The Federal Civil Service of the United States began giving merit ratings, cited in Wiese &
also known as efficiency ratings, in the late 1800s. Buckley (1998).
1911 Taylor further stressed the importance of the individual worker by Radnor & Barnes
advocating the payment of individually based financial incentives to those (2007)
workers who could increase their output as a result of the application of
scientific management. This in turn required the measurement of the
performance of individuals, especially their output.
1914 Development of performance appraisals in United States industry began Scott et al. (1941)
with early work in salesman selection by industrial psychologists at as cited in Wiese
Carnegie-Mellon University, who used trait psychology to develop a man- & Buckley (1998).
to-man rating system. The army used this system during World War I to
assess the officer performance. After the war, business leaders, impressed
by the achievements of the army researchers, hired many of the men who
had been associated with the work in man-to-man appraisals. Industry
wanted to use the contributions of this new breed of psychologists.
1918- The widespread use of performance appraisal techniques with blue-collar Pratt (1991).
1955 employees didn't start until after World War I. Appraisal systems for
measuring managerial and professional employee performance weren't
used extensively until about 1955.
1918- Prior to World War II, performance appraisal systems tended to exclude Spriegel (1962).
1939 top management, generally used graphic-rating scales and had just one or
two forms for all employees regardless of the job performed or skills Wiese & Buckley
These systems appraised individuals on the basis of previously established
performance dimensions, using a standard, numerical scoring system.
They focused on past actions instead of future goals and were always
conducted by the supervisor with little input from the employee.
Historically, performance appraisals have been used for administrative DeVries et al.
purposes, such as retention, discharge, promotion, and salary (1981); Murphy &
administration decisions. Cleveland (1995) ;
However, in this early era, with weak human resource management
departments and a lack of understanding of performance appraisal Whisler & Harper
systems, administrative decisions were often made independently of, and (1962).
even ran counter to, performance appraisals
In addition to, and perhaps because of, supervisors who did not take Wiese & Buckley
performance appraisals (1998).
seriously, the unions of this era advocated seniority-based decisions over
performance-based decisions. Thus, a loose correlation between appraisal
results and administrative decisions was permitted, which gave individual
supervisors discretionary power in relation to human resource outcomes
(e.g. promotions, salary increases).
1950- By the early 1950s, 61% of organizations regularly used performance Spriegel (1962),,
1960 appraisals, compared with only 15% immediately after World War II. Wiese & Buckley
By the 1950s in America and the 1960s in Europe, around a 50% to 75%
of bigger companies had some performance appraisals process. Furnham (2004).
1957 Emergence of Performance Appraisals based on Management by McGregor (1957)
Objectives. Employees should be appraised on the basis of short-term
goals, jointly set by the employee and the manager, rather than traits.
A shift in the purpose of performance appraisal system towards employee Fedor (1991) as
development and feedback. cited by Wiese &
1960- In the US, passage of the Civil Rights Act of 1964 and the 1966 and 1970 Murphy &
1970 Equal Employment Opportunity Commission Guidelines for Regulation of Cleveland, (1995).
Selection procedures created a need for improvement in organizational
appraisal practices. These legal considerations exerted strong pressure on
organizations to formalize, validate, and organize appraisal systems
1970- In the 1970s in America and the 1980s/1990s in Britain it was government Furnham (2004).
1990 legislation concerning such things as equal opportunity, civil rights, etc.
which compelled organisations to adopt some sort of system. Performance
management systems (PMS) are a powerful tool for change. They were
used in the 1980s and 1990s to try to bring about change in public sector
culture and ethos.
Indeed, as survey results show:
• public sector organisations are more likely to have PMS than private
sector organisations Murphy &
• larger organisations are more likely to have them than smaller Cleveland (1995).
• middle managers are more likely to be formally appraised than senior
• human resources professionals are drivers of these systems in
In general, then, performance appraisal appears to be nearly universal, and
importance of performance appraisal as a tool for managing human
resources has increased.
1990s Innovative use is now being made in some organizations of a self- Pratt (1991).
appraisal system, especially for managers and higher-level professionals.
Advocates of the self-appraisal approach say it has these advantages: (1) It
motivates the incumbent to take more responsibility for his own
performance and growth; (2) Appraisal can be performed as often as
believed necessary throughout the year because it can be initiated by the
person being assessed; (3) It can be clearly focused on job behavior,
avoiding confusion with other issues such as compensation, promotion,
lateral transfer, or training; and (4) Performance ambiguity is decreased,
creating the potential for more timely and specifically-focused job
1996- The introduction and growth of strategic performance management Author (2008)
2008 systems such as the Balanced Scorecard that cut across organisational
levels, linking strategic, operational and individual performance
management in organisations. Individual performance management
systems start to be aligned to corporate strategies, to create a clear line of
sight. Individual objectives and performance measures are based on and
continuously aligned with the organisational ones, to enable clear
accountability at individual level towards the achievement of
Operational performance management evolution
The evolution of operational performance management is linked to the evolution of
accounting and management in history. This is due to the fact that operational performance
was evaluated in terms of efficiency and effectiveness. And the easiest way to do this is by
using financial indicators, provided by the accounting function in organisations. Over time, as
internal and external operating environments became more complex, organisations started to
look at nonfinancial indicators of performance. The chronological evolution of operational
performance management in illustrated by a selection of citations in the table below:
Timeline Event – Comments Source
13th The performance of a Venetian sailing expedition defined as the Lebas (1995)
century difference between the amount of money invested by the ship owner(s)
and the amount of money obtained from selling all the goods brought
back by the ship's captain.
1494 Luca Pacioli (1445 – 1517) published Summa de arithmetica, geometrica, Dainty &
proportioni et proportionalita (Summa on arithmetic, geometry, Anderson (2008)
proportions and proportionality, Venice 1494), a textbook for use in the
abbaco schools of northern Italy, where the sons of merchants and
craftsmen were educated. It was a compendium of the mathematical
knowledge of his time and included the first printed description of the
method of keeping accounts that Venetian merchants used at that time,
known as the double-entry accounting system.
Although Pacioli codified rather than invented this system, he is widely
regarded as the "Father of Accounting". The system he published
included most of the accounting cycle as we know it today. He described
the use of journals and ledgers, and warned that a person should not go to
sleep at night until the debits equaled the credits! His ledger had accounts
for assets (including receivables and inventories), liabilities, capital,
income, and expenses — the account categories that are reported on an
organisation's balance sheet and income statement, respectively. He
demonstrated year-end closing entries and proposed that a trial balance be
used to prove a balanced ledger. His treatise also touches on a wide range
of related topics from accounting ethics to cost accounting.
1776 Adam Smith wrote the “Wealth of Nations” in which he emphasised the Smith (1776)
division of labour as a driver of productivity:
“The greatest improvement in the productive powers of labour, and the
greater part of the skill, dexterity, and judgment with which it is
anywhere directed, or applied, seem to have been the effects of the
division of labour.”
early 19th Some of the first factory owners concentrated on improving methods of Dainty &
century production and introduced concepts that proved fundamental to modern Anderson (2008)
manufacturing method. For instance Eli Whitney and Simeon North
developed the concept of interchangeability of parts in the manufacture of
pistols and muskets. Before then, each gun was unique. If a part did not
work, an abandoned pistol would not provide a replacement piece.
19th In the early 19th century the need for larger aggregations of capital to Dainty &
century support factory operations resulted in the increased application of special Anderson (2008)
legal forms of organising a business. The corporation as a separate legal
entity could sell shares in stock to many individuals and thus raise large
sums of capital. Stockholders then became so numerous that they all
could not actively manage the business and a distinction between the
function of owners and managers arose. This distinction set the stage for
management processes as an identifiable and separate activity.
1911 Frederick Taylor believed that it was management’s responsibility to Radnor & Barnes
devise the best method of performing work. In the first decade of the (2007)
twentieth century he developed the concept of scientific management.
This was based on the analysis of existing work methods through
observation and measurement. From this, an improved method could be
developed and implemented, and its results monitored through ongoing
performance measurement. The focus of scientific management was
primarily on increasing the efficiency of individual workers. Thus, the
emphasis of Performance Management in scientific management was at
the micro-level within each operation, focusing on the work and the
output of individual workers.
1915- Taylor’s ideas were advanced by many others including Frank and Lillian Radnor & Barnes
1928 Gilbreth, who developed the concept of time and motion studies, which (2007)
required the measurement of every single movement undertaken by a
worker in the course of their work. This newly developed discipline
which came to be known as work study, incorporated the study of work
methods and the measurement of work.
1920s The principles of capital investment appraisal, budgeting, performance de Waal (2002)
measurement, variance accounting and ROI were introduced in the 1920s.
1920- DuPont and General Motors experimented by introducing decentralized de Waal (2002)
1925 divisional structures with profit centers. As support for these
reorganizations they also introduced the DuPont chart and with it the
concept of return o investment (ROI). This meant that management was
now also held responsible for the achievement of budgeted ROI and
therefore not only focused on measures on margin and net income, but
also on return on investment.
1930s Fully integrated cost and management accounting systems were de Waal (2002)
developed, regulated, subjected to independent auditing and linked to
external financial operating systems.
Most standard accounting methods, such as budgeting, standard costing,
transfer pricing and DuPont chart had been developed and incorporated in
the accounting textbooks. Only in sporadic instances were new
developments, such as the concepts of residual income and net present
value, included in the textbooks. Bessire & Backer
‘Tableau de bord”, a management tool introduced in France in the 1930s
and described as a "dashboard" used by managers to monitor the
operational performance of their organisations Bontis et al.
The “tableau de bord” has been quite popular in France ever since its
introduction and the majority of the large companies are using it,
however, due to the limited availability of translated literature it had a
minimal overseas diffusion
1930s- Performance measurement was conceived primarily in terms of the Radnor & Barnes
1960s volume and cost, and hence productivity. In an era of labour intensive (2007)
mass manufacture this made a lot of sense. These ideas came to dominate
Operations Management theory and practice well into the second half of
the twentieth century. Their application made a significant contribution to
the success of western and
1940s- especially US, industry in this period. Busi & Bittitci
The quality management Japanese philosophy emerge to form the roots of
1950s today’s performance management theories and rules.
After the 1950s, management information systems focused on the de Waal ( 2002)
growing used of accounting targets to control operating processes.
1970s Questions began to be asked about the wisdom of concentrating solely on Radnor & Barnes
performance measurement. The previously unassailable position of US (2007)
style management practice was increasingly challenged as manufacturers
across the world were forced to face up to fierce competition from
Japanese companies. The Japanese manufactured goods in a greater
variety, with lower defect rates, yet competitively priced. Western
operations managers were therefore forced to reconsider their practices,
including their approach to performance measurement and management.
The General Motors system of performance measures, the development Johnson &
of which culminated in the 1970s (see) included several non-financial Kaplan (1987)
indicators, and can been seen as the fore-runner of the balanced scorecard
1974 "Cost" and "efficiency" are widely used as the conventional yardsticks for Skinner (1974)
planning, controlling, and evaluating in U.S. plants.
late New measures were required to reflect the new found concern for Radnor & Barnes
1970s effectiveness. (2007)
early Initially, the focus was on eliminating defects and achieving
Statistical techniques were based on the work of a number of Americans
– most notably Shewhart (1980) Deming (1982) and Juran (Juran and
Gryna, 1980) – who had been largely ignored by their compatriots, but
whose ideas had been enthusiastically taken up in post war Japan.
The advent of total quality management (TQM) increased Operations
Management’s concern to improve effectiveness and responsiveness.
This, therefore, saw the introduction of customer-based measures. This
linked well to the requirements of the increasingly important service
operations sector for measures of customer satisfaction. In services, a
level of high quality was seen as synonymous with a high level of
1980s The competitive environment changed dramatically through the de Waal (2002)
appearance of new technologies, increased competition as consequence of
deregulation and emergence of foreign producers. Quality improvements,
reduced inventory, more efficient production processes and increased
automation were needed. The traditional management accounting and
information systems were not suited for modern organisations that were
characterised by customer specific production, short life cycles,
computer-aided design and manufacturing technologies and more
A constant stream of new developments in production and processing
techniques – such as flexible manufacturing systems, just-in-time
production, materials requirements planning, enterprise requirements
planning, supply chain management and total quality assurance – has
been matched by new management information and accounting
techniques such as target costing, value engineering, strategic cost
accounting, activity-based costing/management, kaizen costing and
nonfinancial performance indicators.
1990s The late 1980s and early 1990s saw the rise of business process re- Radnor & Barnes
engineering (BPR) which had main principles based on a consideration of (2007)
organisations in terms of processes – looking across organisations
horizontally rather than functionally and on creating an environment
which allowed “breakthrough” or “step-change” improvements. BPR
focused on those processes that crossed departmental boundaries, which
enabled operations to be seen as more clearly linked with other
departments (e.g.Marketing). This promoted a more strategic
consideration of operations and gave rise to operations being assessed
against objectives beyond cost and quality, including speed, flexibility
and dependability (Slack et al., 2005).
1992 . . . in the late 1980s and early 1990s, this dissatisfaction [with traditional Bourne et al.
backward looking accounting based performance measurement systems] (2000)
led to the development of “balanced” or “multi-dimensional”
performance measurement frameworks. These new frameworks placed
emphasis on non-financial, external and forward looking performance
measures. These frameworks have been dominated by one particular
model “The balanced scorecard” (BSC).
The BSC was introduced by Kaplan and Norton in 1992 as an improved
approach to performance management beyond standard financial metrics.
Since then, it has grown from being a tool for organising measures to
being a device for controlling the implementation of strategy.
late The rise of Business Intelligence software products had a profound Author (2008)
1990s- impact on how companies manage their operational performance.
early Enterprise Resource Planning software (SAP, Oracle, etc.), combined
2000s with Business Intelligence software (Business Objects, Hyperion,
Cognos,etc.) enabled companies to reach new levels of data integration,
by making the data gathering and reporting process more streamlined.
Availability of performance reports widened to organisational level and
not just a limited number of employees. Reporting becomes more
complex, with data streams enabling live reporting via dashboards and
scorecards of performance indicators. Users of such performance reports
are able to customise them by slicing and dicing the reported data.
Integration with strategies performance management reports makes the
separation between the two difficult.
Strategic performance management evolution
At strategic level, performance management had a shorter history as strategic management as
a discipline was established only in the 20th century. It was driven mainly by strategic
management and organisational behaviour practitioners. Overall, there are multiple
connection points between the strategic, operational and individual performance management
evolution, as they all evolved under the umbrella of the management discipline. The
chronological evolution of strategic performance management in illustrated by a selection of
citations in the table below:
Timeline Event – Comments Source
1920s Traditional performance measures are primarily financial ones aimed Denton (2005)
mostly at outcomes. This is not particularly surprising since most cost
accounting systems were developed in the 1920s. As a result, most
accounting reports are not directly related to strategic concerns in other
areas. Granted, some strategic goals are financial, but most are not
focused on money issues. Trying to track things like customer service,
quality, flexibility, and innovation – to mention a few – using 1920s’tools
seems a bit of a stretch.
1946 Concept of a Corporation – the first book to treat a business corporation Galagan (1998).
as a political and social institution. Authored by Peter Drucker based on
his observations of management practices of General Motors (1943)
launched the idea of “self-governing plant community”, by which he
means the assumption of managerial responsibility by individual
employees, work teams and employee groups over such areas as the
structure of jobs, the performance of major tasks and the management of
community affairs, meaning such things as shift and vacation schedules,
safety and benefits.
1954 The term "management by objectives" was first popularized by Peter Drucker (1954)
Drucker in his book 'The Practice of Management'.
1950s and Interest in strategy as an area of management study followed the diffusion Grant (2003)
1960s of strategic planning (‘long-range planning’) among large companies
during the 1950s and 1960s. Articles on long-range planning began
appearing in the Harvard Business Review during 1956–61 (Ewing, 1956;
Wrap, 1957; Payne, 1957; Platt and Maines, 1959; Quinn, 1961) and by
1965 the first systematic, analytically based frameworks for strategy
formulation appeared (Ansoff, 1965; Learned et al.,1965).
1951 Ralph Cordiner, the CEO of General Electric, commissioned a high-level Eccles (1991)
task force to identify key corporate performance measures. (The
categories the task force singled out were timeless and comprehensive: in
addition to profitability, the list included market share, productivity,
employee attitudes, public responsibility, and the balance between short-
and long-term goals.
According to a knowledgeable senior executive, the 1951 effort had only
a modest effect because the measures believed to determine the
company's stock price, to which incentives were tied, were all financial:
earnings per share, return on equity, return on investment, return on sales,
and earnings growth rate. He believed that once the financial markets
valued other measures, progress within companies would accelerate.
1961 D. Ronald Daniel states in a Harvard Business Review article that: Daniel (1961)
“companies were plagued by a common problem: inadequate
management information. The data were inadequate, not in the sense of
there not being enough, but in terms of relevancy for setting objectives,
for shaping alternative strategies, for making decisions, and for
measuring results against planned goals.”
It was proposed that a company needed a compilation of environmental,
competitive and internal information provided by financial and
nonfinancial data in the form of “success factors). The idea did not really
catch on, not in the literature or in the practice of the day can much
reference be found to nonfinancial indicators. This was probably because
the idea was too optimistic about the capabilities of computers of the time
to deliver the right information.
1965 Anthony at the Harvard Business School proposes under the title of Anthony (1965)
‘management planning and control systems’ a separation of ‘management
control’ from ‘strategic planning’ and ‘operational control’.
1976 Beer and Ruth publish a HBR article in which they describe and analyse Beer & Ruth
the performance management system piloted by Corning Glass Works. It (1976)
was developed by staff psychologists and personnel specialists who were
looking for a system that would incorporate the strengths of Management
by Objectives with a better way to help managers observe, evaluate and
aid in improving the performance of subordinates. The PMS was a
formal vehicle used by Corning to manage, measure and improve the
performance and potential for advancement of approximately 3,800
managerial and professional employees.
1979 John F. Rockart describes in his an HBR article a new approach Rockart (1979)
developed by a research team at MIT's Sloan School of Management,
termed the "critical success factor(CSF) method. the CSF method focuses
on individual managers and on each manager's current information
hard and soft. It provides for identifying managerial information needs in
a clear and meaningful way.
1980s As strategic management developed as an area of academic study, interest Grant 2003
in companies’ strategic planning practices waned. By the 1980s empirical
research in strategic planning systems focused upon just two areas: the
impact of strategic planning on firm performance and the role of strategic
planning in strategic decision making. The first area spawned many
studies but no robust findings. Ramanujam, Ramanujam, and Camillus
(1986: 347) observed: ‘The results of this body of research are
fragmented and contradictory, while Boyd’s (1991) survey concluded:
‘The overall effect of planning on performance is very weak.’
The contribution of both areas of research has been limited by lack of
empirical investigation of the phenomenon itself. Planning–performance
studies relied upon largely superficial characterizations of strategic
planning practices based mainly upon questionnaire data.
1991 Eccles publishes the “Performance Measurement Manifesto” in Harvard Eccles, 1991
Business Review. In this article, he predicts a performance measurement
revolution will take place in the next five years. During this revolution
traditional financial information systems would be replaced by
nonfinacnial information system. According to Eccles, such a revolution
was necessary to improve manager’s satisfaction with the information
they receive and satisfy the increased information requirements of
modern-day-organisations caused by new techniques like total quality
management, focus on customer satisfaction and benchmarking.
1992 - 1992 - Kaplan and Norton introduced the BSC to the wider public in Kaplan &
2007 1992. The concept was presented at that time as a performance Norton, 1992
measurement tool, used to capture besides the financial measures, the
value-creating activities from an organization’s intangible assets .
1993 - In a new article, the authors made the first references about the
connection between performance metrics and strategy. Kaplan &
1996 - The BSC was labeled as a strategic performance management Norton, 1993
system, which formed the basis of a rallying framework for strategic
processes, resource allocation, budgeting and planning, goal setting and
employee learning. Kaplan &
2001 – In their second book on the subject, Kaplan and Norton present Norton, 1996a
the Balanced Scorecard as an all encompassing strategic management and
2007 - Companies expand their use of the balanced scorecard, employing
it as the foundation of an integrated and iterative strategic management Kaplan &
system. Norton, 2001
Companies are using the scorecard to:
• clarify and update strategy;
• communicate strategy throughout the company; Kaplan &
• align unit and individual goals with the strategy; Norton, 2001
• link strategic objectives to long-term targets and annual budgets;
• identify and align strategic initiatives;
• conduct periodic performance reviews to learn about and improve
The balanced scorecard enables a company to align its management
processes and focuses the entire organization on implementing long-term