INTEGRATED PERFORMANCE MANAGEMENT

Faribors Ronaghi

Department of Knowledge Engineering, University of Vienna, Bruenner Str. 72, Vienna, Austria

Keywords: Integrated Performance Management, Meta Model

Abstract: Recently the performance of companies has gained a significant meaning due to globalization and new

conditions in th

e field of the markets and the competition area. To be successful the set objectives derived

from the strategy in different levels must be controlled and an approach must be chosen that integrates the

three parts, performance management concept, IT and organisation. The proposed article is to depict the

basic requirements for integrated performance management and shows as a result a meta model, where all

the basic objects and their relations are considered.

1 INTRODUCTION

Through globalization and thereby extended markets

the pressure of competition on enterprises

continuously rises (Ronaghi, 2003b). The offers on

services and new products extend and the Internet

gives the customers the possibility to recognize

changes in price and quality and react by changing

the supplier. New technologies and shorter

innovation cycles bring new products on the market.

The requirements of the stakeholders grow and the

time to react to changing environmental conditions

is getting shorter. New legal conditions force the

enterprises to the disclosure of their achieved

performance. These facts require a competitive

operational reaction time and a high flexibility and

ability regarding new strategic targets (Piser, 2004)

and top performance of the company (Kueng, 2003).

A success factor in this connection is the

measurement and management of the performance

in the relevant fields.

The traceable performance measurem

ent in the

company has always been a very difficult task for

the management. The main criticism of the

implemented approaches was the focus on financial

measures (Ronaghi, 2003a). New and modern

performance management concepts promote now a

multi perspective point of view and both financial

and non-financial figures. Analysis of the practical

use show, that there are still weaknesses to

overcome like:

• The m

issing of the focus on strategic

aspects and success factors.

• The com

plicated maintenance of the IT-

systems.

• Ob

solete and irrelevant performance data.

• The l

ow involvement of the employees for

the use of the system.

• The m

issing link between different

performance management concepts.

• The i

nappropriate chosen indicators not for

measuring the performance.

• The in

sufficient report systems aligned to

the requirements of the individual persons.

• The m

issing link between performance

management concepts, organisation and IT,

etc.

The mentioned facts show that there is a need for

an i

ntegrated performance management model (see

section 2), that considers the basic requirements

regarding the performance management concept, the

IT and the organisation. This paper introduces a

meta model (see section 3) derived from

requirements of different sources and weaknesses

that are arising by the use of performance

management concepts. The mentioned meta model

gives the possibility to get an overview of the

necessary objects that are used as a base for modern

integrated performance management.

2 INTEGRATED PERFORMANCE

MANAGEMENT

The aim of performance management is

systematically generating and controlling the

performance of an enterprise (Melchert, 2004) and

174

Ronaghi F. (2005).

INTEGRATED PERFORMANCE MANAGEMENT.

In Proceedings of the Seventh International Conference on Enterprise Information Systems, pages 174-178

DOI: 10.5220/0002551301740178

 SciTePress

consists of the four main activities planning, doing,

checking and acting. A successful implementation of

such a method is only possible by linking strategy to

the operational execution. The integrated

performance management is here seen as a critical

and important approach which provides an interface

between management and its operations at various

levels and consists of the following three parts

namely performance management concept, IT and

organisation, that are briefly described in the

following sections.

2.1 Performance Management

Concept

The main criticism of performance management in

organisation is even today the strong adjustment on

monetary figures. But by constantly changing

market requirements and environmental conditions,

this alignment is insufficient. New concepts

introduce the balanced use of financial and non-

financial, internal and external measures and support

the shift from a single dimensional point of view to a

multi perspective one. As another very crucial

success factor it has been proven that strategic

concepts are very important to overcome the new

economic conditions. Different objectives that are

derived from the strategy are the base to define

actions or projects to achieve the set targets

(Ronaghi, 2003a). The indicators used for measuring

are distinguished between leading and lagging

indicators and are linked to the objectives.

Regarding these paradigms a lot of concepts

have been developed with different emphasis and

focus (Verweire, 2004) like the Performance

Pyramid (Lynch, 1991), EFQM-Model (EFQM,

2004), Quantum Performance Measurement

(Hronec, 1996), Intellectual Capital (Sveiby, 1998),

Balanced Scorecard (Kaplan, 1992), by far the most

wide spread and accepted, and many else. These

different dimensions of performance must be

understood and strengths and weaknesses of the

different frameworks must be evaluated (Verweire,

2004).

A suggestion for a classification of the different

concepts and methods regarding their applicability

in companies with certain requirements is shown in

figure 1. The properties are put on the left hand side

and on the right side their values. The mentioned

properties can be amplified at any time by factors

that are important for a company to implement a

method.

2.2 The IT

The IT-support during the development process of

the performance management system and the further

implementation is very important to ensure high

flexibility, equal data basis and actual data. The IT is

an “enabler” for management theories but on the

other hand the heterogeneous systems, the wide

spread data sources and legacy systems lead to some

difficulties.

The IT must have an appointed architecture, to

meet all the requirements that are set for such

systems. Especially the availability of financial, non-

financial, external and internal data and the

possibility to analyse them by providing an OLAP

functionality and to give the management the

feasibility to navigate through the data with certain

granularity is important. Very often a Data

Warehouse (DWH) is used to meet the challenges

like the extraction, transformation, loading of data

(ETL-process), security mechanisms, history of

Value

Linking to Vision and Strategy

fulfilled

Property

not fulfilled

Perspective View

Linking of Objects

Key Figure Management

partially fulfilled

Frequency of the Measurement

low

high

middle

Addressee

Top

Employees

Middle

Necessary Know-How of the

Employees

low

high

middle

Necessary stage of Maturity

Maintenance effort

Implementation effort (tech./org.)

Planning horizon

short

longmiddle

Diffusion of the Concept

low

high

middle

fulfilled

not fulfilledpartially fulfilled

low

high

middle

low

high

middle

low

high

middle

Figure 1: Classification Schema for the PM-Concepts

INTEGRATED PERFORMANCE MANAGEMENT

175

changes in the data, user administration etc. of

performance management systems. But the use of a

DWH should only be taken into consideration if

there is already one in use or if there are plans to

implement a DWH for further purposes regarding

the applications in the enterprise. But the DWH is

not enough to meet all requirements for the

integrated performance management like:

• Documentation of the developing

process

• Definition and description of the

performance indicators

• Comments on the “Strategy Map”

(Kaplan, 1996), etc.

An additional layer must be established one level

over the DWH given the possibilities to fulfil the

described points above. It serves like a pool were all

the information is gathered. Therefore this layer is

called “Performance Pool”. In the top level the front

end tools are settled. Figure 2 shows the different

layers deduced as an architecture for an integrated

performance management.

2.3 The Organisation

The organisational surrounding shows different

interests of the internal and external stakeholders.

These interests influence the strategy of an

organisation and the problem is that they are in some

aspects contrary. It’s the task of the management to

find a good balance and comprise between these

interest groups to assure the success and profit of the

company.

Because of the recent fraud and the crisis in the

financial market new laws force companies to

disclose information about their performance data.

So push techniques regarding the communication

must be used to provide the addressee with the

desired information. Furthermore the information-

consumer must have the possibility to decide and to

chose which amount of information concerning

different hierarchical levels in the company is the

optimal one.

Integrated performance management assumes an

opened communication culture in the organisation. If

this culture does not exist steps must be taken to

create such environment. This procedure takes a

pretty long time and its difficulties should not be

underestimated.

Although partly conflictive discussed the option

to link objectives to an incentive system is more and

more required. Certain roles are defined in the

organisation to better assign and define the tasks.

3 INTEGRATED PERFORMANCE

MANAGEMENT META MODEL

The target of this section is to summarize the

mentioned facts of the previous sections as basic

requirements for a modern integrated performance

management to derive a meta model. The sources for

Frontend

Performance

Pool

Data Warehouse

Performance

Indicators

Beschriftung

-Werte Y-Werte

Datenpunkt1 2 5

Datenpunkt2 9 7

Datenpunkt3 5 3

Datenpunkt4 4 8

Manual Input

External and internal Data

Figure 2: IT-architecture for integrated performance management

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176

the requirements (here labelled R) as introduced are

surveys, laws, vendor catalogues, literature,

stakeholder interests and practical experiences (see

figure 3):

R1: The objectives are derived from the strategy

R2: Success factors effect the strategy

R3: Actions and projects to support the

realisation of the set objectives

R4: Financial and non-financial indicators are

used

R5: There is a differentiation between leading

and lagging indicators.

R6: There are internal and external indicators

R7: Indicators are linked to objectives

R8: As-is and target values are linked to time

periods

R9: Different perspectives (e. g. financial,

customer, process, innovation) are used

R10: The data has a certain granularity and can

be analysed by OLAP-functions

R11: Internal and external data is used

R12: Performance Indicators can be composed

and analysed

R13: The IT-System supports the pull and push

technique

R14: An Extraction, Transformation, Loading

(ETL) process delivers automatically the

data

R15: The interests of the stakeholders are

considered

R16: Stakeholders have a certain role

R17: There is a link to an incentive system

R18: The measurement is possible through

different hierarchical levels

Figure 3 shows the integrated performance

management meta model that maps all the basic

requirements and shows the relation between the

objects.

4 CONCLUSION AND FURTHER

WORK

This article depicts the basic requirements for

integrated performance management regarding three

areas namely the performance management concept,

IT and the organisation. This requirements to

modern integrated performance management and

their relation build the base for a meta model. Future

research has to examine the applicability of the meta

model introduced by implementing it with the help

of a meta modelling tool like ADONIS® (BOC,

2004).

Strategy

Objective

is derived from

Incentive System

is linked to

PM-Concept

is linked with

Stakeholder

P-Indicator

Granularity

has relation

with

Hierarchical Level

set for

Enterprise

Business Segment

Department

Employee

Business Process

contains

uses

internal

financial

external

leading

non-financial

lagging

linked

with

has

communicated

considers

quantifies

As-Is Target

has

Role

has

IT-System

uses

Composition

has

Push-technique

Pull-technique

supports

Data Source

uses

ETL-Process

follows

Framework

uses

Elementary

P-Indicator

Composed

P-Indicator

Realization

responsible for

Project

Action

Perspective

organizes

Sucess Factor

organizes

influences

Figure 3: Integrated performance management meta model.

INTEGRATED PERFORMANCE MANAGEMENT

177

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