The relationship between capability factors and performance improvement is often hypothesised as having a cause and effect. One of the best known performance measurement systems is the Balanced Scorecard (BSC) by Kaplan and Norton (1992). The intention of the BSC is in providing focus for and measurement of the drivers of future financial performance. The BSC is supported by the production of a strategy map (Kaplan and Norton, 2000, Kaplan and Norton, 2001a, Kaplan and Norton, 2001b) linking the drivers with the overall financial performance of the company. The best scorecards and associated strategy maps convey in clear terms an organisation’s desired outcomes and the hypotheses of how the organisation will get this done. Over time as more data is collected stronger objective evidence of cause and effect relationships may be established. However over the short term these hypothesised cause and effect relationships between value drivers and strategic outcomes may be based of necessity on subjective and qualitative judgements (Abdel-Maksoud and Kawam, 2009).
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Numerous studies have considered the link between an organisation’s capability in various guises and improved operational performance. Ika (2009) describes critical success factors (CSF), similar to capability factors referred to in other improvement research, as the levers a project manager has to improve the probability of success in meeting project goals. Mo (2012a) considered the link between organisational capability and performance in meeting contractual requirements of service contracts. Niazi et al. (2005) presented a maturity model for software process improvement (SPI) identifying factors having a positive or negative effect on SPI programmes. Bateman and Rich (2003) identified capability factors either enabling or inhibiting process improvement in a manufacturing environment. Wallace et al. (2004) researched a model of risk and performance based on inadequate levels of capability in a software development project environment. In their study of project success and failure factors Belassi and Tukel (1996) grouped necessary capability in factor groups including factors related to project manager skill, project team member skill and commitment and organisational factors including both senior and mid-level functional management support, project organisation structure and the existence of an active project champion. Al-Mashari and Zairi (1999) summarised from the literature success and failure capability factors cited as affecting BPR implementation success. While acknowledging the high failure rate of PI efforts Alley (2003) listed key reasons and ‘tools’ or capabilities to avoid failure in meeting PI performance goals. While the most highly ranked capability factors differed Lager and Hörte (2002) found links between key performance success factors in process industry in both the areas process improvement and process innovation even though there was limited commonality between these capabilities.
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Sila (2007) studied the relationship between total quality management (TQM) implementation in companies and value in terms of financial and market results, where a significant positive link was found. Narasimhan et al. (2005) studied the progression of capability for companies attempting to move from average performance to world class performance levels. Capability in this case was measured in terms of the best manufacturing practices (BMP) companies had implemented at a given time to achieve performance gains.
Increased improvement capability does not necessarily result in immediate performance improvement. The dynamics of process improvement was studied by (Repenning and Sterman, 2002) providing a system view for the reasons between increases in capability and potentially delayed performance improvement responses. Each link in the causal map was reviewed to assess whether the relationship was supported by existing studies and suggest people make causal links based on amongst others temporal order, covariation and contiguity in time and space. Temporal order is considered when performing causal relationship studies based on the path analysis technique. In their study Abdel-Maksoud and Kawam (2009) clarified cause to effect variables need to have a definite time order.
Done et al. (2011) studied the relation between capability factors and performance obtained from business process improvement (BPI) interventions. Simatupang and Sridharan (2005) investigated the relation between collaboration capability and supply chain performance. A weakness is however the probability of success in achieving levels of performance is however not considered in these models.
Other researchers have provided evidence to support hypothesised cause and effect relationships between capability factors and performance/value variables. Abdel- Maksoud and Kawam (2009) identified the variables affecting the customer
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satisfaction (value to the customer) and customer loyalty (value to the service provider). Identification of the core variables or capability affecting customer satisfaction and subsequently customer loyalty was made based on a thorough understanding of BSC logic and hypothesised links between the BSC component levels and the service provider management expertise. Schroeder et al. (2002) considered the cause effect relationship between internal and external learning capability factors and proprietary processes and equipment and further to the value measure manufacturing performance. Bustinza et al (2010) studied the effect of outsourcing and the nature of knowledge management affecting its success. They found that learning capability was one of the keys to achieving success in business. However, this will take time to realise because the knowledge is actually accumulated through non-codifiable skills.
In summary, research from the literature provides a clear indication of the causal relationship between improvement capability factors and the performance levels obtained from process improvement. This causal relationship is also shown to extend into the future after immediate completion of a process improvement project. Perseverance and commitment are required to succeed over extended time periods for larger projects.