The Integrated Performance Measurement Framework (IPMF)

1. Just like the IDPMS, the IPMF was designed for manufacturing environments. The IPMF consists of six steps that have to be followed when implementing the model. For the selection of the performance measures, the company must form a Performance Measurement Grid (PMG) based on the company’s success factors and six competitive priorities.

For the Rolls-Royce company, the PMG might look like this:

Competitive priorities Company’s success factors Performance measures

Quality

After-sales service 1. Customer satisfaction with service Engine manufacturing 2. Customer perceived value of products

3. # complaints

4. # hours engine downtime / year

Cost

Engine manufacturing 5. Inventory levels 6. Waste levels 7. Operating margin

Flexibility

Worldwide overhaul network 8. Extension of overhaul network Employee competency 9. Employee Retention rate

10. # hours training / employee

Time

Engine manufacturing 11. Manufacturing cycle time

12. Effectiveness of production schedule After-sales service 13. Mean time to repair engine problem Delivery After-sales service 14. # Fixed first visits

Sales of equipment 15. Range of products

Future growth

Innovation 16. # new products to market

17. Perceived added value of new products by customers

Market share 18. Market share in civil aerospace sector 19. Market share in defense aviation sector 20. Market share energy generation sector 21. Market share in marine propulsion sector

Table 14 - The IPMF put to practice

2. The model very much focuses on the operational level of business architecture. This is probably because the model was created for manufacturing organizations. The competitive priorities ‘Quality’, ‘Cost’, ‘Time’ and ‘Delivery’ could all be situated within the operational level. The extent to which a company can adjust to the customer needs could be seen as an important component of value creation within a service organization. Therefore, the competitive priority ‘Flexibility’ could be placed at the value level. The last competitive priority, ‘Future growth’, has a more strategic value and is placed at the first level of the business architecture.

3. Like many other models, the starting point of the IPMF is the chosen strategy. This strategy is then subdivided into different success factors for the company. This model thus has a top- down approach. In the Rolls-Royce case, the most important success factors will be growth of

the after-sales services and maintaining an innovative lead. These success factors are then further subdivided into performance measures. However, the model has a strong focus on the operational level of business architecture. Therefore, this model might have a beneficial effect on strategic alignment within a company, but it is probably less appropriate when comparing it with some of the other models discussed in this thesis.

4. Just like some of the models that were previously discussed, the IPMF too has a very internal focus. Most of the stakeholders are simply ignored. Also, the focus is very much on the operational performance of an organization and it could therefore be questioned whether the IPMF is comprehensive enough. Although it could be adopted by all types of organizations, this model will be more relevant for manufacturing companies.

5.2.8 The Performance Prism

1. In contrast to the two previous models, the Performance Prism was designed for use in commercial or non-profit organizations, big and small (Ryan, 2012). The prism consists of five different facets, which should illustrate the true complexity of performance measurement and management (Neely & al., 2001). The different facets of the model should be interlinked and should support each other. It may even occur that the same measure is applied in different facets. When applied to the Rolls-Royce case, the Performance Prism might look like this:

FACET 1: STAKEHOLDER SATISFACTION

Who are the important stakeholders in the organization and what do they want and need?

Stakeholders Performance measures

Investors 1. Return on investments

2. Operating margin

3. Revenue growth

Customers 4. Customer satisfaction with service 5. Customer perceived value of products 6. # product complaints

7. # fixed first visits

Employees 8. Employee satisfaction

Government / Society 9. # layoffs 10. CO2 - emission

Suppliers / Partners 11. Buyer-Supplier partnership levels

FACET 2: STAKEHOLDER CONTRIBUTION

What does the organization want from the stakeholders?

Customers 12. Customer retention rate Employees 13. Employee retention rate

FACET 3: STRATEGIES

What are the strategies the company requires to ensure the wants and needs of the stakeholders are satisfied?

After-sales services 14. Growth of after-sales services

15. Share of after-sales revenues in total revenues Aero engine sales 16. Growth of market share in civil aerospace sector

17. Growth of market share in defense aviation sector 18. Growth of market share energy generation sector 19. Growth of market share in marine propulsion sector

FACET 4: PROCESSES

What are the processes the organization has to put in place in order to allow their strategies to be delivered?

Engine manufacturing 20. Manufacturing cycle time 21. Waste levels

22. Inventory levels

23. Effectiveness of production schedule Innovation 24. # new products to market

25. Perceived added value of new products to market Generate demand 26. Effectiveness of promotional activities

FACET 5: CAPABILITIES

What are the capabilities the organization requires to operate the processes?

Technology 27. Budget spent on technological innovations 28. Improvement of EHM

Employee competency 29. # hours training / employee 30. Employee retention rate Infrastructure 31. Extension of overhaul network Equipment 32. # hours machine downtime

Table 15 - The Performance Prism put to practice

2. The Performance Prism distinguishes from other frameworks in the fact that it does not start from the strategy. In the first facet, the Performance Prism aims to measure to what degree the company is currently delivering value for all of it stakeholders. The Performance Prism therefore starts at the value level. The strength of the Performance Prism is that the strategy will be derived from the results on the first two facets. In other words, if the company is not delivering sufficient value to the different stakeholders, the strategy could be wrong. The evaluation of the current strategy is performed in the third facet. Therefore, the Performance Prism is also active on the first level of the business architecture. The fourth facet could either be placed on the value level or the operational level. Take for example

‘Innovation’. This process will have a direct link with delivering value in the future, whereas the process of ‘engine manufacturing’ is a process that should be placed on the operational level. The last facet evaluates the capabilities that are needed to operate the processes that lead to value-creation. This fifth facet could be linked to the operational level of business architecture.

3. Strategic alignment is not achieved in the same way as the other frameworks so far. As we just stated, the Performance Prism does not begin with the company’s strategy. The first step is to analyze the needs and goals of all stakeholders. Strategies are then put in place to satisfy these needs. The model thus starts with questioning the company’s existing strategy before the process of selecting measures is started (Najmi et al., 2012). Since the Performance Prism focusses on the three levels of business architecture and there is a clear linkage between the selected measures, we might conclude that once implemented, the Performance Prism can play an important role in strategic alignment within an organization.

4. The most important difference between the Performance Prism and other models is that it tries to focus on all different stakeholders and even identifies what the stakeholders can do for the organization in return. Therefore, this model perhaps has the most external organizational focus of all PMSs evaluated in this research. It might be a disadvantage that the framework offers little information about how the performance measures should be selected and implemented.