Performance Improvement In Development Of Systems Commerce Essay Example

but acknowledging the problem and determining how to solve it is a good starting point. Sometimes, improving performance starts with a targeted plan to address a specific issue that hinders the achievement of goals (Darryl Enos, 2007). As a recommendation, management should identify areas for improvement before implementing any techniques or initiatives to enhance performance.

The issue of poor performance or stagnant performance can potentially be caused by the top management itself (Refer Enron's Scandal 2001). As a result, it is important to clearly identify and evaluate the areas for performance improvement in order to prevent wasted efforts in non-critical areas. When attempting to adopt efforts and strategies to achieve corporate performance, organizations encounter challenges and often fail. According to Kaplan and Norton's research, 9 out of 10 companies fail to implement their strategies (Bob Paladino 2007).

Paladino identifies four barriers that hinder an organization's ability to achieve expected outcomes from their efforts and strategies: the Vision barrier, where only 5% of employees fully understand the company's strategy; the Management barrier, where executive teams spend less time discussing strategic issues compared to traditional operating results; the Resource barrier, where budgets are not aligned with the strategy; and the People barrier, where only 25% of managers have incentives linked to the strategy.

PERFORMANCE MANAGEMENT SYSTEM (PMS)

The Performance management system (PMS) is not an end in itself but improving its efficiency allows an organization to perform better. Enhancing its effectiveness provides valuable information regarding the organization's current position, performance, and future direction. "Effective management relies on accurately measuring performance and outcomes" (Gobal).

According to K. Kanji (2002), Mohan Nair (2004) stated that corporations often measure an excessive amount

of certain things while neglecting others. Nair also suggested that organizations may unintentionally overlook certain aspects of the business.

Furthermore, numerous administrations struggle to link their measurements with corporate strategy. Nair added that many of these measurements are disjointed and serve the wrong objectives. Additionally, many corporations lack a comprehensive framework for monitoring, measuring, and managing their business. The Balanced Scorecard provides a broad and comprehensive approach to the structural architecture of the business. (Nair 2004) Gobal K. Kanji (2002) explains the role of PMS and how an administration can achieve business excellence by identifying areas for improvement and effectively utilizing limited resources to reflect system improvement.

The implementation of a new Performance Management System (PMS) can cause employees to have questions and feel stressed. Kanji (2002) emphasized the importance of creating a measurement system that serves as both a management and motivational tool. I personally agree with this idea as it will help in gaining employees' support and commitment during the design and implementation of the new system. Therefore, it is essential to clearly communicate to employees how their contributions will align with the overall strategy. Additionally, an efficient PMS can also serve as a means of communication and recognition for employees.

Furthermore, Kanji 2002 discusses the historical and current methods of measuring performance and their impact on modern business practices. According to Kanji, the traditional approach to measuring performance primarily focuses on financial metrics which do not fully align with the skills and capabilities that companies need to thrive in today's business environment. Likewise, Paul Niven in 2003 argues that financial measures are criticized for their lack of predictive ability, creating division between departments, promoting short-term

thinking, and being irrelevant to various levels of the organization. Kanji also quotes that financial measures do not effectively improve customer satisfaction, quality, cycle time, and employee motivation.

The important part by Kaplan and Norton (1992) supports the use of Kanji so to overcome the deficiencies of traditional PMS that only uses financial measures.

THE BALANCED SCORECARD (BSC)

Robert S. Kaplan and David P. Norton (2005) introduced the BSC in 1992 because traditional accounting measures such as Return on Investment and Earning per Share were believed to provide misleading signals for continuous improvement and innovation in today's competitive environment. The authors noted that senior executives do not rely solely on one set of measures to the exclusion of others. "They realized that no single measure can provide a clear performance target or focus attention on the critical areas of the business."

This suggests the need for a balanced presentation of both fiscal and non-fiscal measures. Kaplan ; Norton addressed this by adding operational measures to financial measures, calling it the Balanced Scorecard (BSC). According to Kaplan and Norton, BSC is a set of measures that provides senior management with a quick but comprehensive view of the business. The BSC includes financial measures that show the results of past actions, as well as non-financial measures related to customer satisfaction, internal processes, and organizational innovation and improvement.

These are the four positions of the Balanced Scorecard (BSC) as stated by the writers. They propose that directors should interpret their visions and missions into strategic goals and objectives for each position, and translate these goals into specific steps. The writers simplify each position into easily understandable questions:

• Customer perspective - How do customers perceive
  

us?

The term "Balance" in the Balanced Scorecard represents the balance between fiscal and non-fiscal indicators, internal and external aspects of the organization, and lagging ; leading indicators (Paul Niven, 2003). Michael Milgate (2004) defines a scorecard as a "balanced management system in which shared vision and strategy serve as reference points for the management process; achieving this balance enables synergies and a practical fit with other models".

One reason why the Balanced Scorecard (BSC) is a powerful tool is because it emphasizes the connections between different steps in achieving exceptional performance, instead of focusing on isolated steps (Kanji 2002). Since its creation in 1992 by Drs. Norton & Kaplan of Harvard Business School, the BSC has been implemented in various organizations worldwide, including corporate, strategic business units, shared service functions, teams, and individuals in both the public and private sectors (Michael E. Nagel- Vice President, BSC Collaborative). In a study conducted by Henri.JF (2006) on a manufacturing company, the BSC model was applied to examine how top management could utilize performance management systems to improve strategic management and organizational performance.

"According to Michael A. Milgate (2004), the BSC rule is widely adopted and refined in user Organizations as they gain experience in its execution. This demonstrates the widespread use of BSC to improve the PMS if an Organization chooses to follow and implement it. Henri.JF (2006) raises the question that top managers should ask themselves: How can we improve our system? The author suggests that improving the PMS is a

continuous process involving changes to reflect new ideas and insights brought to the Organization through creativity and other development activities. BSC can be successfully implemented in any administration where management is committed, dedicates time to formulate strategy, and is willing to accept changes. According to Wikipedia, "BSC has been implemented by government agencies, military units, business units & corporations as a whole, non-profit organizations, and schools". It is important to note that each administration should design its own BSC, as management is knowledgeable about its responsibilities and operations rather than adopting another Administration's BSC."

David P. Tarantino (2003) expands on Kaplan and Norton's work by defining the Balanced Scorecard (BSC) as a performance management tool that offers a comprehensive view of an organization. Tarantino highlights four perspectives of the BSC: external (how customers perceive the organization), internal (identifying areas where the organization needs to succeed and improve), growth & learning (analyzing how the organization grows and learns), and financial (evaluating the organization's financial performance). Tarantino emphasizes that each of these perspectives impacts one another.

He stated that focusing solely on one aspect, such as fiscal performance, disregards the contribution and equilibrium of the other three perspectives. The author provides an explanation on how to establish the BSC. The initial step he recommends is for the organization to determine what it will measure in each of the four perspectives, i.e. the objectives. Subsequently, the organization should establish the metrics for each of the four BSC perspectives and determine their respective weights for an overall performance evaluation.

According to the Harvard Management Update (2000), the author argues that there is no need to wait for a companywide initiative to

implement the strategic-management system described by the balanced scorecard (BSC). The author believes that even though it may take years and millions of dollars for companies to implement the scorecard throughout their operations, the effects can be significant once the system takes hold. The author states that managers today do not have to wait for a scorecard-inspired corporate transformation before learning and implementing some of the ideas centered around BSC. The author goes on to explain four lessons from the BSC that can be immediately applied in any business unit or department: watching a variety of metrics, connecting metrics to strategy, developing a strategic budget, and involving everyone in tracking metrics. The author emphasizes that BSC is a method that helps managers develop a well-rounded strategy and involves everyone in the company in its implementation.

The balanced scorecard, as described by Henry Killackey and Mohan Nair in 2004, enables an Administration to consider the perspectives of various stakeholders while providing a comprehensive evaluation of Organisational progress. Nair argues that the changing nature of business assets has increased the challenges faced by businesses, with 85% of assets now being intangible. Nair also criticizes the inefficiencies of traditional financial measures that focus only on tangibles, when it is intangibles that drive the future. According to www.balancescorecard.org/BSCresources, the benefits of the balanced scorecard include improved organizational alignment, better communication internally and externally, increased focus on strategy and organizational results, linkage between strategy and operations, and integrated strategic planning and management.

BSC development

Kaplan and Norton have defined a four-step process that many organizations have used to develop their balanced scorecard.

The procedure consists of the following:

• It is advised for
  

beginners to start with a business unit and use the metrics as designed in the BSC rather than the corporate level. "However, interactions must be considered in order to avoid optimizing the outcomes of one business unit at the expense of others."

The online resource Cresources also recommends nine steps for success in developing and deploying the BSC framework. These steps should be followed consecutively and include: organization assessment, strategy development, strategic objectives, strategic role, performance measures and targets, strategic initiatives, automation, cascading the BSC throughout the organization, and final evaluation.The BSC involves several steps: clarify the vision, communicate to middle management and develop business unit scorecards, eliminate non-strategic investments and launch corporate change plans, review business unit scorecard, polish the vision, communicate the BSC to the full company and set up individual performance goals, update long-range plan and budget, conduct monthly and quarterly reviews, conduct annual strategy review, link everyone's performance to the BSC.

There are criticisms of the BSC system as it may not meet directors' expectations.

According to Stephen Smith (2006), there are several issues that can cause Balanced Scorecard (BSC) initiatives to fail. One major problem is that BSC does not provide practical

guidance for implementation and some executives perceive it as a quick fix for their organizations. In his article, titled "Problem with a Balanced Scorecard," Smith identifies key issues that contribute to the failure of BSC efforts. These include poorly defined metrics, which should be relevant, clear, and easily understood. Another concern raised by Smith is the lack of efficient data collection and reporting, as he questions whether the resources invested in collecting performance data are consuming too much time and energy. He suggests prioritizing key performance indicators to obtain the most relevant information. Additionally, Smith highlights the need for a formal review structure to accommodate any changes in metric values.

Reviewing is a transverse functional activity. If the administration does not have standard methodologies and toolkits for addressing process problems, the amount of efforts required to derive a problem-solving approach for each new performance gap could ultimately harm the performance improvement plan as it will be seen as taking too many resources away from daily operation. Smith ranks too much internal focus as one of the major criticisms of BSC and suggests that organizations should always start with an external focus through analyzing administration's markets, stockholders, competitors, employees, and other stakeholders. However, Smith assured that there is nothing wrong with the concept of balanced scorecard. This means that the BSC approach is a useful tool and can bring desired results if management knows how to structure it and consider the above points to avoid its initiatives from failing.

According to Wikipedia, some criticisms of the Balanced Scorecard (BSC) come from members of the academic community who dislike the empirical nature of the model. They also highlight technical

flaws in the method and design of the original BSC proposed by Kaplan & Norton. Additionally, other academics have pointed out the lack of citation support as a major issue, while initiates and advisors have criticized the BSC for not providing a bottom line target or a comprehensive view with clear recommendations. Instead, they view it as simply a list of metrics.

According to Wikipedia, despite criticisms, studies have shown that the Balanced Scorecard (BSC) is a useful tool for strategic performance management in organizations. The website www.netmba.com warns of potential traps when implementing BSC, such as avoiding the use of generic measures used by successful companies. Managers should not view BSC as a guarantee of success, but rather consider the company's strategy and aim to translate improved operational performance (measured in the scorecard) into improved financial performance. Kaplan and Norton also emphasize that even with excellent BSC measures, a winning strategy is not guaranteed.

The BSC has the capability to translate a company's strategy into specific measurable objectives. Additionally, it provides guidance to managers by helping them understand the interconnectedness of the four perspectives. These perspectives are related to each other, and any impact on one perspective will affect the others. A well-designed BSC should depict the company's strategy through chosen objectives and associated measurements. These measurements should be linked together in a cause-and-effect relationship. Therefore, it is recommended that all perspectives are equally important and should not be considered independently of one another.

COMPARISON BSC AND OTHER PERFORMANCE IMPROVEMENT TECHNIQUES

When discussing performance improvement in an organization, in addition to BSC, Six Sigma and Total Quality Management (TQM) are also considered. Both tools, when properly applied, work

to achieve management's goals. These tools will be compared to BSC in the following sections.Balanced Scorecard (BSC) Vs Six SigmaIt has been discovered that BSC and Six Sigma operate independently of each other. BSC translates corporate strategy into actions that help achieve the strategy. Six Sigma aims to solve performance issues by closely examining the root cause of poor performance.

In this instance, Six Sigma attempts to reduce mistakes and eliminate other causes of defects in business processes. However, these models are complementary, and when used together, they offer significant potential value. (Michael E. Nagel). Alastair Horn (2006) shares the same perspective, stating that combining BSC with Six Sigma can lead to breakthrough business performance. Nagel supports this idea by explaining that BSC and Six Sigma are complementary because BSC provides the strategic context for targeted improvement initiatives, while Six Sigma is a business improvement approach that addresses various performance issues.

''Nagel states that BSC is not a solution for closing specific strategic performance deficits, unlike Six Sigma. He concludes that BSC describes the strategy for creating value and aligning resources to ensure successful execution of the strategy. Six Sigma achieves the strategy by using data and process improvement tools. As Alastair Horn 2006 quotes a senior executive, both BSC and Six Sigma guide our approach to striving for 'greens' and fixing 'reds'.

In order to achieve high performance, a corporation may choose to implement any of the models, but it is suggested that using both the Balanced Scorecard (BSC) and Six Sigma would lead to the best results. According to Horn, Six Sigma focuses on improving the performance of products and processes through process excellence,

while BSC focuses on performance management that translates strategy into actions. In explaining how both BSC and Six Sigma can work together, Henry Killackey (2008) suggests the common practice of labeling the organization's performance matrix in the BSC with red (poor performance), yellow (mixed results), and green (excellent). If the organization also implements the Six Sigma approach, the red ratings serve as alerts for Six Sigma practitioners to identify areas in need of immediate attention so they can find ways to improve the situation.

To put it simply, the Balanced Scorecard (BSC) serves as a communication tool for Six Sigma professionals. It allows them to easily identify areas of poor performance, employees who directly affect daily operations, and drive organizational transformation (Henry Killackey 2008). Both the BSC and Six Sigma aim to improve the performance of the organization, and as such, they can be implemented simultaneously.

The following statements demonstrate how Six Sigma and BSC (Balanced Scorecard) are compatible, as explained by Henry Killackey in 2008:

• Both methodologies require the organization to rely on input from clients and other external stakeholders.
• Both methodologies depend on metrics to communicate organizational progress and objectives.
• Both methodologies rely on accurate data.

Six Sigma Y's or outcome indexes can be used as measures within the BSC, which can assist Six Sigma professionals and other employees in focusing on the same goals. However, in a 2004 article, Paul Grizzell noted that many articles and books promote Six Sigma as the most effective management system ever. He advised readers to understand the assumptions upon

which those opinions were based. Grizzell expressed his view that using all performance management tools (in his case, Six Sigma, lean, BSC, Baldrige) as an integrated approach to maximize performance will lead to breakthroughs rather than just incremental improvement.

Balanced Scorecard (BSC) Vs. Total Quality Management (TQM)

It is argued that the best approach between BSC and TQM depends on the organization itself. The main difference between TQM and Six Sigma (a newer concept) is the approach.

According to Wikipedia, TQM aims to improve quality by ensuring adherence to internal requirements, while Six Sigma aims to improve quality by reducing the number of defects. Schwartz Jay (2005) states that when developing a business strategy, organizations must consider various factors such as leadership, customers, business processes, financial goals, and the structure, culture, and size of the company. Jay further suggests that TQM and BSC share a common theme of improving communication within an organization.

He also emphasized another common goal of both BSC and TQM, which is to reduce costs and improve services in an organization. Additionally, both approaches require managerial support to ensure that all employees are on board with the new initiatives. However, BSC and TQM differ in other aspects. The main difference lies in the level of employee involvement; TQM requires full engagement, while BSC only requires limited involvement. This is according to Schwartz Jay (2005). From my limited knowledge of the BSC, I believe that it also requires full engagement. This is crucial to prevent any possible resistance.

According to Schwartz, another significant difference between BSC and TQM is their emphasis. BSC prioritizes finance by using traditional financial tools, while also recognizing the importance of

financial solvency. However, TQM focuses more on the administration's systems and empowering employees. I have concerns about Schwartz's view on where BSC's focus lies, specifically on finance. When examining the four perspectives of BSC (financial, customer, internal process, and learning & growth), it is apparent that BSC incorporates both financial and non-financial aspects. BSC was initially designed to complement financial measures, so it includes more than just financial metrics.

The BNET concern lexicon defines BSC as a system that measures and manages an administration's advancement towards strategic aims. Introduced by Kaplan & Norton in 1992, the BSC incorporates not only fiscal indicators but also other perspectives. To conclude, Schwartz (2005) suggests that before deciding between TQM or BSC, which fits the administration, managers must ask themselves the following questions: What is the administration structure? What is the corporate structure? What is the size of the administration? He then recommends that for a large and bureaucratic administration, BSC fits best, and TQM fits best with small & service-related administration. However, Schwartz did not make it clear how to define a "big administration" either in terms of capital, employees, etc. I would rather say that whether using BSC or TQM, the most important aspect to consider is whether the administration is genuinely committed and has a leader to initiate the change, including involving all the employees.

I highly recommend the use of BSC because its construction is clear and helps the administration to set the scheme into measurable ends.

MANAGEMENT CHANGE

Introduction

Management change involves reducing the chances of resistance from top management forces and executives. In many organizations, the tendency of

management to resist changes, especially in adopting a new system, continues to grow daily. Therefore, for the administration to effectively manage the changes, there should be a systematic process that is properly planned and involves the stakeholders and other key stakeholders.

A change can be defined as an addition to an existing system or a modification to an old system, or the omission of an aspect of an old system. There are various reasons for making changes, such as solving problems, meeting growth objectives, improving performance, or adapting to technological advancements. For a change to be successful in any organization, management should commit to implementing it within a reasonable timeframe. However, in many organizations, this has not been the case, particularly when it comes to adding new components to an existing system. It can be argued that taking a systematic approach to implementing changes reduces their negative impact and potential failure. In this study, the researcher will assess the performance of the Local Authorities Pensions Fund (LAPF) using the metrics outlined in the proposed Balanced Scorecard (Table 1), which are relevant to the Fund's operations.

Some prosodies may be in usage while others may not. In this instance, LAPF may want to fully adhere to the performance prosodies as depicted in the proposed BSC. Consequently, all issues regarding change management must be taken into account before attempting to implement BSC approach in order to assess and enhance the overall performance. This is the essence of analyzing how change process can be executed, potential challenges and change failure, along with suggesting ways to maximize opportunities for successful change process.

Continuously improving public performance requires organizations to adopt new measures

and approaches. This is also the reason why an administration cannot avoid making changes if it wants to gain a large market share, compete effectively, and improve overall performance (Henry J.F, 2006).

Review by the writers

"Change management involves planning, initiating, achieving, controlling, and ultimately reinforcing the process of change at both the corporate and individual level.

The text explains that change can involve various tasks, such as strategic planning or personal development plans for staff. The author expresses concern about people's negative attitude and perception towards change. Management fears being blamed for failure, while employees fear losing their jobs. Instead of embracing change as an opportunity for improvement, many employees react with resistance. They often fear that something bad may happen, which could affect their tasks, responsibilities, and even their lives. Therefore, managers should consider these negative effects of change initiatives in order to achieve the desired positive results. The success of change projects depends on the organization's ability to involve all employees in the change process, in some way or another.

"In 2001, Oliver Recklies stated that according to Lawler's viewpoint in 1986, overall change is challenging for organizations. Many organizations see change as a highly structured process that starts with identifying and fixing problems." (Rob Paton & James McCalman, 2008).