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>Strategy and Performance Measurement How do managers react if there is tension between strategy and performance measurement Ron Konjer 836964561 Open University Netherlands Faculty : Management Sciences Education : Master of Science in Management Mentor/Examiner : Drs. Veneklaas Slots Co-Examiner : Dr. Kamminga February,
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Strategy and Performance Measurement How do managers react if there is tension between strategy and performance measurement Ron Konjer 836964561 Open University Netherlands Faculty : Management Sciences Education : Master of Science in Management Mentor/Examiner : Drs. Veneklaas Slots Co-Examiner : Dr. Kamminga February,
Key WordsStrategy, Performance Measurement, Balanced Score Card, tensions, leading and lagging indicators,distracting or ignoring or pseudo alignment tacticsAbstractAlmost every organization has some kind of a Strategy and uses some kind of PerformanceMeasurement. Although having a Strategy and a Performance Measurement System (PMS)is no reason to survive and reach the optimal performance. In a cover article of the Fortune(June 1999) of failures of organizations the conclusion was that focus on strategy and visionapparently led to the misplaced believe that the only thing management needed was havinga good strategy. In approximately 70% of all cases the real problem is not the strategy itselfbut implementing the strategy. To know if a Strategy is implemented it has to be measured.By measuring this there might be tension as the outcomes might indicate that the Strategy isnot implemented as desired and hence the results of the organization will also not be thedesired outcomes. In this research the main question consists of the way Managers act incase there is tension between the Strategy and the Performance Measurement.As the implementation of Strategy is seen as highly critical it is also necessary to know if it isimplemented and to know what will be one if this is not the case. The financial industryseems to be an interesting sector to make further research on this theme as their outputconsists of services and hence intangible assets which are closely tight with their Strategy. Inorder to do so a research is done at a medium sized organization within this financialindustry. The main question in this thesis is:How do managers react if there is tension between strategy and performance measurement(PM)?Tensions do exist but not because the Performance Measurement system shows that theStrategy is not met or implemented. The current Performance Measurement System andmore in particular the BSC does not guarantee whether the organization is able to assess ifthe organization meets its Strategic goals. Targets are defined on a yearly bases followingbudget and based on a three year perspective. As market circumstances change the targetschange also during this Strategic period. As the implementation of Strategy is not visiblymeasured by the BSC it is difficult to assess whether Managers use the mitigating tactics ofdoing nothing, pseudo alignment or distracting focus from the discussion. As Strategy is nottranslated into actions and there is no specific measurement through a PMS then there istension. Strategy should be implemented and the performance indicators and the PMSshould be aligned to Strategy. The missing part is how to do so and that is where the tensionis about.Managers at this organization prefer to adapt the Performance Measurement system andbased on the outcomes decide what has to be changed on Strategic level. During theinterviews none of the mitigating strategies have been proven and consequently we canconclude that the described mitigating strategies (doing nothing, pseudo alignment ordistracting focus) are not applicable for the Managers and management style of thisorganization.Master Thesis Drs. RG Konjer Page 3 of 3So by using the BSC in the (ongoing) Strategic process the Strategy can be better analyzedwith the feedback of the organization and make the Strategy more tangible. So perhaps theconclusion should be that if an organization wishes to implement its Strategy it should usethe BSC to get a clear view on the Strategy and by doing so the Strategy might getimplemented
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