Wednesday, September 30, 2020

The Performance Prism

The Performance Prism (PP) is referred to by its Cranfield University developers as a ‘second generation’ scorecard and management framework. The distinguishing characteristic of the Performance Prism is that it uses as its starting point all of an organisation’s stakeholders, including investors, customers and intermediaries, employees, suppliers, regulators and communities, rather than strategy. According to PP proponents, strategy should follow from stakeholder analysis. The PP framework also focuses on the reciprocal relationship between the organisation and its stakeholders, as opposed to just stakeholder needs.

There are five ‘facets’ to the Performance Prism which lead to key questions for strategy formulation and measurement design:

  1. Stakeholder Satisfaction: Who are our stakeholders and what do they want and need?
  2. Strategies: What strategies do we need to satisfy these wants and needs?
  3. Processes: What processes do we need to execute these strategies?
  4. Capabilities: What capabilities do we need to operate our processes more effectively and efficiently?
  5. Stakeholder Contribution: What do we want and need from our stakeholders if we are to develop and maintain these capabilities?

The Performance Prism is a management framework that reflects the complexities of organisations and the multiplicity and reciprocity of stakeholder relationships. The comprehensive nature and flexibility of the PP contribute to its applicability in a wide range of organisations.

The Performance Prism

Source: Cranfield School of Management

What benefits does the Performance Prism provide?

The Performance Prism allows organisations to develop strategies, business processes and measures geared to the specific needs of all important stakeholder groups. By taking a broad stakeholder perspective that includes regulators and business communities, the PP enables an organisation to more directly address the risks and opportunities in its business environment. Using the PP to develop measures for each relevant stakeholder facilitates the communication and implementation of strategy.

Questions to consider when Implementing the Performance Prism

Does the complexity of our organisation and our stakeholder groups warrant the use of the Performance Prism?

Which important stakeholders do we need to consider that might be overlooked by another performance management system, such as the Balanced Scorecard?

How well do we understand our business model and our relationship with our important stakeholder groups?

Actions to take / Dos

Start with stakeholders, not with strategies

Understand not only what stakeholders want from you, but what their contribution is to the organisation – such as financing from investors, and talent, energy and commitment from employees

Develop measures specific to the processes and capabilities necessary to meet the needs of each stakeholder

Actions to Avoid / Don'ts

Don’t forget about the interests of regulators and communities

Do not ignore the reciprocal relationship between the organisation and its stakeholders

Never underestimate the importance of capabilities – the people, practices, technology and infrastructure necessary to support key processes

Don’t use the Performance Prism in small or very simple organisations


In practice: The Performance Prism

Stakeholder needs at DHL

(Measuring Business Excellence, 2001)

One of the first applications of the Performance Prism took place at DHL International in the UK. Implementation of the PP at DHL was precipitated by board-level frustration at the amount of time spent reviewing operational data without having any real impact on the business or the issues that continued to present themselves.

Development of a ‘success map’ and populating a PP revealed the needs of various stakeholders, in particular the set of customers that had a desire to have a more strategic relationship with DHL, so-called advantage customers. This led to conversations about the processes and capabilities that DHL needed in order to meet the needs of these important customers.

Once the Prism was constructed, the board was able to step back and ask important questions about how to oversee the business from a more strategic perspective and identify the relevant performance measures for the organisation.

Lessons learned

Implementation of the Performance Prism created a shift in the board review process from scrutinising lots of numbers to having a meaningful conversation about strategic issues and the direction of the company.

The more strategic discussions stimulated by the PP created an emphasis on working together on issues rather than on individual functional responsibilities.

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