Discuss about the Strategic Performance Measurement System.
Strategic Performance Measurement System have been designed so that they can present the managers with financial along with non-financial measures that can help in the translation of strategy into that of performance measures. Strategic Performance Measurement Systems have gained popularity in recent times in the different organizations (Melnyk et al. 2014). The organizations make use of Balanced Scorecard and cost management technique for the aspect of performance measurement. This report throws light on the issues related to the implementation of strategic performance measurement system in an organization. It also discusses about the implications of strategic performance measurement system on the arena of strategic alignment (Koufteros, Verghese and Lucianetti 2014).
Nature of Strategic Performance Measurement System
The Strategic Performance Measurement System (SPMS) can help in linking the performance of the employees with that of organizational performance. It can help in enhancing performance orientation in relation to the compensation system. It can help in ensuring that the employees achieve the goals pertaining to the organization which in turn can help the organization in achieving the objectives that has been set by the strategic plan (Van Horenbeek and Pintelon 2014). The SPMS adopts a team approach to the aspect of performance measurement. The SPMS is complementary to results based Performance Measurement System that can help in linking the organizational performance to that of societal goals. Balanced Scorecard is indicative of a performance metric that is used in the process of strategic management for improving the internal functions in relation to a business. It can help in bringing improvements to that of external outcome. The balanced score card helps in measuring and providing feedback pertaining to an organization. The information gathered by the managers and the executives helps in making better decisions within the organization (Mohamed et al. 2014). The balanced score card can help in reinforcing the good behaviours in the organization and with the help of balanced scorecard the companies can identify the factors that hinder the performance of the company.
Issues of Strategic Performance Measurement System in MNC
Strategic Performance Measurement System becomes difficult in the case of a multi-national company where the goals differ between the subsidiaries and the parent company. The objectives of the subsidiary and parent company being different poses a challenge to the successful implementation of that of strategic performance measurement system. The mission statement of a company helps in the reflection of the values of the company. The subsidiary has a mission statement of its own and its organizational objectives are different which proves to be a hurdle in the implementation of strategic performance measurement system. The objectives being different in the case of the subsidiary and the parent company the performance measurement system becomes more difficult for the organization (Micheli and Mari 2014). The multinational corporations that have global value chain activities needs an accounting system that is well-organized that can help in monitoring the operations of the corporations. Performance evaluation is carried out so that it can review the development of the corporation. Performance evaluation becomes difficult in the case of a multinational corporation on account of the international context. It becomes difficult for a multinational corporation to decide whether the foreign operations should be evaluated as that of cost, profit or that of investment centre (Lisi 2015). The environmental circumstances will have a bearing on the process pertaining to performance evaluation which becomes difficult for that of a multi-national corporation. A multinational corporation finds it difficult to decide the basis on which the evaluation of performance will be carried out that can produce a valuable result.
For obtaining valuable results in relation to evaluation of performance it is crucial to differentiate between performance of subsidiary and performance pertaining to management. Performance evaluation system should be able to support separation pertaining to managerial and the subsidiary performance so that it can provide remuneration to the good managers. This can help in ensuring that the poor managers mistakenly do not get rewarded (Parida et al. 2015). The performance measures of the foreign subsidiary are influenced by many factors that is beyond control of the local manager. The individual managers are not supposed to be held accountable for the costs on which they do not have any control. It becomes difficult for a multinational corporation to identify the uncontrollable variables in the field of performance evaluation related to the foreign subsidiaries (Hoque 2014).
Organizational culture comprises of norms that can help in describing the appropriate behaviours. A positive culture can help the employees in achieving success and a negative culture decreases the performance of the employees in an organization. The cultural values of the parent division and the subsidiary is different that makes the implementation of a performance measurement system difficult. The performance of the employees in an organization and his values will be awarded on the basis of the culture prevailing in an organization. Strategic Performance Management System should be integrated at the international level so that it can help in the process of strategic planning. The lack of a uniform culture becomes a barrier in the implementation of performance management system. The feedback and appraisal interviews are held locally and hence it cannot properly determine how the performance should be measured (Gibbons and Kaplan 2015). Cultural diversity can influence the behaviour of employees in an organization. Cultural differences exist between that of a parent company and the subsidiary which has a direct effect on the aspect of performance management. The methods that are devised in relation to performance measurement may not prove to be acceptable for all kinds of cultures. Performance appraisal that is individual-based can prove to be inappropriate for the regions that have a collectivist culture. Such kind of culture lay strong emphasis on the aspect of group cohesion instead of appraising the entire group (Hansen and Schaltegger 2016). In the regions that have a high power distance culture, the superiors find it inappropriate to criticize the work of the subordinate. Participative goal setting may not be effective for that of high power distance culture. The employees who belong to that of uncertainty avoidance culture show reluctance in the aspects of participating. It has been found that the reward preferences vary between the different cultures.
The strategic performance measurement system becomes difficult owing to the differences in the different cultures. The feminine cultures prefer a work-life balance and the masculine cultures on the other hand show preferences for rewarding those who have status. This makes the process of performance evaluation difficult in the case of a multinational corporation. There can be differing opinions in relation to receiving of feedback. There are some kinds of cultures that prefer negative feedback as they consider it integral for the learning from the previous experiences whereas there are other cultures that lays importance on the aspect of positive feedback for improving the performance of the employees (Moran, Abramson and Moran). 2014 The employees who belong to the Asian culture feel devastated as compared to the Irish employees when they get negative feedback. The managers have stated that employee reactions to that of feedback is dependent on the ability of the managers of giving feedback as compared to that of national culture.
Cultural dimension is regarding how the people view the aspect of performance whether from that of individual or that of group perspective. The individual driven performance becomes difficult in the case of group work. In this kind of organisational culture, collectivism acts as the predominant anchorage in relation to relationship (Van de Vijver, Van Hemert and Poortinga 2015). The Asian, African along with the South American society stands as an example of that of collective culture. The individuals lay more stress on the aspect of group work in these kind of society. This shows that these kind of issues proves to be a barrier in respect to strategic performance management system.
A balanced scorecard can help in the translation of vision pertaining to an organization. This step can assist in helping the managers of building a consensus in relation to the strategy of the company. It can help in guiding the action at that of the local level. Cultural differences exist between the parent and that of the subsidiaries and the visions are different which makes the implementation of a performance measurement system difficult. Business planning can help the organizations in integration of the business plan with that of the financial plan. The financial planning in relation to the parent company and subsidiaries will be different that would make difficult the implementation of a stable strategic performance measurement system.
Implications of SPMS on strategic alignment
The effectiveness of strategic performance measurement system is closely related to that of information quality. The higher quality of information can lead to effectiveness of system within the organization and it has a great impact on that of the organization. The balanced score card can help in influencing the motivation in relation to the employees and it can thus promote the aspect of strategic alignment. Effective steps taken by the management can lead to improvements of the performance of the employees in the organization. The strategic performance system can lead to changes in the internal process of organization and lead to financial results. The strategic performance measurement system can lead to value creation in relation to the firm and it influences many aspects in relation to the organization.
Strategic Performance Measurement System can link performance of employees with the performance of organization. It can assist in the process of augmentation of performance orientation related to the compensation system. The employees can attain objectives within the organization that can in turn help the organization in reaching its aims. Strategic Performance Measurement System becomes difficult in relation to a multi-national company because the goals of the parent company and that of the subsidiaries differ on significant points. The performance evaluation should be able to support the separation in relation to managerial along with subsidiary performance. It can thus ensure that the managers are provided with good remuneration. It may not be favourable for high power distance culture to indulge in that of participative goal setting. High quality information can lead to effective system in the organization that has an overall impact in relation to performance of the company. Balanced score card influences the motivation of the employees and it leads to promotion of strategic alignment.
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