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Month: July 2014

A beginner’s guide to Performance Control Systems

(Juran & Godfrey, 1999, p. 4.9) acknowledged that control subjects run to large numbers, but the number of “things” to be controlled is far larger. There is no possibility for upper managers to control huge numbers of control subjects. Instead, they divide up the work of control, using a plan of delegation somewhat as depicted in figure below. This division of work establishes three areas of responsibility for control: control by nonhuman means, control by the work force, and control by the managerial hierarchy.

Figure: The pyramid of control. Making Quality Happen, Juran Institute, Inc.

Various authors have tried to explain control in light of different meanings. (Tannenbaum, 1968, p. 239) referred it as any process in which a person or group of persons or organization of persons determines, i.e., intentionally affects, what another person or group or organization will do.

However, (Ouchi, 1979, p. 833) considers a more simple minded view of organizational control stated in the following two questions: What are the mechanisms through which an organization can be managed so that it moves towards its objective? How can the design of these mechanisms be improved, and what are the limits of each basic design?

(Tannenbaum, 1968, p. 246) noted that variations in control patterns within organizations have important and in some cases quite predictable effects on the reactions, satisfactions and frustrations, feelings of tension, self- actualization, or well-being of members.

(Ouchi, 1979, p. 834) classified that organizations have three control mechanisms:

Market control

Market control system focuses on output target as it is more effective to evaluate the work after it has been completed. In order to use a market control system effectively, there must be a certain level of information and clearly set targets to make it possible to evaluate the output.

Bureaucratic control

The fundamental mechanism of control involves close personal surveillance and direction of subordinate by supervisor. The information necessary for the completion is contained in rule; these may be rules concerning processes to be completed or rules which specify standards of output or quality.

Clan Control

The clan control system is based on cultural values, shared norms, informal relationships and beliefs that coordinate the behaviour to achieve organisational targets.

(Johnson, et al., 2008, p. 10) categorises controls as:

Strategic control

involves monitoring the extent to which the strategy is achieving the objectives and suggesting corrective action.

Operational control

is what managers are involved in for most of their time. It is vital to the success of strategy, but it is not the same as strategic management.

Performance Control Tools

“I often say that when you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind.
If you can not measure it, you can not improve it.” – Lord Kelvin


(Slack, et al., 2010, p. 611) defined benchmarking as the process of learning from others and involves comparing one’s own performance or methods against other comparable operations. It is a broader issue than setting performance targets, and includes investigating other organizations’ operations practice in order to derive ideas that could contribute to performance improvement. Further, the stressed that Benchmarking is essentially about stimulating creativity in improvement practice.

(Spendolini, 1992) defined benchmarking as continuous, systematic process for evaluating the products, services, and work processes of organizations that are recognized as representing best practices for the purpose of organizational improvement.

(Camp, 1994) on the other hand described benchmarking as the continuous process of measuring products, services, and practices against the company’s toughest competitors or those companies renowned as industry leaders.

Benchmarking is not about imitating another organization. It is or should be more about innovation and improvements than about copying a competitor. Benchmarking should facilitate learning and understanding organizational processes and results.

There are various types of benchmarking, some of them are listed as follows. Organisations can decide to use one or a combination of different types to meet their goals.

  1. Internal benchmarking

    is a comparison between operations or parts of operations which are within the same total organization.

  2. External benchmarking

    is a comparison between an operation and other operations which are part of a different organization.

  3. Non-competitive benchmarking

    is benchmarking against external organizations which do not compete directly in the same markets.

  4. Competitive benchmarking

    is a comparison directly between competitors in the same, or similar, markets.

  5. Performance benchmarking

    is a comparison between the levels of achieved performance in different operations.

  6. Practice benchmarking

    is a comparison between an organization’s operations practices, or way of doing things, and those adopted by another operation.

(Spendolini, 1992) came up with a generic model for benchmarking with the following five steps being involved:

  1. Determine what to benchmark.
  2. Form a benchmarking team
  3. Identify benchmark partners.
  4. Collect and analyse benchmark information.
  5. Take action (and continue the process)

(Juran & Godfrey, 1999) presented the following 10-step process for conducting a benchmarking investigation consists of the following five essential phases:

  1. Planning
  2. Analysis
  3. Integration
  4. Analysis
  5. Maturity

Figure: The formal 10-step benchmarking process.

Balanced Scorecard

(Kaplan & Norton, 1992) suggested what you measure is what you get. They introduced the balanced scorecard in 1992 and believed that measurement was as fundamental to managers as it was for scientists. If companies were to improve the management of their intangible assets, they had to integrate the measurement of intangible assets into their management systems. While formulating the balanced scored, they emphasised on the aspect that the Balanced Scorecard does not become a benchmarking exercise. (Kaplan, 2010, p. 19) acknowledged that even high-performing companies succeeded with strategies that were quite different from each other.


Figure: Balanced scorecard developed by Kaplan and Norton (1992)

The figure above shows the original structure for the Balanced Scorecard which retains financial metrics as the ultimate outcome measures for company success, but supplements these with metrics from three additional perspectives – customer, internal process, and learning and growth – that we proposed as the drivers for creating long-term shareholder value.

(Lipe & Salterio, 2000) described the balanced scorecard as an integrated set of leading and lagging performance measures designed to capture the organisation’s strategy.

Various authors such as (Johnson, 1980) have argued that companies should focus on improving quality, reducing cycle times, and improving companies’ responsiveness to customers’ demands. Doing these activities well, they believed, would lead naturally to improved financial performance.

However, (Jensen, 2001) stated that Balanced Scorecard theory is flawed because it presents managers with a scorecard which gives no score – that is no single-valued measure how they have performed. Thus managers evaluated with such a system have no way to make principled or purposeful decisions.

(Bloomfield, 2002) noted that automation is essential in order to manage the vast amount of information related to a company’s mission and vision, strategic goals, objectives, perspectives, measures, causal relationships, and initiatives. The alternative is a manual process, which significantly increases the effort and cost of scorecard development and sets back progress in the early stages of the balanced scorecard development, when momentum is critical.

A beginner’s guide to diffusion of innovations


(Johnson, et al., 2008 : 328) described that while Invention involves the conversion of new knowledge into a new product, process or service, Innovation adds the critical extra step of putting this new product, process or service into use, in the private sector typically via the marketplace and in the public sector through service delivery.

Types of innovation

Innovation is usually driven by the following two factors:

  • Technology Push: In this model, technologists or scientists drive the innovation by carrying out research and development to create new knowledge. This is used as an input to create further products or services which can be used to sell in the market.


  • Market Pull: In this model, the market represents the actual source of information about the usage of product or service. The lead or power users usually express the need of capabilities in the product which leads to the further innovation. Microsoft maintains a deep relation to its MVPs (Most Valuable professional) around the globe who are usually the biggest critic and source of suggestion while they introduce a new product in market.

Usually, organizations try to create balanced blend between the technology push and market pull. The balance can vary based on the geography, industry etc.

Another factor which is important is to decide between product or process innovation. Process innovators focus on changing how something is done and not what is done. New developing industries favour the product innovation compared to the process innovation as other competitors are still busy defining what needs to be done. On the other hand, mature industries favour process innovation as the basic rules of the game are already well defined and clear. Thus, it is important that focus is centred on how things can be improved and delivered. The new entrants in any business are the ones who usually focus on product innovation as they have less risk of anything to loose and if successful, the margins are very high. Large settled firms on the other hand have an advantage later as the design is established and they can further innovate the process to improve the efficiency and services.

A key question for innovators is the importance of new knowledge in the form of scientific or technological advances. Successful innovators don’t just rely of technical or scientific improvements but creating the whole new business models to bring consumers, suppliers and producers together with or without new technologies.

Diffusion of Innovations

Diffusion is the process by which an innovation is communicated through certain channels over time among the members of a social system. Given that decisions are not authoritative or collective, each member of the social system faces his/her own innovation-decision that follows a 5-step process (Rogers, 1995):

  • Knowledge – person becomes aware of an innovation and has some idea of how it functions,
  • Persuasion – person forms a favourable or unfavourable attitude toward the innovation,
  • Decision – person engages in activities that lead to a choice to adopt or reject the innovation,
  • Implementation – person puts an innovation into use,
  • Confirmation – person evaluates the results of an innovation-decision already made.

The pace of diffusion can vary according the nature of the product. It also depends a lot of the factors such as demand as supply rate.

The diffusion S-curve

The pace of diffusion is typically not steady. Successful innovations often diffuse according to an S-curve pattern. The shape of the S-curve reflects a process of slow adoption in the early stages, followed by a rapid acceleration in diffusion, and ending with a plateau representing the limit to demand. The height of the S-curve shows the extent of diffusion; the shape of the S-curve shows the speed.

Figure 1: The diffusion S-curve


Innovators and followers

When it comes to innovation, a big decision for managers to make is to lead or follow. The S-curve concept suggests that leaders in innovation have an advantage. Looking at the historic evidences, it is difficult to come up with one rule of thumb in this decision making process. Though it is evident in some cases that early adopters or leaders had significant advantage when innovating, there have been several cases where this position has resulted in failures.

First movers usually have the following advantages:

  • Rapid accumulation of experience compared to the late entrants who are not yet familiar with the process, product and the technology.
  • They can make an early start when it comes to bulk production or purchase.
  • They have the opportunity to pre-empt the resources as the late entrant would not have the same environment available with resources, skilled labour etc.
  • They can build up a reputation as the customer’s do not have many alternatives in mind.
  • They can exploit the customers with hefty switching costs which would make it difficult to move to the new entrants.

On the other hand, late adopters have the following advantages:

  • They can imitate the technology and other innovations at a far lesser cost than it was done by the first movers.
  • They can learn from the experiences of the first movers and thus have lesser chances of making mistakes.

Based on the advantages for both first and late movers, Managers should further consider the following factors when deciding whether to go first or move late:

  • It is unwise for companies to be first movers if the innovation can easily be imitated by the competition.
  • If there is an absence of necessary complementary resources, then the organizations should retrain in investing heavily being the early adopters.
  • In a slow moving market, it is easy to decide to be early adopter or not. In a fast moving market, managers need to duly pay attention whether the investment in being the fast mover would be beneficial or not.

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