Cascading Performance Measures

One of the keys to achieving improved business performance and organizational success is
having the ability to design and monitor the right and appropriate performance metrics capable of
giving insights into the operations of the business.

The balanced scorecard, one of the most popular strategic performance management tools used
by many organizations to monitor business performance has had both its success and failure
stories. Focusing on four perspectives – Financial, Customer, Internal Business Processes and
Learning and Growth, the model is widely used to choose measures and targets to track.

Formulating a business strategy is one thing and implementing a successful one another thing.
For the process to be successful, there is need to cascade and link performance measures on
individuals. Cascading strategy using one of the performance management tools – the Strategy
Map, helps identify the cause-and-effect relationships that exist between higher and lower level
strategic objectives. Managers must be aware and understand the benefits that derive from using
a strategy map to communicate strategy enterprise-wide.

This is where the balanced scorecard falls short. The model’s main focus on placing measures
under the four perspectives fails to show the cause-and-effect thinking and hence the drivers of
business performance. By adopting the use of the strategy maps, the organization is able to
identify and evaluate various drivers of business performance which in turn enables business
process improvement initiatives to be implemented.

The following are key to cascading and linking performance measures on individuals:

1. Communicate the strategy down the organizational hierarchy: Managers and employees at

lower levels of the hierarchy need to be aware of the strategic objectives of the organization and
how they are expected to contribute towards the achievement of those targets. The key is
breaking down the corporate strategy into operational objectives, measures and targets that link
back to the corporate measures. Communicating strategy enterprisewide, also allows for
functional co-ordination and reduction of duplication of effort and resources.

2. Always ask the right questions: Strategy Mapping is all about identifying and evaluating the
cause-and-effect relationships that exist within business processes and functional objectives.
Unlike the balanced scorecard which answers the WHAT question of measures to monitor under
each perspective, cascading strategy answers the WHAT, WHY, HOW and WHO questions. For
example, if one of the goals is ‘improving sales revenue’, adopting the cause-and-effect thinking
will help you ask and find solutions to questions like:

• What is the goal?

• Why is this necessary?

• How are we going to achieve that?

• Who needs to be part of the team?

By asking more questions, this will help you identify individuals and organizational functions
that need to work together to meet the chosen targets and goals.

3. Engage people: By engaging people and asking them for their contribution, the probability of
getting buy-in is high. Successful strategy execution involves team work. Engagement is also
necessary for informing employees the benefits that will derive from cascading and linking
performance measures and the risks of not doing so either. When there is buy-in, it makes the
process less prone to resistance leading to wider achievement of the objectives.

4. Establish Accountability: There should be ownership of cascaded measures and objectives at

different levels of the organization. The person charged with this responsibility should act as the
agent of change, linking his function/team with other organizational teams/functions.
Establishing accountability also enhances feedback, recognition of the system and
communication of results regularly.

5. Review and Control Performance: There is need to regularly monitor the performance of the
strategy mapping process to establish whether strategic goals and objectives are being met. If
not, such a formal review will help you develop and implement corrective measures.

Implementing Performance Measures

Determining what to measure can take considerable effort, but it will probably be less than
one-third of the total effort required to implement an efficient and effective measurement
system. Data collection and processing systems will have to be implemented to produce the
measures; everyone will have to be trained in using the systems and measures; and as the
measures are used, some problems are sure to be identified that will require changes to the
system.

Perhaps the greatest challenge faced when implementing performance measurement systems
is changing an organisation’s culture. Using performance measures requires managers and
employees to change the way they think and act. For most people, this is relatively easy, but for
some, changing old beliefs and habits is very difficult.

Overcoming such problems requires strong leadership to provide appropriate direction and
support. The best measurement system in the world will yield few benefits if the right
knowledge, skills, abilities, and values are not developed in a company. An organisation doesn’t
just interface with a measurement system; it is part of the system.
Developing and implementing effective measurement systems requires leadership,
commitment, and hard work. Some investment is required, but it is small relative to the key
benefits of a well-designed and implemented measurement system:

 The ability to determine if sales and profit problems are caused by strategies,
operations, or both;
 Early identification of problems and opportunities;
 Increased productivity, quality, and customer service;
 A clear understanding of what drives financial and operational performance so
resources can be allocated to the areas of greatest return; and
 A cohesive organisation working toward common goals.

Cascading Performance Measures

Corporate level measures are very important, but they aren’t going to have much impact unless
they are cascaded all the way down to front-line employees. The case for cascading is simple:
Do you want 10% of your employees working toward company objectives or 100%?

With some exceptions, such as market share, what you measure at the top is what must be
measured at all levels. However, the specific measures will change with every functional and
organisational level because managers doing different jobs need different information to make
different decisions.

The same methodologies used to develop measures at the corporate level can be used to
cascade the measures down to front-line managers, supervisors, and employees. However, as
you go down the organisation chart, the focus is on operations or processes. Strategy is
incorporated into operational measures by giving more weight to the measures that are
strategically important. This communicates strategy to all employees by translating it into
operational terms – at the individual level.

Key Questions to be answered by Performance Measurement Systems

No matter what approach you use to develop performance measures, bear in mind that the
objective is not to have a measurement system in itself, but to empower business
improvement, and to do so, to enable managers at all levels to answer ten key questions:-

1. Are we satisfying our customers?

2. Are we satisfying our shareholders?
3. Are we satisfying our other stakeholders?
4. What is happening to our customer base?
5. Is our company strategy working?
6. Are our individual strategies being properly executed?
7. Are we serving our customers and stakeholders effectively?
8. Are we operating efficiently?
9. Are stakeholders contributing what they should?
10. Are we developing the abilities we need to  execute our strategies?

If all of your managers can readily answer those questions about their areas of
responsibility and support their answers with objective numbers, your company has the
performance measures it needs. If they can’t, some of the “good” decisions they are making are
undoubtedly not very effective – and they may even be harmful.

References:

https://erpminsights.com/how-to-cascade-performance-measures-to-achieve-improved-
business-performance/

https://www.otsmanagement.com.au/choosing-implementing-and-cascading-performance-measures/

The achievement of Performance measures at the whole organizational level must involve individual
business units, customers/segments, and products and services to contribute/participate in the certain
performance.