Performance Measurement Frameworks

One of the major questions in setting up a performance measurement system is: How do you choose the right set of performance measures? There is a huge range in terms of the number of non-financial measures. The problem in selecting non-financial measures can be overcome by utilizing performance measurement frameworks (Medori, 2000). Performance Measurement Frameworks define areas in which you should measure performance. They guide you to define a set of performance measures to communicate and implement your strategy.

Four popular performance measurement frameworks are reviewed below:
1. The Balanced Scorecard (BSC)
2. The Baldrige National Quality Program (BNQP)
3. The EFQM Business Excellence Model
4. The Performance Prism

Balanced Scorecard

The Balanced Scorecard, developed in 1992 by Robert Kaplan and David Norton, is one of the most popular Performance Measurement Frameworks (Neely, 2002) . Its purpose is “translating strategy into action” by expressing an organization’s strategy as a set of measurable goals from four different perspectives:

Figure 1: Balanced Scorecard by Kaplan and Norton (1996)

1. Financial - To succeed financially, how should we appear to our shareholders?
2. Customer - To achieve our vision, how should we appear to our customers?
3. Internal Business Process - To satisfy our shareholders and customers what processes must we excel at?
4. Learning and Growth - To achieve our vision, how will we sustain our ability to change and improve?