Cranfield School of Management
Interview: Professor Andy Neely
The Performance prism
AK
Andy, what is a performance prism?
AN
The performance prism is a measurement framework – I think it
has got three big advantages over many of the other measurement
frameworks that are out there today. The first is it takes a broad
view of stakeholders. Now lots of measurement frameworks,
frameworks like the balanced scorecard for example, tend to take
a fairly narrow view of stakeholders so that the balanced scorecard
refers to shareholders and customers, but it ignores employees, it
ignores suppliers, it ignores regulators and in today’s society
organisations can’t afford to ignore those different pressure
groups, those different groups of stakeholders that might be
interested in the business.
The second thing is the balanced scorecard and other
measurement frameworks make no distinction between what you
might call stakeholder satisfaction and stakeholder contribution.
Now a way of thinking about this is that as a stakeholder in an
organisation, as a customer of an organisation, there are certain
things I want from the organisation. Let’s take a telephone
company. From a telephone company I want a decent service, I
want my phone to work, I want reasonable value for money, and
they are the reasons I might choose to go with a particular
telephone service. The phone company wants certain things from
the customers. They want the customers to be loyal, to be
profitable, to pay their bills on time, etc, etc. And it is the
relationship between the organisation and the stakeholder that
matters.
Now many frameworks, many measurement frameworks, don’t
make that distinction, they just assume you could talk about
customers, but they are never clear about are we talking about
what the customer wants of the organisation, or what the
organisation wants of the customer. And that is true for every
stakeholder. So that second distinction between stakeholder
satisfaction and stakeholder contribution is important. The third
thing about the performance prism that is particularly unique is its
focus on, if you like, the delivery chains inside the organisation.
If you think about how organisations deliver value to their
customers or to their stakeholders more broadly, then there is a lot
Knowledge Interchange Podcasts
Page 1
Cranfield School of Management
Professor Andy Neely
encompassed by phrases like strategies, processes, capabilities
and the performance prism asks people to articulate the logic that
underlies the design of the organisation. So it asks questions
about what strategies the organisation is pursuing, how the
business processes support the execution of those strategies, and
importantly what capabilities the organisation needs to allow it to
operate its business processes.
AK
And why was it developed?
AN
It was developed I guess in response to a recognition of lots and
lots of measurement frameworks. In fact what we did in
developing the performance prism was to look at all the existing
measurement frameworks and really review their strengths and
weaknesses and so actually what is good about particular
frameworks – so some are good because they call for a balance
between financial and non financial measures, some are good
because they have a short and long term orientation, some are
good because they have a good link between the internal and
external focusing side of organisations, etc, etc. So we looked at
the strengths and weaknesses of the existing measurement
frameworks and really tried to develop a framework that built on
the strengths of other frameworks, but also overcame some of
their weaknesses. So there was quite a long time spent thinking
about what the right dimensions were for the performance prism,
how it should be structured, and some testing of it in different
organisations as well as the concept.
AK
What business challenges has the performance prism helped
managers address?
AN
I think there are some very enduring challenges of performance
measurement generally, that the performance prism is designed to
help people address. So the enduring challenges, the way I tend
to talk about this is to think about three challenges: the first for
organisations is the desire to quantify, in most organisations
whether you are in the public sector, or the private sector,
managers have this desire to quantify to know how well they are
doing, whether the things they need to do are actually being done
inside the organisation. The problem with quantification is that
often you get unanticipated consequences, so you measure
something but then people respond to the measure and they
behave in strange ways in organisations. You can see lots of
examples in the public and private sector – so hospital waiting lists
are a very current example, where people worry about some of the
things that happen inside the health service, where actions are
Knowledge Interchange Podcasts
Page 2
Cranfield School of Management
Professor Andy Neely
being taken that reduce the waiting but don’t necessarily improve
health outcomes for the population at large. And the way that
people try to overcome the unanticipated consequences is really
through the need for balance, and saying what we need to do is
have a balanced view of what good looks like an organisation, a
balanced view of what success looks like and if we can balance
difference measures one against another to make the trade offs
that exist inside organisations explicit, then we are in a much
better position to manage the organisation.
Now those three enduring challenges, the desire to quantify
unanticipated consequences and the need for balance have been
discussed in the academic literature for years – there are some
lovely articles from the 1950s where actually you read them today
and you think the points that people are making are still challenges
that managers are struggling with in organisations today and that is
a testament to how difficult it is to design a good measurement
system. It is not that intellectually it’s a difficult concept to get
your mind around designing a good management system, we
understand what the principles are and so on, but actually it's
just a challenge to do it in practice. And so what we try to do in
the performance prism and some of the accompanying tools that
go with it, like the measure design templates and some of the work
we have done around visualisation, is to think through a series of
tools, techniques, frameworks that would help managers in
organisations who are grappling with designing well rounded, well
structured performance measuring systems that are aligned to the
organisation’s strategy, that don’t result in dysfunctional
consequences or dysfunctional behaviour inside the organisation –
so it is really a framework for helping managers think through
those challenges of getting good measures of performance in
place.
The reason that is so important and one of the ways I tend to talk
about this is I describe the measures as, if you like, the rules of the
game in a business, particularly when you link the measures the
incentive scheme – in essence what you are doing is you are
saying to people these are the things that we are going to track,
these are the things we care about, these are the things we are
going to reward you for if you perform well against, and effectively
you are setting up the rules of the game that people play inside of
the business. So, thinking carefully about what game it is we are
trying to set up inside an organisation is fundamentally important.
And lots of organisations, lots of managers complain that their
measures drive inappropriate behaviour and measurement
systems can be extremely powerful in driving inappropriate
behaviour, but actually if you get them right they can be extremely
powerful in driving appropriate behaviour and that is the real trick –
it's how do we think through carefully the designed deployment to
the measurement system to drive the right behaviours in the
Knowledge Interchange Podcasts
Page 3
Cranfield School of Management
Professor Andy Neely
organisation and the prism is in essence a framework to help
managers think through those issues.
AK
Thanks – who is using the performance prism – you mentioned
DHL as a case study in your book?
AN
Yeah, DHL was one of the early pilot cases and in the DHL
example what we were trying to do there was help the organisation
redesign its performance management and review processes.
DHL as an organisation is intensely operational – it has got
enormous volumes of transactions going on. You can imagine
you are delivering packages from London to Tokyo and London to
Paris and Paris to Tokyo and Paris to New York etc, etc. So
enormous amounts of operational activity. In a context like that
you can get access to enormous amounts of data and the
challenge for many managers actually is there is so much data
inside organisations, but that is all it is – it's data, there is no insight
from that data, it doesn’t tell you what is happening inside the
organisation, it doesn’t tell you where you might need to intervene,
it doesn’t help you focus your attention and your resources. And
so in DHL’s case we used the performance prism to help initially
the board and then down through the organisation, management
teams, to think through their performance management structures,
review structures.
Subsequently the prism has got picked up all over the place, so I
get notes from people in the US and Canada and the Middle East,
organisations in both the public and private sectors, that have
taken the framework and used it, as I said earlier, to help their
managers and to help them to think through how they structure a
good measurement system for their business. Sometimes those
changes are part of major cultural change programmes, so there
are examples where people are fundamentally trying to change
what people in the organisation do, how they behave, the incentive
schemes that are linked into that and they have used the
performance prism as a central part for thinking through their
culture change programme. In other cases, it is much more
focused, it will be a team who say we are an R&D team, we need
to think through how we assess the success of our performance of
our R&D team and its contribution to the business. So it gets
applied at different levels in the organisation.
AK
Andy, thank you very much indeed.
Transcript prepared by Learning Services for the Knowledge Interchange
www.cranfield.ac.uk/som
Knowledge Interchange Podcasts
Page 4
Cranfield School of Management
Produced by the Learning Services Team
Cranfield School of Management
© Cranfield University 2007