THE 5PS MODEL BY PRYOR, WHITE, AND TOOMBS

Mildred Golden Pryor, Chris White, and Leslie Toombs24 developed the 5Ps model as a tool for small business owners to monitor long-term organizational survival and success. Pryor et al., at the time, deemed it necessary to develop a simple tool for smaller businesses for strategic direction and for the strategy execution. They called this element of their framework (1) purpose. The other four elements of the 5Ps are (2) principles, (3) processes, (4) people, and (5) performance.25

In the 5Ps model purpose drives structure, which in turn is defined by principles and processes. Structure then drives the behaviors of people, which lead to improved performance. Through feedback loops all three levels reconnect individually with purpose and guide the improvement processes in an organization.26 Pryor et al. specifically mentioned that metrics and measurements are vital to track status and to gauge success toward performance. However, the authors fall short of providing specific measurement tools. Pryor et al. also explicitly referred to alignment but they do not specify how alignment should be achieved. In a recent follow-up article Pryor et al. stated that: ". . . they [small business owners] may or may not understand how to convey those principles to their employees or how to align principles with the other elements of the 5Ps Model."27

Using the 5Ps framework is considerably simpler than the McKinsey 7S framework, both because of the former's application simplification and more so because of its straightforward linear design as compared to the complexity that the multidimensional interconnectedness of the 7S framework creates. The 5Ps framework could be developed step by step and would still be useful even if only partly completed. Implementing the 5Ps framework is considered to be less disruptive to daily business activities, less resources demanding, and no general buy in by many different stakeholders would be required.

THE BALANCED SCORECARD AND STRATEGY MAPS

Robert Kaplan and David Norton first introduced the balanced score-card as a stand-alone concept in 1992 in a Harvard Business Review article.28 The motivation behind the development of the balanced scorecard approach was to provide a tool that would measure performance beyond traditional, purely financial, indicators. It was immediately appealing not only to those organizations that did not seek superior financial performance as their primary objectives, such as not-for-profit organizations, but also to strategists who adopted the balanced scorecard for measuring those managerial activities that could not directly be assessed by reviewing financial balance sheets. The tool's great initial success led to the bestseller: The Balanced Scorecard: Translating Strategy into Action.29

The balanced scorecard filled a void30 that using financial measures alone left when assessing competitive and corporate strategy. This included the strategic value of nonfinancial resources such as intellectual capital. The balanced scorecard does not ignore the financials. Instead, it adds three more dimensions to the strategy assessment and planning processes, including customers, organizational processes, and learning and growth. The explicit objective is to measure current performance and also to evaluate how well the organization is actually positioned for future performance.

According to Kaplan and Norton, the balanced scorecard provides three main advantages. First, it allows managers to identify the key focus areas that lead to superior results. Second, it supports the integration of organizational initiatives, including product or service quality, human resources activities, research and development, or other long-term activities. Third, it allows for breaking down the usually higher-order strategy objectives into finer-grained measurable activities that can then be attributed to individual departments and managers. For example, investment in training might not lead directly to higher profits but it might improve the skills of the customer service representatives, which then will lead to higher levels of customer loyalty, which should lead to more sales. Other examples include the measurement of the effectiveness of information technology, specific customer data, and market intelligence that is not publicly available as well as organizational climate including innovation propensity, entrepreneurial spirit, employees' conflict-and problem-solving attitudes, and the efficiency of organizational processes.31

It has to be pointed out that these measures are meant to complement financial performance data and do not replace them. In fact, the authors argue that in combination with (1) traditional financial measures (2) customer scores, (3) learning and growth scores, and (4) internal business processes scores, the balanced scorecard approach further enables organizations to be more forward looking, which then leads to better risk and cost-benefit assessments.32

At the time when Kaplan and Norton developed the balanced score-card, more and more management literature started to look strongly at the notion of customer focus. Hence, customer satisfaction became a hot topic. Measures for customer-relevant performance included new customer acquisition rates, customer retentions, loyalty, defect and failure rates, and relative market share. Depending on a firm's strategic objectives, for example, product leadership (e.g., Mercedes, Intel), customer intimacy (e.g., Starbucks), or operational excellence (e.g., Wal-Mart), these measures would reflect how well it performed.

In the context of accelerated innovation cycles and technology change, the concept of continuous learning is regarded as a critical capability for organizations to achieve sustainable growth. Kaplan and Norton understood that measuring only the dollars spent on training would not measure successful learning.33 Therefore, in order to assess the effectiveness of learning and growth activities, measures should include, for example, aggregated scores for employee satisfaction, information system availability (e.g., intranet), propensity for information sharing, employee's willingness to excel, and the awareness of and willingness to support strategy.34

Business processes are the fourth dimension included in the balanced scorecard. Business process scores measure internal effectiveness, or how well a business operates. There are two categories, including mission-oriented processes that encompass production processes, product turnaround, and innovation effectiveness. These mission-oriented processes are usually difficult to decouple or break down. Relevant measures have to be carefully developed by those who actually run the processes. The second category consists of support processes that are easier to measure because of their more repetitive characteristics.35

One reason that the balanced scorecard has been so successful from the beginning is that it integrates the four basic perspectives into one graphically easy-to-grasp framework. All dimensions are divided into four main categories called: (1) objectives, (2) measures, (3) targets, and (4) initiatives. For example, if the objective were expanding sales across the product portfolio, the relevant measure would be the increase in the number of products sold. The target would be set accordingly and specific initiatives to reach the objectives would be defined as, for example, sales promotions that include the number of product bundles offered.

The business process category is particularly important. If developed correctly, the measure can lead to identifying errors within the system at more specific points rather than at the very end of the process only. Kaplan and Norton argue that the balanced scorecard creates a double-looped feedback system by not only measuring the effectiveness of the process but by also measuring the effects of the processes on the overall strategic outcome.36

Recently, the balanced scorecard evolved from a simple assessment tool into a strategic management framework when the concept of strategy maps was added.37 Strategy maps enable companies to visualize critical cause-and-effect relationships of the different individual score-cards of different departments or business units. Strategy maps show how the different layers of an organization connect with each other and how they influence overall performance. They also allow for the development of a fair reward system that is not only based on the achievement of individual targets but that also shows how a specific objective supports, accelerates, or hinders overall strategy.

The introduction of strategy maps also revealed one of the biggest reasons for criticism of the balanced scorecard approach, namely, poor implementation design and implementation longevity.38 The most common complaints and application failures include too many or too few measures, ambiguity concerning the real performance drivers, inappropriate/inconsistent or static weighting of the individual measures, a lack of annual reviews of the relevance of individual measures, and, most importantly, poor organizational design and the lack of structural adjustment based on the initial scorecard outcomes. Kaplan and Norton themselves listed the following eight main risks of the balanced score-card approach, including insufficient top management commitment, too few individuals involved, implementation of the scorecard at the highest organizational level only, too lengthy development and implementation processes, making the scorecard only a one-time initiative, implementing the scorecard as a systems project, inexperienced score-card champions or consultants, and finally, using it only for compensation justification purposes.39

 
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