A study of an integrated approach for strategy formulation and performance measurement in manufacturing enterprises

• Main Author: Pun, Kit Fai
• Published: Middlesex University 2003
• Subjects: 658
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.519339

Performance measurement quantifies the efficiency and effectiveness of action that helps organisations translate their strategies into results and fixes accountability to improve performance. This research identifies two problem statements: First, can integrating strategy formulation with measurement initiatives safeguard the performance goals in manufacturing enterprises? And second, how can manufacturing enterprises derive an integrated approach that meet their requirements and needs for strategy formulation (SF) and performance measurement (PM) system implementation? This work proposes an integrated paradigm that aligns the strategy-related performance measures to attain performance improvement in manufacturing enterprises. A two-stage empirical study was conducted, with 232 Hong Kong firms and 85 Shanghai firms participating in the study. The first stage surveys identified the common success factors, problem areas and strategy choices, and examined the relationship amongst corporate, marketing, technology and operational strengths and the 'reactive/proactive' strategy choices. The subsequent personal interviews in Hong Kong complemented the survey findings by examining the impact of SF/PM efforts in manufacturing enterprises. There were two series of interviews. The first series acquired the managerial views on the decision criteria on the integration of strategy formulation and performance measures, with the aid of Analytical Hierarchy Process (AHP) methodology. The second interview series derived several design elements and process considerations for aligning strategy formulation with performance measures. The empirical study used in this research provided important inputs and served as a foundation for development of a SF/PM Integration (SPI) model. In an attempt to integrate strategy formulation and performance measurement, the SPI model adopts the guiding principles embodied with the Business Excellence Models and stresses the results-oriented assessments on five categories of SF/PM criteria, namely leadership and constancy of purpose, management by process, people development, continuous improvement, and results orientation. Unlike that of the MBNQA and EQA, the point values for criteria and sub-elements of SPI model were generated collectively from the perspectives of industry practitioners in the manufacturing sectors. These were determined using the normalised weights obtained from the AHP analysis of empirical interview findings. They are taken together to calculate the overall performance index for an organisation. The process framework comprises five stages starting from strategy formulation to implementation and evaluation of an integrated performance measurement system. It encapsulates the requirements, critical processes and activities of strategy formulation and performance measures into the way they are being managed in organisations. The SPI model helps manufacturing enterprises to build a self-assessment platform for amalgamating strategies, plans and actions which can enable performance improvement. It can supplement any Business Excellence Models, and serves three important purposes. Firstly, it is a working tool for integrating SF and PM initiatives and guiding the implementation of performance measurement system in manufacturing enterprises. Secondly, using the model can help improve the effectiveness of management practices in relation to performance measures and self-assessment; and thirdly, using the model can facilitate information sharing of best practices within an organisation and benchmark performance against competitors and other organisations. Results of a post-evaluation survey affirmed that the model and processes could encourage organisational learning and provide a practical means for manufacturing enterprises to devise effective self-assessment and performance improvement. The novel contributions of the research are to identify the key SF/PM attributes, develop the self-assessment scoring method and the process framework accompanying the SPI model. Manufacturing enterprises must evolve a holistic performance measurement system matching their corporate mission, objectives and strategies. The SPI model provides them with a systems approach for building and integrating the capabilities of SF and PM to attain performance improvement goals, irrespective of their business nature and sizes.