Disruptive Effectiveness: Would Every Organization Have Its Own Performance Measurement Model?
Researchers have suggested that studies of organizational performance should include multiple criteria. Thus, it is better to have multi-dimensional criteria to determine effectiveness in organizations because organizations face with several interactions in operations, hence they are in need of different indicators to assess 
effectiveness. Also,single approach-based effectiveness evaluation increases the risk of regression. Organizations may differ from one to another in terms of environmental complexity environmental stability, vision and mission.Therefore, all
organizations should consider their contingency factors such as structure, size, and they should build their own performance assessment criteria. These criteria should include flexibility of structure, environmental complexity, focus of organization and their visions with using BALANCE SCORECARD.
Huge Tendency: Single Measurement Tool as Financial Health in Organizations
Senior managers always tend to focus only on goal implementation such as profit making or cost decreasing. Actually, they are right. Profitability, gross revenues, return on capital, etc. are the critical, “bottom line” kinds of results that companies must deliver in order to survive. However, if senior management only focuses on the financial health of the organization, manyfatal consequences may occur. For example, financial
conditions are “lagging indicators” of success; high or low numbers showed depends on a wide variety of events that may have happened months or years before, these problems cannot be presented quickly. It is already so late when you realize that your car has broken and is not working!
Another result of focusing on financial measures only is that they are not directly related to the customers that use your organization’s product or service. Decisions might be made which maintain your organization’s financial problems but these damages the long-term relationships with consumers.
Effective Tool for Performance Management: Balance Scorecard
Balance Scorecard is a strategic planning and management system that
allows to look at the organization and focus on the big picture through strategic goals. It aligns the work on a daily basis and prioritizes some strategic objectives over the others in the organization. It achieves that by connecting the organization’s core values, vision, mission and more operational objectives. Hence, the approach helps to convert complex, big strategic vision into smaller steps to follow on a day-to-day basis, as it helps to balance short-term and long-term actions. The approach can be used for organizations as well as business units and departments. Most importantly, it is a method of measurement of different measures of success.
As mentioned before, solely looking at financial results of an organization overlooks some aspects of the business such as the learning environment, the satisfaction of customers. In order to get a more balanced vision, BSC strategic planning tool suggests using strategic measures along with the financial measures. In this sense, it introduces four aspects of business. These also reflect the areas in which the organization’s performance is measured:
- Organizational Capacity/Learning and Growth:
Organizational Capacity perspective views the overall performance of the organization through the lenses of human capital, its infrastructure and the organization’s culture. It defines the extent to which people in the organization can collaborate and share knowledge. Also aims to measure the growth opportunities for individuals.
- Internal Business Process:
This perspective measures the performance of the organization relative to the quality of its products and services and the extent of efficiency it achieved while delivering value to customers. In fact, it defines “how smooth the business is running.”
- Customer/Stakeholder Satisfaction:
Customer/stakeholder perspective measures the organization’s performance relative to its key stakeholders such as its customers and stakeholders. It identifies whether the business is capable of acquiring new businesses. Thus whether it can satisfy and retain the existing customers. Besides that, it envisions the organization’s position regarding its competitors. It is the most important element in assessment of organizational performance because customer satisfaction is the most forward-looking indicator of future performance of the organization.
- Financial Measures
Financial aspect of the assessment is one of the major focuses in this model. This aspect measures the organizational performance through financial performance and efficient use of financial resources.
The BSC strategic planning model works as the organization first determines sufficient number of strategic objectives for each perspective. (In this step, it is suggested and confirmed that two objectives for each element is sufficient, provided that if the organization has more than two goals for each element, it is quite hard to achieve and keep track of them.) Then it needs to confirm that the objectives that had been established is actionable, quantifiable; can be taken track of and evaluated regularly. After this step, it needs to “map” in order to see the story of the organization’s strategy. This also helps the organization to identify cause and effect relationships within the organization.
THE BIG PICTURE
As mentioned, Balance Scorecard consists of multiple dimensions of the business and would be considered as a better method that can be used over single-sided approaches. Because these kind of an organizational performance assessment lack a vision of a variety of perspectives, organization theorists suggest multiple criteria. Hence, usually in the business world, financial measures of performance are solely used. Certainly, this perspective only falls short for assessing all functions of the business. For this reason, we introduce the BSC approach. It views the business in four aspects such as Learning and growth, Internal Business processes, Customer Satisfaction and Financial area. These aspects were developed to serve the objective of assessing all aspects of business, evenly. To implement such approach, organization first have to align concrete objectives for each dimension and then map it by defining causal-effect relationships. However, since we argue that each organization should attain their approach to assess its performance, in accordance with their current circumstances. The five crucial factors affecting this decision is its strategy, environment, culture, technology and size/life cycle of the organization.
REFERENCES
Allam, A. (2015). A Critique of the Balanced Scorecard as a Performance Measurement Tool. A Critique of the Balanced Scorecard as a Performance Measurement Tool, 6, 7th ser. Retrieved July, 2015, from https://ijbssnet.com/journals/Vol_6_No_7_July_2015/9.pdf.
Connolly, T., Conlon, E. J., & Deutsch, S. J. (1980). Organizational Effectiveness: A Multiple-Constituency Approach. The Academy of Management Review, 5(2), 211. doi:10.2307/257430
Available at: https://www.researchgate.net/publication/271775944_Organizational_Effectiveness_A_Multiple-Constituency_Approach
Ostroff, C., & Schmitt, N. (1993). Configurations of Organizational Effectiveness and Efficiency. Academy of Management Journal, 36(6), 1345-1361. doi:10.5465/256814
Cunningham, J. B. (1977). Approaches to the Evaluation of Organizational Effectiveness. Academy of Management Review, 2(3), 463-474. doi:10.5465/amr.1977.4281841
available at: https://www.researchgate.net/publication/245460359_Approaches_to_the_Evaluation_of_Organizational_Effectiveness
Norton, R. S. (2014, August 01). The Balanced Scorecard-Measures that Drive Performance. Retrieved from https://hbr.org/1992/01/the-balanced-scorecard-measures-that-drive-performance-2
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