Strategic dimension of performance measurement
Measures so far mentioned have related only to an organizations current use of resources in a static environment. The strategic dimension of performance measurement therefore addresses itself to the dynamic aspects of organizational performance.
Much research has been done on the stages of organizational growth - Greiner (1972) (relates to four stages of management and philosophies), Haire (1959) (based on natural biological growth) and Hofer (1975) (focused on the product life-cycle).
In the simplest terms an organizations focus on productivity will very much depend on the stage of its growth cycle. The Growth Cycle Stages schematic shows one cycle of growth.
At each of the stages of growth, a different strategy is pursued. At Stage I organizations (as they evolve) seek market efficiency; at Stage II they may seek selling efficiency; at Stage III as growth reaches a plateau they may look for internal efficiencies; in Stage IV the company will either decline, consolidate or look for new growth potential.
At each of these stages a different productivity focus is pursued. At Stage I an organization may be monopolistic in character. It evolves new methods, probably in a flexible way and strives for market efficiency above all else. At Stage II it capitalizes on the gains made and selling efficiency becomes paramount. At Stage III as growth reaches a plateau, consolidation is sought and standard operating procedures for work activities are introduced. Strategies for development decline and the refinement of procedures take place. Stage IV is a period of decline or redevelopment in which old methods and measures become obsolete as changes occur and new opportunities are sought.
A shift from concern from internal efficiency strategies to strategies and means that encourage and focus on innovation would improve growth and development of organizations. Greiner (1972) and Webster (1976) have also shown that as organizations grow in size they face increasingly difficult management problems which not only weaken the ability to adapt and react but also lead to an inability to innovate systems which work well in conditions of stability.
It is all too clear that many managers in large companies merely administer their departments rather than manage in the true sense. The dilemma is, as Lawrence and Lorsch (1967) point out, that "at this stage management have to differentiate and integrate both at one and the same time".
In organizations with established markets it may well be important for sections of the business to concentrate on efficiency measures to reduce costs and provide competitive advantage by performing known tricks better and faster. Even in those circumstances there is another set of factors that relate to the capacity to continue being effective and profitable.
These are strategic and less quantifiable, such as the ability to improvise, to reach new markets or to attain a flexible approach to business uncertainty. It is recognized that one approach should not exclude the other, but awareness of both is an important first step. In the 1970s complacent car companies on both sides of the Atlantic failed to take Japanese and European competition seriously, with the result that a number of firms, once unassailable and indicators of national prosperity, were forced to change or disappear completely.
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