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January 17, 2011

Strategic Performance
Management
Leveraging and Measuring Your Intangible
Value Drivers
Bernard Marr

©2006 by Bernard Marr


Adapted by permission of Butterworth Heinemann, an imprint of
Elsevier, Ltd.
ISBN: 978-0-7506-6392-2

Introduction
Strategic Performance Management is the process in turn can be used to gain insights, make decisions,
of managing and measuring organizational evaluate future directions, and improve learning.
performance. Major corporations such as Walmart,
Mapping the Boundary Conditions
Shell Oil, and Sears, Roebuck, and Co. as well as
Marr has observed that too many organizations carry
non-profit and public institutions have successfully
out their performance management initiatives without
put it into practice to outperform their competition.
making sure that their strategy is clear to all levels
For many organizations, however, the successful
of staff. Managers and executives may interpret the
assessment and management of the key drivers of
strategy differently from others in the organization.
performance have remained elusive.
The basis for strategic boundary conditions, or the
In Strategic Performance Management, Bernard components of an organization’s vision, starts with
Marr pools his expertise, research, and observations considering its main mission and the overall guiding
into a detailed navigation of the components of the principles. This usually remains constant unless
practice. He includes how to identify tangible and a fundamental change, such as a merger, brings a
intangible value drivers, create core competencies that need for the enterprises involved to harmonize their
are linked to the organization’s value proposition, and visions.
establish meaningful performance indicators. These
There are three components to a visionary mission
Business Book Review January 17, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved
®
Strategic Performance Management Bernard Marr

statement. First, the organization must have a


fundamental purpose; for example, Walmart’s purpose
can be summed up as, “to give ordinary folk the Key Concepts
change to buy the same things as rich people.”
Second, the core values are essential to setting the Strategic Performance Management is the pro-
organization apart from its competitors. These values cess of managing and measuring organizational
include the increasingly popular notion of Corporate performance. It involves the collective responsi-
Social Responsibility (CSR), which bundles together bility and understanding and the use of relevant
ethical behavior, economic development and quality performance indicators to inform strategic deci-
of life for employees and the society at large. sion-making.

The final component of the mission statement is a set The first step in Strategic Performance Man-
of visionary goals that any organization—commercial, agement is gaining an understanding of the
social service, or non-profit—should develop in organization’s strategic context. This involves
order to articulate its medium-term ambitions and defining the boundary conditions, or organi-
remain valid and tenable over the next ten years. If zational mission and completing an external
organizations reach their goals, they should replace analysis of the environment.
them with new ones to avoid complacency. These The value creation map is a visual represen-
three factors need to be meaningful and understood tation designed to communicate information
by all employees so they will have clear guiding about strategic planning. It shows how key
principles under which to operate. resources combine to produce capabilities,
which are linked to the core competencies that
The View from the Market
organizations need to achieve in order to deliver
The key outcome from an external analysis of an
a relevant combination of values to their stake-
organization is the stakeholder value proposition. This
holders.
answers the questions, “Who are your stakeholders,
and what do you have to do to deliver to them?” The strategic performance improvement meet-
It combines customer needs and organizational ing is an effective review model for an enabled
capabilities into a declaration of how resources and learning environment. The strategic perfor-
competencies will be used to deliver a combination of mance review uses performance indicators to
values to its shareholders. These propositions broadly answer relevant questions and foster collabora-
include operational excellence, product leadership tive decision-making and learning.
and customer intimacy. g g g g
First, an organization should identify its key Information about the author and subject:
stakeholders, people or institutions who not only www.ap-institute.com/about_chiefexecutive.asp
have an investment or interest but who also affect
Information about this book and other business titles:
the organization’s success. These may include
www.elsevierdirect.com/imprint.jsp?iid=30
consumers, distributors, intermediaries, employees,
and legislators. The needs of one of these groups may Related summaries in the BBR Library:
be a priority; for example, in some financial services, Performance Management
telecommunications, and other industries, satisfying Finding the Missing Pieces (to
regulators may be key to avoiding penalties or Close the Intelligence Gap)
restrictions. Gary Cokins
Organizations must also consider the macro- Five Key Principles of Corporate
environment in which they operate. Political, Performance Management
economic, and legal conditions may provide taxation, Bob Paladino
trade, and other restrictions, as well as determine the

Business Book Review® January 17, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 2
Strategic Performance Management Bernard Marr

potential for addressing the needs of different age competitive edge to the organization. For example,
and cultural groups. Nokia’s relations with a Philips semiconductor
plant that was damaged by a fire enabled the cell
Scenario planning involves the findings from micro- and
phone producer to receive valuable information
macro-environment analyses as well as consideration
for pursuing a contingency strategy. Its competitor,
of how the status quo of the operating environment
Ericsson, had a more limited relationship with Philips
might change in the future. Marr uses Shell’s efforts
which resulted in difficulties sourcing sufficient chips
as an example of how anticipating multiple scenarios
and the eventual discontinuation of their cell phone
of energy consumption and availability helped the oil
production.
company make more-informed decisions about future
capital investment projects.
Resources are critical building blocks of strategy because they
Resources: The Roots of
the Organization determine not what an organization wants to do, but what it
The identification of an can do.
organization’s own competencies
and resources is a relatively new but often Structural resources include not only an organization’s
misunderstood component of a thorough contextual policies but also its culture, practices and routines,
analysis. However it is a crucial step in determining and intellectual property. An organization’s culture
what an organization is capable of achieving. Often is shaped by values and management philosophies,
difficult to define and classify, intangible resources resulting in a framework that helps employees
have also been referred to as intangible assets, transmit and process information as well as function
intellectual capital, or knowledge assets. Human effectively as both individuals and team members.
resources include the skills, knowledge, expertise, Practices and routines include internal practices,
and experience of an organization’s staff, as well as virtual networks, and review processes; whether
attitudes. Loyalty, motivation, and flexibility can formalized in manuals or understood informally,
reduce turnover, increase productivity, and therefore effective structural resources have an impact on
further develop these assets. organizational workflow. Intellectual property such
Relationships between an organization and its as patents, trade secrets, copyrights, brands, and
customers, intermediaries, regulators, creditors, database content belong to the company and help
investors, communities, and other outside parties are differentiate what it can offer the market.
known as relational resources, and they can provide a
Creating Core Competencies
Capabilities and core competencies are developed
through the combination of resources. Marr
About the Author defines capabilities as “the combination of a set of
organizational resources that collectively enable that
Bernard Marr is a leading expert on Strate- organization to perform well in specific areas.” Core
gic Performance Management, working with competencies are different in that they are linked to
organizations including AstraZeneca, BP, DHL, an organization’s strategic value proposition and can
NovoNordisk, and Royal Dutch Shell. Since 1999 evolve and be learned over time to meet the needs of
he has been a Research Fellow at the Centre for key stakeholders and set the organization apart from
Business Performance at the Cranfield School of its competitors.
Management in the United Kingdom, and has
produced more than 100 books, reports, and Different capabilities such as planning, distribution,
articles on Balanced Scorecard, Corporate Per- and credit management work together as an
formance Management, and other topics. organization develops its core competencies. Core
competencies are most effective if they can broaden
access to a wide range of markets, add to the perceived
Business Book Review® January 17, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 3
Strategic Performance Management Bernard Marr

customer benefits of the end product, and cannot be employees, managers, and stakeholders with the
easily imitated. A successful example can be seen strategy “big picture.”
in Walmart’s success with “cross-docking,” which
Marr defines a value creation map as “a visual
has eliminated the need for expensive warehousing,
representation of the organizational strategy that
enabling the company to price its merchandise at
includes the most important components that exist
lower prices.
within this strategy (namely stakeholder value
Key Resource Identification proposition, core competencies, and key resources)
Through collective brainstorming an organization and places them in relationships with each other.” An
can identify its resources and considerations as it effective map communicates:
goes forward with an internal strategic analysis. One 1. who the key stakeholders are and what the
useful tool is the SWOT analysis; as the acronym organization is delivering to them
suggests, this involves listing the internal factors of
strengths and weaknesses as well as external factors 2. the core competencies the organization needs to
of opportunities and threats. Understanding the master and
organization’s priorities, proficiencies and dangers 3. the underlying key resources linked to these
can bring different departments together. competencies.
In order for everyone to contribute to identifying Different map templates use arrows to diagram
resources, Marr suggests using surveys or interviews, cause-effect relationships, illustrating the relative
and presenting findings to different levels of staff and dependence that resources have on each other and
even external stakeholders. The result should be a their foundation in achieving the capabilities and
common language and an understanding of the most competencies needed to meet the value proposition.
significant resources.
A facilitator may take the insights
from the internal and external
The questions to answer are: how important are our different analyses, interviews, surveys, and
existing resources to achieving our overall value proposition? workshops to draft preliminary
Or, how strong are our existing resources and how can we uti- maps before bringing them to
lize them more effectively? workshops of individuals for
consensus. Because a value
These key resources can then be examined and brought creation map represents the organization’s strategy at
together in the context of achieving the organization’s a particular point in time, and it needs to be revised
value proposition identified through the external on a regular basis to stay in keeping with the overall
strategic analysis. Assessing how relevant these strategy.
resources are can aid in a gap analysis to determine
The value creation narrative is a written work that
which areas need more or less investment. Marr
accompanies the map and includes additional
suggests asking individuals involved in the prior
contextual information as it communicates the chain
brainstorming to rate the strengths of each of the key
of events in a narrative format. At no longer than 500
resources within the organization and their relevance
words, its purpose is not prescriptive, but to clarify
to delivering its value proposition.
the strategy in a concise manner, free of confusing
Visualizing and Articulating a Strategy or technical jargon but containing terms that are
Some organizations make the mistake of presenting a universal within the organization.
set of goals and targets to their staffs without showing
The Value Creation Map at Work
how they fit together. Marr promotes a value creation
To demonstrate a variety of approaches, Marr
map as a means of presenting complex information
provides case studies of how leading organizations
and relationships from a value creation narrative in
put the concepts of core competencies and value map
a clearer and more holistic manner, helping provide

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Strategic Performance Management Bernard Marr

creation into practice. For example, for the Greek measures to shape the behavior of its employees,
division of DHL, the international freight shipping (agents). If some aspects of the job are overlooked,
company, the results of a survey of employees to the gap could negatively affect performance. For
target key resources and a survey asking customers example, a salesperson could rush through visits
about the value DHL delivers led to an increased to meet a quota. The employee has fulfilled the
understanding of the overall value proposition: “To measured expectations, but if the quality of the
make our customers successful by delivering high visits is not assessed no real benefit is gained. With
quality shipment solutions and superior customer numbers replacing trust, territoriality, possessiveness,
service.” and other dysfunctional behaviors could undermine
morale and the organization’s mission.
An initial value creation map bundled DHL’s key
resources, then interviews and
workshop sessions identified the What we have to move away from is the command-and-con-
interdependencies between them. trol mentality, in which backward-looking, pseudo-relevant
These resources and dependencies
were the foundation of the core
metrics are being used to reward or punish people. The value
competencies of “harmonized creation map tells us the most important components of our
process and network” and strategy and it will therefore guide us to measure what really
“understanding customer matters.
needs.” The strategy revealed
that an emphasis on collaboration enhanced customer Assessment Beyond Numbers
relationships and fostered a shared purpose and
To move away from the quantification associated with
engagement among employees.
the term “measurement,” Marr shifts the focus to
Measurement and its Limitations “performance assessment,” which helps organizations
The achievement targets of the command-and- value performance through collecting information
control style of management have been misused as “to enable comparison of a given situation or status
performance indicators focused on end results and do relative to known objectives or goals,” and can be
not offer employees opportunities for improvement expressed in written descriptions, symbols, or color
and challenge, nor do they lead to insights and codes. He prefers the term “indicator” to “measure,”
decisions that can inform the organization’s strategy. as it can be expressed as a level of performance. To
Marr’s view is that organizations should measure determine these indicators, it is necessary to start with
performance “to inform management decisions, to the value creation map, which reveals the factors that
challenge strategic assumptions and to continuously contribute to the overall strategy.
learn and improve.” To start, organizations must determine what they
In most disciplines, measurement is often quantified; really want to assess, and look at the performance
in business this includes profits, returns on assets, data that they have already collected. If the data is
orders, successful deliveries, and service visits. irrelevant or insufficient, more will be needed. Various
Gauging organization culture, reputation, and quality methods of obtaining this data can be used which
of customer relationships remains more elusive, and involve the input of people both inside and outside
approaches that involve measuring a quantitative of the company. These people can define indicators as
value cannot provide an accurate assessment. For well as provide perceptual data, which studies have
example, the size and physical appearance of produce shown to be reliable.
cannot provide a complete measurement of intangible One popular collection method is sending out surveys
features such as taste or nutritional quality. and questionnaires; a well-designed survey must be
Another danger of measurement is that it can lead to brief but clear enough to yield useful information.
a misuse of agency theory, in which a business uses Other methods include recruiting observers—

Business Book Review® January 17, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 5
Strategic Performance Management Bernard Marr

who may or may not be involved in the activities • The method for reporting about the performance
assessed—to provide descriptions or fill out score indicator, including who will receive and
sheets or checklists. Interviews and focus groups are have access to the results, the frequency of the
more interactive and can provide additional insights. reporting, the format of the data, and notifications
Mystery shopping features a person posing as a client and workflows developed to achieve progress
or customer who later evaluates a service, while peer- toward the indicator
to-peer assessment allows people to evaluate and learn
• The expiry/revision date, used in the process of
from each other. Many phone conversations at call
determining if the indicator is still valid
centers are recorded and monitored, and customers
are often asked to rate their services. Triangulation, or • The estimated costs of assessing the performance
using multiple methods and sources, can reduce bias indicator
and increase reliability in data collection. • The confidence level in regards to the validity
of the indicator, which may be
Many studies have shown that perceptional assessment is as measured in percentages or other
reliable, if not more reliable, than archival data. It can provide ways, which helps designers keep
in mind how well the indicator can
richer insights into the real level of performance because our actually determine a measurement
brain is able to comprehend performance more holistically.
Much of the same information
from the template should be revisited in the reporting
Designing and Reporting of an indicator. Traffic light assessments, graphs
Performance Indicators and speedometer displays can also provide a visual
Marr presents a template for designing performance gauge of how targets are being met. A comment by
indicators that he believes ensures understanding the owner of the indicator can begin a discussion
by everyone involved and eliminates ambiguity and about improvement. While complete accuracy in
inconsistency in the data collected. Its components assessing performance remains impossible, the use of
include: indicators as decision-support measurements is vital
for an enabled learning environment.
• A name that explains what the indicator is about
Successful Organizational Learning
• The strategic element being assessed, or the
An enabled learning environment allows all
specific resource, core competence, or output
employees of an organization to gain insights through
deliverable from the value creation map
their understanding of strategy and their involvement
• The purpose for assessing the element’s with the collection of performance indicators. They
performance can use these insights to challenge assumptions, refine
• The data collection method, including description their decision-making and learn. The value creation
of the method, the source of the data, the personnel map promotes what Marr refers to as “double-loop”
involved, the formula and measurement scale learning; while “single loop” learning involves
used, the frequency of collection, and other details merely evaluating performance against targets, the
outer circle of the double-loop model represents how
• The individual or department taking ownership, the underlying assumptions and business model are
or managing the assessment of the element challenged, which results in new insights that inform
• The targets and performance thresholds future performance.
that the organization is striving to reach in a In the command-and-control management model,
specific timeframe, and a determination of the performance evaluation is largely based on past
performance direction; in other words, how efforts to meet targets, often reported in formats that
closely the target value should be achieved are difficult to understand, and may lead to blaming

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Strategic Performance Management Bernard Marr

departments or individuals. However, in an enabled the next meeting. The content should be relevant
environment, failure is seen as an opportunity to and meaningful to the participants, so they are in a
reflect on performance in a way that leads to new position to take action.
learning.
Also before the meeting, facilitators should develop
A supportive organizational or social context is the questions that they would like to have answered; for
foundation to an enabled learning environment, as example, if the quality of customer relationships is one
it promotes personal commitment, mutual support, of the elements discussed, the question could be “Are
and trust. Marr outlines Charles Elhin’s four tenets of we building the right relationships?” Data analysts
this context, which include line-of-sight relationships, can help determine the answers by presenting data
a sense of community, a common purpose, and and using performance indicators. Although some
finally, the capability for individuals to visualize answers will come as a result of debate during the
wholes, which leads to an understanding of how meeting, circulating other answers and supporting
departments’ work can contribute in creating overall performance indicators ahead of time allows people
value. Although it takes time to cultivate stronger to reflect on performance, thus promoting learning.
human relationships, the act of developing the value If a process for double-loop learning is in place, the
creation map and narrative is a step toward achieving underlying value creation map will continue to be
these. questioned about its relevance to the organization’s
strategic plan.
The Strategic Performance
Review Process At the meeting, the leader needs to create an
A typical organization performance review meeting atmosphere of purpose, trust, and respect, encouraging
is what the author refers to as an “on trial” review, constructive dialogue among all participants. The most
in which individuals are held accountable for their engaging way to present performance and alternative
numbers, often resulting in blame or defensive options is in story form, using performance indicator
reasoning. Another scenario is the “can’t see the data as support and keeping discussion in the context
woods for the trees” review, characterized by random of the value creation map. Finally, collaborative
discussion and debate over the variety of data that decision-making and learning need to take place, and
individuals report, which in turn detracts from a performance analyst can answer questions about
strategic decision making. The “strategic performance the data collection and its validity so the group can
management” meeting is more focused, with reach a mutual agreement on next steps to take.
participants able to understand
how different elements of the
“On-trial” reviews destroy any social context that is conducive
agenda fit into the strategic to collaboration and learning, and instead bring out an array
plan. With the data circulated of self-centered characteristics, negative politics, and a focus on
in advance and feedback from compliance.
analysts attending the meeting,
collective decisions can be made regarding the leaders’
More Insights from the
recommendations.
Value Creation Map
There are several key aspects to a successful strategic In addition to engaging organizations in strategic
performance improvement meeting. Referring to the planning, the value creation map can be a useful tool to
event as a “meeting” and not a “review” moves the provide them with other insights that impact success.
emphasis away from past performance toward future The map can assist in the development of dynamic
decision-making. The value creation map is used to set capabilities, or “the ability to integrate, build, and
up the agenda; for example, output deliverables such reconfigure the resources of an organization in order
as financial performance and customer satisfaction to create new capabilities,” which in turn helps it to
might be discussed at one meeting, while building stay competitive. Value creation maps can also be
relationships with customers might be the focus of
Business Book Review® January 17, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 7
Strategic Performance Management Bernard Marr

used by organizations to test their business model. Mergers and acquisitions have become a popular
The entire map, subsets, or individual linkages can strategy for growth. They can increase profit, and
be tested through a complicated statistical process to cash flow, as well as eliminating competition and
determine if assumptions are true. broadening an organization’s reach. However,
incompatibility due to differences in leadership
There is a common awareness of external risks
styles, information systems, and other elements of
stemming from competition and the market, but
the businesses joining forces can prevent successful
components of the value creation map can shed
outcomes. Developing and analyzing value creation
light on different risks related to internal resources
maps for both organizations before an acquisition
involved. Monetary resource risks include cash flow
or merger can shed light on the compatibility of
and capital, which need to remain at adequate levels,
resources and the feasibility of integration, and
and price risk around fluctuations in costs of elements
facilitate post-merger integration activities to better
for a business. Physical resource risks include natural
manage the growth.
disasters and production bottlenecks that lead to
glitches in output delivery. Using Software Applications for
Staffing risks can include a lack of engagement,
Automation
which in turn may manifest as absenteeism, poor Research that Marr has conducted of the Strategic
customer service, or other issues. Other human Performance Management practices among the 5,000
resource risks involve employee theft and out-of- largest companies in the United States has revealed
date knowledge. Among structural resource risks are that there has been the most satisfaction among
that IT systems could be compromised by hackers users of software designed for that purpose. Users of
or viruses, intellectual property rights theft such spreadsheets were the least satisfied, due to the lack
as illegal copying of merchandise can lead to lost of scalability and support for collaboration, among
revenue, and regulatory risk could lead to ethics other reasons. Though he recommends software as
violations and litigation. Risks to relational resources a powerful enabler of the Performance Management
such as reputation and supply chains can lead to a process, he warns users that no program will do all
loss of confidence and production respectively, with a the work for them.
disastrous impact. Software
applications can help organizations
display strategic performance
Testing the value creation assumptions and assessing potential information in various formats
risks to the current business model are other forms of analysis that can be understood
that help organizations to see possible areas where they need to by employees and other
stakeholders. Value creation
reconfigure their current resource base. maps are web-based and
interactive, allowing links
Marr suggests that organizations identify risks to underlying indicators, descriptions, and other
associated with each component of the value creation relevant information concerning each element.
map by creating a log that lists a description of Authorized users can access performance data from
each risk, the level of risk determined by potential any location with Internet access. Software also
consequences, and a level of probability that it would features sophisticated data analysis features such as
occur. Assigning numerical values to the levels and multidimensional tools, which allow users to view
adding them can help determine how to prioritize three dimensions of data (for example, product sales,
each risk, and a staff person assigned to it can be region, and time) from different perspectives that
held accountable for a regular review and necessary are relevant to their work. Finally, it can serve as a
actions such as buying insurance and introducing data integration and analysis tool, providing rich,
compliance audits. contextual information that can facilitate knowledge
and learning.

Business Book Review® January 17, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 8
Strategic Performance Management Bernard Marr

Marr includes an appendix that helps organizations introduction that puts each component in context with
determine which software is most appropriate for the overall strategy, and ends with a list of references.
their needs. The advantages of a packaged application In addition, he provides numerous examples of
include quicker implementation and the availability value creation maps, flow charts of processes, tables
of ancillary services to assist users. If organizations explaining resources and other elements, as well as
cannot find an appropriate application that fits case studies of a variety of organizations that have put
their requirements, building a system may ensure components of Strategic Performance Management
better integration with other organizational tools into practice.
and procedures. He also describes issues around
implementation and integration, outlines selection
criteria, and provides a list of the twenty-five leading Contents
vendors and the products they offer. About the author
g g g g Preface

Features of the Book Introduction


Part I: Understanding and clarifying the strategic
Reading Time: 8-10 hours, 219 pages context
Many organizations have had little success Understanding the strategic boundary conditions –
implementing Strategic Performance Management purpose, values and goals
to better understand and improve corporate
performance. Managers meet and devise sets of External strategic analysis – market-based view
measures and targets based on existing strategy, but Internal strategic analysis – resource-based view
in some cases, the data from the areas measured
Mapping and narrating the value creation
fails to provide relevant insights into management
practice and employee performance, while in others, Part II: Managing performance in an enabled
the performance review process disenfranchises staff learning environment
without leading to learning or better decision-making.
Performance indicators
Can organizations assess their intangible value
Creating an enabled learning environment
drivers—variables that are difficult to measure yet
are key indicators to superior performance? Can Extracting more management insights
employees at all levels and stakeholders develop
Part III: Automation of Strategic Performance
and share ownership of strategic planning? In
Management
Strategic Performance Management, Bernard Marr
outlines the necessary steps that organizations need Benefits of automation
to take to analyze their external environment and Appendix: Selecting the appropriate software solution
internal resources, develop a value creation map that
communicates goals and strategy, and determine Further reading on the topic
relevant performance indicators to improve strategic Index
thinking and promote organizational learning.
Marr addresses the needs of organizations both large
and small, from international corporations to non-
profit organizations and government institutions. The
book is organized so that readers have the option to
refer to particular sections dedicated to the general
Strategic Performance Management components;
Marr begins each section and chapter with a thorough
Business Book Review® January 17, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 9
Strategic Performance Management Bernard Marr

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