The Building Block Model

The Building Block Model

1. Fitzgerald and Moon proposed a Building block model which suggests the solution of performance measurement problems in service industries. But it can be applied to other manufacturing and retail businesses to evaluate business performance.

   • It identifies three areas for performance measurement, these are
     • Dimensions
       • The dimensions are the goals, i.e. the Critical Success Factors for the business and suitable measures must be developed to measure each performance dimension.
         • They are the areas of business performance which need to be monitored and controlled if business goals have to be achieved.
           • For overall assessment of the business performance, performance needs to be measure from various perspectives. They are further divided into two sub-categories.
       • Determinants.
         • These are performance areas which influence the results. I.e the up stream determinants which influvences the down stream results
         • Quality of service
           • Measure
             • Product reliability
           • It is the ability to deliver goods and service with consistency. Quality should be judged from eyes of the customers. Quality is the level of benefits customers expects from the product. Quality should be enough for a product price paid.
         • Flexibility
           • Measure
             • Delivery time
           • It is the responsiveness to change in the factor influencing the business performance. Ex, ability to cope with sudden increase in sales demand.
         • Resource utilization
           • Measure
             • Productivity
           • It is the ability to use resources to achieve business objectives. Business assets should be used for the proper purpose and in most efficient way. Ex, using delivery vans to its maximum capacity only by carrying authorized goods.
         • Innovation
           • Measure
             • New product Numbers
           • Ability of the business to devise new products and new ways of doing things. Like packaging of products with environment friendly (recyclable) material.
       • Results.
         • It reflects the success or failure of determinants identified above.
         • Financial Performance
           • Financial performance gives an indication of overall business at a glance in monetary terms. These can be used to identify areas of strengths and weaknesses. It may also highlight other areas previous identified which may be critical to business success.
         • Competitive Performance.
           • How they stand in comparison to its competitors? How are the different from their competitors? Ex, offering of products of higher quality than competitors and products having distinct features than rival products.
     • Standards
       • Equity.
         • When setting standards across an organisation, care should be undertaken to ensure that all managers have equally challenging standards.
       • Ownership
         • Performance measure should be acceptable to everyone. Employees should be got involved in the identification of measures rather than being imposed on them. Ownership means here is responsibility for the results.
           • Managers who participate in the setting of standards are more likely to accept and be motivated by the standards than managers on whom standards are imposed.
       • Achievable
         • An achievable, but challenging, standard is a better motivator than an unachievable one.
       • It explains What kinds of properties good standards or targets should possess.
     • Rewards
       • What kind of properties reward schemes should possess.
         • To ensure that employees are motivated to meet standards, the standards need to be clear (e.g. the target is to 'achieve four product innovations per year' rather than to simply 'innovate') and linked to controllable factors. The actual means of motivation may involve performance related pay, a bonus or a promotion.
       • Motivation
         • Rewards scheme should be set in manner which motivates employees to achieve the business goals. If sales growth is desired than bonus can be linked to performance measures, like increase in number of units sold than previous year.
       • Clear
         • Rewards scheme should be clearly communicated to employees in advance. What kind to performance will be rewarded and how their performance will be measured.
       • Controllability
         • Employees should only be reward or penalized of the result over which they some control or influence. Aspects of business like financing and investment should not be considered by eliminating related expenses like interest and depreciation, when evaluating their performance.