The performance prism
The following BPM tool guide is one of a series produced for ICAEW by Professor Mike Bourne of Cranfield University.
What is a Performance Prism?
The Performance Prism is a framework used for developing multi-dimensional performance measurement frameworks. It has five perspectives:
- Stakeholder needs
- Capabilities and resources
- Our needs from stakeholders
- What are our stakeholders’ wants and needs?
- Which strategies should we pursue to fulfil our stakeholders’ requirements?
- Which processes underpin the delivery of our strategy?
- What capabilities and resources are required to perform our processes well?
- What do we need back from our stakeholders?
The format of the Performance Prism is usually depicted as in figure 1.
Background to the Performance Prism
The Performance Prism has its origins in a research project between colleagues from Cambridge University and what is now Accenture. The Performance Prism was developed as an alternative consulting approach to the Balanced Scorecard
The idea behind the Performance Prism came from the fact that organisations don’t exist to deliver strategy. In fact, organisations only exist to satisfy the needs of stakeholders. This means that the Performance Prism has a fundamentally different starting point to the Balanced Scorecard. In a Performance Prism world, understanding the needs of the key stakeholders is a precursor to the development of strategy. Strategy must then be developed in the light of these stakeholder needs and in light of the organisation making a profit or delivering its purpose.
The Performance Prism then suggests managers proceed to ensure that:
- process are aligned with the delivery of strategy and
- the resources are allocated and aligned with ensuring performance of these processes
Finally, the Performance Prism recognises that organisations have a two way interaction with their stakeholders. There are things that the stakeholders require from the organisation and things that the organisation requires from their stakeholders. In the Balanced Scorecard these are both contained within the Customer Perspective. In the Performance Prism this difference is specifically highlighted.
Performance Prism Practice
The Performance Prism approach has been used in organisations as diverse as the Public Private Partnership in London Underground, DHL, Schering Health Care and the New Zealand Navy, but the Performance Prism isn’t widely used. You will rarely find companies stating that they have a Performance Prism. However, its value lies in the thinking process the Performance Prism creates rather than in the framework itself. So some organisations use the Performance Prism as the means of developing their strategy or success map.
One of the enduring benefits of the Performance Prism is that it focuses on stakeholders. Those stakeholders may be the owners and the customers as in a traditional Balanced Scorecard, but they may also be suppliers, employees, regulators and society at large. This makes the Performance Prism particularly useful for public sector and third sector organisations whose ultimate goal is not always the pursuit of profit. It also lends itself well to companies that operate at the interface with the public sector, such as public/private partnerships and companies in regulated industries. However, there are very few “for profit” companies that wouldn’t benefit from taking a broader multiple stakeholder approach in the development of their performance measurement and management systems.
The output of a Performance Prism initiative should be an explicit Success Map that links the different objectives to be achieved from the stakeholders’ wants and needs, through the strategy, processes, capabilities and resources to our wants and needs from the stakeholder.
There are two distinct processes for creating a Performance Prism base Success Map.
- Working through the Performance Prism questions for all the stakeholders at once, building the Performance Prism from the five questions outlined above.
- Creating a separate Success Map for each of the major stakeholders and then combining these individual Success Maps to create a single Success Map for the whole organisation.
My preference is for the second approach. It takes slightly longer but it helps those involved in the process to gain a much greater understanding and insight into the different stakeholders’ needs. It also makes the final trade-offs explicit, so I believe the extra time spent is well worth the effort. Further, you will find that you speed up as you go through the process, so your consideration of your first stakeholder will take much longer than the consideration of your last stakeholder.
Benefits of a Performance Prism
The Performance Prism has a number of benefits:
- It is more the outline structure of a process than a framework as it possess the series of steps and questions to ask yourself when developing a performance measurement system.
- It focuses attention on stakeholders.
- It allows performance to be explored from multiple perspectives. By this I mean that performance can be viewed from the perspective of each of the important stakeholders.
- This focus on stakeholders enables people in the business to think about their stakeholder requirements.
- It focuses on both the needs of your stakeholders and your needs of your stakeholders. In the scorecard these two requirements are combined in a single perspective.
- It is non-prescriptive in that it is up to the organisation to decide which stakeholders to consider and which stakeholders to ignore.
Issues and pitfalls to be avoided
There are a number of issues to be aware of when adopting a Performance Prism:
- It is a multiple stakeholder framework which is considered contrary to the objective of profit maximisation is some quarters (especially in the USA).
- It can be misused in that:
- You need to decide who the key stakeholders are. Deciding to ignore a stakeholder is appropriate, but which stakeholders you include and ignore is an important decision.
- There are always trade-offs between conflicting stakeholders to be managed. Some organisations do this well. In other organisations this trade-off is either done superficially or politically.
Neely, A. D., Adams, C. & Kennerley, M., (2002), The Performance Prism, the scorecard for measuring and managing business success, FT Prentice Hall, London.