To Be Ahead, Through Innovative Thinking
25/06/2021
“What do you perceive as the single most important goal of any organisation?” With this question, Prof. Dr. Harold Hassink, Programme Director at UMIO, began his presentation on performance management during an eye-opening Breakfast Booster session presented live from the Brightlands Chemelot Campus.
According to Prof. Hassink, the answer to this question is – without any doubt – having a viable business model. Without this, an organisation is not able to continue as an organisation in the long run. This seems to be obvious, but when we look at recent history, we see a number of companies that didn’t make it because their business model did not evolve over time in response to the changing environment.
Customers are the key
The key to any business model is the customer, or for that matter, the patient, the student, the inhabitant of a municipality. The organisation acts on behalf of the customer and all the other stakeholders. Without customers, any organisation will cease to exist in time. So, there should be a focus on what is relevant for the customer and how to bring value to these customers. The type of customers and their needs might change over time and organisations should be in sync with these changes in order to continue delivering value to them.
Strategic development and execution
Prof. Hassink explains that we have two important phenomena that go hand-in-hand: strategy development and strategy execution. These are not single or stand-alone issues, but are two important aspects of the same model. Many companies spend a lot of time on strategy development. But that is only one side of the coin. The other side refers to the strategy execution: how do we actually make sure that we are going to live up to the ideas that we have in our strategy development process? That’s much more difficult to grasp. The business model is at the core and it is about surviving. The strategy is about how to make and keep the business model alive in order to reach the next step: to face and answer all the challenges in the organisation’s environment. The strategy development is about how can we get things done in the organisation. That is for most organisations a much more difficult question to answer.
Achieve strategic goals
Strategic performance management is the way a company is able to execute its strategic ideas and goals in order to make sure their business model stays alive. It will be adapted and executed in a way that stakeholders believe adds value. Scientists have thought about these structures and the ways in which organisations can increase the likelihood of achieving their strategic goals. Prof. Hassink shared two models on performance management that can help organisations execute their strategy to make the business model work.
Framework for Performance Management Systems
The first model is the Framework for Performance Management Systems from Aldónio Ferrera and David Otley. They combined research and insights from different disciplines and came up with one single overview that captures the best of the ideas on strategy, performance management, finance and control, rewards, cultures, and so on.
The model contains different steps and every step is linked to a question the company should ask themselves as far as each component is concerned. The main idea is that the company goes step by step from one issue to another within this model. Each of these steps should link to the previous step as robustly as possible. When this happens, the likelihood of eventually strengthening your business model is much greater.
The Levers of Control Model
Harvard professor Robert Simons introduced the Control Systems Framework. This model focusses on the way in which an organisation organises their strategic control mechanisms in order to be able to realise their strategic goals. At the heart of the model, you’ll find the business strategy. This is what the company is all about and what they are trying to accomplish. The business strategy is surrounded by four levers of control: belief systems, boundary systems, diagnostic control systems and the interactive control systems. The idea of this model is that there should be a balance in each of these four levers in order to be able to help the organisation to realise its business strategy.
The belief and boundary systems are more focused on employee behaviour and the diagnostic control systems and interactive control systems are about the organisation’s objectives. The nature of how companies decide on their performance management systems and their control systems is changing. What we observe now is that belief systems and interactive control systems become more important, especially for new and more innovative companies. The way in which employees interact is much more driven by belief and interactive systems compared to the past where the focus was more on boundary systems and diagnostic control systems.
Adapting the business model
When we refer back to this presentation’s initial question, Prof. Hassink emphasises that continuously adapting the business model is in the top three of the most important challenges for any company. This is definitely not something that happens automatically. The company should think of ways to renew and consider its business model. Once there is a new goal or strategy, you also need to be successful in executing the strategy, because “many companies have great ideas but poor strategy execution and in the end, you still have the risk of not being able to survive as a company”.
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Harold Hassink
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