Cranefield Mcom_Dissertation'final_rev'3

Performance Measures Reflecting Competitiveness and Productivity Improvement In
The NPI Workplace Challenge Programme
A Dissertation by
Conrad Sebego
Post Graduate Diploma-Project & Programme Management
ID Number: 720914 5792 081
Submitted in partial fulfilment of the requirements for the degree of
MASTER OF COMMERCE
in
PROJECT MANAGEMENT
at
CRANEFIELD COLLEGE OF PROJECT AND PROGRAMME
MANAGEMENT
Supervisor: Dr L.J. Botha
Date: March 2006

Abstract
i
ABSTRACT
Author: Conrad, Sebego; Post Graduate Diploma Project &
Programmme Management
Degree: Master of Commerce
Title: Performance Measures Reflecting Competitiveness
and Productivity Improvement in the NPI Workplace
Challenge Programme
Institution: Cranefield Graduate School of Management
Supervisor: Dr L.J. Botha
Date: March 2006
Key Words: National Productivity Institute, Workplace Challenge,
world-class organisations, best operating practice, quality,
speed, cost effectiveness, productivity improvement,
customer focus, teamwork, continuous learning, waste
elimination, value addition.
The National Productivity Institute (NPI) is a tripartite organisation dedicated to
the development and enhancement of South Africa’s productive capacity. The
Workplace Challenge (WPC) Programme within the NPI is a supply-side
initiative of the Department of Trade & Industry (DTI) established to meet the
competitive challenges presented by South Africa’s re-entry into the global
market. It aims to encourage government, business and labour to participate in a
consultative process, to improve the performance of local industry.
The programme seeks to enhance productivity and competitiveness through:
 Collaboration between employers and workers;
 Improving workplace practices (best operating practices and world-class
competitiveness);
 Sharing and disseminating processes and lessons.
A number of companies from contrasting sectors are grouped together based on
locality to form a cluster.

Abstract
i
i
According to Womack, Jones and Roos (1991: pre-frontis page), the companies
apply the principles of lean production that include:
 Teamwork
 Communication
 Efficient use of resources and elimination of waste
 Continuous improvement
The research focused within the WPC programme to further identify what factors
need to be considered in order to develop uniform measurements for quality,
speed, cost and morale. The factors were analysed individually and an
understanding of how they relate to each other was drawn. This led to a minimum
acceptable standard of what variables to measure under the different dimensions
of quality, cost, speed and morale. If the measurements are similar, they can be
aggregated per each dimension of QSCM across the company, cluster, regional
and national levels to provide a valid and reliable indication of what improvement
is taking place due to the implementation of the WPC programme.
The research was initiated so as to find ways of making the quality, speed, cost
and morale measurements the same across the different companies, clusters,
regions and nationally. Once that was achieved, the reporting to the Department of
Trade and Industry would give a common indication in terms of overall
improvement due to the implementation of the Workplace Challenge Programme.
Numerous performance frameworks were evaluated for suitability after
determining “why” and “what” to measure. The frameworks assisted with the
“how”. This approach takes full cognisance of the fact that defining what a
performance measurement system constitutes is not as straightforward, as the role
of the measurement system should be considered from the outset.

Declaration
ii
i
DECLARATION
I, the undersigned, hereby declare that this dissertation is my own unaided work.
It is being submitted in partial fulfilment of the requirements for the degree of
Master of Commerce in Project Management at Cranefield Graduate School of
Management
It has not been previously submitted for any degree or any examination at any
other university or institute.
Signed:………………………………
Date: 17th
March 2006

Acknowledgements
iv
ACKNOWLEDGEMENTS
I would like to acknowledge the leadership of the National Productivity Institute
for allowing me to identify a significant job related topic to base the dissertation
upon.
Further to this, I would like to thank Mr David Scorey (National Programme
Manager: Workplace Challenge) for allowing me the substantial time required to
fully understand the real issues about the research topic and lead to practical
implementation. The support and readiness to engage in fruitful discussions from
all the Workplace Challenge Programme employees, has been phenomenal and it
is a privilege to work with such incredible individuals with vast amount of
experience.
My best regards to the representatives and leadership of the ten WPC-Phase III
companies that agreed to engage in discussions and contributed to the topic as part
of the survey in order to gather qualitative data about the topic.
Many thanks to Dr Dudley Jackson (Programme Head: Supporting National
Strategic Initiatives) for being available to act as a sounding board in order to
guide the study in the right direction and helped to inject the motivation to
complete the dissertation.

Table of Contents
v
TABLE OF CONTENTS
PAGE
ABSTRACT i
DECLARATION iii
ACKNOWLEDGEMENTS iv
TABLE OF CONTENTS v
CHAPTER 1
SCOPE OF THE RESEARCH
1.1 Introduction and background 1
1.2 The research process 5
1.2.1 The research problem 6
1.2.2 The research question 7
1.2.3 Investigative questions 7
1.3 Research design and methodology 8
1.4 Research constraints 12
1.5 Chapter and content analysis 13
1.6 Key research objectives 13
1.7 Conclusion on the scope of the research 14
CHAPTER 2
LITERATURE RESEARCH
2.1 Definition of terms and concepts 15
2.1.1 Productivity 15
2.1.2 Competitiveness 19
2.1.3 Performance measurement 28
2.2 Conclusion on literature research 62
CHAPTER 3
RESEARCH DESIGN
3.1 Introduction of issues and relevance 64
3.2 Research theory 64

Table of Contents
vi
3.3 Theoretical framework and validation techniques 65
3.4 Conclusion on research issues 67
CHAPTER 4
DATA COLLECTION METHODOLOGY
4.1 Introduction on methodology 68
4.2 Justification for the concepts 71
4.3 Research procedures 72
4.4 Ethical considerations 73
4.5 Conclusion on methodology 73
CHAPTER 5
ANALYSIS AND INTERPRETATION OF DATA
5.1 Introduction to analysis 74
5.2 Subjects and issues 74
5.3 Categorisation of data 76
5.4 Patterns of data for each research issue 77
5.5 Synthesis and generalisation 77
5.6 Conclusion on analysis 80
CHAPTER 6
OVERALL CONCLUSIONS AND RECOMMENDATIONS
6.1 Introduction to conclusions 81
6.2 Conclusions about the research problem 83
6.3 Conclusions about the research question 83
6.4 Implications for theory 85
6.5 Limitations of research 85
6.6 Further research 85
CHAPTER 7
IMPLEMENTATION GUIDELINES
7.1 Introduction 87
7.2 Applicability within the Workplace Challenge programme 94

Table of Contents
vi
i
BIBLIOGRAPHY 97
ACRONYMS 100
LIST OF TABLES
Table 1 Guideline for measurement reference and method 30
Table 2 Performance measure record sheet 33
Table 3 Framework for operations strategy 44
Table 4 Competitive attributes 60
Table 5 List of interviewed companies 69
Table 6 Intended impact of the WPC intervention 76
Table 7 Utilisation of measurements in WPC companies 77
Table 8 Implementation schedule 94
Table 9 Calculation of performance indicators 96
LIST OF FIGURES
Figure 1 Workplace Challenge Programme Organisation Structure 3
Figure 2 The question hierarchy 5
Figure 3 World-class manufacturing structure 21
Figure 4 The basic model of competitive strategy 25
Figure 5 The basic model of the dynamic approach 26
Figure 6 Importance of performance measures in Japan 35
Figure 7 The performance chain of the firm 52
Figure 8 How activities drive customer revenues 54
Figure 9 Estimating activity revenues 54
Figure 10 Ease of implementation versus quality of measurement 57
Figure 11 Mid-1980’s model of manufacturing firm 59
Figure 12 General customer requirements 61
Figure 13 Descriptors of research 65
Figure 14 WPC impact framework 67
Figure 15 WPC broad based outcomes 72
Figure 16 Project portfolios and process portfolios in the value chain 88

Table of Contents
vi
ii
Figure 17 Organisational improvement model 91
Figure 18 The changing significance of the balanced scorecard 92
APPENDIX 1:
Source of evidence-Interviews with the ten WPC companies 101

Chapter 1 Scope of the Research
1
CHAPTER 1
SCOPE OF THE RESEARCH
“Count what is countable, measure what is measurable, and what is not measurable, make
measurable.” by: Galileo Galilei (1564-1642) as quoted by Kaydos (1999:20)
1.1 INTRODUCTION AND BACKGROUND
The National Productivity Institute is tasked by the Department of Trade and
Industry with managing the Workplace Challenge Programme which aims to
improve productivity and competitiveness through:
 Collaboration between employers and workers;
 Improving workplace practices (best operating practices and world-class
competitiveness);
 Sharing and disseminating processes and lessons.
The Workplace Challenge programme was initiated by a Theory of Constraints
workshop, to identify core problems affecting productivity and wealth creation in
South Africa, during January 1995. The importance of constructive labour
relations at the workplace to improve productivity and competitiveness was
initiated as one of the core issues.
The Workplace Challenge began as a joint initiative between Nedlac and the NPI,
managed by a sub-committee of Nedlac’s Trade and Industry Chamber
comprising business, labour and the dti, Department of Labour, NPI and the
Nedlac secretariat.
The first phase of the Workplace Challenge, between October 1995 and June
1997, was a series of workshops funded by the NPI. This consisted of 9 two-day
provincial workshops, chaired by Nedlac, comprising presentations from
stakeholders and workplace change consultants, followed by discussions on
constraints preventing productivity and growth in sectors and workplaces. The
discussions and findings were published during 1997.

2
During November 1997 to July 1999, the Workplace Challenge sub-committee of
Nedlac’s Trade and Industry Chamber (business, labour, the dti, Department of
Labour, NPI and the Nedlac secretariat) appointed Labour Market Alternatives
(LMA) and the IDC to jointly manage the Workplace Challenge programme.
From August 1999 to December 2002, additional expenditure of R1.3 million
allowed the Plastics sector and Capital Equipment sector to complete
implementation. Expenditure of R18.8 million allowed a further nine sectors
(Clothing, Footwear KwaZulu Natal, Footwear Cape, Automotive, Furniture,
Stainless Steel, Fruit Packing, Textiles and Fish Processing) comprising 53
companies employing 21 690 people to complete implementation by December
2002. In summary, a total of eleven sectors comprising 62 companies employing
25 110 people completed implementation.
Following a revised 3-year work-plan submitted to the dti during June 2002
(drafted jointly by the dti and the NPI), the dti agreed to fund the Workplace
Challenge for a further three years. Implementation started during August 2002.
The Workplace Challenge Programme establishes clusters which are made up of a
number of companies from contrasting sectors and grouped according to locality.
This is where the research will be focused.
The Workplace Challenge Joint Committee has 3 members from the DTI and 3
members of NPI including the National Programme Manager.

3
Figure 1 Workplace Challenge Programme Organisation Structure
Source: Workplace Challenge Programme Annual Report 2003-2004:6
The specific outcomes associated with the different components of the Workplace
Challenge are, capacity building, change management process, project
management, facilitation and evaluation.
The best operating practices are implemented at the different companies in the
clusters to be world class and increase the competitiveness of South African
companies. There are currently about 108 companies taking part in the
programme, grouped into 14 manufacturing clusters. The clusters make up 3
regions spread up in KwaZulu Natal, Gauteng & North West Province, Eastern
Cape & Western Cape. The profile of the companies is as follows:
 SMME = 29%
 Small = 21%
 Medium = 37%
 Large = 11%
 Corporate = 3%
The companies apply the key strategies of best practice organisations by:
 Focussing on simultaneous improvement of quality, speed and cost
effectiveness;
 Establishing close links with customers and suppliers;
Deputy-Director
General, the DTI
Three DTI
Representative
s
†Three NPI
Representative
s
Chief Executive
Officer, NPI
Workplace Challenge
Joint Committee
†Programme Head: Supporting
National Strategic Initiatives
†Programme Manager:
Workplace Challenge
Panel of Experts
+- 108 companies divided into
14 clusters
†Programme Head:
Finance and IT

4
 Driving both linear and non-linear improvement initiatives;
 Eliminating all forms of waste and ensuring value flow; and
 Implementing leadership practices that promote teamwork, participation,
continuous learning and flexibility.
The research will be focused within the WPC programme to further identify what
factors need to be considered in order to develop uniform measurements for
quality, speed, cost and morale. The factors will be analysed individually and an
understanding of how they relate to each other will also be drawn. This will lead
to a minimum acceptable standard of what variables to measure under the
different dimensions of quality, cost, speed and morale. If the measurements are
the same, they can be aggregated per each dimension of QSCM across the
company, cluster, regional and national levels to provide a valid and reliable
indication of what improvement is taking place due to the implementation of the
WPC programme.
Research limitations and scope:
 The mandate and objectives of the Workplace Challenge programme will
not be assessed, it will be taken as is
 The key strategies for best operating practice will be used as the reference
for determining world-class performance
 It is assumed that all companies are using the dimensions of quality, speed,
cost and morale to measure performance of the mini-business teams,
irrespective of what best operating practice methods they use
 It is further assumed that all companies will have substantial measures in
place
 The overall company strategies are not linked and integrated with the
objectives of WPC programme
 The research will not assess the role of the organisational leadership and
the company strategies
 The research will not take the duration of companies on the WPC
programme into account as it is considered immaterial

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 The size of the companies, product variety and industrial sector will be
assessed individually and collectively to understand how they influence
the determination of appropriate measures
 An understanding of the relationship between types of measurements and
organisational level will be drawn to determine where the greatest impact
due to WPC implementation is exerted and therefore what kind of
measurements will provide a correct reflection
 It will be assumed that all the companies exist for the reason of
maximising wealth from invested resources and as such the goal of the
research will be to understand how WPC programme is assisting them to
become productive and competitive
1.2 THE RESEARCH PROCESS
The problem statement and associated research questions can be approached using
the question hierarchy of Emory and Cooper, (1995) as indicated by the following
figure.
Figure 2 The question hierarchy
Source: The Question hierarchy: Adapted from Emory and Cooper, 1995: 56-59
This approach depicted in Figure 2, assumes the problem statement to be
composed of a hierarchy of questions with a descending level of specificity. The
aim of the adapted question hierarchy is to achieve a focus on the research
problem as a result of increasingly descriptive questions.
Identification of appropriate valid and reliable performance measurements of
companies will be vital for them to correctly quantify the benefits associated with
PROBLEM
STATEMENT
RESEARCH
QUESTION
INVESTIGATIVE
QUESTIONS
The problem, which
has prompted the
research
The single objective
or hypothesis that
best states the
objective of the
research study
Those questions, which
must be answered
satisfactorily to support
the research question
or hypothesis

6
implementation of the WPC. Therefore, companies will know at any time whether
the programme is adding value or not. Appropriate actions can be developed
according to the situation.
The measurements at the company level can be aggregated at the subsequent
levels to obtain a true reflection of the improvements. Appropriate decisions that
inform policy and legislation can be made based on the feedback.
As such, the output of the research will be used to the advantage of both the
stakeholders and the beneficiaries.
The exploratory case study approach will be followed to gain insight and analyse
the situation. Both a qualitative and quantitative methods will be used to collect
research data. Ten companies in the 14 clusters countrywide will be selected to
discuss the topic with them. Further to this, overarching issues will be identified
and a questionnaire will be developed. The questionnaire will be used to collect
both internal and external perspectives. The approach will provide ample
explanation and understanding of the issues.
1.2.1 THE RESEARCH PROBLEM
Researchers get off to a strong start when they begin with an unmistakably clear
statement of the problem. After identifying a research problem, therefore you
must articulate it in such a way that it is carefully phrased and represents the
single goal of the total research effort. (Leedy & Ormrod, 2001:52).
Quality, speed, cost and morale are the dimensions used to measure the efficiency
and effectiveness of the Workplace Challenge Programme intervention at different
levels of the participating manufacturing companies.
There exist disparities between the variables that are being measured under each
dimension at all levels, and as such, the results cannot be aggregated together to
determine an overall score since the variables being measured are not the same.
As such, a clear gap has been created and led to the following problem statement:

7
“Lack of uniform performance measures by companies participating in
Workplace Challenge Programme makes it difficult to determine overall
improvement in competitiveness and productivity resulting from implementation
of the WPC programme.”
The indication for competitiveness and productivity improvement must be based
on uniform substantial measures in order to assist with providing valid and
reliable reporting to the Department of Trade & Industry and hence the
importance of the research.
1.2.2 THE RESEARCH QUESTION
Currently, the situation is such that a majority of the mini-business teams in WPC
participating companies, measure different variables within the dimensions of
QSCM. Therefore, the lack of similar measurements at the company levels would
impede correct reflection of WPC intervention at cluster, region, and national
levels. As a result, this has led to the following question:
“What are the uniform measurement variables within the dimensions of Quality,
Speed, Cost and Morale that would be sufficient to reliably and validly indicate
performance (competitiveness and productivity) of the companies participating in
the WPC Programme?
1.2.3 INVESTIGATIVE QUESTIONS
The aim of this chapter is to identify factors (within the dimensions of QSCM)
that impact directly on WPC, and other aspects that impact on WPC.
The following investigative questions will assist to further understand the problem
as they support the research question:
 Are the dimensions of QSCM adequate to measure productivity
improvement in the companies participating in the WPC programme?

8
 Is it important that the QSCM measures must be kept uniform across all
levels of implementation?
 Is it possible that the QSCM measures can be kept uniform across all
levels of WPC implementation?
 Is the quality of QSCM measures more important than the quantity of the
measures?
 Is the WPC programme making a bigger impact at the factory floor levels
of the participating companies?
 Will the small size of the company increase the impact of WPC
implementation?
 Will the product variety affect the quantity of variables to measure under
the dimensions of QSCM?
 Will the industrial sector of the company influence determination of the
variables for the dimensions of QSCM?
As such, the investigative questions and the research question will help to
understand “why” to measure and the interpretation of the questionnaire results
will assist to establish as to “what” to measure.
1.3 RESEARCH DESIGN AND METHODOLOGY
Performance measurement is a topic which is often discussed but rarely defined.
Literally, it is the process of quantifying past action, where measurement is the
process of quantification and past action determines current performance.
Organisations achieve their goals, that is, they perform, by satisfying their
customers with greater efficiency and effectiveness than their competitors. The
terms efficiency and effectiveness are used precisely in this context. Effectiveness
refers to the extent to which customer requirements are met, and efficiency is a
measure of how economically the organisation’s resources are utilised when
providing a given level of customer satisfaction. Neely (1998:5).
This is an important distinction because it not only identifies the two fundamental
dimensions of performance, but also highlights the fact that there can be internal
as well as external reasons for pursuing specific courses of action. Take for

9
example one of the quality-related dimension of performance: product reliability.
In terms of effectiveness, achieving a higher level of product reliability might lead
to greater customer satisfaction. In terms of efficiency, it might reduce the costs
incurred by the business through decreased field failure and warranty claims.
Hence the level of performance a business attains is a function of the efficiency
and effectiveness of the actions it has undertaken, and thus performance
measurements can be defined as the process of quantifying the efficiency and
effectiveness of past action. Once this definition has been established a second
immediately follows, for a performance measure can now be defined as a metric
used to quantify the efficiency and/or effectiveness of a past action.
These three roles of measurement – comply, check and challenge – are
significantly different from and much richer than the traditional view of
measurement as a means of control. They are not based on the assumption that the
behaviour of people can be controlled through measurement. They are founded on
the assumptions that measurement is a tool to be used by people to enhance
business performance and that there are distinct dimensions of business
performance, which need to be measured and managed in different ways.
With regard to the performance measurements that would correctly indicate
impact due to implementation of the WPC programme, the measures would be
attempting to reflect productivity improvement and competitiveness of the
companies. This is in line with the objectives of the programme.
The companies participating in the WPC are not linking or integrating the
objectives of the WPC programme with their overall business strategies. As such,
implementation of WPC is not correctly appraised; this is with exception of only a
few companies. So, the often cited homily: “You can’t manage what you can’t
measure” is applicable to a larger percentage of the companies. The research will
assist with making sure that companies do not measure the wrong things, as things
would go wrong.
According to Yin (2003:20), research design and methodology can be defined as:

10
“The logical sequence that connects the empirical data to a study’s initial
research questions or hypothesis, and ultimately to its conclusion”
An illustrative case study approach will be suitable, as it will assist with
highlighting the best practices adopted by world-class companies. Some of the
more salient aspects of case study research described by Yin (2003:48) as follows:
 A case study is an empirical enquiry that investigates a contemporary
phenomenon within its real-life context, especially when the boundaries
between phenomenon and context are not clearly evident.
 Case study research aims not only to explore certain phenomena, but also to
understand them in a particular context.
 ‘How’ and ‘why’ questions are exploratory, and likely to be used in case study
research.
 A case study illuminates a decision or set of decisions – why they were taken,
how they were implemented, and with what result.
 The case study as a research strategy comprises an all-encompassing method -
with the logic of design incorporating specific approaches to data collection
and data analysis. In this sense, the case study is not either a data collection
tactic or merely a design feature alone, but ‘a comprehensive research
strategy’.
 Case study research uses multiple methods for collecting data, which may be
both qualitative and quantitative.
 A case study is typically used when contextual conditions are the subject of
research.
According to Hussey & Hussey (1997:66), case studies are often described as
exploratory research used in areas where there are few theories or a deficient body
of knowledge. In addition, the following types of case studies can be identified:
 Descriptive case studies: Where the objective is restricted to describing
current practice.
 Illustrative case studies: Where the research attempts to illustrate new and
possibly innovative practices adopted by particular companies.

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 Experimental case studies: Where the research examines the difficulties in
implementing new procedures and techniques in an organisation and
evaluating the benefits.
 Exploratory case studies: Where the existing theory is used to understand
and explain what is happening.
Ten companies around the country, participating in Workplace Challenge
Programme will be selected randomly to discuss the topic with them and identify
valid overarching themes (using a qualitative method).
The combination of both a qualitative and quantitative results would assist to
determine reliable and valid performance indicators, which would be independent
of industrial sector, company size, and product types. The measurement approach
has to take into consideration the different and NPI approved best operating
practice methods such as: MDWT, 20 Keys, TRACC and BICIT.
According to Leedy et al (2001:108), one common practice is to present an
informed consent form that describes the nature of the research project, as well as
the nature of one’s participation in it. Such a form should contain the following
information:
 A brief description of the nature of the study
 A description of what participation will involve, in terms of activities and
duration
 A statement indicating that participation is voluntary and can be
terminated at any time without penalty
 A list of any potential risk and/or discomfort that participants may
encounter
 The guarantee that all responses will remain confidential and anonymous
 The researcher’s name, plus information about how the researcher can be
contacted
 An individual or office that participants can contact, should they have
questions or concerns about the study
 An offer to provide detailed information about the study (e.g. summary of
findings) upon its completion

12
 A place for the participant to sign and date the letter, indicating agreement
to participate
The balanced scorecard (BSC) will be used to categorise especially quantitative
data (which will be collected via open ended interviews) into meaningful groups
based on the 4 perspectives, i.e. financial, customer, business processes, learning
and growth. The output will give a clear idea about where respondents suggest
that more emphasis in terms of the company performance indicators need to be
exerted.
The quantitative data collected via questionnaires together with other supportive
data will give a direction about what variables to measure under the dimensions of
quality, speed, cost and morale. Once the variables are established, a weighted
scale with criteria will be developed. This will be guided at a higher level by the
data categorisation from the preceding paragraph.
1.4 RESEARCH CONSTRAINTS
Limitations:
 Sensitive quantitative data that will be collected, as part of the research, will
unfortunately not be published as it might compromise the organisation’s
competitive status.
Delimitations:
 The research will only focus on the NPI’s Workplace Challenge
Programme.
 The research will not assess the current organisational strategy

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1.5 CHAPTER AND CONTENT ANALYSIS
1.6 KEY RESEARCH OBJECTIVES
 To contribute towards alleviating some of the challenges through the research,
gain relevant and up to date information about the current situation and
develop possible solutions, thereby adding value to the organisation
o To determine robust performance measures that would provide a true
reflection of WPC impact and help with reporting correctly to the DTI
o The set of performance measures will provide critical feedback that the
NPI can act upon and diagnose to increase the success of the WPC
programme
o The intention to define uniform measurements will influence
companies to make sure that they deliver with regard to making sure
that WPC is appropriately implemented and be allocated the correct
priority
 The research is such that, it is practical and if facilitated through this
dissertation, it will be beneficial
 To demonstrate that the research builds on ideas developed by others
Chapter 1: Scope of Research
Chapter 2: Literature Research
Chapter 4: Data Collection
Methodology
Chapter 5: Analysis and
Interpretation of Data
Chapter 6: Overall
Conclusions and Implications
Chapter 7: Implementation
Guidelines
Bibliography
Acronyms
Appendix 1
Chapter 3: Research Design

14
1.7 CONCLUSION ON THE SCOPE OF THE RESEARCH
“Measurement is the first step that leads to control and eventually to improvement. If you can’t
measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you
can’t control it, you can’t improve it.” By H. James Harrington as quoted by Kaydos (1999:3)
The need to have uniform performance measures due to the implementation of
the Workplace Challenge Programme is critical to the project managers, the
beneficiaries and the funder. In the attempt to determine what those measures
should be, many factors have to be considered, i.e. those that are relating to the
dimensions of productivity improvement and those that are impacting
universally on the problem. All these factors have been identified via the well
defined research process, the questionnaires will be based upon them, the
collected data will be interpreted and inferences will be made from the surveyed
population. The research constraints are outlined, a brief report content analysis
is provided and the research objectives are discussed. The next chapter will
provide supportive and relevant literature research regarding the topic.

Chapter 2 Literature Research
15
CHAPTER 2
LITERATURE RESEARCH
2.1DEFINITION OF TERMS AND CONCEPTS
2.1.1 PRODUCTIVITY
There are some common misunderstandings about productivity. It is not a
measure of production although many students of economics and many
businessmen have failed to comprehend the difference between productivity and
production. It is not a measure of costs, although it is one component of cost. It
does not measure the cost of a resource, but it is a measure of the relationship
between quantity of resources used and quantity (or value in constant terms) of
output.
It is not precisely a measure of efficiency, although it is often a good indicator of
the efficiency with which some resource is being used. The basic arithmetic of
productivity is very simple—it is a ratio of some measure of output to some
measure of input. One output measure, for example, with which every car owner
is familiar, is miles per gallon of gasoline. This measure is used not as a gauge of
the efficiency of the gasoline but as an indicator of the efficiency of the car’s
performance.
Illustrated here is one of the first principles of a productivity ratio. It does not
necessarily represent the efficiency of the specific resource used in the input
measure but rather the combined effect of a number of factors. Thus, miles per
gallon of gasoline is a ratio which reflects the size and efficiency of the engine,
speed, road conditions, traffic and traffic lights and other factors as well as the
efficiency of the gasoline itself.
These observations are also true, in varying degree, of company productivity
ratios which relate output to any one of the inputs such as labour, capital or
material. Each ratio is influenced by the volume and quality of the other inputs
employed and how effectively they are used. Output per man-hour, output per unit

16
of capital, and output per unit of labour plus capital are all influenced by the
volume of capital equipment, its stage of technological development, the quality
and availability of materials, the scale of operations and rate of capacity
utilisation, organisation and workflow, and other factors—as well as the very
important contribution of the skill and attitude of the workforce, including
management.
It is very important to recognise this interplay of factors which may affect the rate
of productivity. If the rate of increase in output per unit of some resource, any
resource, appears to be lagging behind the industry’s performance or behind some
expected standard, the causes of that lag are usually not found in the ratio.
Confusion about the meaning of productivity often arises because different
measures are possible and because different compilers or users often claim that
there is only one “true” measure (their own, naturally) and the others are
somehow inferior or of secondary importance.
Various types of ratios in use at the plant level are often called productivity ratios.
These include operating ratios, performance ratios, labour ratios, and so on. They
often fail to meet one important criterion of a productivity ratio, namely, that the
output and the input be expressed in constant terms over the selected time period.
It is not likely that any firm will have in its accounting records the kind of detail
needed for absolutely precise measurements of productivity, nor is a firm likely to
engage in the expense of setting up and maintaining such records. But that is not
necessary. The measurements obtained, for the establishment or for entire
industries, need not have the penny precision of a balance sheet. What is
important is that the measures yield a reasonably accurate picture of what is
taking place and that the user not to be misled by small, fractional and
insignificant differences in performance.
We define productivity as the ratio of output to inputs of labour and other
resources, in real terms. Productivity increases as output grows faster than the

17
inputs use in the production process. Changes in productivity are of great
importance at all levels – national, industrial, company, and personal.
At national level, productivity is a major element of economic growth and
progress. At the national level, productivity growth also provides a proportionate
offset to increases in wage rates and other input prices, thereby reducing the rate
of inflation of output prices.
At the industry level, above-average productivity growth leads to relative declines
in costs and prices. In both domestic and international markets, this increases the
competitiveness of the firms of the progressive industries, which consequently
tend to grow faster than average.
At the level of the company, productivity is fundamental to profitability and
survival. Companies with higher productivity than the industry average, tend to
have higher profit margins. Moreover, if productivity is growing faster than that
of competitors, the margins will rise.
At the personal level, increasing productivity in all of one’s activities is an
important aspect of self-fulfilment. To the individual, as a member of a firm or
other organisation, it serves as a key to advancement since it helps increase the
productivity of the organisation. In the last analysis, the productivity advance of
the nation, with all its attendant benefits, depends on the increasing productivity
of all of us as individuals and of the organisations in which we work. Christopher
& Thor (1993: 1-1.3).
Greenberg (1973:1) is of the opinion that there are some common
misunderstandings about productivity. It is not a measure of production although
many students of economics and many businessmen have failed to comprehend
the difference between productivity and production. It is not a measure of costs,
although it is one component of cost. It does not measure the cost of a resource,
but it is a measure of the relationship between quantity of resources used and
quantity (or value in constant terms) of output. It is not precisely a measure of

18
efficiency, although it is often a good indicator of the efficiency with which some
resource is being used.
Christopher et al (1993:1-1.5) indicates the following, for an organisation unit or
firm, the quantity of goods and services produced depends on (and is function of)
the quantity of labour and other resource inputs used in production and on the
efficiency with which they are used, i.e., their productivity. This is also true of
aggregations of firms up to the levels of the industry and the national economy.
This theory implies, of course, that the production of individual firms can be
increased and the whole economy can grow by increasing the quantity of labour
and other inputs used, and/or by increasing productivity. For the firm that
increases productivity relative to competitors, less input and less cost will be
required per unit of output.
The ratio of output to input at a point in time has no meaning. Rather, productivity
ratios are meaningful only in measuring changes over time, or differences among
plants or firms producing the same range of goods and services or among the
same industries in different countries.
The ratio of output to all associated inputs has been called “total productivity”; in
contrast to the “partial productivity” measures, it reveals advances in overall
productive efficiency – the same output with lowered total input.
It is true that labour cost is the major factor cost of the national product and of
“value added” in most industries. Partly for this reason, “output per labour-hour”
measures have been widely used as indicators of changes in productive efficiency.
But these measures are biased to the extent that capital per labour-hour has not
remained constant. As a matter of fact, real capital stocks and inputs – in the
economy and in most industries – have increased faster than labour input. Thus,
some part of the increase in output per labour-hour has reflected the substitution
of capital for labour. In many cases, measures of output per labour-hour may not
be seriously misleading, but when the goal is to measure changes in productive
efficiency, it is better to attempt to deal with all inputs. The total productivity

19
index, as a measure of the efficiency of the business as a whole, is the key
measure.
Productivity is obviously very important to any business. However, low
productivity is only a symptom of process quality. Consequently, quality is what
should be emphasised when trying to improve performance, not productivity.
Productivity is used as a cross-check on total process performance.
Measuring productivity is a complex subject by itself, especially when trying to
develop measures which combine labour and capital components. However,
because productivity is the result of high process quality, all that is needed for
improving performance is an index that will reliably indicate which direction
productivity is moving.
2.1.2 COMPETITIVENESS
The manufacturing game today has changed from one in which the field is defined
by national boundaries to one in which there are no boundaries. The market today
is the world. Companies who want to compete successfully are striving to become
world class manufacturers. Giffi, Roth & Seal (1990:6).
Few references to or uses of the term world class in the context of manufacturing
can be found prior to 1986. Until then, manufacturing excellence was the most
common way to refer to the goal of achieving superior manufacturing capabilities.
Each of the more recent books on manufacturing has its own definition of world
class manufacturing. Hayes et al (1988: 24-25), identify these attributes of world
class manufacturers:
 Becoming the best competitor. “Being better than almost every other
company in your industry in at least one aspect of manufacturing.”
 Growing more rapidly and being more profitable than competitors.
“World class companies can measure their superior performance by
observing how their products do in the marketplace and by observing their
cashbox.”

20
 Hiring and retaining the best people. “Having workers and managers
who are so skilled and effective that other companies are continually
seeking to attract them away from your organisation.”
 Developing a top-notch engineering staff. “Being so expert in the design
and manufacture of production equipment that equipment suppliers are
continually seeking one’s advice about possible modifications to their
equipment, one’s suggestions for new equipment, and one’s agreement to
be a test site for one of their pilot models.”
 Being able to respond quickly and decisively to changing market
conditions. “Being more nimble than one’s competitors in responding to
market shifts or pricing changes, and in getting new products out into the
market faster than they can.
 Adopting a product and process engineering approach which
maximises the performance of both. “Intertwining the design of a new
product so closely with the design of its manufacturing process that when
competitors ‘reverse engineer’ the product they find that they cannot
produce a comparable one in their own factories without major retooling
and redesign expenses.”
 Continually improving facilities, support systems, and skills that were
considered to be “optimal” or “state-of-the-art” when first
introduced, so that “they increasingly surpass their initial capabilities.
This emphasis on continual improvement is the ultimate test of a world
class organisation.”
Huge & Anderson (1988:24-25) also identify “lower cost, higher quality, better
service and more flexibility than competitors” as the factors behind the success of
leading Japanese companies both in Japan and in the U.S.
“Today there is wide agreement…that continual improvement in quality, cost lead
time, and customer service is possible, realistic and necessary,” and that “one
more primary goal, improved flexibility, is also part of the package.” With
agreement on the goals, the management challenge is reduced to speeding up the
pace of improvement, as indicated by Schonberger (1986:2).

21
Giffi et al (1990:8) is of the idea that world class manufacturers, then are those
that are able to create high-valued products and earn a superior return over the
long run through the application of competitive strategies. World class
manufacturers today are applying concepts designed to demolish the obsolete
methods, systems, and cultures of the past that have impeded their competitive
progress. In their place, these manufacturers are building a more effective
competitive structure, using improved tools, materials and techniques, on a solid
foundation of human resources, organisational development and cultural
understanding. The result in each case is an organisation capable of competing on
a global basis.
Figure 3 World-class manufacturing structure
Source: Giffi et al (1990:9)
World class manufacturers, regardless of industry or size, operate within a
framework as seen in Figure 3. At its centre, the framework highlights quality and
the customer. A commitment to quality and the customer affects every aspect of
the organisation:
 Management Approach
Management
Approach
Manufacturing
Strategy
Manufacturing
Capabilities
Performance
Measurement Human
Assets
Organisation Technology
QUALITY &
CUSTOMER

22
 Manufacturing Strategy
 Manufacturing Capabilities
 Performance Measurement
 Organisation
 Human Resources
 Technology
According to Giffi et al (1990:12), world class manufacturers are changing their
performance measurement system to encourage manufacturing excellence.
Performance measurement systems in the future will be tailored to a company’s
strategic action programs. Traditional cost accounting systems at leading
manufacturers will be dismantled and replaced with performance management
systems.
Accounting systems in the future will be reshaped to enable manufacturers to
examine the activities that drive costs rather than the departments that collect
costs. Cost drivers that have a direct influence on operational performance will be
identified and managed. Overhead will not be equally spread over all
manufacturing work centres, based upon changes in direct labour input, but will
be directly traceable and accountable to individual cost drivers. Costs will be
segregated into value-added and non value-added categories. Non value-added
costs are those that can be eliminated without detriment to the product or service.
Target costs that are not based upon internally generated cost standards, but rather
upon externally defined competitive costs, will be developed. Performance
systems will be expanded to include the critical non-financial or operational
measures of performance. Time-based measures of performance such as
manufacturing cycle time, setup time, on time delivery, engineering cycle time,
and order processing cycle time are important barometers and regular measures of
performance. Quality measures will be expanded to include not only
manufacturing quality but quality in all functional areas of the enterprise.
Customer feedback and performance ratings are an integral part of the enterprise
wide system of world class competitors. This quality integration will have to be a
common part of the performance measurement systems of all contenders.

23
Giffi et al (1990:62) indicates that being a world class manufacturer demands
significant cultural and behavioural changes at all levels of the company.
Management must be able to manage by fact and have the information that taps
into customer satisfaction. Companies must use measurement systems to identify
customer needs, expectations and satisfaction and to measure internal and external
customers’ attitudes. Methods such as QFD and Taguchi are powerful in
determining measurable requirements. Other important measures are the level of
service quality delivered and gaps between customer expectations and the service
delivered.
As noted by Giffi et al (1990:102), American manufacturers are beginning to
understand the strategic advantage created by time-based capabilities. Time-based
competitive capabilities have been increasing in importance. This theme has been
echoed by numerous researchers over the last several years. While conformance
and performance quality remain the primary focus of U.S. manufacturers, time
and service continue to increase in importance.
Competitive advantage grows fundamentally out of the value a firm is able to
create for its buyers. It may take the form of prices lower than competitors’ for
equivalent benefits or the provision of unique benefits that more than offset a
premium price. Competitive advantage is hardly a new subject. In one way of
another, many books about business deal directly or indirectly with it. The control
of cost has long been of concern, as has differentiation and segmentation. This
topic cuts across many disciplines, because marketing, production, control,
finance and many other activities in a firm have a role in competitive advantage.
Similarly, a long tradition of research in business policy and in industrial
economics bears on this subject. However, competitive advantage cannot be truly
understood without combining all these disciplines into a holistic view of the
entire firm.
Pumpin (1991:23) is of the opinion that value potential is one of the three
cornerstones of dynamic growth: dynamic companies exploit value potential.
Value potential requires a certain favourable combination of circumstances as
evidenced by, for example, a number of ‘undermanaged companies’ or a number

24
of capital investors. This combination may be found within the company, or it
could be in the market or elsewhere in the company’s environment. It may not be
an obvious combination yet.
Value potential is something which a company can develop through its business
activities to its own advantage and that of all its stakeholders.
Value potential can therefore be defined as a favourable combination of
circumstances in the environment or market or within the company that is either
still latent or already recognisable. This potential is then exploited through
company activities for the benefit of all stakeholders. However, obvious potential
of this kind is usually of little interest because it is bound to be noticed and
harnessed by other companies as well. For example, there is doubtless great
potential in the market for personal computers, but in practice this is only open to
PC firms which are already established. Less conspicuous, latent potential benefit
is much more interesting. Henry Ford recognised the latent demand for low-priced
motor cars at the beginning of this century, and immediately developed a product
– famous Model T – with which to tap the market potential. It is worth noting in
this context that, in a large market, value potential may often arise in the form of
market niches.
Classic, market-oriented management theory focuses on the relationship between
the company and the market as shown on Figure 4. The company is perceived as a
productive social system which provides goods or services for a third party – the
market. This is also true in strategic theory, where the competitive dimension is
taken into account. One of the main objectives of ‘competitive strategy’ is to
achieve superiority over the competition by creating the right emphasis. Pumpin
(1991: 24).
This model inevitably places great weight on market potential. To put is simply,
the company must concentrate on markets with considerable potential and offer
these markets products which are better than those of the competition.

25
Figure 4 The basic model of competitive strategy
Source: Pumpin (1991:24)
‘Value potential’ should therefore be thought of as a generic term, including
market potential as just one type of potential among many others. Figure 5 shows
the broader base of this approach compared with the classic management
approach of Figure 4. The principles of corporate dynamism differ from classic
competitive strategy and should be seen as a complete corporate concept. Nor
would the more common expression ‘profit potential’ be appropriate to the
concept. In the end, of course, any company trying to be dynamic is also trying to
increase its own profits, but instead of working entirely to the advantage of its
shareholders it must increase benefits for all its stakeholders at once. It must
achieve a balance which will avoid conflicts and give higher value to all its
stakeholders, including its investors.
Company
Competition
Market
potential

26
Figure 5 The basic model of the dynamic approach
Source: Pumpin (1991:26)
‘Strategic excellence positions’ is where companies consciously develop selected
skills which give them superiority over the competition and hence above-average
results over the long term. Here the focus is on the company’s skills, in contrast
with value potential, where the focus falls on a grouping in the environment or the
market, or possibly within the company. It is often necessary to build up strategic
excellence positions in order to exploit long-running value potential.
Only limited growth can be achieved by ‘dynamic behaviour’ and hectic activity.
It is crucial to dynamic growth that the company’s activities should be directed
towards areas where yields are high. In other words, dynamic growth can only be
sustained when the company’s activities generate high value.
Virtually every company report or management book you pick up today makes the
point that people are the most valuable asset in the company. It is a
straightforward thesis: after all, it is people – executives and workers – who
perform the activities of the company. If they do not do their jobs well, then the
company’s existence is threatened. It is quite natural that the importance of the
workforce should be highlighted.
Financial
potential
External human
potential
Market
potential
Balance
sheet
potential
Company

27
Pumpin (1991:133) is of the view that, actual practice, however, is quite different,
and not only in static companies. A great many very successful, dynamic, firms
have a cold, authoritarian atmosphere. Superficial observation might even seem to
support the theory that many major successes have only been possible thanks to
an almost tyrannical entrepreneur. Some industrial pioneers, such as Rockerfeller
and Ford, have been extremely domineering. Contradictory examples, however,
such as Thomas Watson Jr, Bob Hewlett and Gottlieb Duttweiler, immediately
spring to mind.
So, corporate dynamism can be achieved, temporarily at least, without an
orientation towards people. In the long term, though, an authoritarian attitude is
sure to lead to a dead end. For long-term corporate dynamism, management must
reflect the needs of the people.
Pumpin (1991:162) further indicates that, dynamic companies motivate their
employees in every possible way. Management is a crucial element in dynamic
development. The culture is oriented to expansion, speed, productivity and risk-
taking. The management of static companies is content to pay lip service to
motivation. What culture they have is dominated by bureaucracy and cost
awareness. They neglect the time factor.
According to Greenberg (1973:17), the influence of material costs can be removed
by using a measure of output called value added, which is the difference between
total cost or value and value of materials purchased. It reflects cost of labour,
capital depreciation, taxes and profit mark-up. The value component mark-up may
be affected by factors quite unrelated to the production process. Some
commodities are produced and sold to “round out” a line of merchandise; the
price on a given day, month, or year may be determined more by competitive
factors than by production costs.
Customer expectation:
 Quality
 Speed
 Cost

28
The benefit of World Class performance lies in providing the cost, quality, and
service advantages that sets the organisation apart from its competitors. This is
only possible if effective measurement techniques and systems, capable of
providing accurate performance data are in place. Measurement can be a complex
issue, so let’s just consider some principles before embarking upon explanation of
the levels.
Measurement is both the way to discover the facts about what is actually
happening, and the means of exercising a degree of control over the results.
Control has several elements, each of which is commonplace to most
organisations as indicated by Drennan et al (1999:78):
 Post-facto control, where what has been done is reported on and analysed
to ensure the mistakes of the past are not repeated.
 Operational control, in which steps are taken to ensure that known or
anticipated problems do not occur.
 Design control, in which the preparation of plan scenarios is done in such
a way as to ensure that the eventual results are confined within planned
parameters.
The three are listed in the order of frequency in which they are found in most
organisations. Measurement plays a key role in each of these elements and in the
pursuit of world class performance, none more than in design control. The first
two elements contain a subsidiary process that requires that a mistake must first
be made before it can be corrected. Design control, on the other hand, takes place
before any tangible evidence is available. Adequate design control means getting
it right the first time (a frequently-used synonym for productivity) and helping the
organisation achieve the desired organisational result quicker than its competitors.
2.1.3 PERFORMANCE MEASUREMENT
According to Nash (1983:2), the theme of managing corporate performance is
how the executive begins with the idea of an enterprise, shapes its image, creates
its climate, sets its goals, motivates its people, and measures individual

29
performance. The leitmotif is achievement, the achievement of goals from the
corporate through the divisional and functional down to the individual. It is a
vertical integration of achievement linking organisational levels through the use of
organisational behaviour tools: strategy, climate, goal setting, incentives, and
performance appraisal.
According to Drucker (as quoted by Nash, 1983:3), believes that there are three
major tasks of management: to decide the purpose and mission of the institution,
to make work productive, and to manage social impacts and responsibilities.
Amongst others, the task of management is to make work productive and the
worker achieving. Business enterprise (or any other institution) has only one true
resource: man. It performs by making human resource productive. It accomplishes
its performance through work.
The major responsibilities of executives are to plan the work of the organisation
and to be sure that the organisation achieves the plan. The business of
management, put plainly, is organisational performance. Admittedly this is an
oversimplification – not because it contains contradictions or exceptions but
because it does not go far enough. Management must do more than plan, execute,
and review quantitative corporate results in order to be successful. It must do the
same for its image and climate, for line and staff, for business units and functional
departments. It must understand the psychology of goal setting and performance
appraisal at the individual level and must be able to involve its human resources
through a process of true participation. Successful management is holistic
management. Each decision or action is taken with insight into its effect on the
other parts of the corporate body.
Performance remains one of the classic problems of management: how to get
people in the organisation to achieve its goals. The problem is enduring and
timeless, as old as management itself.
The word: perform means to do, to accomplish. The act of performing means to
carry out a goal or responsibility. Performance is the thing done.

30
Performance is the pure essence of management, independent of time, place or
type of business. To manage is synonymous with to perform. Management is
independent of ownership, rank or power. It is objective function and ought to be
grounded in the responsibility for performance. Drucker (1973:455).
Few books link strategy to image, climate, goal setting, performance appraisal,
and participatory management. Planning should be viewed as a long-range
strategy for corporate effectiveness, but in fact it is not. According to Beer (as
quoted by Nash 1983:11), both specialists in the field and management seem to
lack the strategic perspective.
Standardisation of concepts and a common understanding of what they signify are
very important if we are to have a system of information by means of which firms
can compare themselves with each other, with the industry and with other
industries. Greenberg (1973:1).
Kaydos (1999:17) recommends the possible measurement reference and
measurement method as shown in the following table:
Table 1 Guideline for measurement reference and method
METHOD
REFERENCE Direct Indirect
Standardised Measure of physical
parameters and countable
items
Determining physical
measures by effects--
deriving a planet’s weight
from its effect on
another’s orbit
Relative Measures derived from
countable items –
complaints/sale,
defects/car, inventory
turns
Measures of qualities and
abstract attributes—
satisfaction, morale,
helpfulness, kindness,
honesty
Source: Kaydos (1999:17)

31
The standardised-indirect combination is interesting, because at first glance, it
seems to be an impossible combination. However, scientists commonly use
indirect techniques to measure physical parameters with magnitudes that stretch
the imagination
The techniques that must be used depend on what you need to know or measure.
If you have a piece of pipe about fifty feet long and need to know if it is longer
than another piece 1000 miles away, a standardised measure is needed (although
you could use a relative measure by sending a very long fax!). However, if the
pieces are about two feet long and in the same room, all you have to do is hold
them side-by-side to determine which is longer.
The choice of the measurement technique to use should be based on the following
factors:
 What questions must be answered?
 What techniques are feasible for producing the measure?
 What is the most economical and reliable method of making the
measurement?
Highly accurate, standardised measures are simply not necessary for the practical
application of performance measures in the typical business environment.
It cannot be proven, but I believe anything can be measured to a useful degree,
especially in a business environment. If something can’t be measured directly, it
must have an effect, which can be measured. If a process has no intended effect, it
is clearly not worth measuring in the first place. More specifically, any production
process can be measured if what it is supposed to accomplish and how it works
are understood. As a minimum, every process must have at least one customer
whose satisfaction can be determined. How far beyond this point measurement
can be taken depends on the process and other factors. Kaydos (1999: 17).
The real question is not whether something can be measured, but whether it is
worth the effort and money to do it. It may require some creative thinking and

32
changes in the way things are done in order to acquire the necessary data, but
these are not insurmountable barriers.
Kaydos (1999:29) is of the opinion that simple measures such as units produced
per hour, shipments per labour dollar, dollars of billings per employee day, and
equipment utilisation will usually suffice.
There are many ways to look at productivity and more than one measure of
productivity may be required to provide a complete picture of what is happening
from a total company perspective. It would be nice if only one measure was
needed, but the laws of complexity and control make that impossible.
A more meaningful approach to measuring productivity is to concentrate on
separate processes or functions. Here, the outputs are fewer in number and their
relative value should not be difficult to determine. Separate productivity and
quality measures of each function could be developed which would be more
meaningful and more sensitive to change. For the purposes of monitoring and
improving performance, productivity measurement efforts should be concentrated
on individual processes producing a narrow range of products. If the productivity
of the parts is taken care of, the whole will take care of itself. However, aggregate
productivity measures should also be used to verify the whole is reflecting the
parts.
Critics of traditional performance measures point out that they are historical in
focus; that they encourage short-termism; and that they often result in local
optimisation. Measures such as machine or labour utilisation encourage
supervisors to keep machines and people busy producing products, even when
there is no market demand. In extreme cases, local efficiencies can seem
remarkable, but the business can be left to write off vast quantities of obsolete
inventory.
It is easy to underestimate how hard it is to design good performance measures,
and there are many examples that illustrate the dysfunctional behaviour that can
result. To avoid this, the designers of measures must consider during the design

33
process the behaviours a measure will encourage once it has been implemented.
A useful framework for doing this is provided by the performance record sheet as
depicted in the following table. This encapsulates the awkward questions
designers of measures need to ask themselves when deciding which measure to
implement.
Table 2 Performance measure record sheet
Source: Neely (1998:36)
Here are the questions to answer when completing the performance measure
record sheet as indicated by Neely (1998:35):
Box 1-Measure
 What should the measure be called?
 Does the title explain what the measure is?
 Does it explain why the measure is important?
 Is it a title that everyone will understand?
Box 2-Purpose
 Why is the measuring being introduced?
 What is the aim of the measure?
 What behaviours should the measure encourage?
Box 3-Target
 What level of performance is desirable?
 How long will it take to reach this level of performance
 How does this level of performance compare with the competition?
Measure
Purpose
Target
Formula
Frequency
Who measures?
Source of data
Who acts on the data?
What do they do?
Notes

34
 How good is the competition currently?
 How fast is the competition improving?
Box 4-Formula
 How can this dimension of performance be measured?
 Can the formula be defined in mathematical terms?
 Is the formula clear?
 Does the formula explain exactly what data are required?
 What behaviour will the formula induce?
 Are there any other behaviours that the formula should induce?
 Is the scale being used appropriate?
 How accurate will the data generated be?
 Are the data accurate enough?
 If an average is used how much data will be lost?
 Is the loss of data acceptable?
 Would it be better to measure the spread of performance?
Box 5-Frequency
 How often should this measure be made?
 How often should this measure be reported?
Box 6-Who to measure?
 Who, by name, is actually responsible for making this measure?
Box 7-Source of data
 Where will the data to make this measure come from?
Box 8-Who acts on the data?
 Who, by name, is actually responsible for ensuring that performance along
this dimension improves?
Box 9-What do they do?
 What actions will they take to ensure performance along this dimensions
improves?

35
For most organisations, perhaps the most serious problem is that their measures
are rarely aligned and integrated, either with each other or with the business’s
strategy.
Organisations which are tops in their industry, stellar financial performers and
adept change leaders distinguish themselves by the following characteristics:
having agreed-upon measures that managers understand; balancing financial and
non-financial measurement; linking strategic measures to operational ones;
updating their strategic scorecard regularly; and clearly communicating measures
and progress to all employees. Lingle & Schiemann (1996:56-62).
As shown in Figure 6, the Japanese ranked delivery speed and after-sales service
last on their list of competitive priorities, a similar position held in the U.S. and
European companies.
Figure 6 Importance of performance measures in Japan
Source: Giffi et al (1990:103)
SPEED
SERVICE
PRODUCT FLEXIBILITY
VOLUME FLEXIBILITY
DELIVERY
CONFORMANCE
PRICE
PERFORMANCE
Decrease Increase
Change in Importance Since 1984

36
For productivity measurement, physical measures, properly weighted remain
significantly more accurate than dollar-value measures (even when adjusted or
“real”) can ever be. Purely value-based productivity measures can be useful, but
in the basic simplified plant-level productivity measurement approaches, physical
measures predominate. One caution about measurement: No firm should set up an
elaborate productivity analysis system for its current operations and anticipate
substantial improvement unless the firm is one of the very few who have
revolutionised their operations to become truly world-class, with a flexible output
pattern, sound and interactive manager-foreman-employee relationships, ability to
change rapidly as needed, and effective, customer oriented systems. Christopher
et al (1993:3-3.1)
Giffi et al (1990:183) is of the opinion that, the prevailing literature on non-
financial performance measurement in manufacturing identifies productivity, time
and quality metrics as the non-financial drivers of manufacturing performance.
Although productivity measurement is among the most traditional measures of
manufacturing performance, it provides a great deal of information about what
determines performance success (Giffi et al, 1990:184). According to Eli Goldratt
in his book “The Goal”, a manufacturing decision is productive only if it:
 Increases throughput (the rate at which money is generated through
sales).
 Decreases inventory (things we buy which we intend to sell).
 Decreases operating expense (money spent to convert inventory into
throughput).
A decision is productive if all three manufacturing performance criteria are
satisfied simultaneously and no tradeoffs have been permitted.
Christopher et al (1993:3-4.1) is of the opinion that, it is no longer news that some
production managers are able to lower the cost, raise the quality and improve on
the delivery of their products all at the same time, even while increasing the
flexibility of their production processes. The reason this is so is that these firms
understand that high cost, low quality, poor delivery and limited flexibility are

37
really a single problem, not four separate ones. They are manifestations of waste.
If waste, defined as anything which adds cost without adding value, is eliminated
in an appropriate way, then all four criteria will be improved simultaneously.
It must be stressed: Quality is defined as performance to the standards of the
customer. “Productivity” is not just the measurement of hourly workers’ unit
production as has been the case in the past. Productive work is the aggregate,
efficient use of all resources, including the knowledge and creativity of
management and professional personnel. The result of the work must be services
of goods of sufficient quality and at acceptable prices to induce customers to buy.
A surplus or profit must be produced to sustain future operations of the enterprise.
Christopher et al (1993:1-7.4).
“The relentless pursuit of excellence is not only demanded by our customers; it is
the best method to improve costs as well”
According to Kobayashi (1990:2), zero economic growth means the growth of
some companies balances out reductions in other companies and small differences
in the internal workings of companies add up over the long term to suddenly
appear as large differences in financial performance. When the economy changes,
companies that are improving their methodologies will find that their advantages
have compounded themselves into a long-term difference in financial
performance.
The first step in obtaining this comparative advantage is to thoroughly examine
yourself in contrast to your competitors. The revolutionary spirit is born through
understanding how your company’s progress and rate of improvement compare to
those of other similar companies or factories around the world. Such a comparison
will make the strategies for short, middle and long-term enhancements clear,
make goals and objectives easily discernable, and generate the desire for quality
and thoroughness.
The value of continuous improvement as a journey that never ends is signified by
Kobayashi (1990:3) that companies that are at the top are often plagued by

38
complacency. Their attitude is why try harder if they are already number one.
Employees are often unaware of the continuous efforts needed to maintain that
position. Position and market share are not the only factors you must compare to
those of competitor firms – quality levels, productivity, costs and other measures
important to the market will determine the relative positions of the enterprises in
the future. You must also carefully analyse these and take action to improve in all
areas.
An enterprise’s ability to remain profitable corresponds to its ability to adapt
manufacturing processes to current demands. It is necessary, therefore, to have
some criteria by which to evaluate this ability to adapt. Moreover, the evaluation
procedure must be explicit enough for improvement activity themes to become
discernible. The evaluation procedure is worthless if after its completion the
managers or staff don’t know what needs to be improved or how to go about it.
Adaptability to change requires more than merely infusing capital into the
operations. It is the ability for management and staff to maintain balance in the
face of unrest and a changing environment.
In evaluating adaptability, be aware of all levels of management and staff in the
factory and evaluate how well they can cooperate in bringing about change.
According to Kobayashi (1990:4), improving manufacturing quality means
constantly seeking ways to manufacture better quality goods faster and less
expensively, as well as more safely. Successful firms constantly seek methods and
programs to achieve these basic, universal manufacturing goals.
The process of attaining these primary goals is similar to climbing a mountain.
The first step is to evaluate where you are in relation to where you wish to be.
Next you must plan your method and your route. The quickest way to reach the
top might be to hang a rope and struggle directly up the face. However, this solo
method lacks any support system for those who follow you – they have to struggle
nearly as hard as you do. Only by building steps can the entire organisation
conquer the mountain. Of course, it is impossible to build the staircase all at once

39
– it takes time. But only by going through the full (though time-consuming)
process can you ensure that everyone will eventually reach the summit.
In the manufacturing environment, the “rock climbing” method of getting to the
top is short-term and tentative. With a sudden change in conditions, the company
may fall without any secured program to give it support. But when the company
has set steps, known to management and staff, everyone can work and climb
together to corporate success.
Christopher et al (1993:1-8.1) indicates that Joseph M. Juran from the Juran
Institute has studied the results attained by both the Baldrige winners and other
leading companies. The strategies used by these companies follow a common
pattern so closely as to establish a cause-and-effect relationship. In my judgement,
the strategy followed by the successful companies show us a road map that, if
followed, leads to world class quality. First, let us notice that all of these leaders
have achieved stunning results with respect to quality. There have been numerous
cases in which these companies have demonstrated the following in only a few
years:
 The time to provide customer service was reduced by an order of
magnitude.
 Defect levels were reduced by an order of magnitude.
 Productivity was doubled through quality improvement.
 Costs were cut by 50 percent, again through quality improvement.
Those are indeed stunning results.
The importance of involving the workers and making them to own the
improvement initiatives is highlighted by Kobayashi (1990:195). Even if a plant
manager devises hundreds of ways to improve productivity in the factory, the
workers cannot get enthusiastic about productivity enhancement when they don’t
feel that their individual efforts are contributing to increases in productivity and
are noticed and appreciated. To optimise the productivity of the factory and use
the resources of your workers to the fullest, you must make an easily understood

40
efficiency evaluation or efficiency control system that shows the employees the
effects of their efforts.
An efficiency control system compares the standard through-time for a process
with the actual through-time and reports the efficiency rating as a percentage
ratio. A proper efficiency control system enables you to achieve efficiency-related
goals. You can readily obtain important data such as how many units can be
produced in one hour or in one labour-hour, how many minutes it takes to make
one unit, what effects different improvements actually have on the system, and so
on.
Although it’s possible to give production workers a rough estimate of their impact
on the company by reporting sales levels of the products they are manufacturing
and the effect of those sales levels on the company’s financial performance, most
factory workers aren’t so interested in that end of the business.
Production workers usually want a more direct measurement of their improvement
efforts than some number that comes from the sales department. They need a
system that shows the direct effects of their own efforts; otherwise they will lose
all motivation to improve the factory. The efficiency control system is one
successful method for giving direct feedback to the workers about the results of
their efforts.
Kobayashi (1990:204) describes the success indicators in terms of the dimension
of quality as follows:
 Efficiency improvements are always achieved
 Workloads and standard labour hours are always up to date and can be
used for production scheduling
Workers in the level-five factory have the ability to consistently meet efficiency
enhancement goals. The workloads on the various equipment are easily balanced
through standard labour hour and cycle time data, production scheduling is done
on an individual machine basis, and production levels have been balanced through
an understanding of labour levels.

41
According to Kobayashi (1990:185), the dream of the factory manager is to
consistently be able to make schedule without periods of wild confusion or of
idleness. Unfortunately, today’s diversified product lines, advanced
manufacturing technologies, shortened cycle time, and fluctuating demand levels
make this ideal difficult to attain. Production scheduling is not the simple matter
that it was in the past when the manager could merely tell the workers to process
the material that sat on the shelf waiting for them.
The production scheduling system of the past, using ledger books to try to control
completion schedules, did not adequately control the intermediate activities on the
production floor. The result was confusion and delayed deliveries.
Here are the performance criteria for a factory that has achieved a world-class
level as indicated by Kobayashi (1990:194):
 All deliveries are made on time, with no last-minute chaos.
The level-five factory can produce the right amount of the right product at just the
right time with the right amount of effort.
 Defects – the greatest enemy of efficiency and on-time deliveries – have
been eradicated.
 Workers are all cross-trained so the production manager can freely
redistribute the work force in response to shifts in the market.
 Suppliers have been developed so that they can deliver just the right
product in just the right amount at just the right time.
 Inventory is low.
 Quality is high.
The factory is now able to meet the demands of the consumer in terms of quality
and delivery schedules, without late deliveries and without having to scramble.
Small group activities (SGA’s) play a pivotal role in improving the manufacturing
quality of the factory. Uniting the workforce in active SGA’s gives the company
competitive strength gained through management of objectives. Small group
activities are the tools for fully utilising the resources of the first-line workers.
Using these tools, the wisdom and the experience of the “hands-on” experts can

42
be applied to solve the problems and achieve the goals that relate to the
manufacturing floor itself, simultaneously improving morale and resolving human
relations issues. Through active SGA’s the workers on the floor can effectively
manage themselves to greater productivity and efficiency.
The purpose of SGA’s is to empower the workers themselves to contribute their
own intellectual resources toward the success of the factory. While SGA’s
naturally increase the capabilities of the workforce and improve performance
toward mutual worker/management objectives, the power and abilities of SGA
groups are far greater than the sum of the abilities of the individual members. The
result of true SGA activity is improvement of the workplace itself and value-
added manufacturing. Kobayashi (1990:37).
In the view of Kobayashi (1990:163-164), a fundamental principle of
improvement in the workplace is that to find lasting success improvements must
originate from the workplace and be executed in the workplace. Many companies
assign all equipment modification activities to outside parties rather than to the
workers themselves. In such situations the modifications often become
complicated, costly, and plagued with delays. Once finally completed, they do not
fulfil the original intent of the modifications at all. Many companies emphasise
programs that encourage first-line workers to develop ideas for improvement, but
the best companies also foster in their employees the ability to execute those
improvement ideas. Ideas conceived by the workers should also be executed by
the workers.
Improvements for the future are firmly rooted in experience from the past. This
does not imply that improvements are always done the same way every time; a
system that was successful under one set of circumstances might need
considerable alteration before it can be applied to a different set of circumstances.
Nevertheless, if the workers have the Improvement Corner as a place to build
improvement equipment and to see model ideas that have been successful in other
areas, their improvement proposals will be far better. The improvement will be
made more quickly, less expensively, and with less trial-and-error. The results
will be a greater savings in money.

43
According to Kobayashi (1990:162), the level-five factory worker is able to say,
“Without all of this unnecessary movement, my job has certainly become easier –
the work seems to do itself.” There is no noticeable waste in the factory, and
morale has improved significantly because all the workers realise that the ideas
they and their fellow employees submitted eliminated wasted steps and
bothersome processes, allowing the real work to progress easily. These workers
all feel a sense of mutual gratitude. There has been outstanding progress in
productivity, quality and lead times and the factory is truly world class.
Competitive advantage is at the heart of a firm’s performance in competitive
markets. After several decades of vigorous expansion and prosperity, however,
many firms lost sight of competitive advantage in their scramble for growth and
pursuit of diversification. Today the importance of competitive advantage could
hardly be greater. Firms throughout the world face slower growth, as well as
domestic and global competitors that are no longer acting as if the expanding pie
were big enough for all. (Porter, 1985:xv).
According to Drennan et al (1999:78), the principal requirements of measurement
are that it should be appropriate, accurate and objective:
 Appropriate: If the measure is achieved (actual against standard or
objective), the organisation will have achieved the organisational result it
wants.
 Accurate: The measure is believable and preferably quantifiable. While
complete accuracy is a possibility there is usually a trade-off between
accuracy and speedy reporting. The rule-of-thumb is that a measurement
be sufficiently accurate to engender the right response in time to effect a
better organisational result.
 Objective: The final requirement is that the measure be objective. The
presence of subjectivity inevitably raises dissent with the outcome of the
measure, which may in turn lead to ambivalent or ineffectual responses to
actual problem situation.

44
At the heart of every organisation are the operations that actually make goods and
provide services. To put it simply, the operations describe what the organisation
does. When you talk about an organisation’s performance, you are describing how
well it does its operations. To improve performance, you have to improve the
operations. This seems obvious. But managers often ignore this simple truth and
try to find quick fixes that don’t involve any effort. Always remember that you
can do great deals with the finances, spend a fortune on marketing, have the best
working conditions, use the latest technology – but if your operations are no good
you might as well shut the door and go home. In brief, the only real way of
improving the performance of your organisation is by doing the operations better.
Waters (1999:48).
Waters (1999:51) indicates that there are many places you can look for
improvements in operations. The operations strategy defines the overall policies
for operations and gives the framework for lower decisions. Medium-term tactical
decisions consider the layout of facilities, process design, capacity planning,
production planning, make/buy decisions, quality assurance, maintenance plans,
recruiting and so on. Short-term operational decisions include resource
scheduling, inventory control, reliability and purchasing. Operations managers
make decisions at all levels, and it is just unfortunate that low-level decisions are
called operational decisions. So, operations managers make strategic, tactical and
operational decisions about operations.
Table 3 Framework for operations strategy
Decision type Typical operations management
decisions
Strategic decisions
Business What business are we in?
Product What products do we make?
Process How do we make the products?
Location Where do we make products?
Capacity How big are the facilities?
Quality management How good are the goods?
Tactical decisions
Layout How are the operations arranged?
Organisation What is the best structure?
Product planning When should we introduce a new
product?

45
Quality assurance How is planned quality achieved?
Logistics How should the supply chain be
organised?
Maintenance How should we maintain and replace
equipment?
Staffing Which people do we employ?
Technology What level is best for planned
production?
Make/buy Is it better to make or buy materials?
Operational decisions
Scheduling When should we do each task?
Staffing Who will do the scheduled operations?
Inventory How do we organise the stocks?
Reliability How can we improve equipment
reliability?
Maintenance When do we schedule maintenance
periods?
Quality control Are products reaching designed
quality?
Job design What is the best way to do operations?
Work measurements How long will operations take?
Source: Waters (1999:51)
In reality, the differences between strategic, tactical and operational decisions are
not this clear. Quality, for example, is a strategic issue when you plan a
competitive strategy, tactical when you choose the best ways to measure quality
and operational when you test products; inventory is a strategic issue when you
decide whether to build a new distribution centre, tactical when you decide how
much to invest in stock and operational when you decide how much to order this
week.
The importance of financial measures such as profitability and return on
investment are referred to by Waters (1999:54). Good financial performance
comes from good operations which can be measured more directly using measures
such as productivity, utilisation and efficiency.
Your competitors are always trying to gain an advantage, and an effective way of
doing this is by increasing their productivity. You then have to match their
improvement simply to stay in business. So the benefits of higher productivity
include:

46
 Long-term survival;
 Lower costs;
 Less waste of resources;
 Higher profits, wages, real income, etc;
 Targets for continually improving operations;
 Comparisons between operations;
 Measures of management competence.
In reality there are four ways of increasing productivity:
i. Improve effectiveness – with better decisions;
ii. Improve efficiency – with a process that gives more output for the same
inputs;
iii. Improve the process – getting higher quality, fewer accidents or less
disruption;
iv. Improve motivation – getting better results from the workforce
A balanced scorecard has been preceded by a number of ideas which resemble it
in various respects and this is referred to by Olve et al (1999:146). If anything,
however, the fact that numerous companies are already using TQM and similar
methods should make it easier to go further and establish a more highly co-
ordinated form of management control in which we believe the balanced
scorecard should be used.
Thus, improving measures of performance has long been an important aspect of
new developments in production management, market research and human –
resources management. Measures used for financial control have also been
refined.
According to Olve et al (1999:147), the notable difference is the balance, the
comprehensive view, and the approach to the future. Successful efforts to reduce
waiting periods or defects in quality show the value of temporarily focusing on
specific measures. But at today’s companies the total picture is also important.
Determining what is right in the long run is not a matter to be left to a single

47
executive acting alone; it calls for discussion. To that end there is a need to
describe the business in a way sufficiently informative and clear to be useful to a
substantial number of people. The balanced scorecard concept can help us by
showing:
 How both financial and other assets are being managed
 Both how others see us and how we see ourselves
 Both stocks and flows
 Both the short and long run
The comprehensive view brings out these trade-offs. The value of the balanced
scorecard concept is not in the key ratios themselves but in the discussion which
the method entails. And this discussion is essential. While a few senior executives
may feel that they understand the trade-offs referred to above, today it is not
enough that only these few do. Many others at the company should also be
discussing the current state and desired future of the business, and for that purpose
the balanced-scorecard concept is a good tool. The reason for involving more
people is that what they do may turn out to be of strategic importance for the
company!
The criteria for determining what measures to use are referred to by Olve et al
(1999:189):
 Measures should be unambiguous and defined uniformly throughout the
company.
 Taken together, the measures used should sufficiently cover the aspects of
the business which are included in strategies and critical success factors.
 The measures used in the different perspectives should be clearly
connected. A scorecard may be said to portray the business as it is, or as
we would like it to be. The picture should be interpreted as a coherent and
convincing report which clearly shows how the efforts described in the
lower portion of the card are logically justifiable for successfully attaining
the criteria in the upper portion.

48
 Measures should be useful for setting goals which are considered realistic
by those responsible for achieving them.
 Measurement must be an easy, uncomplicated process, and it is must be
possible to use the measurements in different systems like the company’s
intranet and data warehouse, for example.
It is often emphasised that we should seek a proper balance between performance
drivers and outcome measures – in other words, between measures which describe
what we do and the effects achieved.
It may at first seem preferable to be able to measure outcomes rather than
performance or its drivers. Therefore the scorecard should probably contain an
appropriate number of drivers. It ay also prove easier to agree on drivers, since
these have to do with something immediate and tangible. The mix of drivers and
outcomes should probably vary among the different perspectives. In general, the
more long-term perspectives, particularly the growth and learning perspective, are
likely to include more drivers.
Olve et al (1999:191) identified and recommends the following possible measures
in each perspective as provided by Norton & Kaplan (1996a):
 Measures suggested for the financial perspective include market shares for
certain customer groups and capacity utilisation for physical facilities –
although these are measures which we may find more often in the
customer or business-process perspective.
 The probability of various customer segments is one of the measures
suggested for the customer perspective – but these may of course be useful
also as part of the financial perspective.
 Among possible measures suggested for the business-process perspective
is the share of sales provided by new products – we have encountered this
measure more frequently in the development perspective, but here it is
described as a measure of the innovation process in a company where this
factor is critical.

49
 Competence and process-improvement time (how long it takes to reduce
costs, rejects, etc by one-half) are mentioned as measures for the learning
and growth perspective – we might expect to find them more often in the
business process perspective.
These examples show that discussing cause-and-effect relationships is very
important. Competencies and capability of improving are factors with longer-term
effects than the share of new products, which in turn is an indicator of the outlook
for future profits. Such reasoning justifies the choice of perspective for these
measures. To agree on cause-and-effect relationships, preferably as shown in
simple graphs, is of course quite valuable, and we have emphasised above how
they can be used for simulation purposes.
When relationships among measures are made clear, and are discussed by many
people, a basis for learning is also created. It may be possible to establish
mathematically the strength of the relationships and the length of time it will take
before the effects become more apparent. For example, studies may reveal that
satisfied customers pay their bills more promptly. In that case, treating customers
well will prove directly profitable even in the short run, while perhaps also raising
hopes of new business in the long run.
The importance of identifying specific properties in performance measures is
referred to by Meyer (2002:6). Ideally, the performance measures of choice would
meet the following requirements:
 Parsimony
 Predictive ability
 Pervasiveness
 Stability
 Applicability to compensation
The requirements of ideal performance measurement are very stringent, far more
stringent than the requirements of the balanced scorecard.

50
Rarely if ever do we find performance measures meeting these common-sense
requirements. Meyer (2002:7) gives the following reasons:
 Firms are swamped with measures, and the problem of too many measures
is, if anything, getting worse, the balanced scorecard withstanding. It is
commonplace for firms to have fifty to sixty top-level measures, both
financial and non-financial. Many firms, I am sure, have even more top
level measures.
 Our ability to create and disseminate measures has outpaced, at least for
now, our ability to separate the few non-financial measures containing
information about future financial performance from the many that do not.
To be sure, research studies show that a myriad of non-financial measures
such as customer and employee satisfaction affect financial performance,
but their impact is modest, often firm and industry-specific, ad
discoverable only after the fact.
 Few non-financial measures pervade the organisation. It is easier to find
financial measures that pervade the organisation, but keep in mind that
many firms have struggled unsuccessively to drive measures of
shareholder value from the top to the bottom of the organisation.
 Performance measures, non-financial measures especially, never stand
still. With use they lose variance, sometimes rapidly, and hence the
capacity to discriminate good from bad performance. This is the use-it-
and-lose-it principle in performance measurement. Managers respond by
continually shuffling the measures.
 Compensating people for performance on multiple measures is extremely
difficult. Paying people on a single measure creates enough dysfunctions.
Paying them on many creates more. The problem is combining dissimilar
measures into an overall evaluation of performance and hence
compensation. If measures are combined formulaically, people will game
the formula. If measures are combined subjectively, people will not
understand the connection between measured performance and their
compensation.

51
Meyer (2002:8) indicates that there is still more fundamental reason for the gap
between ideal performance measurement and performance measurement as it is.
The modern conception of performance, which is the economic conception of
performance, renders the performance of the firm not entirely measurable. The
modern conception of performance is future cash flows – “cash flows still to
come” – discounted to present value. In other words, we think of the firm as assets
capable of generating current and future cash flows. Future cash flows, by
definition, cannot be measured. Nor can we measure the long-term viability and
efficiency of the firm in the absence of which cash flows will dwindle or vanish.
What we can and do measure are current cash flows (financial performance)
potential predictors of future cash flows (non-financial measures), and proxies for
future cash flows (share prices). All of these are imperfect. They are, at best,
second-best measures. Note the paradox that is at the heart of efforts to improve
performance measurement: knowing that most measures are second best compels
us to search for better measures that are inevitably second best.
According to Meyer (2002:9), to search intelligently for better, albeit second-best,
performance measures, we may have to rethink the firm and the relevant units for
measuring performance. Right now, we think of firms as black boxes: investment
flows into the firm, activities take place, products are made and sold to customers
as a result of these activities, and an income statement, balance sheet, and market
valuation of the firm follow. Since financial results – the income statement,
balance sheet, and market valuation – accrue to the firm as a whole or, internally,
to large chunks of the firm called business units, we look for drivers of financial
performance, that is, non-financial measures describing internal processes,
products, and customers, at the level of the entire firm or its business units. The
problem with the black-box approach to the firm and performance measurement is
that it masks differences within firms and their business units: so many processes
take place, so many products are produced, and so many customers are served by
that firm – or business unit-level performance measures – which I’ll call aggregate
measures – conceal important sources of variation.

52
The rethinking of the firm and of the relevant units for measuring performance
begins by asking where the performance of the firm comes from. The
performance of the firm originates in what the firm does, in its activities or
routines. These activities give rise to costs, but they also generate revenues in
excess of costs to the extent that the firm’s products and services add value for
customers. These cash flows and the expectation of future cash flows in turn give
rise to the valuation of the firm in capital markets. The causal chain running from
activities to costs to revenues to the valuation of the firm in capital markets is
shown in Figure 7. This ‘performance chain’ is an extension of Michael Porter’s
idea of the value chain that incorporates costs.
Figure 7 The performance chain of the firm
Source: Meyer (2002:10)
The performance chain carries some immediate implications for performance
measurement. First, the units in the performance chain bear little resemblance to
the units on a typical organisation chart. There are three principal units: the firm,
the customer and the activity. By contrast, the units displayed on an organisation
chart are typically the firm, the business units, functional units and work groups
within business and functional units. Many activities take place within business
units, functional units, and work groups, and many customers are served, directly
or indirectly, by each of them. The performance chain thus raises two questions:
should firms be partitioned into units, such as activities that are much smaller than
the units shown on organisation charts, and how should performance be measured
on these smaller units?
Activities Costs Value added
for customers
Revenue
net of costs
Long-term
revenues/Valuat
ion of firm by
capital markets

53
Second, the performance chain shows that activities incur costs and customer
supply revenues – and that revenues and costs are usually joined at the level of the
firm. This raises the question of whether costs can be assigned to customers and,
correspondingly, whether revenues can be assigned can be assigned to activities
so that revenues and costs can be compared for individual customers and
activities. It is not uncommon for firms to assign costs to customers and then
compare revenues to costs customer by customer. This is sometimes called
customer profitability analysis.
Once costs are assigned to customers, revenues can be assigned to activities, in
other words, it is also possible to compare revenues to costs activity by activity.
This is called activity-based profitability analysis or ABPA. The possibility of
assigning revenues and costs to individual customers and activities is one of the
several reasons why it may be better for performance measures to follow the
performance chain than to follow the organisation chart – while you can always
assign costs to the units shown on an organisation chart, you cannot easily assign
revenues to units smaller than your profit centres or strategic business units.
The aspect where the firm can cut costs without impairing revenues and ill afford
to cut costs because revenues will be impaired is illustrated by Meyer (2002:113).
This aspect is especially crucial in the context of global management, since
success in the global marketplace often requires driving unit costs downward
relentlessly.
If there were simple ways to cut costs without impairing revenues, much of the
performance-measurement problem would disappear, and many of the tough
choices facing managers would be easier. But there are no simple solutions.
Separating costs that should be managed aggressively from costs that must be
tolerated because they are incurred by critical revenue drivers can be very
difficult. A new approach to performance measurement called activity-based
profitability analysis (ABPA) is founded on a simple premise: if you understand
the activities in which the firm engages, their costs, and the revenues that result
from them, then you have a powerful tool for measuring and improving the
performance of the firm.

54
Figure 8 How activities drive customer revenues
Figure 9 Estimating activity revenues
ABPA is based on the elemental conception of the firm that defines the
performance of a firm as what the firm does, its activities, and the measure of
performance as the revenues generated by these activities less the cost of
performing them. ABPA is derived from an established performance measurement
technique, activity-based costing (ABC). It is also based on a success story, the
success many firms have had in managing costs using ABC. ABPA maps almost
Customer revenues
Activity
Activity
Activity
Activity
Activity
Activities add value
for customer
Customer supplies
revenues
Activity
Activity
Activity
Activity
Activity
Activities drive costs
Customer profitability =
customer revenues minus
activity costs

55
everything the firm does onto bottom-line results, avoiding many of the problems
associated with measures of non-financial performance.
Some simple examples illustrate where it is important to separate cost drivers
from revenue drivers and where it is not. Consider first a product whose value to
the customer depends entirely on physical specifications such as capacity,
reliability, and speed – in other words, a product whose value depends on its
functionality or performance for the customer, not its economic performance.
The upshot is that cost drivers can be separated from revenue drivers when two
conditions are obtained as referred to by Meyer (2002:121): (1) products or
services are made to physical specifications, and (2) these specifications capture
performance for the customer and hence drive revenues. When both of these
conditions prevail, costs can be reduced so long as specifications are maintained
or improved (e.g. DRAMs). But only rarely are both of these conditions present.
For many products and services, are no specifications (an extreme case is
psychotherapy). For others, the activities that drive costs are in effect
specifications that may or may not add value for the customer and hence drive
revenues – in other words, activities and specifications cannot be distinguished.
(e.g. airline journeys). The more commodity-like he product and the less the
significance of ongoing customer relationships, the easier it is to separate cost
drivers from revenue drivers. The reverse is also true: the less commodity-like the
product and the greater the significance of customer relationships, the more
difficult it is to separate the two.
Meyer (2002:135) is of the opinion that ABC is capable of distinguishing cost
drivers from revenue drivers if three conditions are met: (1) if the costs of
activities are known, (2) if the revenues generated by each customer are known,
and (3) if the activities performed for each customer are known. The first
condition, of course, is met by ABC, which estimates activity costs. The second
condition depends on the firm – firms that cultivate long-term customer
relationships will often track revenues for individual customers, whereas firms
engaging in one-off transactions or selling in mass markets generally will not. The
third condition obtains far less frequently. Few firms, retail firms especially, will

56
track the activities performed for individual customers due to the systems
requirements imposed by having to monitor the frequency with which many
different kinds of activities are performed for many thousands of customers.
Activity-based costing in the context of ABPA raises the question of who bears
the cost of inefficiency and this aspect is illustrated by Meyer (2002:138). ABC is
principally a costing tool: it is normally used to identify costs and either reduce or
eliminate those which are unnecessary. When doing ABC, it is not unusual to
discover that unit costs vary substantially within a firm. Indeed, the larger the firm
and the more diverse its businesses, the greater the variation in costs across its
units. From the perspective of costing, variation is helpful because it pinpoints
outliers where costs can be reduced easily. From the perspective of customer
profitability or ABPA, however, this variation poses the question of whether
customers should bear the cost of inefficiency.
Meyer (2002:141) is of the opinion that ABPA implements the elemental
conception of the firm by reducing the firm to its activities and the costs,
customers and revenues associated with them. ABPA, in other words, is a method
of partitioning the firm analytically, activity by activity and customer by
customer. Partitioning a firm analytically, by activities and customers, rather than
organisationally following lines of authority, offers substantial advantages for
performance measurement and performance improvement. You do not have to
worry about modelling relationships of non-financial and financial measures into
an overall appraisal of performance. And you need not worry that your cost-
cutting initiatives will exact an untoward toll on revenues. ABPA relieves these
worries because it makes the financial consequences of what you do transparent,
or as transparent as hey can be made. The strength of ABPA is that it makes sense
conceptually and thus promises to clean up many of the problems inherent in
other approaches to performance measurement. ABPA promises to facilitate
learning in organisations and simplifies people’s compensation. But ABPA is not
without limitations. The drivers of non-financial outcomes not captured for
individual customers cannot be easily estimated by ABPA. Nor can ABPA
estimate the revenue consequences of executive and staff activities performed on
behalf of all customers.

57
Figure 10 Ease of implementation versus quality of measurement
According to Meyer (2002:164), ABPA is superior to financial measurement and
the balanced scorecard with respect to the alignment of measures with the
profitability objectives of the firm, its treatment of performance drivers, the way it
compensates people, and the opportunities for organisational learning. In short,
the ABPA advantage is completeness of performance measurement: ABPA
completes the connection between the activities performed by the firm and the
firm’s financial performance. The advantage of financial measurement, by
contrast, is ease of implementation, which will be decisive in many instances.
Financial measures are widely understood, most are governed by accounting
conventions, and most are comparable both within and across firms. The balanced
scorecard falls between ABPA and financial measures on both dimensions.
Scorecard measures are more complete than financial measures but less complete
than the measures generated by ABPA, and balanced scorecards are somewhat
more difficult to implement than financial measures when used to gauge progress
toward strategic objectives and, nearly impossible to implement satisfactorily
when they are used to compensate people.
Financial
measurement
Balanced
Scorecard
ABPA
Favoured by: complex
service firms; moderate
levels of uncertainty
Favoured by: six single-product,
single-customer, or commodity
firms, low levels of uncertainty
Ease of
implementation
Completeness of
measurement

58
The conditions governing the choice of performance measures can follow from
ABPA’s decisive advantage (which, of course is not costless):
“ABPA locates and finds opportunities for profit in differences in customer
valuation of the activities performed by the firm”
Meyer (2002:168) indicates that the profitability of an activity, transaction, or
product can be assessed for the entire customer base of a firm or for segments of
its customers. The profitability of customers is then the profitability of their
products and transactions, that is, revenues less the costs of providing these
products and transactions. Since people’s performance can be appraised and
rewarded against customer profitability targets, ABPA not only allows firms to
identify which actions are profitable and which are unprofitable, but also allows
firms to reward people for doing what is profitable and for improving the
profitability of what they do. ABPA, though complicated, is thus a powerful tool
for aligning people’s behaviour with the financial objectives of the firm.

59
Figure 11 Mid-1980’s model of manufacturing firm
By the mid-1980’s, the buffers and management layers surrounding the firm’s
“technical core” had largely disappeared, and core production activities were
directly exposed to several kinds of external pressures including just-in-time
delivery of materials, which reduced inventories nearly to zero; continuous
improvement, which sought to reduce costs by reducing cycle times; and the
quality revolution and mass customisation, which drove customer preferences
directly into the production process. These developments, shown in Figure 11,
Production Core
Exposed to uncertainty/variability in supply,
customer preferences, and internal processes;
balances costs against revenue drivers (“cost of
quality”)
Customers
Sales
Demand buffer (finished goods inventory)
Supply buffer (raw material inventory)
Purchasing
Suppliers
Quality/
Customer-in →
revenue
drivers
Continuous
improvement
→ cost drivers
Just-in-time →
cost drivers
Managers
sparse
→ = information flow
= core unit

60
forced manufacturing firms to focus on costs and revenue drivers simultaneously,
just as ABPA focuses on the relationship of costs to revenues.
Porter (as quoted by Brown, 1996:61) argues that a firm must seek to be either a
low-cost or differentiated player – a firm can do both but if it does, Porter
suggests, it runs the risk of being out-performed by a more focused player.
However, in the 1990’s a firm might have to compete on both low cost and
provide differentiation features (for which it cannot charge premium prices) at the
same time. In the 1990’s and beyond, other equally important competitive
attributes are integral as shown in the following table.
Table 4 Competitive attributes
Product quality
Process quality
Delivery speed
Delivery reliability
Flexibility – in terms of range, volumes and mix of outputs
Rapid product innovation
Source: Brown (1996:61)
Brown (1996:63) indicates that although production/operation’ contribution will
vary according to specific markets, there are general improvements that any
manufacturing company can make in order to be competitive. Ferdows et al (as
quoted by Brown (1996:63)) attempt to unravel a step-by-step generic guide that
any manufacturing change should follow:
 First, high quality must be produced.
 Then delivery reliability must be achieved.
 Then production costs must be lowered.
 Then production flexibility must increase.
Although this four-step process is most suited to high volume, relatively standard
products, the need to improve quality, enhance delivery performance and reduce
costs is important in any manufacturing firm. This certainly seems to have been
the process model for Japanese success; quality became the first priority and other
equally important factors then followed. This indicates that improvement in

61
competitive areas will come over a period of time, rather than as a result of any
quick-fix cost-cutting solutions.
In the view of Schonberger and Knod (1997:13), though customers’ requirements
can be stated in great detail, the number of persistent general wants appears to be
small, and they seem to apply universally. Regardless of type of business, internal
and external customers generally have these six basic requirements:
 High levels of quality
 A high degree of flexibility
 High levels of service
 Low cost
 Quick response (speed)
 Little or no variability
These six requirements are part of the foundation of a well-conceived operations
management system. Inasmuch as they apply to internal as well as external
customers, the requirements have a unifying effect, that is, they permit each
employee along the chains of customers to have a common, small set of goals.
Figure 12 General customer requirements
Source: Schonberger et al (1997:13)
According to Schonberger et al (1997:14), it is important not to view the
requirements in Figure 12 as potential tradeoffs. Customers don’t. As customers,
we do not want to settle for just high quality or just low costs, or for increased
flexibility, or just quicker response. We require that all these needs to be met.
Quality
Flexibility
Service
Costs
Response times
Variability

62
From the provider’s standpoint, excelling in all six basic needs is a considerable
challenge. Though no trade-off candidates, they do need to be priority ordered. If
competitors are beating the company on speed, then quick response becomes a
high-priority objective. Later on, the main issue may shift toward flexibility, but
not at the expense of speed. Customers want and expect ever better performance
in the direction of the arrows in Figure 12. Recognising this, superior
organisations commit themselves to continuous improvement.
2.2 CONCLUSION ON LITERATURE RESEARCH
It is very important to recognise the interplay of factors which may affect the rate
of productivity. The total productivity index, as a measure of the efficiency of the
business as a whole, is the key measure.
Companies who want to compete successfully are striving to become world class
manufacturers. Competitive advantage grows fundamentally out of the value a
firm is able to create for its buyers. It may take the form of prices lower than
competitors’ for equivalent benefits or the provision of unique benefits that more
than offset a premium price. However, competitive advantage cannot be truly
understood without combining all these disciplines into a holistic view of the
entire firm.
Highly accurate, standardised measures are simply not necessary for the practical
application of performance measures in the typical business environment.
Measures such as machine or labour utilisation encourage supervisors to keep
machines and people busy producing products, even when there is no market
demand. In extreme cases, local efficiencies can seem remarkable, but the
business can be left to write off vast quantities of obsolete inventory. Purely
value-based productivity measures can be useful, but in the basic simplified plant-
level productivity measurement approaches, physical measures predominate.

63
Criteria for determining appropriate productivity improvement measures were
explored fully and will provide a solid foundation upon which to base the
recommendations.
The emerging ways of increasing productivity are as follows:
 Improve effectiveness
 Improve process efficiency and flexibility
 Improve the product efficiency
 Improve motivation
The next chapter will look at the process of research design in detail.

64
CHAPTER 3
RESEARCH DESIGN
3.1 INTRODUCTION OF ISSUES AND RELEVANCE
The Workplace Challenge programme is aimed at continuously improving the
performance of manufacturing companies that participates in it. In the past,
outcomes such as: number of jobs created, turnover, market size, etc. have been
used to assess the impact of the programme. These have been found not to be easy
to make an inference about whether they reflect the correct impact of the WPC
programme.
The manufacturing companies participating in the Workplace Challenge
programme have been capturing performance of their teams by using the QSCM
factors. These factors have not been assessed in terms of adequacy and
completeness. It is also noted that the variables within QSCM dimensions are not
common at team and company levels. As such, it becomes difficult to report
correct improvement due to intervention of the Workplace Challenge programme.
The outcome of this research will be used to provide a clear and practical
guideline for implementation of properly designed performance measurements in
order to report productivity improvement resulting from the WPC programme.
3.2 RESEARCH THEORY
According to Cooper and Schindler (2003:146), the important essentials of
research design are:
 The design is an activity- and time-based plan
 The design is always based on the research questions
 The design guides the selection of sources and types of information

65
 The design is a framework for specifying the relationships among the
study’s variables
 The design outlines procedures for every research activity
A number of different design approaches exist but, unfortunately, no simple
classification system defines all the variations that must be considered as
contained in the following table.
Figure 13 Descriptors of research
Category Options
The degree to which the research
question has been crystallised
 Exploratory study
 Formal study
The method of data collection  Monitoring
 Interrogation/communication
The power of the researcher to produce
effects in the variables under study
 Experimental
 Ex post facto
The purpose of the study  Descriptive
 Causal
The time dimension  Cross-sectional
 Longitudinal
The topical scope-breadth and depth-of
the study
 Case
 Statistical study
The research environment  Field setting
 Laboratory research
 Simulation
The participants’ perceptions of
research activity
 Actual routine
 Modified routine
Source: Cooper et al (2003:147)
The descriptors that are applicable to this research are highlighted in bold.
3.3 THEORETICAL FRAMEWORK AND VALIDATION TECHNIQUES

66
In contrast to exploratory studies more formalised studies are typically structured
with clearly stated hypotheses or investigative questions as referred to by Cooper
et al (2003:161). Formal studies serve a variety of research objectives:
 Descriptions of phenomena or characteristics associated with a subject
population (the who, what, when, where, and how of a topic)
 Estimates of the proportions of a population that have these characteristics
 Discovery of associations among different variables
The third objective is sometimes labelled correlational study, a subset of
descriptive study.
There are several stages through which a company goes, once they become part of
the Workplace Challenge initiative. These are segmented into the following four
stages:
 Nurturing (buy-in to the Workplace Challenge process);
 Orientation (diagnostics, appointment of plan-level committees,
development of individual company implementation plans, collaborative
structures, and capacity building);
 Implementation (implementation of the improvement plans through
collaborative structures, quarterly milestone workshops and monthly
cluster networking meetings);
 Diffusion (sharing of information and diffusion of lessons learnt to other
firms and industry sectors, promotional efforts concentrate on changing
attitudes by using video testimonies).

67
Figure 14 WPC impact framework
Source: Original work of the author
The author is of the idea that one of the most important criteria to apply in
capturing WPC impact is that it must be easy to make inferences on selected
measures in relation to the WPC objectives as depicted in Figure 14. Even though
there is impact on the method/process aspect and financial aspect of a company,
the former is difficult to quantify (see the last paragraph of page 88 with regard to
further research) and the latter is only a lagging indicator, therefore it should not
be too emphasised.
3.4 CONCLUSION ON RESEARCH ISSUES
This chapter has helped to establish the research design descriptors that are
applicable to this research topic. Thus, the specification for the methods and
procedures for the collection, measurement, and analysis of data are in place. The
design will help to provide the correct framework to investigate the relationship
between the outcome of WPC impact measurements and overall performance of
companies participating in it. The next chapter deals with data collection
methodology.
WPC change
management
process
Lead to company
performance
improvement and
competitiveness
Expected outcomes in
terms of:
Employee satisfaction
Customer satisfaction
Determine appropriate performance measures to
capture valid WPC impact

Chapter 4 Data Collection Methodology
68
CHAPTER 4
DATA COLLECTION METHODOLOGY
4.1 INTRODUCTION ON METHODOLOGY
According to Neely (1998:7), in the United States the National Academy of
Engineering asserted: “World-class manufacturers recognise the importance of
metrics in helping to define goals and performance expectations for the
organisation. They adopt or develop appropriate metrics to interpret and describe
quantitatively the criteria used to measure the effectiveness of the manufacturing
system and its many interrelated components”
Doyle Wilson of Austin, Texas, had been building homes for fifteen years before
he got serious about quality. “In October of 1991 I just got disgusted. Such a large
part of my business was waiting and rework, with expensive warranty claims and
friction with customers, that I knew there must be a better way. Then I stumbled
across the quality movement”
He read Carl Sewell’s book on car dealing, Customers for Life, and decided to test
his claims by buying a car at Sewell’s Dallas dealership. (“I thought that if even a
car dealer could make a customer feel good, it should be easy for a
homebuilder!”). His purchase was such a positive experience that he asked Sewell
for advice on quality in home building and was told to red the works of W.
Edwards Deming.
Doyle Wilson is the archetypical Texan and never does things halfway. By
February of 1992 he had launched a wall-to-wall Total Quality Management
campaign at Doyle Wilson Homebuilder. Over the next three years he personally
taught his workforce the principles of TQM, began to collect and analyse
enormous amounts of data on every aspect of his business, got rid of individual
sales commissions (“which destroy quality consciousness”), eliminated the
traditional “builder bonus” for his construction superintendents (who were
qualifying for the “on-time completion” bonus by making side deals with

69
customers on a “to-be-done-later” list), reduced his contractor corps by two
thirds, and required the remaining contractors to attend (and pay for) his monthly
quality seminars.
Customer surveys showed a steady rise in satisfaction with the homebuilding
experience and sales grew steadily even in a flat market as Wilson took sales from
his competitors. In 1995, Doyle Wilson Homebuilder won the National Housing
Quality Award (often called the Baldrige Award for quality of the construction
industry), and Wilson set a goal of winning the Baldrige Award itself by 1998.
Yet he was not satisfied.
The study was initiated so as to find ways of making the quality, speed, cost and
morale measurements the same across the different companies, clusters, regions
and nationally. Once that is achieved, the reporting to the Department of Trade
and Industry would give a common indication in terms of overall improvement
due to the implementation of the Workplace Challenge Programme.
The following companies were visited as part of the study amongst other things,
basically to tap their brains with regard to the topic as to how such a uniform
mechanism for reporting can be achieved.
Table 5 List of interviewed companies
Company Name Contact Person Picture
Alvern Cables Mr Bongani Dunywa
Somta Tools Mr Imdren Naidoo &
Ms Bongi Zondi

70
Ramsey Engineering Mr Marlin Govender
Shatterprufe Neave
Plant
Mr Mandla Msizi & Mr
Roger Dublanq
Vlok Pottery Ms Saras Ramcherita
LUK Clutches Mr Arno Vosloo
Magnador Mr Peter Bresler Jnr
Mandalay Coatings Mr Galiem Jacobs &
Mr Alvin Beukes
Bondtech Laminators Mr Mark Schnider &
Mr Jack Bodington

71
Roto Label Mr Roy Clarke
As can be seen in the table above, 10 companies were visited in the week of 25th
to 29th
October 2004 and engaged in discussions about the topic. The interviews
were held in an informal manner as there wasn’t any specific list of questions that
they had to answer. Most companies preferred to take me to 1 or 2 of their green
areas and request the team leaders to explain the measurements at that level. As
such, only few companies chose to have a quick company tour and hold the
discussions about overall business performance. They are: Somta Tools,
Shatterprufe Neave Plant, Roto Label and to some extent, Magnador.
4.2 JUSTIFICATION FOR THE CONCEPTS
The following diagram is used to generate a common ground upon which to
understand the characteristics associated with the research from the perspective of
the author.

72
Figure 15 WPC broad based outcomes
Manufacturing companies at different stages/levels of manufacturing capability
join the Workplace Challenge Programme with the objective of improving their
productivity and competitiveness. After the two years period of participating in
WPC and implementing best operating practice principles, the following broad set
of outcomes can be realised:
 Improve
 No change
 Decline
Thus the reason to determine optimal measurement attributes within the
dimensions of Quality, Speed, Cost and Morale. Those attributes would be made
common for all WPC companies. The companies can choose to have more
performance measurement variables on top of the prescribed set of attributes.
4.3 RESEARCH PROCEDURES
According to Yin (2003:20), a research design can be defined as: “The logical
sequence that connects the empirical data to a study’s initial research question and
ultimately, to its conclusions”. According to Hussey & Hussey (1997:54),
“methodology refers to the overall approach to the research process, from the
1st
Company
2nd
Company
Nth Company
Workplace Challenge
Programme
Improve
No change
Decline

73
theoretical underpinning to the collection and analysis of data”. This directly maps
to the two main research paradigms, i.e. quantitative and qualitative research.
An illustrative case study approach is selected to establish a common
understanding with regard to the topic, i.e. gather data from a small number of
samples and make sure that the validity is high and derive meaning.
4.4 ETHICAL CONSIDERATIONS
According to Cooper et al (2003:135), ethics are norms or standards of behaviour
that guide moral choices about our behaviour and relationships with others. Ethics
differ from legal constraints, in which generally accepted standards have defined
penalties that are universally enforced. The goal of ethics in research is to ensure
that no one is harmed or suffers adverse consequences from research activities.
As research is designed, several ethical considerations must be balanced:
 Protect the rights of the participant or subject.
 Ensure the sponsor receives ethically conducted and reported research.
 Follow ethical standards when designing research.
 Protect the safety of the researcher and team.
 Ensure the research team follows the design.
All the people who contributed towards data collection and assisted in discussions
will be acknowledged in the dissertation. Prior to that, a letter would be sent to
them informing them and asking for their consent to be quoted on the dissertation.
4.5 CONCLUSION ON METHODOLOGY
The lack of common understanding regarding productivity improvement and
performance measurement amongst the WPC companies led to a qualitative
approach instead of a quantitative method for data collection. This means, that,
agreement on the dimensions suggested will take a bit longer and varied
understanding could prevail. The next chapter will provide analysis and
interpretation of data.

Chapter 5 Analysis and Interpretation of Data
74
CHAPTER 5
ANALYSIS AND INTERPRETATION OF DATA
5.1 INTRODUCTION TO ANALYSIS
The improvement experienced by the companies can easily be attributed to where
WPC intervention is genuinely making a difference. As such, it becomes difficult
if not impossible to accredit WPC with company performances such as: sales
increase, new jobs created, increased market share, improved turnover, etc as it
was in the past. As such, this requires appropriate performance variables to be
defined to be able to make inferences for both instances of when there is lack of
performance and improved performances due to implementation of WPC.
5.2 SUBJECTS AND ISSUES
Here’s a summary of discrete extracts from the company discussions to highlight
critical issues arising from the discussions:
 Ramsay Engineering: “The major challenge at the team levels is making
cost measurements uniform, as such they have numerous cost criteria.”
 Vlok Pottery: “The quality and cost measurements include numerous
criteria and these are complicated by the different processes for making
pottery.”
 Somta Tools: “All the teams measure the same attributes on QSCM.
Company wide performance is achieved by aggregating the scores for
each attribute as such goal alignment of the teams and that of the
organisation does not become a challenge.”
 Roto Label: “Based on the measurements that are available, daily multi-
departmental short meetings are held for 30 minutes to improve the
efficiency of the production lines.”
 Shatterprufe: “The overall Neave Plant business performance is derived
from the teams, and since they are uniform, it does not present a difficulty
to have these measurements aligned. The overview results provide a
summary for Quality, Speed and Cost.”

75
 Magnador: “Each of the 7 departments, measure their own performance
based upon what is important to them. The measurements are aligned to
the mission of the company.”
 Mandalay Coatings: “Their measurements are relatively straight forward
and since they have only one team, the performance of the team forms the
basis for the overall business performance.”
 Alvern Cables: “The QSCM measurements of the 12 teams are presented
at the business level as they are. This is due to the different measurements
undertaken by the teams especially for speed of production.”
 Somta Tools: “Efficiency ratio, goal = 1.4, target is 1.1 It was agreed
here that these need to be interpreted in a simple way so that the teams
can understand it.”
It is evident that some companies such as: Shutterprufe, Roto Label and Somta
Tools have some established measures which can be aggregated throughout the
company. Companies have challenges with too many variables to measure under
the dimensions of QSCM.
The emerging issues that will be considered in formulating the universal
performance measures for the companies in the WPC programme are:
 Type of processing (start-stop versus ongoing)
 Customer interaction (made to order versus stock holding)
 Level of mechanisation
 Type of operation (job shop versus batch)
 Seasonal effect
 Product diversity
 Literacy and numeracy level of education of the workforce
Attributes such as cost of production (Cost), efficiency (Speed), and waste
(Quality) were identified as important to any business and that they can be derived
from the green area performance measures. These attributes depend largely on the
morale aspect of the employees. The companies identified numerous factors that
they use to determine the morale of their employees such as (arranged by

76
popularity): attendance, number of innovative suggestions, safety, and employee
satisfaction index.
5.3 CATEGORISATION OF DATA
The data can be clustered into the following meaningful groups as weighed up
from the summaries:
Table 6 Intended impact of the WPC intervention
Perspective Emphasis
Financial results Low
Customer satisfaction Low
Business processes Low to Medium
Learning & Growth Medium to High
The emphasis during the discussions was on the learning and growth
opportunities, the ability to change the employees’ attitude and behaviour in order
to achieve better results. Once the minds of the people are focused and convinced
as to why they should implement WPC, then the impact on the rest of the
dimensions would take place by virtue of having motivated employees, clear team
objectives and goals, clearly defined individual roles, increased teamwork, and
improved communications between management and employees.
The balanced scorecard enables an organisation to link its long-term strategy with
short-term actions, and moves away from relying solely on short-term financial
measures as indicators of performance. It complements the financial perspective
by adding value three additional ones: the customer, learning and growth, and
internal business process perspectives as can be seen in Table 6 above. All four are
indicators of performance. However, the financial perspective is a lagging
indicator, since organisational improvements may take some time to manifest in
financial rewards. The other three are adjudged leading indicators of performance,
since organisational improvements are immediately evident.

77
5.4 PATTERNS OF DATA FOR EACH RESEARCH ISSUE
It became evident during the discussions that most companies do not align the
green area measurements with the overall business objectives. As such, measuring
performance of the companies is currently achieved via different channels. A
better way to integrate WPC into the company strategies is needed to present a
cohesive picture all the time.
WPC provides intervention at the productivity tier of the companies that are
participating in the programme. Inferences about other aspects of the companies
will not provide a true reflection of the WPC impact. Therefore, in order for
companies to become world-class, they must: reduce waste, reduce the cost of
production, and increase the quantity of products. For this to happen, they must
have motivated employees. The opposite is also true, that for any company to
achieve reduced cost of production, better quality and increased volume, they
must have motivated employees. The following table provides a summary of
measurements which are currently generated and comparison with deemed
importance and utilisation at the different organisational levels:
Table 7 Utilisation of measurements in WPC companies
Type of measurement
Level of organisation Hard Soft
Management × √
Factory floor √ √
5.5 SYNTHESIS AND GENERALISATION
To establish priorities, the relative impact or importance of quality problems must
be determined. For internal quality problems, measuring the frequency of
occurrence is not sufficient. The best measure is costs. It is not very difficult to
estimate the cost of rework, scrap, downtime, idle time, or inventory. Determining
the cost of queue or delay time is a less tangible problem, but for a specific
process, it is possible to identify the effects of such delays.

78
The cost figures that will be developed may only be rough estimates, but if the
same people make them using consistent ground rules, they will be a reliable
indicator of the relative cost of quality problems. They will also probably not be
terribly far off the true costs.
An important consideration in calculating the cost of rework and scrap is where a
problem is discovered in the production process. Every step in a process is
supposed to add value to the product. This increase in value, means that the cost
of a defect found at the end of the process is going to be much greater than finding
the same defect at the beginning of the process. The actual cost of any particular
defect would also depend on the nature of the defect, its severity, and other
product or process variables.
Any quality problem that gets to a customer must have a higher cost than just
correcting the problem. Consequently, for external customers, two quality costs
must be added to determine the true cost of a quality problem:
 All the tangible costs of repair or replacement
 The less tangible, but higher costs of the impact on the customer
satisfaction—increased selling costs, lost sales, and lost customers
Putting a cost figure on a customer dissatisfaction is not easy to do. In some
situations, it might be zero; in others, a few problems could result in the loss of an
important customer. Specific situations might be easier to quantify, but where a
physical product is concerned, multiplying the actual cost of repair or replacement
by a factor of five to ten is very reasonable. The basis for saying this, is analysis
of quality costs by one authority on the subject, which led him to conclude that the
long term cost of quality is at least six times what anyone can identify as tangible
costs.
For services, there is also rework cost that can be estimated. Costs should be
estimated as closely as possible, but for establishing priorities, what is important
is the relative size of costs or opportunities, not their precise value. If the method
of valuation is consistently applied, a 20% error is not going to make any
significant difference in priorities.

79
Costs can be expressed in currency values, but it could take considerable time and
effort t put cost figures on everything, especially if the necessary financial data is
not available. An alternative is to use a weighting scheme and assign points to
quality problems according to their estimated actual costs. For example, assume a
process has four steps and within the process, three different degrees of defect
severity are possible:
1. Minor, requiring less than 10 minutes work to correct
2. Major – requiring an average of one hour to repair
3. Reject – the product must be scrapped
Points could be assigned to each category of defect, but as the product goes
through each process step, the cost of each defect is going to increase because:
 More value is added to the product
 The time required o correct problems is going to increase
 There is a greater probability the repair will not be successful
The specific type of defect and its location on the product could also have a
significant effect on its cost. If so, that would add two more dimensions of
complexity to the matrix. This level of complexity may seem difficult to handle,
but it can be easily accommodated by relational database management systems.
There is no reason to shy away from using the degree of complexity necessary to
reflect what happens in a production process.
As experience is gained and the impact of quality problems becomes better
understood, point weights can be adjusted. Then, when the economics of
production process and the costs of customer dissatisfaction are determined, a cost
per point figure can be calculated based on an estimate of total quality costs and
the total quality points created for the same period.
With goods and services, value and quality costs increase with each successive
step of a process. Performance measures must reflect these cost relationships, but
general rules cannot be applied – it all depends on the production process and the

80
customer. Using point weights to establish the cost relativity of quality problems,
is a way to get meaningful performance measures implemented without having to
do an exhaustive study of costs.
5.6 CONCLUSION ON ANALYSIS
It is clear from the discussions that the companies participating in the WPC
programme are at different levels of understanding operational measurement and
integrating the measures from the teams to the overall company performance. The
author argues that it is symptomatic of the lack of solid guidelines that was not
provided when they joined the programme.
One of the most critical aspects that will have to be considered is to address the
integration needed at company level. This should be embedded into the process of
standardising the performance measures across disparate industries and sectors.
Some companies such as Shatterprufe, Somta Tools, Ramsay Engineering and
Toto Label have ‘some established’ measures which have been used for a long
time. These companies could see these guidelines as undermining the “good” job
that they are already doing. It is a different scenario for smaller companies
especially such as Vlok Pottery, Mandalay Coatings, Bondtech and Alvern Cables
which, in the view of the author will be assisted by the guidelines to create a solid
foundation on operational performance reporting and will benefit them the most.
Either way, it is important for the WPC companies to be made aware that they can
continue with the measures that they have in place, as long as they view the
process to standardise the measures as the minimum requirements with credibility.
The measures should be independent of the company size, product types, size of
company, and industrial sector. It is further suggested that the measurements at
the cluster, region and nationally make use of percentages instead of actual units
quantity. The next chapter will look into the overall conclusions and implications.

Chapter 6 Overall Conclusions and Implications
81
CHAPTER 6
OVERALL CONCLUSIONS AND IMPLICATIONS
6.1 INTRODUCTION TO CONCLUSIONS
In a world of perfect measurement, managers would be able to design optimal
performance measurement systems. The measures chosen would meet the
following requirements as indicated by Marshall W. Meyer (Ed. Neely, 2002:52):
 There would be relatively few measures to keep track of, perhaps as few as
three financial measures and three non-financial measures. This is a matter
of parsimony. If there are too many measures, cognitive limits will be
exceeded and information will be lost.
 The non-financial measures would predict subsequent financial
performance, in other words, the non-financials would serve as leading
performance indicators (and the financials as lagging indicators). Non-
financials not demonstrated to be leading indicators would be sidelined
unless, of course, they were tracked as matters of compliance, ethics, and
security – “most do’s” for the firms.
 These measures would pervade the organisation – the same measures
would apply everywhere. Measures pervading the organisation can be
summed from the bottom to the top of the organisation and decomposed
downward, the latter giving managers’ drill-down capability. Measures
pervading the organisation, moreover, permit performance to be compared
across units.
 The measurement system would be stable. Measures would evolve slowly
so as to maintain people’s awareness of long-term goals and consistency in
their behaviour.
 People would be compensated for performance on these measures, that is,
for performance on both financial measures and the non-financial
measures known to be leading indicators of financial results.
Here are the reasons why such a measurement system does not exist:

82
 Firms are swamped with measures and the problem of too many measures
if anything is getting worse. It is commonplace for firms to have 50 to 60
top-level measures, both financial and non-financial. The longest list of
top-level measures I have seen contains 117 measures – 17 financial
measures, 17 customer measures, 19 measures of internal process, 35
measures of renewal and development, and 26 human resources measures.
Many firms, I am sure, have even more top-level measures.
 Our ability to create and disseminate measures has outpaced, at least for
now, our ability to separate the few non-financial measures containing
information about future financial performance from the many that do not.
Some non-financial measures, such as customer satisfaction properly
measured, have been shown to predict financial performance (Anderson,
Fornell and Lehmann, 1994) but the jury is still out on most measures.
 It is very difficult to find financial measures that both predict financial
performance and pervade the organisation. It is somewhat easier to find
financial measures that pervade the organisation, but keep in mind that
firms struggle to drive measures of shareholder value from the top to the
bottom of the organisation.
 Performance measures, non-financial measures especially, never stand
still. With use they lose variance, sometimes rapidly and hence the
capacity to discriminate good from bad performance. This is the use-it-
and-lose-it principle in performance measurement. The result is a
continual shuffling of measures.
 Compensating people for performance on multiple measures is extremely
difficult. Paying people on a single measure creates enough dysfunctions,
and paying them on many measures creates more. The problem is
combining multiple and often disparate measures into an overall
evaluation of performance and hence compensation. If measures are
combined formulaically, people will game the formula. If measures are
combined subjectively, people will not understand the connection between
measured performance and their compensation.

83
6.2 CONCLUSIONS ABOUT THE RESEARCH PROBLEM
It is evident from the literature that the dimensions of quality, speed, cost and
morale (QSCM) provides a sufficient framework upon which to measure
performance improvements and competitiveness of the companies participating in
the Workplace Challenge programme. As such, the measures cannot be
aggregated at a company level to reflect a consistent performance improvement,
refer to first paragraph of page 77. Hence the need to exploit the research question
which in the view of the author is therefore relevant.
6.3 CONCLUSIONS ABOUT THE RESEARCH QUESTION
It is clear from the research findings that companies participating in WPC have
contrasting measurements within the dimensions of QSCM for different teams.
The measures were found to be company specific and not influenced by industrial
sector, product type, product variety, or the size of company.
The emerging ways of increasing productivity are as follows (as was also
indicated in the second paragraph of page 46):
 Improve effectiveness
 Improve process efficiency
 Improve process flexibility
 Improve the product efficiency
 Improve motivation
The author is of the opinion that it is possible to draw a relation between the
dimensions stated above (with exclusion of the third dimension which still needs
to be defined better on how it will be measured) and the broad WPC objectives
exists in terms of increased employee and customer satisfaction (refer to figure
14).
Here is the relation (in this sequence):
 Employee satisfaction is achieved by:

84
o improved management decision making (effectiveness), because
WPC change management process encourages consultation of the
floor workers
o involvement and consultation in turn leads to improved
motivation/morale of the workers
 Customer satisfaction is achieved by:
o improved product efficiency results in good quality benefits, and
o improved process efficiency results in good delivery and lower
costs
Therefore, the recommended universal performance measurements for the
companies in the WPC programme are as follows:
 Morale (Employee Satisfaction Index and Number of implemented
innovations- this is beyond just employee attendance, but actually going
the extra mile and contributing innovative incremental ideas while at
work)
 Quality (Defects expressed as a % of total throughput- this variable
includes rework and waste)
 Speed (On time delivery of the right quantities- this is beyond just
throughput, efficiency, availability, and the like, as all of them make up
the equation towards fulfilling a customer request)
 Cost (Cost of unit production- the aim of this variable is to capture all
costs that contribute towards the production cost of products, both variable
and fixed company costs should be factored into the calculation)
These formulation of the universal measures were guided by the emerging issues
identified during literature research as listed in page 63.
The author’s view is that, this rule of thumb should be followed when reporting
on the measures: “The goal must be to strive for adequate but valid measures
instead of highly accurate but invalid measures.” Therefore, the author argues
that it is better to record estimated values instead of precise values. This will help
the Workplace Challenge programme with reporting reliable and valid
performance of productivity improvements and competitiveness to the

85
Department of Trade and Industry. And the aggregation will also be possible at
the company, cluster, regional and national levels.
6.4 IMPLICATIONS FOR THEORY
The recent literature in performance measurements must be tried and tested for
suitability in South African manufacturing companies, specifically with the WPC
programme objectives in mind. This needs to be introduced properly designed
case studies and change processes so as to give objective and extensive appraisal
of theories produced in this document.
6.5 LIMITATIONS OF RESEARCH
The following proved to be limiting the breadth and width of the research:
 Lack of time to engage the WPC companies and other experts in the field
about the applicability of the literature findings and interpretation thereof.
 The lack of definition and knowledge of performance measurements
amongst companies, this has only been treated anecdotally.
 As such, the latter resulted in no quantitative research being undertaken
which could have strengthened the findings and conclusions. This is an
opportunity for future research.
6.6 FURTHER RESEARCH
The next stage of the dissertation will be to pilot the implementation of universal
QSCM variables in selected WPC companies (through a case study approach)
according to the guidelines provided in chapter 7 with adjustments where
necessary. This will include common definition of productivity improvement and
performance measurement. The results will be captured and set as minimum
requirements for all companies participating in the WPC programme.

86
As indicated in the first paragraph of 6.2, the QSCM dimensions reflect the
performance of WPC companies adequately. Here are opportunities for follow-up
research:
 A new dimension, i.e. process flexibility was found to be predominant in
most of literature and this aspect needs to be integrated in the WPC
measurements as well in order to reflect completeness of the performance
indicators.
 The quality dimension needs to be explored further in terms of reporting
correctly based on where the defect occurs in the level of processing and
the extent of the defect through some kind of a weighted matrix.
 The assessment of the impact of innovations on the Quality, Cost and
Speed dimensions needs to be investigated fully and a practical
mechanism is needed in this regard.
The next chapter will provide a plan for the implementation guidelines.

Chapter 7 Implementation Guidelines
87
CHAPTER 7
IMPLEMENTATION GUIDELINES
7.1 INTRODUCTION
According to Steyn and Schmikl (2003, 6:3), the Balanced Scorecard Programme
Management (BPSM) system delivers effective and efficient implementation of
strategies for transformation and change, as well as process-related work to satisfy
customers’ requirements in accordance with strategic objectives. Elsewhere in the
text, Wijnen and Kor are quoted as stating that projects and large tasks are unique
assignments that cannot be undertaken by just one department, nor can these can
be undertaken using existing standard procedures or improvisation. The result is
that organizations have to adopt programme management, which effectively and
efficiently provides the required framework for implementation. Projects
concentrate on realizing a single predetermined result, whereas programmes strive
for the achievement of a number of goals. The strategies developed by the
balanced scorecard approach are best implemented following a programme
management approach. This means that the management emphasis is on which
activities are essential to achieve organizational goals and objectives most
effectively and efficiently.
According to Steyn et al (2003, 2:34), when balanced scorecard (BS) guided
formulation and strategy description as well as criteria for measuring
organisational benefits are coupled with programme management (PM), A BSPM
system is created. The system enables integrated and coordinated management of
the organisation’s value chain processes from suppliers to external customers,
including implementation of project portfolios that enhance the effectiveness and
efficiency of the value chain.
At the heart of the BSPM system, is creating high-performance integrated project
and process teams that operate in a coordinated manner across functional
boundaries in the organisation. Outsourced teams, that enhance the organisation’s
capacity, are integrated into high-performance project and process teams. The

88
actions and performance of the teams are coordinated and integrated by project
and process managers who maintain a continuous focus on customer’s needs,
irrespective of whether it is external or internal customer. Moreover, the project,
process and programme managers ensure that goals and objectives of the project
deliverables are aligned, and remain aligned, with the strategic objectives of the
organisation. Double-loop learning in team context promotes the innovative
continuous improvement actions so critical for success in both strategy
implementation and operations management. Moreover, double-loop learning
within high-performance teams enables quick response handling of emergent
strategies.
Figure 16 Project portfolios and process portfolios in the value chain
Source: Steyn et al (2003, 1:6)
There are certain key success factors that guide the implementation of a portfolio
of projects. First and foremost, the organization’s vision and mission must be
clearly defined and strategies developed to achieve it. Once the portfolio of
ORGANISATIONAL VALUE CHAIN
STRATEGICORGANISATIONALGOALSAND
OBJECTIVES
PORTFOLIO OF
ORGANISATIO
NAL
TRANSFORMA
TIONAL
PROJECTS
PORTFOLIO OF
CONTINUOUS
IMPROVEMENT
PROJECTS
PORTFOLIO OF
CAPEX
PROJECTS
MAJOR BENEFIT:
ORGANISATIONAL
EFFECTIVENESS
MAJOR BENEFITS:
ORGANISATIONAL
EFFECTIVENESS
AND EFFICIENCY
MAJOR BENEFIT:
ORGANISATIONAL
EFFICIENY
PORTFOLIOSOFORGANISATIONAL
BUSINESSANDOPERATIONS
PROCESSES
CONTINUOUSOPERATION,
MAINTENACEANDSERVICEOF
PROCESSES
MAJORBENEFITS:
CUSTOMERSERVICEEFFECTIVENESSAND
EFFICIENCY

89
strategies has been established, resultant projects must be prioritized to establish a
sequence of implementation. Efficient implementation requires knowledgeable
and skilled human resources. Once these resources have been selected and
organized into project teams, responsibilities for implementing the individual
projects in the portfolio must be allocated. All stakeholders engaged in
implementation must be assigned appropriate authority. The most important key
factor for success, is to engage maximum support from to leadership, also in the
form of building relationships of trust amongst the stakeholders.
Wijnin and Kor propose the following general criteria for managing strategic
organizational transformation and innovative change (continuous improvement)
programmes:
 A tempo criterion, which gives priority to those actions that will speed up
the implementation process
 A feasibility criterion, which reports those activities that increase the
probability of programme success. A typical example is new technology
that will enhance value while complying with the cost- benefit analysis
principle.
 The efficiency criterion, which compares financial or quality values of
alternative activities, selecting the most beneficial ones.
 The flexibility criterion, which is emergent in nature and determines the
extent to which activities can be changed during the life cycle of the
project or the programme. This criterion also determines the ease with
which capacity can be switched from one activity to another, as the
emergent situation may require.
 Finally, the goal- orientation criterion, which assesses the relevance of all
the activities in the programme to the goals. This criterion determines that
highest priority be given to those activities making the greatest
contribution to the formulated programme’s goals.
For any strategic transformation and innovative change programme to be
successful, it is imperative that there be highly significant involvement of
executive leadership and to management. The importance of executive

90
leadership’s and top management’s role-modelling functions cannot be
overemphasized. Research by Dugan, et al, underlines the significance of top
management support as a factor for achieving project and programme success.
Their findings are very relevant to strategic transformation and innovative change
programmes. They found that top management support is one of the most
profound factors for success over a project’s life cycle, hence the programme
duration. Their research also shows that appointing the appropriate project
manager is a further key factor for success over the project’s life cycle. To achieve
overall success it is imperative that programme and project mangers enjoy
maximum support from executive leadership, top management and functional
management.
In setting up and planning the BSPM-based system process for managing
transformation and change, cognisance must be taken of Lewin’s change model,
Kotter’s eight steps for leading organisational transformation and change, as well
as Connor and Lake’s change strategies. Lewin’s change model of unfreezing old
paradigms and ways of working, changing these, and refreezing the
improvements, provides a high-level holistic framework for transformation and
change. Kotter proposes eight steps to be followed by executive leadership for
leading organisational transformation and change. These steps are essential for
achieving success. Connor and Lake’s change strategies draw attention to four
important generic change strategies that should be focused on, namely: political;
attitudinal; informational and facilitative.
Kotter’s proposed eight steps for leading organisational transformation and
change:
 Establish a sense of urgency
 Create the guiding coalition
 Develop a vision and strategy
 Communicate the change vision
 Empower broad-based action
 Generate short-term wins
 Consolidate gains and produce more change
 Anchor new approaches in the culture

91
An adaptation of Harvey and Brown’s view is shown by the following figure. To
succeed with strategic transformation and change, all three approaches shown
must be strongly supported by leadership – executive leadership in particular.
Figure 17 Organisational improvement model
Source: Steyn et al (2003, 6-14)
The feasibility of these methods will depend on their relationship to existing cost
accounting procedures or on the ability of the firm to modify its accounting
procedures without incurring excessive costs.
The same proponents of the balanced scorecard argue that scorecard measures can
and should be used to manage strategy, in other words to gauge progress toward
strategic objectives. The scorecard, it is argued, helps translate a firm’s strategic
vision into quantitative measures of success, communicate the vision by setting
goals, and learn from experience by comparing results with expectations. This
ORGANISATIONAL
STRATEGY
Behavioural
Strategy
Structural
Strategy
Technical
Strategy
Change Attitudes &
Values
Change Org
Architecture &
Design
Change Operation &
Methods
New
Behaviours
New
Relationships
New Processes
TRANSFORMED ORGANISATION AND IMPROVED PERFORMANCE

92
claim is nearly irrefutable: a strategic vision cannot be implemented in any large
organisation until measures and milestones are put in place, and a strategy cannot
be tested until results are compared with expectations. Meyer (2002: 183).
The rows of Figure 18 show the four major categories of scorecard measures –
financial, customer, internal process, learning and innovation – over time. The
columns on which the rows are superimposed represent performance in the four
scorecard categories at different points in time, for example quarterly results in
these categories. Initially, the value of the scorecard was believed to lie in the
columns, in its capacity to capture the performance of the firm in a set of financial
and non-financial measures. This objective has proved elusive, and the columns
shown in Figure 18 have largely disappeared from discourse surrounding the
scorecard. The rows remain. The rhetoric bout transforming strategy into action
notwithstanding, the scorecard has become a device for tracking progress toward
financial and non-financial targets, which are derived intuitively from the firm’s
strategy.
Figure 18 The changing significance of the balanced scorecard

93
Source: Meyer (2002: 184)
There is nothing wrong, in principle, with using the balanced scorecard
framework to organise the implementation of strategy provided some hidden
assumptions are recognised. One hidden assumption is this: the strategy of the
firm originates in the vision of senior managers, and choices among strategic
alternatives remain the prerogative of senior management. To be sure, overall
financial targets, capital allocation, and corporate imperatives – the must-dos of
business – will remain senior management prerogatives. Another hidden
assumption is that connections between high-level strategic objectives and
specific measures applied at the operating level can somehow be intuited. The
strategy maps recommended by proponents of the balanced scorecard help to
organise the process of intuiting connections between high-level strategic
objectives and operational measures, to be sure, but the connections are derived
intuitively nonetheless.
Financial performance
Performance for the customer
Internal process performance
Learning and innovation performance
Time
Strategic objective
Strategic objective
Strategic objective
Strategic objective
Performance
of the firm
Performance
of the firm
Performance
of the firm
Ten years ago scorecard measures captured the performance of the firm
Today scorecard measures track progress toward strategic objectives

94
The second paragraph of 5.6 (page 80) refers to lack of integration between the
teams and overall company performance. Table 6 on page 76 specify where the
emphasis of the WPC programme is directed in terms of the four Balanced
Scorecard perspectives. The BSC is seen as a tool to clearly define expectations
and outcomes as a result of implementing the WPC programme. The key
performance indicators and key successes indicators can be interlinked to provide
improved integration. From figure 16, the WPC programme is much suited to the
portfolio of continuous improvement projects resulting in effectiveness and
efficiency for the customer. The WPC programme change management process is
summarised by figure 17 with all the three approaches applicable at different
phases of the programme life-cycle.
7.2 APPLICABILITY WITHIN WORKPLACE CHALLENGE
PROGRAMME
A detailed schedule of activities (in sequential order) for implementation of the
universal performance measurement guidelines is as follows:
Table 8 Implementation schedule
ITEM DESCRIPTION PERIOD RESPONSIBLE
1 Communicate new reporting
mechanism with companies
and facilitate implementation
1-09-2005 to 15-
12-2005
WPC Change
Facilitators, WPC
Regional Project
Managers
2 Present the new performance
indicators to DTI and obtain
buy-in
16-01-2006 to 20-
01-2006
WPC Programme
Manager
3 Obtain further modifications.
Entrench the practice within
WPC. Finalise and approve
23-01-2006 to 27-
01-2006
WPC Programme
Manager
4 Obtain performance
measurements from individual
companies during monthly
Starting on 31-04-
2006 and every
month thereafter
WPC Change
Facilitators

95
audits
5 Compile cluster performances
and submit to Programme
Manager on a monthly basis
31-04-2006 to 31-
03-2007
WPC Regional
Project Managers
6 Integrate performance of all
clusters and regions on a
monthly basis
31-04-2006 to 31-
03-2007
WPC Programme
Manager
7 Report periodically to DTI During Joint
Committee
sessions with DTI
and at the end of
the financial year
WPC Programme
Manager
Here is how the data will be presented:

96
Table 9 Calculation of performance indicators
Notes:
a) Improvements are calculated from the comparison between target versus
actual of the different dimensions as determined by the individual
companies.
b) The values are expressed as percentages.
c) Trends are plotted from the reported figures as performance is compared
over a period of time.
d) The company results must be consolidated according to the four
dimensions of quality, speed, cost and morale.
WPC COMPANIES PERFORMANCE MEASUREMENT SYSTEM
DIMENSION VARIABLES
AVERAGE
SCORE
PER
FACTOR
SCORE BY COMPANY SIZE
(TOTAL PER CATEGORY)
Small Medium Large Corporate
Quality
Defects (1st time right quality
expressed as % of the total
throughput)
Speed
On-time delivery of the right
quantities (comparison between
actual delivery time vs planned
delivery time, expressed as %)
Cost
Total production cost (i.e.
estimated cost of producing 1
product, expressed as a percentage
i.t.o savings/cost reductions from
actual/standard)
Morale
Employee
Satisfaction
Index
Aligned goals
Constructive/useful
participation
Teamwork
Motivated
employees
Number of
implemented
Innovations

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Acronyms
100
ACRONYMS
ABC: Activity Based Costing
ABPA: Activity Based Profitability Analysis
BICIT: Best In Class Improvement Tools
BOP: Best Operating Practice
BSPM: Balanced Scorecard Programme Management
DTI: Department of Trade and Industry
EID: Enterprise and Industry Development
ESI: Employee Satisfaction Index
IDC: Independent Development Corporation
ISO: International Standards Organisation
JIT: Just In Time
LMA: Labour Market Alternatives
MDWT: Mission Directed Work Teams
NEDLAC: National Economic Development and Labour Council
NPI: National Productivity Institute
PLC: Plant Level Committee
PPM: Parts Per Million
SABS: South African Bureau of Standards
SGA: Small Group Activity
SMME: Small, Micro, and Medium Enterprises
TQM: Total Quality Management
WCM: World Class Manufacturing
WIP: Work-In-Progress
WPC: Workplace Challenge Programme

Appendix 1
101
APPENDIX 1
INTERVIEWS WITH THE TEN WPC COMPANIES
This chapter provides the details of the discussions with each company.
Alvern Cables (Summary of discussions with Mr Bongani Dunywa on 26 Oct 04,
08:45 – 09:15)
 The QSCM measurements of the 12 teams are presented at the business
level as they are. This is due to the different measurements undertaken by
the teams especially for speed of production. They would be very
interested on NPI assistance to formulate a uniform measure for the speed
attribute. The relevance of the study is already being realised to be
important and can make a substantial difference. As such, they show great
interest in the outcome of the study.
 Employees are lowly skilled, as such the measurements should be as easy
as possible. They have just enrolled their workers on the Adult Basic
Education & Training programme to increase their literacy and numeracy
skills.
 Focus must be on the production environment, build the contribution of
the support functions such as HR, Finance, IT, Logistics, Transport, etc.
around the production function of the organisation at least for the purposes
of the study.
Somta Tools (Summary of discussions with Mr Imdren Naidoo and Ms Bongi
Zondi on 26 Oct 04, 11:30 – 12:20)
 All the teams measure the same attributes on QSCM. Company wide
performance is achieved by aggregating the scores for each attribute as
such goal alignment of the teams and that of the organisation does not
become a challenge.
 The major part of the discussions was around the company wide
production goals which provided an impetus into the whole topic of
uniform measurements.

Appendix 1
102
 Efficiency ratio, goal = 1.4, target is 1.1 It was agreed here that these need
to be interpreted in a simple way so that the teams can understand it.
 Backorders overdue, it is currently at 2 times the capacity levels and
growing. The company have devised plans by prioritising jobs and
focusing on the backorders to get rid of them and then deliver on the
current orders. The Managing Director of the company is involved in this
regard and feedback about leadership of this company is overwhelming
and as such this should only be a temporary measure. Among other things
that they need to do, is to align the goals of the sales department with the
practical capacity possible in the production department.
 Output at standard cost. Here the target for the amount of sales required
per week is monitored. They need to measure in actual units for ease of
interpretation.
 Right, first time quality. They need to measure in actual units for ease of
interpretation.
Ramsey Engineering (Summary of discussions with Marlin Govender on 26 Oct
04, 12:40 – 13:20)
 Busy with transforming their production teams to migrate to a cell
systems/format so that the teams are arranged in such a way that they
produce a final product at the end of the production chain. The company is
busy with building and extending the production capability with new
installations underway.
 The major challenge at the team levels is making cost measurements
uniform, as such they have numerous cost criteria.
 The company has been able to achieve zero parts per million over a
considerable time period and the next level is to sustain it there especially
with their major customer reducing the scrap target levels from 50 p.p.m.
to 30 p.p.m. The MD of the company spent substantial time recently in
Japan at Toyota City to learn about producing automotive components at
zero defect rates.

Appendix 1
103
Shatterprufe Neave Plant (Summary of discussions with Mr Mandla Msizi and Mr
Roger Dublanq on 27 Oct 04, 09:00 – 11:20)
 The plant level performance is uniform for all the teams.
 They measure two criteria for each attribute of QSCM and they have also
added safety as another attribute.
 The drive of the company is about increasing the dialogue between the
employees and therefore the emphasis is on the softer aspects in the
production environment.
 Innovation is considered to be very important for sustenance of the
business. The Plant Manager is the innovation champion and this
behaviour is cascaded to the rest of the functional managers. The rewards
for innovation are built around the profit sharing scheme where the
bonuses for end-of-year are displayed depending on performance. The
linking was made so as to have longer-term sustainability. The teams
decide how to celebrate innovations and request petty cash from their
manager for such celebrations.
 The overall Neave Plant business performance is derived from the teams,
and since they are uniform, it does not present a difficulty to have these
measurements aligned. The overview results provide a summary for
Quality, Speed and Cost.
 Here is a summary of the whole system as seen by the Plant Manager Mr
Roger Dublanq: It starts with prediction of the order fulfilment by making
use of the 2 internal measures per attribute, putting a plan in place to
monitor compliance, the plan is derived from known output rates and
comparing with determined targets, as such the company can be forced to
decline orders or prioritise orders and sometimes extra orders present an
opportunity for growth. The criteria for declining orders are clear and well
thought through.
 In terms of what other measurements would have an impact if correctly
reported to DTI, he suggested the following: job growth, cost reduction,
employment. They have been able to achieve the following results in real
terms over the period of 1 to 1.5 years since joining WPC: 10-15% in cost
reduction and achieved 7% employment growth.

Appendix 1
104
 The amount of new jobs generated by companies participating in WPC
would be a very good measure especially for convincing politicians to
extend the programme, however it would be difficult to accurately gauge
WPC contribution in that regard. In the same vein, it will be difficult to
make inferences about WPC contribution towards increase in sales and
increase in market share.
Vlok Pottery (Summary of discussions with Ms Saras Ramcherita on 27 Oct 04,
11:40 – 12:15)
 They have difficulty in setting targets for producing pottery because they
do not produce based on a specific customer order.
 Currently busy with a new way of capturing the output rate, very much
experimental and trying to refine it.
 The quality and cost measurements include numerous criteria and these are
complicated by the different processes for making pottery.
 The company wide goals are achieved by aggregating the team scores.
LUK Clutches (Summary of discussions with Mr Arno Vosloo on 27 Oct 04,
12:45 – 14:05)
 They have 21 teams, of these, 2 are based in Johannesburg (Warehouse
and sales/marketing).
 The teams have implemented modules 1, 2, 3 & 8. They will start module
7 in Feb 2005.
 The discussions started in the warehouse green area and commenced into
the commercial vehicles clutch assembly green area. In the latter, the
clutch parts are organised around a rotating table timed with about 5
operators each inserting a specific component of the final product, the
clutch is then balanced, each finished clutch is tested for movement of the
parts. It is noted that the testing bench could also damage the clutch if for
example it is wrongly inserted, and such mishaps increase the rate of failed
products.

Appendix 1
105
 The target for scrap for the final product is set at 0.04%. The relation
between the quality targets for the first stage processes and the final
product is not clearly spelt out and this was discussed at length. Their
approach is to set stricter parameters in the initial stages rather than at the
end of assembly of final product. It is apparent that the quality
performance for the whole company is measured separately for each green
area.
Magnador (Summary of discussions with Mr Peter Bresler Jnr. on 28 Oct 04,
09:00 – 11:10)
 The introduction of the WPC programme had a positive impact on mind-
shift change and the overall business performance.
 Initially, the workers and management were pulling in different directions,
and the first module in the MDWT’s approach, i.e. Goal Alignment helped
to get this right and as such seen to be relevant.
 The teams are critical about each other and how the negative actions of
anyone of the teams can affect performance.
 Each of the 7 departments, measure their own performance based upon
what is important to them. The measurements are aligned to the mission of
the company, i.e. produce within 5-7 days, install and deliver within 12-15
days.
 In terms of innovation, a clear criteria is used and points are awarded to
quantity of ideas (importance = 70%) and quality (importance = 30%).
 A profit sharing scheme is in place based on accumulated performance
over the whole year
 An accounting package (QuickBooks Pro) was introduced in July to be
able to account accurately for the performance of the company at any time
by generating balance sheet, cash flow and income statements. This would
help to have a better control of especially variable company cost, and
create reliable projections. The company intends to adopt a transparent
approach about decisions regarding finances.
 In terms of the process, focus is on the starting point as this represents the
critical link in manufacturing. The output rate is compared to the input rate

Appendix 1
106
to identify any bottlenecks. The individual team scores are summed up to
generate a company performance.
 MDT-3 measurements are as follows:
o Quality: Jobs completed correctly the first time (target = 95%)
o Speed: To deliver on time (target = 90%)
o Cost: Reduce waste (target = R15 000)
o Morale: Attendance, Innovation, Safety (target = 98%)
 With regard to the tools and techniques: It is felt that there are too many
modules, they can be reduced by combining a number of them, the cost
can thus be driven down which would be appreciated by smaller
companies, thus enabling the grant to be spread wider, this would be
suitable to especially low skilled workers in the manufacturing industries,
the complex tools can be applied to the high tech/advanced companies
 The company contributes towards public outreach by taking people from
the local community and teaching them skills such as welding, grinding,
galvanising, etc. at no cost to the candidates.
Mandalay Coatings (Summary of discussions with Mr Galiem Jacobs and Mr
Alvin Beukes on 28 Oct 04, 11:30 – 12:30)
 SABS was impressed with the MDWT implementation and the visual
measurements with production targets; this was highly recommended as a
suitable approach to implement ISO accreditation successfully.
 They have established factory and workplace check sheets as part of the
Visual Workplace module and the colleagues are checking on one another
to make sure that measurements are taken down correctly.
 Their measurements are relatively straight forward and since they have
only one team, the performance of the team forms the basis for the overall
business performance.
 The incentive scheme is put is place to reward acceptable behaviour.
Factors such as absenteeism, job related injuries, wasting paint, etc. leads
to less bonus paid out at the end of the year for the individual.

Appendix 1
107
Bondtech Laminators (Summary of discussions with Mr Mark Schnider and Mr
Jack Bodington on 28 Oct 04, 13:00 – 14:50)
 According to the MD, “WPC implementation helped to rescue the
company from going down”.
 WPC provided the opportunity to measure performance of the business,
analyse and dissect the results. This helped the company to assess new
areas for product diversification.
 The availability of performance measures has enabled the company to
survive the difficult market conditions that they are faced with, amongst
others: high staff turnover (40%), social issues, sick leave abuse, and
imports from the Far East countries especially China.
 On a positive note, they have been able to negotiate with the unions to
financially compensate good workers. This system is based on clear
criteria: i.e. going beyond call of duty, innovation, consistency,
attendance, etc. The idea here is to encourage an optimistic behaviour in
the workplace.
 They use the high attrition rates to attract better qualified employees.
Roto LABEL (Summary of discussions with Mr Roy Clarke on 28 Oct 04, 15:00
– 17:00)
 The company makes use of PRISM, an online computer program to
monitor plant production performance based on 7 x B200 printing
machines. The following parameters can be measured on any job: machine
setup times, the run, quantity, waste (determined by comparison between
planned input materials versus actual materials used). The system provides
valuable statistics which would otherwise be impossible considering that
they could run as much as 60 different jobs per day.
 Factory attributes are as follows:
o Reject rate (includes both internally and customer end)
o Shortages
o Cost (additional raw materials)

Appendix 1
108
 Based on the measurements that are available, daily multi-departmental
short meetings are held for 30 minutes to improve the efficiency of the
production lines and follows the following format:
o Identify any problems
o Identify any rejects
o Identify any time lost
o Action items are formulated, prioritised and the improvement is in
line with ISO procedures. These efforts are led by a continuous
improvement officer. They appointed the best industrial
engineering student from Peninsula Technikon for that position.
 The gain sharing scheme is put in place to drive the acceptable behaviour
that will be required in order to achieve excellent business results. The
criteria are clearly spelt out and performance is displayed on the factory
floor.
 Suggestions for generic measurements include attributes such as:
o Gross profit per 1 Rand spent on salaries (i.e. output minus direct
input)
o Efficiency
o Cost of production
o Output per asset
o The WPC impact on the workers
o Return on money invested by NPI/DTI on WPC
 Another suggestion was to measure the benefit of WPC on companies via
a simpler survey, to measure attributes such as:
o Level of knowledge after WPC implementation
o Relationship with superiors/supervisors
o Relationship with co-workers
o Relationship with subordinates
o Knowledge of the business
 The surveys should be designed to measure both hard and soft
measurements at management and factory floor levels. Measuring using
percentages would be suitable rather than using actual units.
 The input from the factory floor is important as this is where the impact is
being experienced due to WPC implementation.

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