Fitzgerald and Moon's Building Block Model

It is vital that a business appraises both financial and non-financial performance. There are four key tools available:

• Kaplan and Norton's balanced scorecard
• The performance pyramid
• Fitzgerald and Moon's building block model
• The performance prism

Here we look at the third of these

The benefits of these models are as follows:

• financial and non-financial performance measures are included
• they are linked in to corporate strategy
• include external as well as internal measures
• include all important factors regardless of how easy they are to measure
• show clearly the tradeoffs between different dimensions of performance
• show how measures will motivate managers and employees.

What is the building block model?

Fitzgerald and Moon have developed an approach to performance measurement in business services that is based on the three building blocks of dimensions, standards and rewards.

Dimensions

The dimensions are the goals, i.e. the CSFs for the business and suitable measures must be developed to measure each performance dimension.

For example:

The table above identifies the dimensions of performance. The first two of these relate to downstream results, the other four to upstream determinants. For example, a new product innovation will not impact on profit, cash flow and market share achieved in the past - but a high level of innovation provides an indicator of how profit, cash flow and market share will move in the future. If innovation is the driver or determinant of future performance, it is a key success factor.

Standards

The standards set, i.e. the KPIs, should have the following characteristics:

• Ownership: Managers who participate in the setting of standards are more likely to accept and be motivated by the standards than managers on whom standards are imposed.
• Achievability: An achievable, but challenging, standard is a better motivator than an unachievable one.
• Fairness: When setting standards across an organisation, care should be undertaken to ensure that all managers have equally challenging standards.

Rewards

To ensure that employees are motivated to meet standards, the standards need to be clear (e.g. the target is to 'achieve four product innovations per year' rather than to simply 'innovate') and linked to controllable factors. The actual means of motivation may involve performance related pay, a bonus or a promotion.

 Illustration - Fitzgerald and Moon applied to a Washing Machine Manufacturer:

Advantages of the building block model

• All key determinants of success in performance will be measured.
• Targets are set in such a way to engage and motivate staff, i.e. through ownership, achievability and fairness.

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