Performance Architect update 1/2010

Performance Management and

aurel-brudan-wwwsmartkpiscomLaunched in November 2009, was met with overwhelming interest by tens of thousands of visitors from over 160 countries. A base of regular visitors quickly formed in a relative short period of time and it continues to grow with many registering as site users daily.

Why such interest in the subject of Performance Management and more specifically Key Performance Indicators (KPIs)?

What sets apart in addressing this interest in the subject?

On Performance Management

Business Performance Management is a dry subject for many. At individual level, annual performance reviews have been compared to preparing tax returns – it is hard to find someone who takes pleasure in completing them, but they are necessary and regular.

For others the topic is complex and rewarding. At company level, Performance Management Systems have been compared to washing machines that have to be properly installed and configured in order to operate as desired (Meekings et al, 2009).

Performance Management is still in the early stages of being established as discipline and the lack of standards makes using tools and concepts from this field a challenging task. There is a certain degree of confusion in the way terminology is used in the discipline both within academic literature, in practice and between them.

Faced with the challenging task of finding coherence in this universe of mostly unstandardised concepts, practitioners welcome tools and methodologies that bring clarity, structure and simplicity to Performance Management. The success of the Balanced Scorecard over the last 20 years is proof of that. fits in this picture as a platform based community that can be used to:

1. Learn more and improve the understanding of Performance Management concepts

2. Review examples of Key Performance Indicators that went through a thorough documentation process

3. Manage personal libraries of KPI examples, selected by users as most suitable for the performance management initiatives they are involved in.

4. Source templates that can be used in better structuring the documentation used as part of organisational performance management frameworks or systems.

smartKPIs differentiation

The world abounds with Performance Management consultants and there are many resources available on the Internet. is not the first, nor the latest online platform available to the wider public.

What sets apart is:

  1. The combination of insight from practice with academic rigor. We value academic research and use its findings and principles. At the same time, abstract concepts are much better understood when analysed in context, in practice. In addition, practice refines such concepts and contributes to their evolution and usability.
  2. The ability to structure information in clear taxonomies, simplifying the analysis process. This enables visitors to better understand the discipline of Performance Management and the use of KPIs as a core organisational capability. The benefits, although indirect are to be seen at both personal and organisational level: “ I am convinced that the first essential of business success is the capacity for organized thinking” (Follett, 1940)
  3. Expertise in the field of Performance Management, through a “community of inquiry”. The definition of an expert is relative. Today, same as in old times, anyone can claim to be an expert in anything. Mark Twain is credited with using the phrase “an ordinary fellow from another town” as an explanation to the term. Will Rogers is credited with using the phrase “a man fifty miles from home with a briefcase” to express the same. In our times, the number of miles increased considerably and the briefcases were replaced by blogs, websites and accounts on social networking sites. In developing expertise we took the long but steady road of academic study, combined with learning from practical experience and generating new insights. Our approach to learning from practice is action research and it follows Peirce’s inquiry process of abduction, deduction and induction (Barton et al, 2007). More importantly, we have done over 10,000 hours of deliberate practice in the field of Performance Management both at team level and individual level by some of the team members. Academic research supports a causal relationship between the accumulated deliberate practice (guided, highly structured learning activity) and the level of expertise in an area. Deliberate practice being a “highly structured activity, the explicit goal of which is to improve performance” (Ericsson et al, 1993). Having said that, we are great believers in the power of collective intelligence. We see ourselves as informed facilitators of the interaction, collaboration and learning process that users will participate in. metaphor

One metaphor that I think describes is comparing it to a tree.

  • It first needed a fertile land – Performance Management
  • A seed – myself as Performance Architect
  • A period of growth – the many years of deliberate practice
  • Branches – the team behind
  • Flowers – its website content
  • Nectar – the quality of the content
  • Bees – visitors of the website
  • Cross-pollination – the exchange of ideas in the online community
  • Fruits – Financial self sustainability of the website
  • Honey – Value generation for visitors, fed back into their organisations.


Aurel Brudan

Performance Architect,


Ericsson, K. A., Krampe, R. Th. and Tesch-Römer C.(1993), The role of deliberate practice in the acquisition of expert performance, Psychological Review, Vol. 100, Nr. 3, pp. 363-406.

Follett, M. P. (1940), Dynamic Administration. The Collected Papers of Many Parker Follett, edited by Henry C. Metcalf and L. Urwick, Harper & Brothers, New York, London

Meekings A., Povey, S. and Neely, A. (2009), Performance plumbing: installing performance management systems to deliver lasting value, Measuring Business Excellence, Vol. 13, No. 3, pp. 13-19

Barton, J, Stephens, J. and Haslett, T (2007), Action Research: An Exploration of its Logic and Relationship to the Scientific Method. Proceedings of the 13th ANZSYS Conference – Auckland, New Zealand, 2nd-5th December, 2007 Systemic Development: Local Solutions in a Global Environment officially launched


The highlight of this week was the official launch of It is the culmination of over 5 years of research, 1 year of web development and 6 moths of beta testing.

I am pleased with both the quality of the website and the experience of developing it. Everyone in the project team, form the project manager, to business analysts, web developers, graphic artists, researchers and editors worked with dedication and enthusiasm, which was very rewarding.

I would like to thank all of them for achieving this milestone. Additional thanks to the project advisors, for their guidance and support, as well as to all the beta users that provided valuable feedback during testing.

Excerpt from the press release:

Melbourne, Australia, 4 November 2009 – eab group announced the launch, a free online database of Key Performance Indicators (KPIs), supported by a Performance Management knowledge base and a community of users. currently contains over 600 KPIs (performance measures), from a variety of Functional Areas, such as Finance, HR, IT, Marketing and Industries, such as Retail, Hospitality, Agriculture and the Public Service. Navigation through the database is facilitated by a user friendly web interface allowing visitors to either browse or search for relevant performance measures. Each measure is documented in a structured template, containing fields such as: definition, variations, subordinate measures and calculation formula among others. To ensure the quality of the content, 3 Subject Matter Experts review each KPI page before being published. As new performance measures are documented and posted daily, the database is expected to gradually grow to several thousand records.

In addition to a comprehensive list of performance measures, also contains a variety of Performance Management resources to support the understanding and use of performance indicators: recommended articles, relevant links, templates as well as an introductory eLearning course in Performance Management and Measurement. is designed for executives, managers, consultants, analysts and other professionals from organisations from around the globe with an interest in Strategy, Performance Management and Measurement. Over 100 registered members from around the world provided valuable feedback during the beta testing of the site, participating in defining the desired content and the interaction model. All registered members can now use the website as a platform for interaction, as they can comment on KPIs, save KPIs to their personal list and propose new ones.

The value added by is represented by the streamlined access to a rich database of well defined performance measures, along with a comprehensive set of resources to guide the users in how to select and work with KPIs“, said Aurel Brudan, founder and director of eab group. “By using the resources available on the website and tapping in the collective experience of the community of users, everyone registered on will have the opportunity to learn more and improve the outcome of their performance management efforts.

New visitors can explore the website contents or register for free to access more content and join the community of users.

Metaphor in performance management

What do prescription medicines, washing machines and performance management have in common?

The answer emerges from several articles published in the Academy of Management Perspectives and the Measuring Business Excellence Journal over the course of 2009.  They reflect a trend in performance management literature of using metaphor to paint the complex picture of some of the theories linked to this discipline.

In their February 2009 article, a group of professors from US based business schools compare goal setting with a prescription strength medication, with powerful and predictable side effects: “Rather than being offered as an “over-the-counter” salve for boosting performance, goal setting should be prescribed selectively, presented with a warning label, and closely monitored.” (Ordonez et al, 2009a). Some of the assertions made by the article were met with a strong response by Locke and Latham, pointing out some of the flaws in the research approach and conclusions (Locke and Latham, 2009a). The debate continued in two more articles (Ordonez et al, 2009b and Locke and Latham, 2009b), however the relevant point here is the use of goals as prescription medicine metaphor.


The performance management system as a washing machine metaphor comes from an article published by a team of practitioners and academics from the UK (Meekings et al., 2009): “Performance measurement and management frameworks are analogous to new washing machines in the sense that they need to be properly plumbed-in, connected-up and switched-on before they can deliver value.”


Same as a washing machine, a performance management system needs to be plumbed in:
1.       located in the organisation (Performance Architecture)
2.       connected to the relevant performance insight sources as input (Performance Insight)
3.       connected to outlet pipes to eliminate redundant and distracting data (Performance Focus)
4.       connected to a power supply – empowered employees that take action (Performance Action).


Meekings A., Povey, S. and Neely, A. (2009), Performance plumbing: installing performance management systems to deliver lasting value, Measuring Business Excellence, Vol. 13, No. 3, pp. 13-19
Locke E.A., Latham, G.P. (2009a), Has Goal Setting Gone Wild, or Have Its Attackers Abandoned Good Scholarship?, Academy of Management Perspectives, Vol. 23, Nr. 1 / 2009, pp. 17-23
Locke E.A., Latham, G.P. (2009b), Science and Ethics: What Should Count as Evidence Against the Use of Goal Setting?, Academy of Management Perspectives, Vol. 23, Nr. 3 / 2009, pp. 88-91
Ordóñez, L.D., Schweitzer, M. E., Galinsky A. D., Bazerman, M. H. (2009a), Goals Gone Wild: The Systematic Side Effects of Overprescribing Goal Setting, Academy of Management Perspectives, Vol. 23, Nr. 1 / 2009, pp. 6-16
Ordóñez, L.D., Schweitzer, M. E., Galinsky A. D., Bazerman, M. H. (2009b), On Good Scholarship, Goal Setting, and Scholars Gone Wild, Academy of Management Perspectives, Vol. 23, Nr. 3 / 2009, pp. 82-87

Photo credits

New pictures from the Hubble Space Telescope

On 09/09/09, NASA unveiled a new set of images and observations from four of the six operating science instruments on board of the Hubble Space Telescope. With the exception of the image of Jupiter released in July 2009, these were the first pictures released since new instruments were installed during the space shuttle servicing mission in May 2009.

Hubble has been in operation for 19 years now. According to Ed Weiler, associate administrator for NASA’s Science Mission Directorate at NASA Headquarters in Washington: “The telescope was given an extreme makeover and now is significantly more powerful than ever, well-equipped to last into the next decade.”  As the new instruments installed in May are more sensitive to light, they will improve Hubble’s observing efficiency significantly.

The montage below included observations made with the new Wide Field Camera 3:

Top left: NGC 6302, a butterfly-shaped nebula surrounding a dying star.
Top right: clash among members of a galactic grouping called Stephan’s Quintet
Bottom left: 100,000 stars residing in the crowded core of Omega Centauri, a giant globular cluster
Bottom right: a pillar of star birth in the chaotic Carina Nebula rises from a sea of greenish-colored clouds.
Credit: NASAESA, and the Hubble SM4 ERO Team

About Hubble Space Telescope

The Hubble Space Telescope is a project of international cooperation between NASA and the European Space Agency. Goddard Space Flight Center manages the telescope. The Space Telescope Science Institute conducts Hubble science operations. The institute is operated for NASA by the Association of Universities for Research in Astronomy, Inc. in Washington, and is an International Year of Astronomy 2009 program partner.


News release: Hubble Opens New Eyes on the Universe

Success in academia – Advice from 3 high achieving scholars

On the first day of the 2009 Academy of Management Conference, I attended a great panel discussion on the topic: “Success in Academia”. I might add “and Beyond”, as the advice given is also relevant to learning, personal productivity and career in general.

The participants were three Academy of Management Laureates, each of them with an academic career spanning over 40 years.
• Distinguished Professor Michael A. Hitt, from Texas A&M University
• Emeritus Professor Edwin A. Locke, from The University of Maryland, College Park
• Distinguished Professor Fred Luthans, from The University of Nebraska, Lincoln.

The discussion focussed on the journey to become an independent scholar. I have structured their advice into 5 sections:

1. Learning through apprentiship

• Stage 1 – Learn to analyse data by analysing existing datasets. Research assistantship is a useful step in this direction. “Data analysis is not just a science, it is also an art.” Edwin Locke
• Stage 2 – Get involved in the design of studies.
• Stage 3 – Know how to write. The method and results sections are considered to be the easiest. The introduction is the most difficult to write. Reviewers have a hard time getting past the data.
• Stage 4 – Write the discussion section – the easiest to write.
• Stage 5 – Job search preparation. At The University of Maryland a job preparation seminar takes place several times a year, addressing the topic of what it is like to be a professor. All candidates are requested to try 2-3 times their job interview presentation.
• Stage 6 – Seek individual advice customised to personal values, interests. Doctoral students are very poor at introspection.

2. Guidance through mentoring

• Senior academics are interested to provide help with questions about ethics, strategies, getting citations, making tenure upon finishing with the dissertation, etc.
• Professor Michael A. Hitt supervised 85 doctoral students over 40 year career. His mentoring methods changed from early, mid to late stage in the career.
• PhD. students fall in two categories:
1. Irrational type – fixed idea, can’t get out of it.
2. Smart and creative – you can have a rational discussion with them.
Assistant Professors are more rigid.

3. Mistakes made by young researchers

• Junior faculty not getting involved in research soon/early enough. They are unlikely to get tenure as a result. Some don’t get it and some don’t want to.
How to avoid it: An option is to volunteer to review research and make comments.
• Research students lock in on a topic way too quickly after the first exposure to a seminar – topic.
How to avoid it: Take at least one year of review and thinking before locking in a PhD. research topic.
• Not a good idea to select a topic the supervisor has done work in.
How to avoid it: Instead the following rule should be used: pick a topic that interest you; if the supervisor has some knowledge or interest, will supervise.
• Researchers don’t do parallel research. They start one project and stick to that. The linear process is a disaster. The tunnel vision doesn’t work. The duration between design and acceptance extended from 1 to 5 years now due to reviews and reviewers. An assistant professor has about 6 years to make tenure.
How to avoid it: Need to hedge your risks, especially under time pressure. Always work on multiple projects. 5-7 projects at the same time.
• PhD. students shouldn’t be involved in reviewing papers for academic journals. An unexperienced reviewer has tunnel vision, often picks on one thing and expands on it, while missing the point of the article. There are many junior faculty members on the editorial boards of journals. One reviewer didn’t know what self-efficacy meant.

4. Personal research productivity. Personal habits that help being productive.

1. Productivity takes effort, time, concentration and motivation.
2. There is no substitute for hard work. Hard work trumps intellect.
3. To be a world class expert you need 10,000 hours of effort in that field.
4. Avoid procrastination , although it is common in any field around the world.
5. It helps to choose – when and where to work to be productive.
6. You need uninterrupted time to work on research.
7. Establishing rituals and goals works for research productivity. You have got to set up and customise rituals and routines – specific times and specific behaviours. We all use them in day to day life – from being an athlete to brushing teeth. Examples:
• 7-11pm every night in the office at home.
• Stay at home on a particular day: i.e. Thursday.
• Write early in the morning: 7-11am.
• University office time late in the afternoon.
• Rule – only work in the office.
• 5pg./day = x pages/year.
8. Once you have a ritual, feel good for doing it or feeling guilty for not going it.
9. Collaboration is also important. Working with others is important as you get a lot more done – division of labour helps. Need to be sure the uni tenure doesn’t penalise collaborative research.
10. Delegation. Data analysis can be delegated to others. There are new mantas – hierarchical linear regression. The method should reflect what you need.
11. Motivation. To be a good researcher for a long time you have to love it. The entire process – conceptualising, designing, writing , dealing with reviewers. You have to love writing and the process of discovery. You also need to be tenacious in the face of failure.
12. Develop ability to work fast.
13. Keep up to date with business news – Business Week, Fortune magazine.

5. Career Advice

• Career success comes from research – this is how you get distinguished professorship. A large portion of the pie for research. In the order of priority: 1. Research, 2. Teaching, 3. Committee work
• Goal in research – do good work. Not fame and popularity.
• Exposure from textbooks helps a lot for promotion and tenure.
• On teaching: not value in listing tools and listing theories. A better way to teach management is to teach principles. Write chapters around principles. Integrate knowledge into principles and sub principles.
• The data is not what you want.
• Need to be open in the approach to research.
• Pay attention to what is being done, not just doing it
• Insert a set of values in what you do.

2009 Academy of Management Meeting statistics


The 69th Annual Meeting of the Academy of Management will take place between 7-11 August 2009 in Chicago, USA. The theme for this year’s edition is “Green Management Matters”, inspired by society’s increasing concern about responsible stewardship of the natural environment.

2009 AOM meeting in numbers

Over 10,000 attendees
8,380 people on program from 78 countries
1,672 sessions

Paper submission statistics

6,795 submissions evaluated by 5,456 volunteer reviewers
Highest number of submissions in the Business Processes & Strategy (741) and Organisational Behaviour (711) Divisions
Lowest number of submissions in the Management History (34), Management, Spirituality and Religion (50) and Management Consulting (61) Divisions.

Affiliations from outside of US with 30+ participants

Bocconi U, Italy
Copenhagen Business School, Denmark
IESE Business School, Spain
INSEAD, France
National University of Singapore, Singapore
Rotterdam School of Management, Erasmus University, The Netherlands
University of St. Galen, Switzerland
University of Toronto, Canada
York University, Canada

Countries with the highest number of participants


Data sources:
Academy of Management Program
US Census Bureau

More interesting statistics are available on page 35 of the meeting program guide:
2009 Academy of Management Meeting statistics

Academy of Management launches AOM Connect

The Academy of Management has recently launched AOM Connect, to coincide with the 69th annual meeting.

AOM Connect is a new service offered by the Academy of Management to its members, as an online professional networking tool. The concept is similar to the AAACommons community operated by the American Accounting Association. Both are powered by HiveLive, a provider of enterprise-class online customer communities.

About the Academy of Management

Founded in 1936, is the oldest and largest scholarly management association in the world.
19177 members from 108 nations.
24 professional divisions and interest groups
Publisher of 4 journals: AMLE, AMJ, AMR and AMP.

Relevant links

Academy of Management
AOM Member Directory
AOM Connect
American Accounting Association

2009 PMA Conference – Professor Kenneth Merchant: Alternatives to accounting measures

The opening keynote speech of Day 1 of the 2009 Performance Management Association conference was given by, Kenneth Merchant, Deloitte & Touche LLP Chair in Accountancy and Professor of Accounting at the University of Southern California Marshall School of Business. Professor Merchant is an expert in management accounting and management control systems with numerous publications in this field.
His speech addressed the challenges practitioners are faced with in selecting and using performance measures. He discussed the flaws of accounting measures and presented four alternatives.

I have structured below my notes from this session. In part one of this blog post, a number of issues with using accounting measures were presented. Several alternatives answering the question “What to use instead?” are presented below.

Part 2: Alternatives to accounting measures

1. Use market measures of performance.

• They have an obvious appeal.
• They also have some problems due to market imperfections, noise, feasibility (i.e. “market expectations problem”).
• For private firms there is no data availability.

Example: The case of Christopher J. Steffen at Eastman Kodak Co.
• January 1993 – Christopher J. Steffen was appointed Chief Financial Officer (CFO) of Eastman Kodak Co.. He had a reputation of cutting costs. Within 2 days, the stock increased $2.2 billion dollars.
• April 1993 – After 11 weeks in the job, he resigns (with few accomplishments). The stock declines with 2.0 billion dollars.
• Questions: What if the period of stay changes with a few months? Should bonuses be paid for the increase in the stock price due to market reactions?

2. Extend the measurement window

• Extend measurement horizon to 3, 5, even 10 years.
• The analysis of profit / market correlation in different windows (1, 2, 5 10 years) by Easton, et al.
1 year: 0.22
2 years: 0.39
5 years: 0.57
10 years: 0.79
• Are you willing to wait 10 years for a bonus? Maybe not, however 3-5 years is doable.

3. Use more informative non-GAAP financial measures of performance.

• “Pro-forma” earnings – exclude line-items that are more distracting than informative.
• Funds from operations (FFOs) – seems to work with Real Estate Investment Trusts (REITs).
• Free cash flow (FCF).
• Earnings before interest, taxes, depreciation, and amortization (EBIRDA).

4. Use combinations of measures

• There are many different approaches. Market and/or financial and/or non-financial measures.

Measure combination example 1: The GE Management Development and Compensation Committee uses a combination of financial indicators and subjective measures in the list of the CEO Goals and Objectives for 2007 and 2008.

Financial Objectives (Continuing operations)

Earnings per share (EPS)
Cash from operating activities (CFOA)
Return on trading capital (ROTC)

Strategic & Operational Goals

Sustain operating excellence and financial discipline.
Create a more valuable portfolio of businesses
Drive organic revenue growth at 2 to 3 times GDP
Retain excellent teams and a strong culture
Manage the Company’s risk and reputation
Build an excellent investor base
Lead the Board activities

Measure combination example 2: The Balanced Scorecard, with up to 20-25 measures, with casual links between them, grouped in four perspectives: Financial, Customer, Internal Business and People, Learning and Growth.
• The majority of firms claim to have a Balanced Scorecard. They misuse the term.
• Which set of measures in that circumstances provide the best indication of the value creation?
• Combination of short-term backward looking measures with leading indicators of future performance.
• How many measures should be used? The function is non-linear:

Ken Merchant-perf-vs-meas

Historical background on the use of measures
1954 – General Motors started using measures – 3-7 measures
1960 – Critical success factors


• Good news: 
o We are accumulating more and more data about the relationship between market related measures, accounting measures and individual non-financial measures (i.e. customer satisfaction).

• Bad news
o Don’t know when to use each of the 4 alternatives presented. Individual or in combination, in any specific period of time.
o Don’t know about the effects of using concurrently multiple performance measures.
o Over satisfying customers is not good either, as this is generating diminishing returns. There is a limit to “profitable” customer satisfaction.
o The benefits of the BSC may not be sustainable (more research is required on what are the long term effects on BSC implementations in the BSC Hall of Fame companies).
o Still lots of research that needs to be done.

2009 PMA Conference – Professor Kenneth Merchant: On accounting measures

The opening keynote speech of Day 1 of the 2009 Performance Management Association conference was given by, Kenneth Merchant, Deloitte & Touche LLP Chair in Accountancy and Professor of Accounting at the University of Southern California Marshall School of Business. Professor Merchant is an expert in management accounting and management control systems with numerous publications in this field.
His speech addressed the challenges practitioners are faced with in selecting and using performance measures. He discussed the flaws of accounting measures and presented four alternatives. I have structured below my notes from this session.

Part 1: On accounting measures

• For management purposes accounting measures are badly flawed. The primary role of a corporation is to create and maximize shareholder value. However, accounting measures tell you little about value. Accounting measures are backwards looking. Value measures are future looking.
Evidence: A research study analysed 172 large firms that averaged an earnings per share (EPS) growth of over 15% over a 6 year period. Their correlation between annual earnings (before extraordinary items) and annual value changes was not as strong as anticipated. These correlations are discussed in several research papers: Easton et al (1992): .22, Biddle et al (1997): .25 and Erkens & Merchant (2005): Annual.18 and Quarterly .13

• Alternative financial-measure specifications are not much better. Correlations with market returns, annual (Biddle et al., 1997)
* Earnings before extraordinary items: .25
* Residual income : .16
* EVA(TM): .15
* Cash flow from operations: .14

• Flaws of accounting performance measures:
* Fail to identify real problems in a timely basis
* Lead to poor decisions, resulting in allocation of resources to “dogs” and not to “stars” and excessive short term orientation (myopia)
* Gamesmanship – ethics issues

• Why using accounting measures? Why do firms use them anyway?
* Nice to have a single, global performance indicator.
* Earnings/returns correlations are positive.
* Some nice measurement properties: timely, understandable, inexpensive, precise, objective and controllability can be tailored to the role (easy to disaggregate)
* Habit – i.e. DuPont chart has a long tradition – ROI = Sales margin * Asset turnover
* Misconceptions, such as: “Profit making firms should make profits” and ” Quarterly EPS reports drive stock prices”.
* Political expediency

• Do Accounting Measures work anywhere? What do we do if they don’t work? Answer: It should be an industry by industry analysis of annual accounting earnings / market correlations. Correlations based on information obtained from Quarterly Earnings and Market Presentations (Erkens and Merchant):
* Overall: .18
* High: Oil and gas: .58, Mining/construction: .35, Manufacturing (misc.) .32
* Low: Pharmaceuticals: .04 (annual), Chemicals – .03 (Q) and Mining and construction – 0.2 (Q)