Unit 2: Alternative performance models

• Goals cascade from the top; measurement and feedback show whether strategy is working.

Kaplan and Norton (1992) proposed measuring performance from four perspectives that translate strategy into objectives and measures.

• Strategy map: cause-and-effect links — learning drives better processes, which delight customers, which improve financial results.

• EFQM Excellence Model (European Foundation for Quality Management; substantially revised in 2020) assesses organisational excellence.

• RADAR logic: results, approaches, deploy, assess and refine — used for self-assessment and awards.
• Indian counterparts: CII-EXIM Bank Award for Business Excellence (based on EFQM), Rajiv Gandhi National Quality Award.

• Implications: EVA aligns managers with shareholders (bonus banks), discourages over-investment, highlights the cost of equity; limitations: accounting adjustments, short-term focus, size bias.
• EVA in performance management: managers are rewarded for creating returns above the cost of capital, aligning their interests with shareholders (bonus banks smooth payouts).

• Features: clear goals, accountability, continuous feedback, learning, empowerment, recognition, openness to change, collaboration.
• High-performance work practices: selective hiring, training, teams, performance-based pay, information sharing, employee involvement.

• Link: merit pay increases, bonuses, incentives, promotions and development opportunities tied to performance ratings.
• Design issues: line of sight between effort and reward, differentiation of high performers, fairness and transparency, avoiding short-termism.