Building Block Model

ACCA P5 Advance Performance Management

Fitzgerald and Moon’s building block model is performance measurement framework based on dimension, standards and measures.

Dimensions are the goals i.e CSF so suitable measure must be developed to measure each of dimensions. Dimensions is two fold:
Downstream Results
Components under results are: competitiveness, financial performance
Upstream Determinants
Components under determinants are: quality of service, flexibility, resource utilization and innovation.

Standards
are set of KPI’s represented by AEO where A means Achievability, E means Equity/Fairness and O means Ownership.

http://saka-accounting.blogspot.com/2014/04/standard-costing-part1.html

Ø  Achievability – links to maximum capacity utilization, challenging enough – not overestimation

Ø  Equity – all participants should be fairly measured by providing equal challenging task

Ø  Ownership – accept participation in setting own measurement target

Measures

Ø  Clear – Reward should be clearly defined i.e. the rate of reward and achievement of performance both should be measurable

Ø  Controllable – should avoid linking reward to areas of performance which cannot be controlled e.g. linking to idle performance which is only achievable only in very short run OR should not be linked to operation where manager does not have power to control

Ø  Motivational – reward should motivate employees to achieve objectives – should be mix of both monetary and not-monetary reward

Dimension	Type of measure - CSF	Standards - KPI	Measures - Rewards
Competitiveness	Market position	Relative market share	Link senior management bonus to market expansion measures
Financial performance	Profitability, gearing	ROCI, ROE, Debt/Equity ratio	Link management profit related bonus
Quality of service	Product standardisation	Reliability, improved performance	% commission for repair engineers from fee or warranty paid
Flexibility	Delivery, Production	Delivery speed, Production cycle	Points for each on time delivery – leading to bonus
Resource utilization	Waste reduction	Productivity	Link reward if waste minimization target is met
Innovation	Learning, creativity, sustainability	No of new product/ process, Earning from new product	Link pay to success of new product over life of product