Performance prism

ACCA P5 Advance Performance Management

Performance prism recognises growing importance of stakeholders in present business environment and focuses in effectively addressing needs of all stakeholders. It recognises organisation as completely open system and focuses on quid pro quo relationship between stakeholders and organisation. Therefore, it contrasts with Value Based Management (VBM) which focuses in shareholders wealth maximization.

In performance prism stakeholders’ satisfaction and stakeholders’ contribution represent two ends of prism linked by three faces - strategies, processes and capabilities.

Stakeholders’ satisfaction: Who are our stakeholder and what do they want? It starts with identifying stakeholder and mapping them. In case of conflict of interest check conflict management strategies (prioritising, negotiating, sequential attention).

Stakeholders’ contribution: What things we expect from stakeholders? For each group of stakeholders’ areas of contribution is identified. E.g. Profit and loyalty from customers, Flexibility and multiple skills from employees. Investment from investors. Sound regulation from regulators.

Strategies: What strategies do we need to put in place to satisfy wants and need of our key stakeholders, while satisfying our own requirements too? Strategy means how mission, vision and goal of an organisation will be achieved. This means strategy aligns interest of organisation and stakeholders. It depends on how well strategy is communicated and implemented and reviewed.

Processes: What processes do we need to put in place to enable us to achieve our strategies? An organisation is a cobweb of processes. Any process involved in operation should add value to both parties. Porter value chain analysis is suitable framework to analyse business process individually and collectively.

Capabilities: What capabilities do we need develop to operate, maintain and enhance processes? Capabilities can be identified by a audit of strength and weakness of business. Capability is combination of resource and competency of an organisation. Resource and competency (skill and knowledge) should address need of both stakeholders and company.

Performance prism highlights that any change in need of stakeholders or organisation will impact strategies, processes and capabilities at same time and they should be adjusted accordingly.

ACCA Article: The Performance Prism