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COBRA 2000 Conference
University of Greenwich
30 August to 1 September
PERFORMANCE EVALUATION IN FACILITIES MANAGEMENT:
USING THE BALANCED SCORECARD APPROACH
Dilanthi Amaratunga, David Baldry, Marjan Sarshar
School of Construction and Property Management, The University of Salford
I S B N - 1-84219-027-X
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Performance Evaluation in Facilities Management: Using
the Balanced Scorecard Approach
Dilanthi Amaratunga, David Baldry, Marjan Sarshar
School of Construction and Property Management, The University of Salford, Salford M7 9NU, UK.
ABSTRACT
This paper is about performance evaluation in facilities management. It identifies the Balanced
Scorecard as a widely used management framework for optimal measurement of organisational
performance, discusses the fundamental points to cover in its implementation and describes the
application which translates an organisation’s mission and strategy into a comprehensive set of
performance measures that provide the framework for a strategic measurement and management
system for facilities management. It emphasises that non-financial criteria are as important as financial
criteria in measurement systems. The implications of the Balanced Scorecard for facilities management
is reviewed, based on the case studies carried out, and a set of propositions are suggested, which may
form the basis for further research.
Key words: Facilities Management, Performance Measurement, Balanced Scorecard
BACKGROUND
Facilities management exists to support the core business (Simpson 1996). There is much agreement
among researchers and practitioners as to the importance of facilities management to both
manufacturing and service industry organisational competitiveness. This paper concerns the
measurement of facilities management performance. One performance measurement method which has
been recently developed to overcome the defects inherent in the more traditional performance measures
is that of the Balanced Scorecard (Kaplan and Norton, 1992). This provides a balance of information
from a variety of different perspectives vital to all organisations, whilst minimising the potential for
information overload by limiting the number of individual measures included.
Empirical research (Barrett, 1992; Douglas, 1996; Simpson, 1996) indicates that facilities management
appears to utilise a wide range of measures – not only traditional financial accounting measures, but
also indicators of managerial behaviour as well as various other measures of effectiveness. This paper
considers both the basis for measurement of performance in facilities management with reference to the
Balanced Scorecard, and the possibility of applying such a management system in facilities
management and presents evidence that supports performance measurement.
PERFORMANCE MEASUREMENT REVOLUTION
Literally it is the process of quantifying an action, where, measurement is the process of quantification
and action leads to performance. Sink (1991) suggested that performance measurement is a
“mystery…complex, frustrating, difficult, challenging, important, abused and misused” function. The
level of performance a business attains is a function of the efficiency and effectiveness of the actions it
undertakes, and thus performance measurement can be defined as the process of quantifying the
efficiency and effectiveness of a action.
Performance measurement systems developed as a means of monitoring and maintaining organisational
control (Nani et al, 1990), which is the process of ensuring that an organisation pursues strategies that
lead to the achievement of overall goals and objectives.
A performance measure can also be defined as a metric used to quantify the efficiency and/or
effectiveness of an action. Hronec (1993) defined performance measures as the vital signs of the
organisation which quantify how well the activities within a process or the outputs of a process achieve
a specific goal. The need for integration is supported by Hronec (1993), who defined a performance
system as a “tool for balancing multiple measures (cost, quality and time) across multiple levels
(organisation, processes and people)”.
Even with these definitions performance measurement remains a broad topic. Edson (1988) and Talley
(1991) stressed the need for performance measurement systems to focus attention on continuous
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improvement. Kaplan (1991) stated that an effective performance measurement system should provide
timely, accurate feedback on the efficiency and effectiveness of operations. The following dimensions:
planning, controlling and evaluating, managing change, communication, measurement and
improvement, resource allocation, measurement and motivation, have been identified by Sinclair and
Zairi (1995) as the need for measurement.
PERFORMANCE MEASUREMENT IN FACILITIES MANAGEMENT
The role and the need for assessment of facilities management performance
Facilities management can be defined by reference to its nature, scope and role. Becker (1990)
suggested: “Facilities management is responsible for co-ordinating all efforts related to planning,
designing and managing buildings and their systems equipment and furniture to enhance the
organisation’s ability to compete successfully in a rapidly changing world”. Spedding et al (1994)
identified that the function of facilities management should be that of managing the property in the best
interests of the core business. Therefore, the aim of facilities management should be not just to
optimise running costs of buildings, but also to raise efficiency of the management of space and related
assets for people and processes in order that the mission and goals of the organisation may be achieved
at the best combination of efficiency and cost.
Facilities management encompasses a vast spectrum of perspectives about people, organisations and
change processes to realise the value of any organisation. These practises are generally consistent with
the ideas and techniques originally articulated by Nutt (1992), Then and Akhlaghi (1992) and Mole and
Taylor(1992). By grouping similar requirements postulated in the literature, Thompson (1990)
classified all these into four separate categories: facility planning, building operations and
maintenance, real estate and building construction and general/office services. Barrett (1992) also
provided a meaningful taxonomy for classifying facilities management attributes.
Facilities management advocates appear to give an equal weight to the importance of customer
involvement and satisfaction. The assumption of facilities management advocates is that customer
satisfaction is needed to support continuous improvement within the organisation (Becker, 1990).
They also appear to assume a strong correlation between satisfaction and performance (Kaplan and
Nortron, 1992 & 1993; Letza , 1996; Eccels, 1992). The link between the human resources
management and facilities management can also be seen in the models of facilities management
proposed by Barrett (1994) and in the work of Hoxley and Barrett (1992).
Performance measurement revolution in facilities management – why now?
The measurement of performance is one of the most prominent features of modern life extending as it
does through politics, economics, business, education and sport (Kincaid, 1994). Allied to this has
been a more widespread desire amongst organisations to know that their facilities provide a value for
money working environment. In 1991, Eccles predicted that “within the next five years, every
organisation will have to redesign how it measures its business performance”. Given the current levels
of activity in the field, it appears that Eccles’ assertion was fair.
Why should the quality of functioning be assessed? The reasons are important because they guide the
selection of appropriate techniques. It is impossible to answer this question definitively, but Neely
(1999) suggests that there are seven main reasons:
• The changing nature of work
• Increasing competition
• Specific improvement initiatives
• National and international awards
• Changing organisational roles
• Changing external demands
• The power of information technology
There has been a growing interest in performance measurement throughout facilities management. For
the economic health of the organisation, the senior management at the core of the business will want
to know the performance of the facilities. The broad management need for performance measurement
can be interpreted in a facilities management context. Becker (1990) suggested facilities management
as a major cost for most organisations. Much work has been done to measure facilities management
performance, but it often ignores the influences of erratic patterns of reinvestment in building fabric
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and components which can add as much as twenty five percent to the cost of running a building
(Kincaid, 1994). Alexander (1996) identified measurement of performance as one of “three essential
issues for the effective implementation of a facilities strategy”. There is a wide range of choices in
measuring facilities management performance reflecting the varied nature of the field. Benchmarking,
or post-occupancy evaluation could be identified as examples(Kincaid, 1994). In essence, however,
they are all seeking to address one of the two fundamental questions associated with performance
measurement, namely: what are the determinants of performance measurement in facilities
management; and how can facilities management performance be assessed? But, what is needed is an
assessment of facilities performance in the eyes of the core business. The remainder of this paper seeks
to address this issue. The paper begins by presenting evidence that supports the assertion that we are in
the midst of performance revolution. Next, the reasons why this is important in facilities management
is explored. Finally, new methods of performance measurement are described and applicability of such
methods into facilities management is explored.
BALANCED SCORECARD – A RADICAL NEW APPROACH TO PERFORMANCE
MEASUREMENT AND MANAGEMENT
Financial and non-financial measures
Interest among both academics and practitioners in performance measurement systems as a tool for
delivering strategic objectives is now well established in the management literature (Kaplan and
Norton, 1992; Eccels and Pyburn, 1992). During the 1980s and early 1990s, managers began to reject
financial measures and were searching for new means of measuring performance. The inadequacies of
solely using financial performance measures are well documented (Medori, 1998). Many organisations
recognise that their cost systems are inadequate for today’s powerful competition (Kaplan and Norton,
1992). Traditional performance measurement systems are not providing managers with the information
they need to measure and manage the all-important competencies that drive competitive advantage.
Traditional financial systems are proving to be of increasingly limited use to managers who want to
manage and improve critical business processes. Many organisations are realising that the traditional
financial orientation of their performance measurement systems is no longer adequate. Newing (1995)
claimed, “In particular, it places too much emphasis on pure profit measures and too little on the
customer, staff, risk process and control aspects of the organisation’s operations, although these are the
key drivers of the financial results”.
Organisations have come to realise the importance of an enterprise wide strategic feedback and
performance measurement and management application that enables them more effectively drive and
manage their business operations. No longer can organisations simply monitor key financial
performance indicators that have often been historical in nature. While these remain critical, what has
become apparent to many organisations is the need to more effectively track and manage performance
in other key areas of their business, that is all areas that contribute to future financial results.
Performance measurement incorporating non-financial measures has been a topic of great interest
throughout most of the 1990s. This is because non-financial measures overcome the limitations of just
using financial performance measures. “Soft” measures, such as employee satisfaction and
commitment, are coming to the fore as protagonists of the business performance measurement
revolution urge organisations to complement their traditional financial focus with softer data. Also, in
today’s global economy, total customer satisfaction is seen by academics and industrialists alike as one
of the key indicators of competitive success (Anderson and Sullivan, 1994). “Soft” issues, “those areas
of the discipline which are generally difficult to measure and assess” (Black and Porter, 1995), are
becoming more widely recognised as having an impact on business performance. They include issues
such as employee and customer satisfaction, and they acknowledge “tomorrow’s organisation needs to
measure these issues in order to fill an identifiable information gap”.
The Balanced Scorecard
The approach of the balanced scorecard is fundamentally different. While financial measures are
included, the scorecard targets leading indicators. Morris (1999) explains, “in business, it’s important
to have a balanced approach. You shouldn’t just measure financial targets or performance targets to
find out how well you are doing. You have to look across the board”. Devised by Harvard Business
School Professor Robert Kaplan and Renaissance Solutions President David Norton, this management
system proposes a system which integrates measures of customer satisfaction, process performance,
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product or service innovation and finance. Kaplan and Norton (1992) suggested that what is needed is
“a balanced presentation of both financial and operational measures”.
“The balanced scorecard integrates traditional financial measures with operational and softer customer
and staff issues, which are vital to growth and long-term competitiveness” comments Newing (1995).
In addition, while traditional financial measures report on what happened during the last period without
indicating how managers can improve performance in the next, the scorecard functions as the
cornerstone of the organisation’s current and future success (Kaplan and Norton, 1993).
The balanced scorecard translates an organisation’s mission and strategy into a comprehensive set of
performance measures that provides the framework for a strategic measurement and management
system. Ashton (1998) believes that the balanced scorecard provides:
• A practical framework for implementing corporate strategy;
• A management tool for linking business, team and individual objectives and rewards to
strategic goals;
• An effective mechanism for implementing change management;
• A good fit with the organisation’s move away from a command and control culture to one
of empowerment and coaching.
• The ability to understand the drivers of business success;
• The story of the strategy will set the foundation for a management system that is capable
of driving dramatic improvements in performance;
• Easy identification of “cause-and-effect” relationships across operations;
• Both quantitative and qualitative information; and
• Dynamic communication and feedback.
The balanced scorecard measures are built around the following four perspectives:
• Customer – what do existing and new customers value from us?
• Internal processes – what processes must we excel at to achieve our financial and
customer perspective?
• Learning and growth – can we continue to improve and create future value?
• Financial – how do we create value for our shareholders?
The four perspectives of the scorecard permit a balance between short-tem and long-term objectives,
between desired outcomes and the performance drivers of those outcomes, and between the objective
measures and softer, more subjective measures. While the multiplicity of measures on a balanced
scorecard seems confusing to some people, properly constructed scorecards contain a unity of purpose
since all the measures are directed towards achieving an integrated strategy.
Kaplan and Norton (1992) expanded the definition of the balanced scorecard as follows: (See also
Figure 1)
Figure 1 – Different Segments of the Balanced Scorecard
Financial perspective
To succeed financially, how should
we appear to our shareholders?
Internal business processes
perspective
To satisfy our shareholders
and customers, what
business processes must
we excel at?
Customer perspective
To achieve our vision, how
should we appear to our
customers?
Learning and growth perspective
To achieve our vision, how will
we sustain our ability to change
and
improve?
Balanced
Scorecard –
Vision and
Strategy
5
Customer perspective: How do customers see us?
The customer perspective looks at the organisation through the eyes of its customers. Many
organisations today have a corporate mission that focuses on the customer. How an organisation is
performing from its customers’ perspective has become a priority for top management. The Balanced
Scorecard demands that managers translate their general mission statement on customer service into
specific measures that reflect the factors that really matter to customers (Kaplan and Norton, 1992).
Customers’ concerns tend to fall into four categories: time, quality, performance and service, and cost.
Customer satisfaction measurement, for example, is one of the generic outcome measures. Customer
satisfaction measures provide feedback on how well the organisation is doing. Depending on
customers’ evaluations to define some of the organisation’s performance measures forces that
organisation to view its performance through customers’ eyes.
Internal processes perspective: What must we excel at?
The internal processes perspective reports on the efficiency of internal processes and procedures. The
premise behind this perceptive is that customer-based measures are important, but they must be
translated into measures of what the organisation must do internally to meet its customers’ expectations
(Kaplan and Norton, 1992). This perspective must reflect the organisation’s core skills and the critical
technology involved in adding value to the customer’s business. The critical internal business processes
also enable the business unit to satisfy shareholder expectations of excellent financial returns.
Therefore, the measures should be focused on the internal processes that will have the greatest impact
on customer satisfaction and achieving the organisation’s financial objectives.
The internal business process perspective reveals two fundamental differences between the traditional
and balanced scorecard approach to performance measurement (Kaplan and Norton, 1992). Traditional
approaches attempt to monitor and improve existing business processes. The balanced scorecard
approach, however, will usually identify entirely new processes at which the organisation must excel to
meet customer and financial objectives. The internal business process objectives highlight the
processes most critical for the organisation’s strategy to succeed.
Innovation and learning perspective: Can we continue to improve and create value?
The learning and growth perspective deals with research and development issues such as intellectual
assets, market innovation and skills development. The customer and internal perspectives will have
focused on the organisation’s current competitive position. The innovation and learning perspective is
required in order to recognise that this is constantly changing. Intense global competition requires that
companies make continual improvements to their existing processes and have the ability to introduce
entirely new processes with expanded capabilities (Kaplan and Norton, 1992). The organisation, its
management and all of its employees, must continually seek to learn, to innovate and to improve every
aspect of the organisation and its business just to maintain their competitive situation, let alone to
improve it in future.
Financial perspective: How do we look to shareholders?
The financial performance measures define the long-run objectives of the business unit (Kaplan and
Norton, 1992). Financial performance measures indicate whether the organisation’s strategy,
implementation, and execution are contributing to bottom-line improvement. A well-designed financial
control system can actually enhance an organisation’s management system.Currently, the Balanced
Scorecard is a powerful and widely accepted framework for defining performance measures and
communicating objectives and vision to the organisation. Roest (1997), based on practical experiences
in putting the Balanced Scorecard to work, determined the following ten golden rules for its
implementation:
• There is no standard solutions: all businesses differ
• Top management support is essential
• Strategy is the starting point
• Determine a limited and balanced number of objectives and measures
• No in-depth analyses up front, but refine and learn by doing
• Take a bottom-up and top-down approach
• It is not a systems issue, but systems are an issue
• Consider delivery systems at the start
• Consider the effect of performance indicators on behaviour
• Not all measures can be quantified
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A balance of measures across these four perspectives is what gives the Balanced Scorecard its name.
However, the measures that make up a scorecard do not exist in isolation from each other. They relate
to a set of objectives that are themselves linked, the final link usually relating to financial outcomes of
one form or another. Measures in this context, can be used to communicate not simply control. It is the
language that gives clarity to vague concepts and the process of building a scorecard develops
consensus and teamwork throughout the organisation.
Linking measurement to strategy
Performance measurement in general and the Balanced Scorecard in particular attempt to address a key
management issue: that organisations often fail to turn strategy into action. The fact is that a clear,
action oriented understanding of an organisation’s strategy could significantly influence that
organisation’s success.
The primary focus of the Balanced Scorecard is on translating the organisation’s strategy into
measurable goals (Letza, 1996). Having understood what is important for the business, performance
measures are set up to monitor performance and targets must be set for improvement. This is illustrated
in figure 2. These must then be clearly communicated to all levels of management and staff within the
business. This enables them to understand how their own efforts can impact on the targets set in respect
of each perspective.
Although offering a sample template, Kaplan and Norton (1992) acknowledged that the precise format
of the Balanced Scorecard is probably an organisation-specific issue. A major task facing an
organisation in attempting to introduce a Balanced Scorecard, is how to devise a set of measures
explicitly linked to its strategy? Underlying this need is the essential condition that the strategy is
widely understood and accepted within the organisation.
To my
shareholders
Financial
perspective
To my
customers
Customer
perspective
To my
internal
processes
Internal
perspective
To my ability
to learn and
growth
Innovation
and learning
The Balanced Scorecard
Only by combining, measuring and thinking in terms of all four perspectives can managers prevent
improvements being made in one area at the expense of another. The Balanced Scorecard forces
managers to focus on some really important non-financial factors which impact on long-term
profitability and which might otherwise be neglected (Newing, 1995).
Statement of vision
1. Definition of unit
2. Mission statement
3. Vision statement
What is my vision of
the future?
What are the
critical success
factors?
What are the critical
measurements?
If my vision
succeeds, how will I
differ?
Figure 2 – Linking measurement to strategy
(Source: Kaplan and Norton, 1993)
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BALANCED SCORECARD – A UNIVERSAL SOLUTION TO FACILITIES
MANAGEMENT?
The balanced scorecard has been used to ensure that departmental and individual objectives are aligned
with the long-term strategy and mission of an organisation. Yet there is still a lot of confusion as to
exactly what the Balanced Scorecard is all about. Even amongst the committed advocates, there are
differing interpretations as to its deployment and use. There is no clear agreement among experts about
whether the scorecard technique is appropriate for assessing facilities management performance as a
function isolated from the rest of the organisation. FBA (1999) believes that if essential facilities
services are to be effective, then the facilities management strategy of any organisation must align with
the core business. This further identifies the possibilities of applying Kaplan and Norton’s Balanced
Scorecard to facilities management.
The fundamental reality of business today, however, remains the need to be able to quickly implement
business strategy. Even more so in difficult external economic times, organisations need to be able to
adjust and flex their strategy. This is where the Balanced Scorecard is such a powerful approach, and
why it is so much more than a measurement system. It is a process for managing the business. Just like
business processes for sales, marketing and production, so now, through the Balanced Scorecard, a
process for facilities management ,may be tested. So what does this all mean in reality? What does the
facilities management scorecard look like and how could it be used?
In par with the original four perspectives of the Balanced Scorecard, propositions which look at the
facilities management function were arrived at:
• Customer – how do the facilities users see us?
• Internal processes – how efficient and effective is the delivery of facilities management
services?
• Financial – how is the facilities management function managed in terms of value for
money
• Learning and growth – how does the facilities management function continue to
improve in itself and to assist the core business
Given the characteristics of the facilities management environment, recognising and satisfying the
needs of the core business is vital for long term survival. To ensure satisfaction of various customer
needs, it is essential that facilities management identifies, focuses on, and monitors key performance
indicators. The remainder of this paper reports on the approach to investigating the suitability of the
Balanced Scorecard to facilities management as a method of linking performance measurement to
business strategies.
The Balanced Scorecard provides a flexible strategic framework that will aid the transition from
average to exceptional (Beechey and Garlick, 1999). Facilities management’s ability to measure and
analyse performance is paramount in importance for its continued success and long-term growth. It’s
ability to plan, anticipate and initiate change is enhanced if it utilises management tools such as the
Balanced Scorecard. The very exercise of creating a Balanced Scorecard forces facilities management
to integrate their strategic planning and budgeting processes, which helps to ensure that their budgets
support their strategies.
RESEARCH METHODOLOGY
The purpose of the research being reported on is an attempt to devise a Balanced Scorecard into
facilities management and to facilitate learning about performance assessment and the outcomes. In the
following, a detailed review of critical methodological issues is undertaken.
The framework of the methodology is based on:
• Study questions
• Its propositions
• Unit of analysis
• Logic linking of the data to the propositions
• The criteria for interpreting the findings, as identified by Yin (1994)
A study was made of the various research methodologies in order to select a suitable approach to the
situation. The nature of the how and why questions to be posed during the research and the
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involvement of both qualitative and quantitative data point to the use of the case study methodology.
According to Yin (1994) this approach is ideally suited for areas where knowledge building is in its
formative stages with few prior studies to build on. Case studies are tailor made for exploring new
processes or behaviours or ones which are little understood (Cassell and Gillian, 1994). In this sense,
case studies have an important function in generating hypotheses and building theory (Feagin et al,
1991; Stake, 1995). Detailed case studies may be essential in comparative research, where an intimate
understanding of what concepts mean to people, the meanings attached to particular behaviours and
how behaviours are linked.
The decision for this approach of research strategy at the first instance is two fold. Firstly, due to the
tenuous nature of the application of facilities management, its performance assessment and linkage
between that and the Balanced Scorecard makes the case approach an ideal methodology for
conducting scientific inquiry in this area to clarify the constructs. Secondly, this approach provides the
ability to focus on the details of individual and group experiences related to facilities management
implementation in order to preserve the contextual richness of the study.
Through this exercise it is expected to identify organisational context and facilities management and
building performance evaluation factors that affect organisational performance. Also the case study
evidence will result in modifying and developing the relevant hypotheses for each critical variable in
the Balanced Scorecard and the explanation of the meaning of each factor. Taken together, the
literature review and case studies together with the pilot study, it can guarantee an appropriate level of
construct and content validity of the research. For a fuller description of these studies, see Amaratunga
and Baldry (1999, 2000a, 2000b)
Data Collection Methodologies
Yin (1994) suggests three principles of data collection for case studies: use multiple sources of data,
create a case study database, and maintain chain of evidence. Case study is known as a triangulated
strategy (Tellis, 1997a:1997b;1997c). Snow & Anderson (cited in Feagin et al, 1991) asserted that
triangulation occurs with data, investigators, theories and methodologies. Stake (1995) stated that the
protocols that are used to ensure accuracy and alternative explanations are called triangulation. The
assumption in triangulation is that the effectiveness of triangulation rests on the premise that the
weaknesses in each single method will be compensated by the counter-balancing strategies of another
(Jick, 1979). The need for triangulation arises from the ethical need to confirm the validity of the
process. Triangulation also increases the reliability of data and the process of gathering it. In a single
case, triangulation essentially involves crosschecking for internal consistency, while in multiple cases;
triangulation tests the degree of external validity (McCutcheon and Meredith, 1993). In this study this
was achieved by using multiple sources of data: survey questionnaires, interviews, documents, archival
records, direct observation and participant observation, as described by Yin (1994). A survey
questionnaire and analysis of archival records and documentation was the research tool to collect
quantitative data. This approach is particularly suited and valuable in the case of building up
relationships among elements to be analysed and in testing the model built during the exploratory stage
of the research work. Interviews with management and customers were the main source of collecting
qualitative data. Constituents other than the senior administration may be the best source to overcome
the potential for bias (Flynn et al, 1994).
Data Analysis
Data analysis consists of examining, categorising, tabulating or otherwise recombining the evidence to
address the initial propositions of a study (Yin 1994). The analysis of a case study is one of the least
developed aspects of the case study methodology. Yin (1994) suggested that every investigation
should have a general analytic strategy, so as to guide the decision regarding what will be analysed and
for what reason. The data analysis for the case studies will follow the logical categories used in the
Levy (1988) study, and will be adopted from the categories developed by Kin and Kraemer(1985)&
Yin (1994).
In this exercise, it was expected to identify organisational context and performance evaluation factors
that affect higher education organisational facilities performance. All the case study evidence will
result in modifying and developing several representative measurement items for each critical factors
and the explanation of the meaning of each. Although the individual cases help to provide an in-depth
knowledge of the relationships studied in this research, inter-group differences and more externally
9
valid results demand a cross-case analysis. The data that is going to be yielded will be used to test the
relationships of the model proposed at the end of the pilot study. The reliability and validity issues of
this phase will be assessed by the guidelines given in the literature (Nunnally, 1978; Creswell, 1994).
STUDY FINDINGS
The Balanced Scorecard forces managers to think in terms of fundamental competitive issues and it is
more than a collection of financial and non-financial measurements. It is the translation of the business
unit’s strategy into a linked set of measures that define both the long term strategic objectives, as well
as the mechanisms for achieving and obtaining feedback on those objectives. Case studies as the initial
approach were conducted. According to the process outlined by Kaplan and Norton (1992) for
developing a Balanced Scorecard, the data collection within the hierarchy of the facilities management
and other customers was structured by three main stages:
• Facilities management’s vision and corresponding objectives;
• It’s relationship to the core business;
• Critical success factors in relation to these objectives; and
• Development of an appropriate balance of performance measures to support the critical
success factors.
Authors rightly recognised that if facilities management organisations are to design fully effective
performance measurement systems, it is essential that management can clearly determine what their
precise performance measurement information needs are. Barrett (1992) identified certain goals
common to most facilities management organisations and this evidence suggests a need for a Balanced
Scorecard approach, which adequately reflects the characteristics, goals and critical success factors of
the facilities management organisation.
Kaplan and Norton (1992) envisaged that the identification of key performance measures would form a
pre-requisite to developing the scorecard, and an iterative process would take place before the
scorecard emerged. In the case of this pilot study, a six-step methodology was adopted, based on the
method established by Vitale et al (1994) (See figure 3).
Vision and objectives
Facilities management organisation’s vision and objectives are shown below:
• To provide a distinctive service combined with value for money;
• To respond quickly to changes in customer needs;
• To achieve continually improving services; and
• To develop skills of all employees, and to recognise their performance by means of
opportunities for advancement.
Indeed these present no real surprises and they serve to confirm the relative importance of customer
satisfaction and achieving good value for money. It is essential for an effective and useful Balanced
Scorecard for use by facilities management organisations to reflect these emphases.
Figure 3 – Six-step methodology (source: Vitale et al, 1994)
Step 2 : Match measures to strategy – what is most
important?
Step 1 : Specify the goal(s) - what are we trying to achieve?
Step 3 : Identify the measures – What should we
measure?
Step 4 : Predicting the results – what will change?
Step 5 : Building commitment – Who is on board?
Step 6 : Planning the next step – where do we go
from here?
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Critical success factors and corresponding performance measures
Critical success factors and appropriate measures were determined, based on the management
responses and keeping in mind the vision and the objectives. By focusing on the aspects of the
business which created value for customers and, by carefully re-appraising the organisational
philosophy and incorporating this into the performance measurement system, this study was able to
build a Balanced Scorecard at the exploratory stage, which will act as a set of propositions to be tested
at the next phase of the study.
The Balanced Scorecard demands that managers translate their general mission statement on customer
services to specific measures that reflect the factors that really matter to customers. Customer measures
must be translated into measures of what the organisation must do internally to meet its customers’
expectations. After all, excellent customer performance derives from the processes, decisions and
actions occurring throughout the organisation. Therefore, it is essential that internal measures are
related to those areas which are most likely to have the greatest impact on customer satisfaction and
achieve the organisation’s financial objectives.
Traditional financial measures do not improve customer satisfaction, quality internal processes and
employee motivation. Financial performance is the result of operational actions, and financial success
should be the logical consequence of doing the fundamentals well. By making fundamental
improvements in their operations, the financial numbers will take care of themselves, the argument
goes. Properly designed financial perspective performance measures can enhance management
planning, control and decision making.
Learning and growth measures are intended to drive improvement in financial, customer and internal
processes performance. Customer and internal processes perspectives identify the factors most critical
for current and future success. If facilities management organisations are to be successful – and, it is to
be hoped, remain successful – they must continually make improvements both to their existing services
and to their operations and processes, as well as developing and introducing new ones. Facilities
management should interact with the core business to ascertain possible future changes to the business.
Therefore, it is only by this continual process of improvement and innovation that organisations can
grow. Organisational learning and growth comes from three principal sources: people, systems and
organisational procedures. Therefore, the challenge of managing the facilities management
organisation is to address issues of cost and profitability within the broader context of quality and
organisational effectiveness.
Table 1 identifies the strategic objectives and measures for the four perspectives of the Balanced
Scorecard in a facilities management context. Further, it shows the importance of linking the set of
objectives and related measures. A financial improvement is usually the end objective of the linked
series. A good balanced scorecard “tells the story of the strategy”. In addition, a checklist of features
was created that will test the scorecard:
• Cause and effect relationships;
• Linked to financials;
• Performance drivers; and
• Measures that create change.
Implementing the Balanced Scorecard management methodology within an organisation can have
profound financial and organisational impact on the organisation. The Balanced Scorecard is a proven
management approach that delivers bottom line results and enables strategy to be communicated and
aligned at all levels of the organisation.
11
Perspective Strategic objectives Strategic measurements
Financial F1 – Financial growth
F2 - Cost reduction/productivity
Improvement
F3 - Asset utilisation
F4 - Management of working
capital
• Cash flow
• Cost reduction rates
• Unit costs (per unit of output)
• Reduce indirect costs
• Services sharing with other
business units
• Reducing the working capital
Customer C1 – Timeliness of service
C2 – Service quality
C3 - Range of services offered
C4 – Effectiveness of partnership,
communication and co-ordination
• Customer satisfaction surveys,
e.g. post-occupancy evaluation
etc.
Internal processes I1 – Service excellence - technology
capability
I2 – Understand the customers
I 3 - Employee competence
I4 - Process efficiency
I5 - Team work and co-ordination
• Process management
• Service quality survey
• Superior project management
• Employee satisfaction index
• Customer contacts, surveys
• Output/cost ratio
• Number of multi-skilled staff
Learning and growth L1 – Technology leadership
L2 – Continuous service
improvement/ Service innovation
L3 - Upgrade staff competencies/
Staff development
• Time to develop new processes
• Staff attitude survey
• Number of employee /customer
suggestions
• Degree of new
facilities/services introduced
• Employee satisfaction
• Staff development programmes
• Courses completed
• Internal promotions made
• New business development
• Expanding services
• Training hours per employee
• Interdependent training courses
Implications and plans for further research
Accordingly the suitability of the Balanced Scorecard for facilities management, as a result of
preparatory research has indicated a number of points which need further clarification and investigation
at the exploratory phase of the study:
• There appears to be a very definite need to be clear about the business unit for which a
scorecard is being developed. The authorities certainly envisaged that a scorecard
developed for the entire business unit would differ from each of the areas or departments
controlled by management within the business unit;
• There is a clear need for the Balanced Scorecard components to be reviewed and, where
necessary, updated on a regular basis if the scorecard is to remain both relevant and
useful; and
• There is also number of areas which could be used to augment a facilities management
scorecard such as measurements reflecting staff reaction to student needs etc.
Further research at the explanatory phase will seek to address the following issues;
• Review of common goals, critical success factors and performance measurement relevant
to facilities management;
Table 1 – strategic objectives and measures
12
• Identification of possible Balanced Scorecards appropriate to other levels within the
facilities management unit and consideration of the implications of using different
Balanced Scorecards at different levels in a facilities management organisation; and
• Further development of effective performance measures appropriate to facilities
management such as customer satisfaction, service process efficiency, staff development
etc., which have been identified as being especially vital to the facilities management
sector.
It is hoped that the outcome of further research will enable academics and practising managers to
assess whether the Balanced Scorecard is likely to be successful in facilities management, as it has
become highly successful in manufacturing and other services organisations.
CONCLUSION
The ability of facilities management to plan, anticipate and initiate change is enhanced if it utilises
management tools such as the Balanced Scorecard. However, in the words of one interviewee from the
study, “ the scorecard must be balanced in order to facilitate the achievement of the short, medium and
long term goals and objectives of the organisation”.
This paper addresses the applicability of the Balanced Scorecard into facilities management as a
performance assessment tool. The adoption of this process would be a major change initiative in most
organisations. Kaplan and Norton (1992) provided a very useful generic model in the form of their
Balanced Scorecard. As seen in the study detailed in this paper, the quadripartite model they present is
suited to different types of business situations. The original idea of the scorecard technique was, as
they point out, “not whether you had created value, but if you are going to create value in the future”.
The impact of this management and measurement process is the basis for the research currently being
conducted by the authors. Issues such as completeness of the Balanced Scorecard measures,
effectiveness of enhancing facilities management performance and barriers to implementation are the
focus of the future investigations.
The findings of this study raise a series of key issues that need to be addressed:
§ Organisations do not identify or learn from their past performances;
§ Organisations fail to collect the right information to monitor progress towards
achieving the strategic goals;
§ Strategic vision requires communicating to the entire organisation and needs to make
sure that it is properly understood;
§ Operating goals of departments and individuals should have a direct
relationship/impact on the strategic vision; and
§ All day-to-day decisions must also be based on the strategic plan.
The study reported in this paper provides the basis for the construction of a set of propositions for a
“Facilities Management Balanced Scorecard”, which forms the framework for further study at the next
phase.
ACKNOWLEDGEMENTS
The authors are grateful to the Royal Institution of Chartered Surveyors Education Trust, for the award
of a research grant to support this work.
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