Performance Management of Tangible Assets within the Balanced Scorecard and Interactive Business Decision Tools

Authors: Raymond K. Jonkers

Abstract:

The present study investigated approaches and techniques to enhance strategic management governance and decision making within the framework of a performance-based balanced scorecard. The review of best practices from strategic, program, process, and systems engineering management provided for a holistic approach toward effective outcome-based capability management. One technique, based on factorial experimental design methods, was used to develop an empirical model. This model predicted the degree of capability effectiveness and is dependent on controlled system input variables and their weightings. These variables represent business performance measures, captured within a strategic balanced scorecard. The weighting of these measures enhances the ability to quantify causal relationships within balanced scorecard strategy maps. The focus in this study was on the performance of tangible assets within the scorecard rather than the traditional approach of assessing performance of intangible assets such as knowledge and technology. Tangible assets are represented in this study as physical systems, which may be thought of as being aboard a ship or within a production facility. The measures assigned to these systems include project funding for upgrades against demand, system certifications achieved against those required, preventive maintenance to corrective maintenance ratios, and material support personnel capacity against that required for supporting respective systems. The resultant scorecard is viewed as complimentary to the traditional balanced scorecard for program and performance management. The benefits from these scorecards are realized through the quantified state of operational capabilities or outcomes. These capabilities are also weighted in terms of priority for each distinct system measure and aggregated and visualized in terms of overall state of capabilities achieved. This study proposes the use of interactive controls within the scorecard as a technique to enhance development of alternative solutions in decision making. These interactive controls include those for assigning capability priorities and for adjusting system performance measures, thus providing for what-if scenarios and options in strategic decision-making. In this holistic approach to capability management, several cross functional processes were highlighted as relevant amongst the different management disciplines. In terms of assessing an organization’s ability to adopt this approach, consideration was given to the P3M3 management maturity model.

Keywords: Outcome based management, performance management, lifecycle costs, balanced scorecard.

Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1125731

References:

[1] United States, Coast Guard, Capability Management, Publication 7.0, May 23, 2013.
[2] Australia, Department of Defence, Defence Capability Development Handbook 2012, Version 1.0, December, 2012.
[3] F.R. David, Strategic Management, 8th ed., New Jersey: Prentice Hall, 2001, pp. 5-6.
[4] R.S. Kaplan, “Conceptual foundations of the balanced scorecard”, Working Paper 10-074, Harvard Business School Press, Boston, 2010.
[5] D.C.Montgomery, Design and Analysis of Experiments, 5th ed., New York: Wiley and Sons Inc., 2005, pp. 218-230.
[6] Rick Adcock, “Systems engineering in defence acquisition”, Defence Academy of the United Kingdom, Cranfield University, (Online). Available: http://www.cems.uwe.ac.uk/~tlwinnin/CPDA_D6/Sessions/Systems%20in%20Acquisition/Systems%20Approach%20to%20Capability.pdf. (Accessed: Jan. 10, 2015).
[7] Valdis Krebs, “Power in neworks”, http://orgnet.com/PowerInNetworks.pdf. (Accessed: Feb 23, 2013).
[8] Dr. Judith S. Dahmann and George Rebovich Jr., “Systems engineering for capabilities”, The Journal of Defense Software Engineering, November, 2008.
[9] J.P. Olivier, S. Balestrini-Robinson, and S. Briceno, “Approach to capability-based system-of-systems framework in support of naval ship design”, 8th Annual IEEE Systems Conference (SysCon), 2014, pp. 1-2.
[10] J.C McDavid and L.R.L Hawthorn, Program Evaluation and Performance Measurement, Sage Publications, 2006, pp. 6-18.
[11] Capt Gary Jones, Edward White, Lt Col Erin T. Ryan, Lt Col Jonathan D. Ritschel, “Investigation into the ratio of operating and support costs to life-cycle costs for DoD weapon systems”, Defense Acquisition University, Defense ARJ, Vol. 21 No. 1, 2014, pp. 442-464.
[12] ISO/IEC 15288:2008, Systems and software engineering - System life cycle processes, 2nd ed., 2008, pp. 12.
[13] The Standard for Program Management, Project Management Institute (PMI), Pennsylvania, 2006.
[14] Managing Successful Programmes, The Stationary Office, United Kingdom, 2011.
[15] G. Bradley, Benefits Realization Management, A Practical Guide to Achieving Benefits Through Change, 2nd ed., Gower Publishing Ltd., England, 2010, pp. 29-47.
[16] United Kingdom, Office of Government Commerce, Portfoilio, Programme and Project Management Maturity Model (P3M3®), Version 2.1, February, 2010, pp. 7.