D EVELOPING A P ERFORMANCE M EASUREMENT S YSTEM IN A V IETNAMES E P ROFESSIONA L S ERVICE F IRM
By Mirthe van de Belt
Studentnumber: 0093742
Research Conducted at: D&N International, Hanoi, Vietnam Graduation Commitee: Prof. Dr. C. P. M. Wilderom, M.R. Stienstra
Date: 23‐01‐2009
NEDERLANDSE SAMENVATTING
Dit onderzoek heeft zich gericht op de ontwikkeling en gedeeltelijke implementatie van een prestatie meetsysteem in een kleine, professionele service organisatie in Vietnam; D&N International. Typische karakteristieken binnen een professionele service organisatie zoals de overvloedige aanwezigheid van
impliciete kennis, een hoge mate van autonomie onder werknemers en een heterogeen proces leiden ertoe dat deze sector over het algemeen niet ontvankelijk is voor de implementatie van een management controle systeem. Desondanks liggen er toch voldoende uitdagingen voor deze organisaties. Werknemers retentie is bijvoorbeeld een bekend probleem. De hoge mate van impliciete kennis heeft hierbij als gevolg dat kennis verloren gaat wanneer een werknemers vertrekt uit de organisatie. Ook kampen deze kleinere, professionele service organisaties vaak met een gebrek aan strategische richting vanwege een focus op dagelijkse taken.
Ontwikkelingen in de management controle literatuur richten zich op een meer context gebonden, strategische inrichting van een prestatie meetsysteem. De hoofdvraag waar dit onderzoek zich op heeft gericht is: “Wat zijn de mogelijkheden voor een kleinschalige, professionele service organisatie om de ontwikkelingen op het gebied van prestatiemeet systemen te benutten zodat er op een effectieve wijze gewerkt kan worden aan het bereiken van de organisatiedoelen.”
Mogelijkheden lagen er met name in de ‘enabled approach’ ten opzichte van de ontwikkeling en implementatie van een prestatie meetsysteem. Een bottom‐up benadering waarbij rekening wordt gehouden met de
organisatiecontext, bestaande indicatoren, verbeterpunten en indicatoren op een interactieve manier worden gebruikt leidt tot een systeem waarbij de strategie voor individuele werknemers duidelijk wordt alsmede de individuele bijdrage van werknemers in het bereiken van de organisatiedoelen. Het wordt duidelijk waar prioriteiten en verbeterpunten liggen in de organisatie en werknemers worden gemotiveerd tot de ontwikkeling van nieuwe ideeën. Hiermee worden stappen gezet richting het bereiken van een lerende organisatie, een doel wat voor organisaties die bestaansrecht halen uit het leveren van complexe kennis zeer relevant is.
De action research methode die is toegepast heeft zich achtereenvolgend gericht op analyse, motivatie en ontwikkeling en implementatie. Deze aanpak heeft geleid tot een situatie waarbij werknemers zich betrokken voelden bij het proces en er geen weerstand onder werknemers ten opzichte van het systeem heerste. Nieuwe procedures zijn tot stand gekomen, nieuwe ideeën zijn ontwikkeld en ingevoerd en er wordt gewerkt aan de ontwikkeling en verbetering van prestatie indicatoren. Hierbij moet worden opgemerkt dat culturele
karakteristieken als een hoge mate van collectiviteit sterk hebben bijgedragen aan de succesvolle ontwikkeling van het systeem. Tegelijkertijd waren typische Vietnamese kenmerken die negatief uit zouden kunnen werken bij de ontwikkeling van het systeem, zoals een hoge mate van mannelijkheid, in mindere mate aanwezig binnen deze organisatie.
De ‘single case’ aanpak heeft het mogelijk gemaakt om in de diepte te onderzoeken of de invoering van een prestatie meet systeem binnen een professionele service organisatie door middel van een ‘enabled approach’
mogelijk is en of deze benadering daadwerkelijk mogelijkheden biedt voor organisaties in deze sector bij het overwinnen van uitdagingen. Gebleken is dat ondanks de vele protesten tegen de invoering van management controle systemen binnen deze sector de invoering van een prestatiemeetsysteem wel degelijk mogelijk is en bovendien een hulpvol middel is in o.a. het expliceren van de organisatiestrategie alsmede de uitdaging om een lerende organisatie te creëren. Desondanks is het zaak voor deze organisatie om te waken voor mogelijke valkuilen als het zien van het proces als een korte termijn project. Indicatoren zullen moeten worden
uitontwikkeld en verbeterd en gezocht zal moeten worden naar mogelijkheden om de IT structuur op het systeem aan te passen.
T
ABLE OFC
ONTENTSAbstract ... 4
1. Introduction ... 4
2. Literature review ... 5
2.1. Tacit knowledge in Professional service organisations... 5
2.2. Management control... 6
2.3. Management control applied to PSFs... 8
2.4. The influence of cultural differences ... 11
3. Research design and approach ... 12
3.1 Research setting ... 12
3.2. Our three step approach to develop a PMS in this PSF... 14
3.2.1. Analysing of the firm... 15
3.2.2 Motivating the workforce ... 16
3.2.3 Starting the development and implementation of the PMS ... 19
4. Outcomes... 19
5. Discussion and conclusions ... 21
6. References ... 22
Appendix A. Measures developed in the Customer perspective... 25
Appendix B. Measures developed in the Development and Innovation perspective... 26
Appendix C. Measures developed in the Internal perspective ... 27
ABSTRACT
Purpose : To show how we developed an enabling type of performance measurement system (PMS) within the context of a Vietnamese professional service firm (PSFs).
Design/methodology: The study is based on action research where one Dutch researcher backed up by a Dutch coach plays the consulting role in the design and participatory development and implementation of the system.
Findings: An enabling approach towards the development of a PMS within a PSF resulted in a system which makes tacit strategies more explicit. Involvement of all the professionals in the process of explicating the firm’s overall goals creates awareness of the priorities in their performances. The interaction during this process creates opportunities to transfer knowledge from a personal level to an organisational level. The approach leads to a system which acts as an employee tool. Employees will get a better insight in their contribution towards the firm’s strategy, will learn from their performances and bring up more new ideas to improve performance.
Research implications/limitations: Other PSFs can use the same approach to creating a more strategic oriented, learning organisation. However, the in depth study is based on a single organisation in a non Western country.
Therefore more research is preferred.
Practical implications: The study proposes a useful approach for PSFs to use a PMS in order to solve the tension between professional autonomy and achieving the firms’ goals by management control.
Originality: The PMS literature focuses mostly on implementation issues and on the manufacturing sector or large scaled PSFs. This is one of the few studies that discusses PMS development within the context of a small sized PSF.
Paper type: Research paper
Keywords: Performance measurement, Professional service firm, Vietnam, Learning organisation.
1. INTRODUCTION
This paper reports on a particular action approach to develop a performance measurement system (PMS) in a small, Vietnamese professional service firm (PSF). Small PSFs are often characterized by an informal approach towards strategy and a day by day mentality which results in a lack of understanding about how to achieve future goals (Hudson et al., 2001; Garengo et al., 2005). Developments within the management control literature propose a strategic, non‐financial and contextual approach towards performance measurement systems (Brignall and Ballantine, 1995). Although this seems to justify the use of a PMS in a professional service context, most of the PMS research focuses on the manufacturing sector. Seen from the perspective of a PSF it is interesting to determine whether codification by means of a PMS is possible without a loss in professionalism, autonomy and flexibility of its employees. Furthermore, the possibilities of a PMS as a mean to support employees in their daily tasks in such a way that processes and their results become more transparent.
Knowledge transfer becomes easier and employees are more capable of behaving in the best interest of the firm are being studied.
A literature review will elaborate more on the context of a professional service firm, wherein the Vietnamese culture will also be taken into account. Hereafter, the relevant developments within the field of performance measurement for this sector will be discussed. The study which is based on action research will make clear that
PSFs can make use of the recent developments that propose a strategic, contextual approach towards the design and implementation of a PMS in order to create a PMS that serves as a tool which makes strategies more explicit, involves employees and guide their actions. This approach will eventually assist other PSFs in becoming a learning organisation. An overview of the new KPIs and new introduced practices that are formulated in this situation can serve as a framework for other PSFs.
2. LITERATURE REVIEW
2.1. TACIT KNOWLEDGE IN PROFESSIONAL SERVICE ORGANISATIONS
Service organisations have some characteristics that make them distinctive from production companies. A service is often a process which implies that a service is intangible and not a physical object. Production and consumption are acted out simultaneously and both the provider and the customer are involved in this process: making interaction crucial in the service process (Brignall and Ballantine, 1995; Gronroos, 2007).
Besides the general service characteristics a PSF has some unique characteristics, employees have to deal with complex knowledge and heterogeneous cases resulting in solutions that often are customized to specific circumstances. Within a PSF knowledge is often defined as: Information which professionals acquire through experience and training, together with the judgement which they develop over time which enables them to deploy that information effectively in order to deliver client service (Morris and Empson, 1998).This definition inherently implies that truly valuable knowledge is often developed and hidden within individual senior professionals. These characteristics make it often hard for customers to form a judgement about the quality of the service. Professionals are therefore traditionally regulated by their peers, based on technical and moral authority, which creates a dependency for the client on the service provider (Greenwood et al. 2005).
Establishing a good reputation that creates client trust is therefore important and hiring capable people who are able to establish and maintain this reputation is therefore crucial for these firms. Besides this, the internal structure of a PSF is regarded as a large factor in the performance of the firm and therefore it is interesting to discuss the typical structure of a PSF a bit more extensively. The most traditional organisational structure is that of a pyramid in which senior executives delegate tasks to lower level personnel. This hierarchy is mostly being applied when it enables leaders to control individual efforts and reduce goal incongruity or when professionalism is lacking (Morris and Empson, 1998).
The general structure that PSFs use is a partnership structure with general partners (GPs) as the senior leaders who are often responsible for the firms internal governance. The cases that are handled in these firms are often complex which makes it hard to divide tasks and to pass them on to younger, inexperienced employees.
This results in a low structural leverage ratio (number of younger employees to the number of experienced employees). The fact that younger staff need to be mentored is for some GPs another reason not to hire young people. Some GPs do not want to be involved in management issues but rather devote time to their practice.
Furthermore, most professionals prefer to work under a structure of small hierarchy and loose forms of normative control that allows them to deal individually with the heterogeneous, complex tasks with a lot of interaction with the client. A steep pyramidal structure often does not suit this need (Morris and Empson, 1998).
Small PSFs have flat, flexible structures with little hierarchy and a personalised management style, yet are often characterized by their severe resource limitations in terms of management and manpower; reliance on a small number of customers since they operate in limited markets; high innovative potential yet informal, dynamic strategies that result in a reactive mentality; and an uncertain environment (Hudson et al, 2001; Garengo, et al, 2005).
When all these characteristics that define a small sized PSF are taken into consideration some challenges for these firms can be identified. The first challenge is to overcome the problem of the loss of knowledge when experienced employees choose to leave the firm, taking their tacit knowledge with them (Greenwood et al, 2005). Another problem occurs in the daily work of professionals. The general loose structure within small PSFs can help experienced professionals in acting out their non‐routine tasks without too much control, but this loose structure without formal strategies could also lead to some disadvantages such as role ambiguity and role conflict among younger employees which often results in a decrease of the delivered quality (Van Looy et al, 2003). When one looks at the aspect of worker temporal flexibility, the unpredictability of the work of professionals can cause a source of inflexibility for workers concerning their schedule (timing of their work) which can be a cause of work‐overload. The possibility to transfer responsibilities and roles between two or more experts (handoffs) can be a solution to this problem (Wassermnan, 2008). This is however often problematic because of the fact that client participation is built upon mutual trust between the worker and the client that are enforced by certain rituals. Different work practices or knowledge about the client are examples of factors that make effective handoffs hard to create.
Although it is traditionally being assumed that an increased amount of control will clash with the characteristic nature and structure of a PSF, adding more management control can be beneficial for a PSF. However, only certain forms of management control may work effectively to counteract the informal relations that typically form PSFs. The main challenge lies in capturing the existing tacit knowledge on an organisational level and enable it to replicate throughout the organisation while passing it on to younger employees and at the same time creating opportunities for new relevant knowledge to be incorporated into organisational practices (Morris and Empson, 1998). When knowledge will be codified and controlled on an organisational level, chances that knowledge will leave the firm with their former employees will be smaller. From an information‐
processing perspective PSF type organisations are viewed at as problem solving mechanisms who also have to deal with cognitive limitations. Some codification may help members to make better decisions and continuously improve the organisation in the ways they carry out their tasks, thereby reducing role ambiguity.
Codification can also serve as a mean to overcome the limits in human information processing capabilities.
Explicit knowledge on an organisational level makes it possible to divide tasks after which results can be integrated. This creates a situation where all information can be processed within the organisation. The possible problem of information overload can thus be overcome when making use of codification (Wasserman, 2008). Another advantage of formalization is that it creates an opportunity to shape client expectations in a way that trust is shifted from the personal level to the organisational level. This process stimulates the handoff of tasks and responsibilities between experts without a decrease in clients’ trust. Processes and routines can serve as the rituals and by standardizing these processes required actions will be known by all employees.
Employees’ behaviour and actions can be guided by protocols that are not being used in a restrictive fashion.
Codification of client knowledge can make tacit knowledge more explicit making it mobile for other projects and clients.
Management control could thus be useful for a PSF when it would serve as a tool to solve the difficulties that these firms face. A PMS can assist PSFs in the creation of more explicit strategies to resolve the general reactive nature of a small PSF, managing uncertainty; capturing knowledge on an organisational level; and enable innovation. It would indeed be a very relevant tool that will assist employees in their daily work. Whether a management control system would be suitable for this role within a PSF will be discussed now in the context of the evolving management control literature.
2.2. MANAGEMENT CONTROL
This study will focus on management control by developing and implementing, at the same time, a performance measurement system (PMS). A PMS entails several performance indicators (PI) that expresses quantitatively the effectiveness and/or efficiency of a part of a whole process against a given norm or target
(Lohman et al, 2004). A PMS thus tries to translate strategies into deliverable results by combining financial, strategic and operational measures. In the management control literature there is a lot of empirical research evidence that organisations that use a certain form of performance measurement outperform their competitors (Kennerly and Neely, 2003). However, there has been a clear shift of focus in the recent literature:
More and more authors propose that performance measurement should get a more strategic focus instead of just being used as a monitoring device. It is being mentioned that for a PMS to be truly successful in aligning performance to the firms strategy and objectives a PMS should get a more broader focus and also incorporate some non‐financial measures to complement the already existing financial measures (Noeverman, 2007).
Financial measures may not always be suitable; most of them refer to the backward looking aspect of financial measures, only the outcomes are available but there is no information about the actions that are needed.
Focus on the short term instead of the long term and the inability to capture all relevant aspects are also mentioned as shortcoming of financial measures (Itner and Larcker, 2003). Furthermore, financial measures could lead to behaviour that attempts to manipulate financial data in such a way that it will present a favourable performance while the effectiveness of the organisation is not being improved. This is the process of sub optimization.
In short, there are some general characteristics that a PMS must contain. Most authors agree on the general characteristics that a PMS must have. Hudson et al. (2001) have listed these characteristics and the authors propose these characteristics in a table which include that the measures should be derived from strategy, clearly defined and with an explicit purpose, relevant and easy to maintain, simple to understand and use, provide fast and accurate feedback, link operations to strategic goals and stimulate continual improvement.
These characteristics are however derived from a list of 22 characteristics made by Neely et al. but a review made by Hudson et al. (2001) revealed that many characteristics were duplicated. Measures that fit these characteristics often represent certain organisational dimensions which are generally used such as quality, time, flexibility, finance, customer satisfaction and human resources (Hudson et al. 2001).
There are several approaches for designing a PMS. The traditional planned approach views it as a top‐to bottom process wherein the top management tries to link the organisational goals to levels lower in the organisation. In general one starts with a clear definition of the firm’s mission statement from which the strategic objectives can be determined. When there is an understanding of each functional area’s role in achieving the various strategic objectives overall global performance measures can be developed. These objectives and goals are communicated to lower levels in the organisation. Consistency among strategic objectives and performance criteria used at each level must be assured. After using the PMS for some time it is critical to re‐evaluate the appropriateness of the established PMS in view of the current competitive environment (Lohman et al. 2004).
The most striking point mentioned by several authors is that the development and actual usage of a PMS always occurs within a certain context. Although there are several general formats which are used by multiple organisations, such as a balanced scorecard, it is crucial to adapt these formats and the measures within them to the specific strategy, organisational characteristics and environment (Emmanuel and Otley, 1985; Brignall and Ballantine, 1995).The context will have influence on the determination for certain measures, interpretation of these measures and actions that are the result of these measures. Kennerly and Neely (2003) and Pun and White (2005) are examples of authors that have given an overview of the existing PMS frameworks and their characteristics in schemes. From this scheme it becomes very clear that there are frameworks that provide a more robust basis than others. The framework that will be worked with in this study is the Balanced Scorecard (BSC) developed by Kaplan and Norton (1996). The BSC looks at four perspectives; financial, customer, internal process and innovation & learning and attempts to align the strategy with performance measures by giving a holistic view of the organisation. The BSC aims to answer the following questions: How do we look to shareholders? How do customers see us? What must we excel at? And can we continue to improve and create value? To assure the long term survival there has to be a balance between the four perspectives. This
framework is being used for multiple reasons. One of the main goals of this study is to overcome an informal strategy, the balanced scorecard aims at improving a firm’s strategy and aligning it with its operations. The framework furthermore gives a simple and clear overview of the involved perspectives. This simplicity is needed because of issues such as time and resources that are generally lacking within a small sized PSF.
2.3. MANAGEMENT CONTROL APPLIED TO PSFS
A strategic and non‐financial approach towards performance measurement may create opportunities for this form of management control within a PSF. By implementing such a system a PSF can overcome its informal approach towards strategy; a planned, rational approach to PMS can support firms in dealing with its great degree of complexity and quality improvement demands. In order for the PMS to align with the strategy a strategy formulation will be firstly needed. Subsequently the PMS can serve as a mean to collect data about the effectiveness of this strategy. A requirement for the system is that is has to be dynamic, changes that are needed have to be monitored and deployed through the system. When changes in the environment are monitored closely the change that customer satisfaction will remain high will increase.
Despite the advantages that a PMS could have for a PSF it has become apparent that these firms, especially when they are small have trouble with implementing a PMS. And if they do implement a system they often not use it correctly. The approach towards the implementation of a PMS is often also informal and not planned, focused on solving one specific problem. When the main problem is resolved the system is often not being used anymore after which it is grown out of the firm. This still results in a poor alignment between strategy and operations and a PSF who has the ambition to implement a system should keep this in mind (Garengo et al., 2005).
While it is clear now how a PMS could help in overcoming an informal, tacit approach towards strategy it is not clear yet how a PMS could be useful in one of the main challenges of a PSF, how to capture tacit knowledge on an organisational level and to create new valuable knowledge in order to improve the firms services. Also, the general resistance that professional employees have towards management control and current problems concerning role ambiguity and role conflict have not been tackled yet.
Considering the fact that knowledge is a crucial resource for a PSF, a general goal of most PSFs is to create new valuable knowledge and to capture and use that knowledge on an organisational level. With this goal in mind one could say that a PSF would want to strive to become a learning organisation of which a definition by Garvin (1993, p 80) is: A learning organisation is an organisation skilled at creating, acquiring and transferring knowledge, and at modifying its behaviour to reflect new knowledge and insights. This learning will be a long term activity and the following interdependent strategic building blocks can contribute to achieve this:
‐ A clear mission, vision and strategy which are supported by employees; Hereby employees will know what organisational priorities are.
‐ Leadership that will empower employees and encourages experimentation; Feedback that will help employees to identify problems and opportunities should be provided.
‐ The ability to transfer information; Learning from past failures and talking to other staff members about successful practices.
‐ Experimentation; problems faced by the organisation can be used as opportunities for experimentation.
‐ An emphasis on teamwork and group problem solving to support the development of innovative ideas. One could also think of cross‐functional teams.
A measurement process is needed to ensure achievement of the goals of a learning organisation. By making use of performance measurement a firm can see the current status on these points and it will also become clear where there is room for improvement (Goh, 1998).
However, in order to tackle the resistance problems that might occur within a PSF and to take the complex nature of a PSF into account, within the use of a PMS it is useful to look closer at the different functions that management control can have and how performance measures could be used in practice. Here the different levers of control that are defined by Simons (1995) can be of help. He defined four different functions of control which all have different functions and result in a different use of control. Belief systems are used to enhance core values, related to the business strategy and to inspire search for new opportunities in line with these values. Boundary systems reduce risks by setting limits to strategically undesirable behaviours.
Diagnostic control systems determine success factors which are communicated and monitored. Interactive control systems are used to discuss strategic uncertainties and to learn novel strategic responses to a changing environment. Interactive control systems have a clear emphasis on learning and are used to promote discussion which will stimulate double loop learning whereby prevailing beliefs are questioned and strategies themselves can be reshaped. Interactive control thus helps in learning about the organisational goals, strategies and key success factors. The validity about cause and effect relationships might be uncertain at the beginning, but at the same time that is exactly the reason to measure these relationships so one can actually test the assumptions that are being made (Tuomela, 2005). By discussing these strategic issues best practices will reveal themselves and individual knowledge will be shared at while everyone involved thinks through the means to achieve the strategy. This process will already make the strategy more formal and at the same time less reactive while individual knowledge and insights are shared among organisational members, stimulating knowledge transfer which is also one of the building blocks in becoming a learning organisation. This interactive approach is most suitable for a PSF considering the often non‐standard and customized solutions which makes output control difficult, the feedforward control which is being achieved by an interactive control system will lead to an emphasis on social and self control wherein the dialogues among organisational members will give input about how to deal with uncertainties (Brignall and Ballantine, 1995).
Leadership is already mentioned as one of the other elements in becoming a learning organisation. Outcomes of the system will differ as managers influence whether to put a focus on long term or short term, use measures in a diagnostic or interactive manner and practice a rigid or flexible management style(Noeverman, 2007). The manner in which information is being used by superiors will thus play an important role in the success of a PMS within the context of a PSF. A distinction can be made between transactional and inspirational leadership wherein transactional leaders will put more emphasis on quantitative aspects and outputs and inspirational leaders will also take interpersonal, qualitative aspects of performance evaluation into account.
These leadership styles will also be reflected in the evaluation styles (Noeverman, 2007). Three different evaluation styles are identified by Hopwood (1973).These styles are based on the extent to which accounting information is being used and the emphasis that is being put on either the underlying purposes of the information or an emphasis on the information itself. A budget constrained style makes extensive use of accounting information and places emphasis on the information itself. The accounting information is thus rigidly being used during performance evaluation. The profit conscious style also uses accounting information but the outcomes and performance are being interpreted against the organisational context and objectives making this style more flexible. The non‐accounting style hardly uses accounting information. Transactional leaders are likely to practice a budget constrained style while inspirational leaders are more likely to practice a profit conscious or non‐accounting style. Within the context of a PSF it is imaginable that a strict emphasis on accounting information would not be the most suitable approach and that the non‐accounting style would be more preferred. The style that is being practiced will influence the perceived fairness. When a manager will
take the current situation into account employees will perceive this as more fair and will have less resistance towards performance measurement. Resistance will also decrease when employees agree with the criteria that are being used and when they have influence on these criteria or can participate in the process of developing performance measures (Wouters and Wilderom, 2008).
Since PSFs often have flat, dynamic structures, with little hierarchy, and employees work in an environment in which they have a lot of autonomy a PMS should support employees in their daily tasks. The right measures could help employees to prioritize, identify problems, make decisions or come up with ideas for improvement (Wouters and Wilderom, 2008).This implies an approach which includes the employee perspective which is different than the traditional top‐down approach wherein a PMS primarily serves as a tool for the top‐
management. This is where a distinction can be made between coercive and enabling formalization. Coercive formalization tries to achieve employee compliance while enabling formalization can be seen as a more motivational approach that tries to support employees with the organisational rules and systems. Whether a PMS is enabling or coercive depends on the characteristics of the system, the design process and the implementation process. Characteristics that lead to an enabling PMS are internal and global transparency, flexibility and repair. Internal transparency refers to the understanding that employees have of the logic of the system’s internal function; the reasons why certain measures are present in the system are clear for the employees. Best practice experiences are included and feedback is provided. Global transparency provides employees with a view on the broader system and creates understanding towards employees how their tasks fit into the greater picture. Flexibility enables employees to modify the system to suit their specific work.
Repair means that users can mend and improve the work process themselves rather than allowing breakdowns and other nonprogrammable events to force the work processes to a halt. Incorporating these characteristics to a PMS will ensure a more positive attitude towards a PMS. There are however more aspects that need to be taken into consideration when developing an enabling PMS. Before the PMS is initiated various levels within the organisation will already use a number of performance measures which are often informal (group‐
meetings, observations etc.) Often top‐management is not aware of these measures which can be very useful.
At the ‘point of entry’ existing measures thus need to be brought onto the table to be evaluated and room for improvements are being identified. A PMS that is designed based on existing knowledge or measures can be called experience‐based which implies that there is room for the identification, appreciation, documentation, evaluation, and consolidation of existing local knowledge and experience with respect to quantitatively capturing and reporting relevant aspects of performance. As opposed to the traditional top‐management approach within the development process of an enabling PMS employees are closely involved, often employees have experience and unique knowledge that top management is not aware of (Wouters and Wilderom, 2007; Hudson et al., 2001). Also Adler and Borys (1996) state that employee involvement in the formulation of the procedures is likely to have a positive effect on both attitudinal and technical outcomes.
Other aspects in the development process that will lead to an enabling PMS are: involving experimentation and building on employees professionalism. With experimentation measures are developed, tested and refined (in several rounds), the conceptualization, required IT tools and presentation becomes clear when doing this, this aspect was also already brought to the fore as one of the blocks that lead to a learning organisation and can be seen as very relevant for a PSF. Employees are also involved in experimentations since employees can best judge whether their work efforts are validly or invalidly represented in the measure, this approach will make the measures more valid, reliable and understandable.
Professionalism implies that employees are oriented towards learning and improving work practices. When employees have this orientation they are more inclined to see performance measurement as positive, stimulating, challenging and helpful. Furthermore this attitude will assure that reliance on employees’
experience is possible. This enabling approach implies that that the design and implementation of a PMS is an interactive, iterative process, during the experimentation process more information about the strategy, customers, and processes will become available and employees will learn. During the implementation phase information becomes available and the measures will be adjusted to new circumstances, insights and
requirements, making the design phase and the implementation phase overlap (Wouters and Wilderom, 2007) (Lohman et al.,2004). This approach is obviously contradictive to the more traditional approach developed by Neely et al. (1996), the Cambridge performance measurement process, in which the development of a PMS can be clearly divided into three phases: the design phase, the implementation phase and the actual usage of the PMS (Pun and White., 2005). Despite the differences in approaches a point where both approaches agree on is the importance to continually refine the system to improve the measures, challenge strategic assumptions and to keep it up to date with the changing business environment. This refinement process can be divided into three steps: Reflection on the existing PMS is necessary to identify where the system is no longer appropriate and where enhancements have to be made. Modification is necessary to assure the alignment of the PMS to the new circumstances, and deployment assures that the adjusted system can actually be used throughout the organisation (Kennerly and Neely, 2003).
2.4. THE INFLUENCE OF CULTURAL DIFFERENCES
Concerning the context of the organisation in the development process of a PMS, not only the characteristics of the organisation (PSF) have to be taken into account as a factor that could influence the design and use of the system. Cultural aspects are another relevant factor that could have a large impact in this case. When it is considered that the researcher in this case comes from the Netherlands and the study itself was conducted in Vietnam cultural differences could result in differences in interpretations, assumptions and customs. The five factors distinguished by Hofstede (1980) are very helpful to make a general analysis of the Vietnamese culture.
Power distance refers to the amount of human inequality concerning areas such as wealth or status, inequality in this sense is accepted within the society and therefore defined from below. Individualism refers to the degree individuals are supposed to take care of themselves or for a part of a group or family. Uncertainty avoidance is the amount that a society tries to control the uncontrollable and whether people feel comfortable or uncomfortable in unknown situations. Masculinity refers to the distribution of emotional roles between the genders. The last dimension is a focus on long term orientation versus a short term orientation. Vietnam can be characterized by its high level of power distance, low level of individualism, a moderate level of uncertainty avoidance, a high level of masculinity and a long term orientation. A comparison between Vietnamese and Australian SME s revealed for example that within the Vietnamese firms there is more hierarchy (King‐Kauanui et al., 2005). In general, aspects such as titles, status and formality are seen as important within Vietnamese firms. Since Vietnam has been under the influence of the socialist system collectivism is high, the country is still characterized by tight social frameworks. ‘Losing face’ is a concept that most Vietnamese try to avoid, harmony and loyalty are being sought in social relations and differences are settled subtle instead of openly. Long term orientation is a remain of the centrally planned economy which was followed for a long time where after in 1986 the country has made a transit to a more market based economy. State strategies were developed and performance targets were being set for production units resulting in organisations that were characterized by short range planning (1‐2 years ahead), control that is based on frequent observation, low decentralization, a paternalistic leadership style, an non transparent personnel policy, top down communication, on the job training programs which are often not effective and an employee moral that is not really high. Although there are at present also a lot of private firms there often one can still see some of the remains of this structure, an authoritarian or familial style of management is still often being practiced and employee participation in decision making is usually not promoted, individual actions and achievement are generally less emphasized than in Western countries such as Australia. However, the younger generation of managers show indeed interest to practice a more participative style and managers are generally open to new technologies (Quang and Vuong, 2002). Empirical research furthermore shows that practices such as training, performance appraisal systems and incentive compensations indeed lead to positive results in terms of firms performance within Vietnamese SMEs despite the cultural differences between Western countries and Vietnam (King‐Kauanui et al., 2005). Since these aspects are all closely related to the use of an enabling, interactive PMS, despite the
cultural differences between Vietnam and Western countries the enabling approach could lead to positive firm results for a Vietnamese PSF.
3. RESEARCH DESIGN AND APPROACH
This research is conducted according to the principles of action research within a Vietnamese PSF. A Western junior consultant/researcher has entered the situation and the ‘objects’ that are being studied have been active participants at the same time. With this design the researchers has put an emphasis on social practice, created a collaborative process between the researcher the employees in the situation, created a process of critical inquiry. In fact, a deliberate process of reflective learning has been achieved. The researcher has strived to make this design replicateble for other researchers. To get a step by step guide of the process (Checkland and Holwell, 1998). Before we will elaborate more on the research process, a description about the organisational context is in place. This will give even more insight in the choices we have made.
3.1 RESEARCH SETTING
The research is conducted within a professional service firm, namely D&N International which is situated in Hanoi, Vietnam. D&N International is a law firm which is specialized in legal issues that deal with intellectual property, investment consultancy and all aspects of business law. The firm is founded in 1992 by two patent and trademark attorneys, and had grown to a firm with a team of over 20 lawyers, trademark and patent attorneys and legal professionals. In 2007 the UK magazine ‘Asian law practice’ has ranked D&N International as one of the top four Vietnamese IP law firms.
The philosophy of the firm is: to maintain the highest international technical and professional standards whilst providing clients with practical advice that adds value to their business. Delivering services that are of quality and perceived as professional by their clients are the two main factors that will lead to the achievement of this goal. It could thus be stated that the firm practices a service strategy which is aimed at delivering an optimal service towards the firm’s clients which are often well renowned firms that expect outstanding result such as Phillips, Ebay and Toyota. By acting out this strategy the firm wants to achieve a long term competitive advantage that will ultimately lead to the success and growth of the firm for especially by ‘word of mouth’.
Human resources are seen as the key factor in this process of delivering value to customers. Therefore the staff is encouraged to continuously update their knowledge about both Vietnamese and International laws.
The firm has two divisions that deal with activities that relate to intellectual property, which are regarded as the core tasks of the firm. These are the patent & industrial design division and the trademark & copyright division. The head of each division is responsible for the management control of the IP related tasks. The general deputy manager and the director who are part of the partner board are responsible for other professional works such as Investment consultancy and business law. Furthermore, both often assist the head of divisions in the management control activities. The firm has a marketing group that is formed by members that are also active in one of the divisions. There is one employee specialized in public relations who together with the general deputy manager assists the marketing group. The administration is handled by one responsible person who works closely with the director. Furthermore, the firm has a representative office in France.
At the beginning of this study the level of standardization within the copyrights and trademark division was less than in the patent division, as activities within this field are regarded core activities and management emphasized that efforts were being made to standardize processes in this division in order to achieve more efficiency and added customer value. This study concentrated on this particular division. The goal in this division was to implement an interactive, enabling PMS as a form of codification. It should be noted here that
since 2006 patent, copyright and trademark protection is being governed by the Vietnamese Intellectual Property Law and the Vietnam National Office of Intellectual Property (NOIP) is responsible for the protection of IP in Vietnam which implies that there are guidelines for the procedures related to the establishment of IP rights.
The daily tasks for employees active within the trademark division can be defined as follow:
‐ The firm receives an instruction from the client;
‐ A check whether the instruction contains all the relevant information is being made;
‐ A letter of acknowledgement is being set up which contains the following issues: When is the request received? Has the client provided enough information or is additional information needed? What are the next steps the firm is going to take? What is the estimated time to fulfil the request? This letter has to be sent to the customer within 24 hours after receiving the instruction from the client.
‐ It is being decided by the head of division who of the staff will be assigned to the project;
‐ A draft of the letter that has to be sent to the NOIP/client/infringer is being set up by the employee;
‐ The head of division will check the letter and provide the employee with improvements;
‐ The employee will add the improvements;
‐ The letter is sent to the head of division who will send it to the receiver and will provide the managing board with a copy as a control mechanism.
Information systems that play a crucial role and contain the measures that were already in use at the beginning of the study are the Task management system (TMS) and the Intellectual property management system (IPMS).
Only the head of director and the permitted staff have access to the TMS. From each division a case list is present with information about the tasks that have to be done. To make processes transparent each case is divided in tasks with an indication of the average time that can be spent on the task. In this section of the system the head of director can assign a task to a member of the staff by selecting the part of the process that has to be done. Other criteria that can be filled in within the TMS are the priority of the task, the assigned starting time, deadline, final deadline and time spent. Since this system is linked to the IPMS which each employee uses each employee can see what their tasks are and how to prioritize them. An employee has to confirm that that he/she has received the task and at that time the starting time will be filled in by the system.
An employee can then select the part of the process and start the task. Also when a letter has to be drafted, the employee can make use of the templates in the system. The information from IPMS is sent back to TMS where the director can upload a report of every employee which is used for his/her evaluation. Herein is can be controlled whether employees fulfilled their tasks according to the prognosis; amount of achieved deadlines, consumed time. The delivered quality is being evaluated in this report by the division head after which it is decided if the results are good/normal/bad. This report can be prepared for every period the head of director wishes to, so for a week, month, quarter or year. Results are displayed in absolute numbers and not in percentages. An additional control mechanism in this process is that a member of the director board will review the drafted letter. Regarding employees’ periodical assessment criteria on the short term as well as the long term are taken into account. Short term criteria are the quality of the work delivered, quantity of the work delivered and respect to deadlines are seen as most important. Long term criteria are initiatives to improve the quality standard of the work or initiatives in other organisational fields (marketing, organisation).
Although this approach seems to work quite well for the firm it is also mentioned at start that there are some challenges the firm faces. It is being mentioned that most of the employees who enter the firm do not have an extensive education or experience within the field of IP. Training on the job which is a characteristic of
Vietnamese firms is thus also within D&N International a key activity and the firm offers a training and education program which is provided by the director and the key associates with experience within the field.
Given the fact that the focus of the firm is to deliver excellent quality and professionalism towards their clients, the development of human resources is one of the main areas of focus for D&N International. The firm’s aims at making use of the available information systems to be up to date with the level of the quality delivered and this information is one of the main factors in the evaluation protocol. The firm acts out the following appraisal policy: The higher the contribution of an employee, the better the appraisal. The challenge in this aspect is to find whether a future PMS could be of guidance in the development of the employees at D&N International where the main relevant question for the firm is how to improve the education system and the quality that the employees deliver.
3.2. OUR THREE STEP APPROACH TO DEVELOP A PMS IN THIS PSF
Since the action research approach is based on a collaborative process that takes the characteristics of an enabling PMS into account the research process can be split up in actions that can be roughly characterized by three sequenced steps: Analyzing, motivating and developing. Each step gave the necessary input to continue to the next step. During this process the researcher has used several techniques such as individual interviews, group interviews, analyzing of documents and participatory observation. A detailed description of the sequenced steps and their goals can be found in table 1. In this section a description of the most striking steps will be given. The consequence of the action research approach is that sometimes there exists a fine line between the methods and results. Since the steps in this process should lead to the (starting point of) the design of the performance measures within this PSF they are regarded as part of the method.
Technique Method Goal
Analyzing ‐ Interviewing managers and employees
‐ Examining of documents
‐ Learning about the firms strategy and focus points
‐ Which processes and systems are used to achieve this strategy?
‐ Which control mechanisms and measures are used at the moment in order to check whether the strategy is being achieved?
Analyzing ‐ Interviewing managers and employees
‐ Examining of documents and information systems
‐ Which typical small sized PSF characteristics are present?
Analyzing ‐ Observating daily practices, structures and documents
‐ In what sense are the typical Vietnamese cultural aspects present?
Analyzing ‐ Conversating based on the Organisational Learning Survey (Goh, Richards, 1997)
‐ Are the characteristics of the strategic building blocks towards becoming a learning organisation present?
Motivation ‐ Interviewing the management
‐ Group discussions
‐ Which aspects need improvement according to the management and the employees?
Motivation ‐ Employees are asked about their priorities in the perspectives of the BSC
‐ Challenge employees to think about the firms strategy and main priorities
Motivation ‐ Group discussion ‐ Sharing each other’s ideas and thinking about follow up
Developing ‐ Groups of two ‐ Making aspects of strategy map more concrete, developing
measures
Developing ‐ Group meetings ‐ Discussing the developed measures by the groups
‐ Experimenting with new developed practices created by the groups
TABLE 1. OVERVIEW OF THE SEQUENCED STEPS TAKEN IN THE STUDY
