CC BY
119Integrated Performance Management — Strategy, Risk and Sustainability Management*
Prof. Dr. Wilfried LUX
FHS St.Gallen University of Applied Sciences, Institute of Business Management, Switzerland Wilfried.Lux@fhsg. ch
Abstract. This article gives an overview about an integrated approach to Performance Management, meaning strategy formulation and implementation. A step-wise approach is illustrated to arrive at strategic goals and to implement them by defining key performance indicators, actions and responsibilities. Modern approaches to trend analysis are introduced in order to make more predictable statements. Risk management as the other side of strategy implementation is suggested to get integrated into the process of performance management. Finally, besides economic factors, sustainability aspects are integrated into performance management. Social and ecological assets are not only altruistic steps but can lead to financial benefits if appropriately integrated. The described results are based upon various research projects of FHS St.Gallen, University of Applied Sciences.
Аннотация. В данной статье дается общее представление о комплексном подходе к управлению эффективностью, в частности к разработке и осуществлению стратегии. Показан поэтапный подход к достижению стратегических целей и осуществлению их путем определения ключевых показателей эффективности, действий и обязанностей. Вводятся современные подходы к анализу тенденций для повышения предсказуемости результатов. Предлагается интегрировать управление рисками, препятствующими достижению стратегических целей, в общий процесс управления эффективностью. Наконец, помимо экономических факторов, в управление эффективностью также интегрируются аспекты устойчивого развития. Создание социальных и экологических активов преследует не только альтруистические цели, но может привести и к финансовой выгоде, если эти активы интегрированы надлежащим образом. Описанные результаты основаны на различных исследовательских проектах Университета прикладных наук Санкт-Галлена (Швейцария).
Key words: performance management, strategy formulation, strategy implementation, risk management, data analytics, sustainability management.
HISTORICAL OuTLINE
The term "Performance Management" is used in many different contexts and disciplines. One common definition is the "implementation of strategic goals into operative plans, the formulation and implementation of operative control and leadership impulses as well as the monitoring of the strategic alignment of the organization" (Merz, 2008). The underlying concept — managing performance — is as old as there have been organizations. However its direct roots go back to the 1970s. The so-called "decision support systems" were software components which focused on individual functional areas. The "Executive Information Systems"
of the 1980s had a look at the whole company and were basically an enterprise-wide information system. In 1989 the Gartner Group created the name "Business Intelligence"; the goal of this approach was to improve decision making based on substantial information. In the mid-1980s the term "Performance Management" was first suggested in the US as an aggregated term to describe control and improvement approaches. Finally, in 2001 the Gartner Group created the term "Corporate Performance Management" to include the necessary processes, methods, key performance indicators and systems in order to improve performance (Hannig, 2008). Especially the last two decades came up with numerous concepts which can be categorized as Perfor-
* Комплексное управление эффективностью: управление стратегией, рисками, устойчивостью.
ENABLERS
RESULTS
Leadership
Employees
Politics and Strategy
Partnerships and Resources
Processes
Employee-
related
results
Customer- Key results
related results
Society-
related
results
INNOVATION & LEARNING
Graph 1. EFQM-Model (European Foundation for Quality Management, www.efqm.org).
mance Management approaches. The following chapters briefly describe the most important ones among them.
APPROACHES TO PERFORMANCE MANAGEMENT
EFQM
The EFOM-model (European Foundation for Quality Management) is a systematic approach to look at the organization and its strategic environment. Graph 1 shows the different elements of this model. It categorizes its elements into enabler and results. The enablers are leadership, employees, politics and strategy as well as processes. The enablers lead to results which can be key results or results related to employees, customers, and society. There is a feedback loop from the results to the enablers which includes innovation and learning. Within each of its elements, the EFOM-model has a scoring system which makes a systematic auditing possible. The main advantage is that benchmarking becomes feasible; every year national and international quality awards are given to extraordinary companies based on the EFOM-model.
BALANCEDSCORECARD
The Balanced Scorecard (BSC) is an approach to implement strategies of corporations. In 1992 it was devel-
oped by Robert Kaplan and David Norton (Kaplan and Norton, 1992); basically, it is a leadership and controlling instrument which aligns the organization according to its strategic goals. For that purpose, it divides the "world" into four so-called perspectives: Finance, Customers, Processes and Learning & Growth. The new thing at that time was that the Balanced Score-card set the focus on non-financial aspects of management. Within each of those perspectives, strategic goals are developed, actions and initiatives are defined, and key performance indicators (KPIs) are set in order to measure success or failure. The intention is to transform the general vision of a company into strategic goals and ultimately into concrete and precise actions. The word "balanced" means that there should be a balance between financial and non-financial goals. Another characteristic feature of a BSC is that there are cause-and-effect relationships between the goals and the KPIs. It turns out that the causes are usually in the non-financial areas, and the results are in the financial figures. The BSC can be defined at the top level of an organization or for different areas or functions within the corporation. The concept of cascading means that the goals for the top level can be broken down to departmental and even individual goals. This enables everyone within the organization to make contributions to the strategic goals of the company.
In 2004, the concept was modified, and the "Strategy Map" was developed (Kaplan and Norton, 2004). The four perspectives still remain the same. The main
Finance
Goal KPI Plan Action
Customer
Goal KPI Plan Action
Internal Processes
Goal KPI Plan Action
Learning & Growth
Goal KPI Plan Action
Graph 2. The classical Balanced Scorecard (Kaplan and Norton, 1992).
difference is that a time-related dynamic has been included. The strategy map differentiates between leading and lagging indicators and shows where the levers and where the results are.
intellectual capital
The concept of "Intellectual Capital" was developed by Eric Sveiby in Sweden in 1997 (Sveiby, 1997). It is a very similar approach like the BSC. However, it splits the Learning & Growth perspective in two — one for innovation and development, and one for human capital. Thereby, this concept places a specific emphasis on employees and people in general. Another point to mention is external structure; with this, Sveiby describes the relationship and connections to the different stakeholders like customers, suppliers, political institutions etc.
performance prism
The Performance Prism was developed in England by Kennerley and Neely (Kennerley and Neely, 2002). It categorizes into the dimensions strategies, processes,
capabilities, and stakeholders. The main difference to the other approaches is the reciprocity of the relationship with the stakeholders. The company has to satisfy its stakeholders, but also the stakeholders have to make contributions to the company, e.g. shareholders have to follow a reasonable dividend policy, suppliers have to deliver on-time, politics has to provide the necessary laws and certificates, etc.
STRATEGY FORMuLATION AS A
prerequisite for performance
MANAGEMENT
The above described approaches of Performance Management focus on implementing strategic goals and monitoring their success based on KPIs. However, in a step before, strategic goals have to be formulated. A goal is a future to-be situation, defined by the company. The actions and initiatives are means to reach those goals. The formulation of the strategic goals is the most important step before Performance Management can come into action. There
are different approaches how to develop strategic goals. Most of them can be categorized either as resource- or market-based. The resource-based view starts within the corporation and its core competences, and takes them "inside-out". The concept of the core competencies was introduced by Prahalad and Hamel in 1990 (Prahalad and Hamel, 1990). According to this approach, a company has to possess or create competitive advantages with technologies, processes, products or any other core competences in order to be successful on the market. The other view is the market, i.e. the relevant market has to be analyzed with regard to its competitiveness. One of the most prominent models is the "Five Forces" model by Michael Porter (Porter, 1980). By analyzing the power of customers and suppliers and by evaluating substitute products/services, as well as potential and already existing competitors in the market, one can determine what the market looks like and what it needs. The following chapters describe a step-by-step approach which combines market and resource view and has been developed in several research projects of FHS St.Gallen, University of Applied Sciences, Switzerland. The different steps are illustrated with the case study Feinkost Käfer (a fine food store), one of the project partners.
FEINKOST KÄFER
Feinkost Käfer in Munich, Germany, is one of the top addresses in Europe for exclusive party service, high quality retail store and excellent gastronomy. The fine food shop in Munich is one of the leading food stores in Europe. It has about 8000 articles, and more than 120 employees. The main strengths of the shop are the large variety of products and the individual service through specially trained employees. The main challenges in this business are to manage this large variety and complexity, as well as the necessity for a high service level (Käfer, Lux and Philipp, 2012). Since Käfer is managing this challenge currently quite well, it is in a good competitive position.
STRATEGY FORMULATION AT FEINKOST
käfer
During strategy formulation, the important long-term goals of a company are defined. Identifying and using opportunities is of particular importance here. Strategy formulation can be conducted in six steps.
1. Definition of mission, vision, and values: Feinkost Käfer's mission statement is "To be the fine food shop in Europe, where customers want to buy
the most unique products of highest quality with the most friendly and best service personnel". Based on that mission, already two strategic goals can be defined: "Sustainable implementation of five core Käfer values: adoring, high-quality, unique, surprising, and emotional", "Implementation of the quality manifest".
2. Identification of trends: In this step, the trends, which are relevant for the industry and the individual company, have to be identified. The trends are typically located outside of the organization. Commonly they can be economical, ecological, social, legal, and technological in nature. Usually, trend analysis is done in a brainstorming process or with a desk and document research. In a research project, an empirical survey was conducted with the goal to identify potential opportunities. The results helped companies in identifying trends. A new approach is data analytics. Massive amounts of data are collected mainly in the internet ("Big Data") and analyzed in order to identify certain patterns which might indicate a future trend. As a matter of course, there is no certainty but always a likelihood that those trends come true, but it helps in judging. An example of trends in the fine food market is the trend towards bio-food and regional products.
3. Market segmentation: A company has to define the most promising market segments. A market segment is a combination of products/services, customers/customer groups, regions, and market channels. In this context a company defines in which market segment it will be doing business and where, according to its management, are the largest opportunities. For Feinkost Käfer, the target customer is between 30 and 50 years old, mainly end-consumers, who are coming not only from Munich, but from all over the world, mainly from Europe.
4. Competition analysis: According to the "Five Forces" model the relative power of customers, suppliers, and competitors are evaluated. For Feinkost Käfer the result was that the individual customers and suppliers did not have a large negotiating power. Additionally, no other comparable fine food shop could be identified.
5. Strengths-Weaknesses-Opportunities-Threats (SWOT-analysis): In the first part, the strengths and weaknesses of an organization have to be identified. Those are mainly internal factors leading to success or failure. The main strengths for Feinkost Käfer were its brand, tradition, the high service quality and the high-end assortment of products. Missing communication among the different departments and lack of qualified labor force were identified as the most important weaknesses. In the second part, the
Strategic goal Responsible Key performance Indicator Balanced Scorecard perspective Actions
Long-term value orientation Mr. Meier Return on Sales Finance Monitoring, Reporting (mainly weekly jours fixes with accounting, bi-weekly reports to general management, quarterly adaptation of forecast)
Mr. Meier Sales Increase Finance
Becoming most innovative fine food shop in Europe Mr. Smith Number of innovative and unique offerings in Bavaria Customer Inventory of existing innovative products
Mr. Smith Number of new and unique products in the assortment Customer Expand and optimize existing food scout system
Further development of internal food scout activities
Innovation cirlcle (employees from different departments)
Long-term implementation of the five core values Mr. Meier Tranfer rate of th values Learning & Growth Development of training and workshops
Conducting training and workshops
Design and conducting en employee survey
graph 3. Strategy of Feinkost Käfer (extract).
opportunities and threats are identified. Those are mainly external factors. Trends which potentially have a positive impact on the organization are called opportunities; trends which have a negative influence are called threats. The main opportunities at Feinkost Käfer were the implementation of a central purchasing department for the Käfer group and the cost consciousness of the management and team leaders. Potential threats are loss of reputation and food scandals.
6. Formulation of strategic goals: Based on the SWOT-analysis, the strategic goals are developed. Especially when strength matches with an opportunity, strategic goals can be formulated. If a weakness meets a threat, goals which try to prevent damage from the company can be developed. At Feinkost Käfer, 12 strategic goals have been developed. Three of them are described below.
• From a financial perspective, the goal is to
achieve a long-term value orientation. This is
measured with the KPIs sales growth and return on sales. Real actions to achieve this goal do not exist at the financial level. The defined KPIs are meant to monitor this goal;
• Feinkost Käfer wants to become the most innovative fine food shop in Europe with unique products — from their customers' viewpoint. Only this way, Käfer can retain loyal customers and acquire new ones. The according KPIs are the number of innovations and the number of new and unique products in the assortment. For that purpose, the already existing food scout system (world-wide food tester) is supposed to be expanded; in addition, innovation circles at all levels of the organization will be established;
• Feinkost Käfer stands for five values: high-quality, emotional, unique, surprising, and adorable. The goal is to implement those values within the organization. The defined KPI is the transfer rate, i.e. the number of internalized values — meas-
Backlinks
Strategy Implementation
Graph 4. Procedure of trend analysis with fuzzy cognitive maps.
ured by an anonymous survey. This is supposed to be supported by workshops and trainings. The general rule is that there should not be too many strategic goals in order to focus on the essential; however, there should also not be too few goals in order to have a balance between financial and non-financial goals. The recommendation here is to have between five and ten goals.
big data as a source for trend
ANALYSIS
One key element in strategy formulation is the trend analysis. Since mostly this is done on a brainstorming basis, the likelihood of forgetting important aspects is fairly high. A new and innovative approach is to use the massive amount of unstructured data in the internet for trend analysis. This is currently being tested in a research project which is conducted by the author of this article. In order to do this, certain strategically relevant key words as well as data sources (social media, blogs etc.) have to be gathered and entered into a web agent (web crawler). This web crawler extracts relevant information out of the pre-defined sources and stores the relationships between the pieces of information with the help of ontologies. Those relationships are analyzed by using fuzzy logic and are visualized with so-called fuzzy cognitive maps. They show the relationships among the pre-defined key words and indicate new key words which have been mentioned in the relevant context on the internet. Those new key words then might be indicators for new trends. Since this process is ongoing, new data from the internet are constantly flowing into the database; one can monitor the development of the key words and their frequen-
cies. If the presence of certain terms is constantly increasing over time, a trend is likely to appear.
integrated performance management
The classical approach to Performance Management is to implement the strategic goals, initiate actions, and monitor the goal achievement with appropriate KPIs. The Integrated Performance Management includes elements of strategic risk management and aspects of sustainability in this process.
CLASSICAL pERFORMANCE MANAGEMENT
"What gets measured, gets done". This expression by Peter Drucker means that strategic goals have to be op-erationalized, the strategy has to be implemented. For that purpose, the following steps have to be conducted:
1. Selecting the relevant KPIs: There are many KPIs around, the art is to find the right ones. For that purpose, it is important to find out the value driver behind the strategic goal. For example, if the goal is to become the most innovative fine food shop in Europe, the relevant value driver is innovation. That means, KPIs have to be selected which measure innovation. For defining the KPI, the relevant perspective has to be defined. If innovation is meant to be from a process perspective, then the number of innovative products might be an appropriate KPI. If the value driver is meant to express the view of the customer, the appropriate KPI is rather something like number of perceived innovations (by the customer).
2. Defining the KPIs: Once the KPIs are selected, they have to be closely defined. This definition has to be very exact, so that people know what needs to be included in the calculation of the KPI value. If a KPI is called number of innovative products, then it needs to
be defined what an innovative product is and for what period this KPI is measured, e.g. per year. It is also very important to define who is responsible for the KPI and the strategic goal behind it. Precise names are more suitable than teams or departments because names are more binding. Finally, the plan and actual values of the KPIs have to be collected or calculated. If the KPIs are new, it can be that actual values are not yet available. When selecting and defining KPIs, this should be done under cost-benefit considerations. If the necessary data for a KPI are too difficult to get, it might not be worth including it. The frequency, with which the values are collected, is also important. For financial figures, monthly values might be appropriate; for customer- and employee-related KPIs, annual values might be sufficient.
3. Defining actions and initiatives: In order to reach the strategic goals and the plan values of the defined KPIs, actions have to be taken. They have to be defined for each goal. For each action, responsibilities have to be assigned. Here, the same applies as above, precise names are better than groups of people.
4. Defining the time line: For the strategic goals and for the actions it has to be fixed when the goals should be achieved and the actions be taken.
When those steps are completed, the results can be documented and shown in a dashboard (see Graph 4). It is important that the planned goals and KPIs are reviewed on a constant basis.
risk management and cost drivers
Risk management can be defined as the "totality of all organizational regulations and actions to identify and manage the risks which are inherent in corporate operations" (Diederichs, Form and Reichmann, 2004). The core elements of risk management are:
• Risk Analysis: Identification and valuation;
• Planning and controlling: Managing risks by avoidance, acceptance, sharing, or shifting (e.g. to an insurance company);
• Monitoring: Reporting and indicators (KRIs).
Risks as well as opportunities have to be managed.
That is why it makes sense to combine strategy implementation (performance management) and risk management. In order to do that, the above-developed strategy map is extended by risks and risk indicators in order to build a risk scorecard. By following such an approach, both sides of the coin — opportunities and threats — are equally considered. In practical business life, those two sides are frequently separated. Different departments deal with them. It would generate substantial synergies to combine them to one approach. The following steps are necessary to develop such a combined approach (Lux and Lohrer, 2012).
1. Assigning the relevant risks to the strategic goals: For each of the defined strategic goals the relevant strategic risks are identified and assigned. This can be done in a brainstorming process or with the help of risk catalogues.
2. In order to keep the focus, only the most important risks should be considered. Therefore, the identified risks need to be evaluated. Commonly, risks are evaluated on the basis of the criteria "extent of damage" and "likelihood". Additionally, the dimensions "controllability of the risk" and "degree of surprise" can be added. Those risks which are considered most important will be adopted into the risk scorecard.
3. Identifying the most important risks which are not associated with a strategic goal: Independent from the strategic goals, there might be strategic risks which should also be considered. They are added without an assignment to the strategic goals.
4. Identifying and defining key risk indicators (KRI): In order to measure the risks, indicators need to be defined if it makes sense. Sometimes it might not make sense. For example, in order to measure the exchange rate risk, the exchange rate or the change in exchange rate might be a good indicator. The risk of political changes is much more difficult to grasp. In such a case, it might be more appropriate not to define a KRI but to estimate the financial consequences of the risk on the strategic goal or the business result in total (see step 6).
5. Identifying plan and actual values of the KRI.
6. Estimating the financial consequences of the risk on the strategic goal or the KPI: This consequence can be a percentage or an absolute value.
7. Estimating the likelihood that the KRI has the consequence on the KPI.
8. Assigning a weight to the risk: If the risk has consequences on several strategic goals or KPIs, weights have to be assigned. If, for example, the risk "economic development" has a potential damage of 1 million and has consequences on the sales and the profit, these consequences have to be split, e. g. sales decrease 800.000 and profit decrease 200.000.
9. Calculating the consequences: Through multiplying extent of damage, likelihood and weight the consequences of the risk can be quantified.
10. Determining the tolerance levels of the KPI: Percentage or absolute value.
11. Defining actions: If the tolerance levels are exceeded, actions have to be defined in order to reduce the consequences of the risks.
12. Estimating the consequences of the risks on the financial result: The calculated consequences
Strategic Goal Key Performance Indicator Plan Value Actual Value Key Risk Indicator Risk (goal-related) (KRI) Plan Value (KRI) Actual Value (KRI) Estimated impact of risk on KPI Likelihood Weight Tolerance Level Actual impact on KPI Actions Impact on financial result Impact in CHF
Reduction of quality costs Scrap rate 1% 4% Additional administrative tasks Increasing administrative costs 0% 5% -8% 30% 100% -5% -2,40% no actions Administration costs -154
Number of cost-related improvement suggestions 5 0
Build up image of a Swiss supplier of high quality products Customer sati-faction index 95% 85- 95% High costs with uncertain outcome Increase in marek-ting costs 10% 20% -30% 20% 100% -10% -6,00% no actions Sales and marketing -114
Strengthening the distribution channels Distributor rate 40% 10% No direct control over distributors
Number of contacts to trading companies and retailers 200 100 Distributors cooperate with competitors Percentage of distributors cooperating with competitors 50% 80% -5% 40% 100% -4% -2,00% Increase direct marketing for distributors Net sales -3 960
Key Risk Indicator Risk (not goal- related) (KRI) Plan Value (KRI) Actual Value (KRI) Estimated impact of risk on KPI Likelihood Tolerance Level Actions Impact on financial result Impact in CHF
Increasing raw material prices Price index raw materials 105% 110% -5% 50% -5% -2,500% no actions Cost of goods -2 427
Increasing pressure through competitors Number of direct co'mpetitors 5 8 -5% 40% -10% -2,000% no actions Net sales -3 960
Increasing costs through environmental protection laws Number of relevant environmental protection laws 10 15 -3% 20% -3% -0,600% no actions Cost of goods -583
Difficulty to attract qualified employees Average time for recruiting 60 100 -15% 40% -5% -6,000% Increase coopeation with universities Profit -329
Employee fluctuation through culture change Fluctuation rate 2% 5% -10% 30% -5% -3,000% no actions Profit -164
Total -11691
ta
5
ta E
S"
C/l On
a
3
a,
ta ri o
3
o
03 r-t E
a-
£
O)
-N> £
3
0-
rt>
1—»
^o O
i—»
Graph 5. Example of a risk scorecard.
Strategic Goal
Responsible
Actions/ Initiatives
Key performance Indicator
Traffic light Risk (goal-(red/yellow/ related) green)
Key Risk Indicator (KRI)
Actions
Reduction of quality costs
Mr. Meier
Introduce automatic quality control
Scrap rate
Additional
administrative
tasks
Increasing
administrative
costs
no actions
Number of cost-related improvement suggestions
Build up image of a Swiss supplier of high quality products
Mr. Smith
Marketing campaign
Customer satifaction index
High costs with uncertain outcome
Increase in
marekting
costs
no actions
New branding concept
Strengthening the distribution channels
Ms. Jones
Meetings with distributors
Distributor rate
No direct control over distributors
Number of contacts to trading companies and retailers
Distributors cooperate with competitors
Percentage of distributors cooperating with competitors
Increase direct marketing for distributors
Risk (not goal-related) Key Risk Indicator (KRI) Actions
Increasing raw material prices Price index raw materials no actions
Increasing pressure through competitors Number of direct competitors no actions
Increasing costs through environmental protection laws Number of relevant environmental protection laws no actions
Difficulty to attract qualified employees Average time for recruiting Increase cooperation with universities
Employee fluctuation through culture change Fluctuation rate no actions
graph 6. Cockpit view of strategic goals and risks.
(step 9) are reviewed with consideration of the actions planning in step 11.
The following example illustrates this procedure: We assume that one of the strategic goals of a Swiss company is "Sales increase in the Euro zone". This is measured by the annual sales increase in Swiss francs. The value of this KPI is currently 10%. There are two potential risks: Exchange rate and economic situation. The former one is measured by the exchange rate, the latter one by the domestic demand in the respective Euro countries. Those are the KRIs.
It is estimated that the Swiss franc will gain further 5 cents (compared to the Euro), and the domestic demand will decrease by 20%. The former risk will decrease export sales by 5%, the latter one by 20%.
The likelihood that the exchange rate actually changes is 60%, the domestic demand will make the expected change with a likelihood of 50%. Under those assumptions the consequence on the KPI "sales increase" would be as follows:
0,6 x (-5%) +0,5 x (-20%) = -13%
Graph 7. Integration of sustainability into Performance Management.
Instead of the expected sales increase of 10% it seems that there will be a sales decrease by 3%. Assuming the tolerance level is set to 5%, actions would have to be taken in order to reduce the risk. Examples of such actions would be setting up production sites in the Euro zone or purchasing raw materials in the Euro zone. Actions in order to increase the domestic demand are not under the discretion of an individual company; those are macro-economic frame conditions.
Now it is fairly easy to estimate the impact on the financial result. Assuming that in the above-mentioned example the sales is 1 million Swiss francs, a 3% decrease in sales would lead to sales of CHF 970.000. By increasing the purchase volume in Germany this could possibly be increased by 20.000 to 990.000. Ultimately, this would result in a sales decrease of CHF 10.000.
Graph 5 shows a fictitious risk scorecard. Certain risks are associated with strategic goals, others are independent. Graph 6 shows a cockpit view of strategic goals and risks.
sustainability - social and ecological power
Sustainability is an important topic in the private and public sector. Scarce resources, climate change,
and social grievances require a change in thinking. People have to live in such a way that they can satisfy their needs without limiting those of future generations (Hauff, Brundtland Commission, 1987). A sustainable development cannot be achieved without corporations (Ehnert, 2012). According to a survey conducted by FHS St.Gallen, 82% of the Swiss companies consider sustainability important (Kugler and Olbert-Bock, 2012). Depending on the industry, it is seen as an important feature, which is required by the customer. Lack of sustainability aspects can have negative consequences on the competitive position of a company because the topic is increasingly on the agenda of stakeholders like customers, investors, business partners and nongovernmental organizations (NGOs) (Kugler and Olbert-Bock, 2011).
Prerequisite for sustainable success and performance is a balanced consideration of the elements of the so-called "Triple Bottom Line": Ecology, Social, Economy (Elkington, 1997). This model has been modified several times, namely by including effectiveness and efficiency aspects. However, this model is still dominated by the economic perspective. The main questions in this context are (Schaltegger et al., 2007, p. 4ff.):
• How can a company reduce the amount of environmental pollution caused by its activities (ecological effectiveness)?
• How can socially undesirable effects, caused by company's activities, be reduced (social effectiveness)?
• How can environmental protection and social engagement be realized in a possibly profitable and value-creating way (economic efficiency)?
• How can those three challenges be balanced and integrated into the traditional, economically oriented management (integration challenge)?
As described above, strategic goals are long-term to-be situations of an organization. Profit-oriented corporations in particular have mainly economic and financial goals. Sustainable strategies according to the "triple bottom line", however, are characterized by the fact that they not only contain financial aspects but also relevant ecological and social aspects. Firstly, the content of those aspects has to be defined. Secondly, the extent to which sustainable goals are taken into consideration — as sub-goals with regard to economic goals, or at an equal level (Kugler and Olbert-Bock, 2011). In order to distinguish themselves from merely being long-term, sustainable goals have to consider explicitly ecological and social aspects of business. Examples of sustainable goals at Migros Corporation, the largest retailer in Switzerland, are the following:
• Improvement of chocolate brand as a socially and environmentally responsible brand;
• Finding an equilibrium between economic, ecologic, and social requirements;
• Achieving a long-term, sustainable growth.
The process to develop sustainable goals is the
same as for developing strategic goals. Therefore, it makes sense to integrate them into one approach. Graph 7 shows how this can be done.
Based on the triple bottom line, strategic and sustainable goals are developed and formulated. Together with the appropriate KPIs and KRIs they are part of the Sustainability Scorecard which contains traditional economic elements and sustainable aspects. Given the fact that the classical Performance Management also includes non-financial figures and aspects, there will usually be an overlap.
CONCLUSION
The above-described model integrates different aspects of Performance Management in order to reduce complexity and make use of synergies. However, since so many different aspects are contained, it is important to reduce it to a minimum, otherwise it cannot
be handled by managers. Future research has to further validate this model and show the financial impacts on the bottom line.
REFERENCES
Diederichs, M., Form, S., Reichmann, T. (2004): Standard zum Risikomanagement — Arbeitskreis Risikomanagement; in: Controlling, Heft 4/5, April-May 2004 Ehnert, I. (2012): Nachhaltiges Personalmanagement. Konzeption und Implementierungsansätze. In: Kaiser, S., Kozica, A.: Ethik im Personalmanagement. S. 131-157 Elkington, J. (1997): Cannibals With Forks: the Triple Bottom Line of 21st
Century Business. Capstone: Oxford Hannig, U. (2008): Grundlagen des Corporate Performance Management; in: Hannig, U. (Hrsg.): Vom Data Warehouse zum Corporate Performance Management, Ludwigshafen 2008 Hauff, V. (1987): Unsere gemeinsame Zukunft — DerBrundtland-Bericht
der Weltkommission für Umwelt und Entwicklung, Greven 1987 Käfer, C., Lux, W., Philipp, M. (2012): Wie ein Feinkostladen mit BI
noch feiner wird; in: IO Management, no. 1, Jan/Feb 2012 Kaplan, R.S., Norton, D.N. (1992): The Balanced Scorecard — Measures
that Drive Performance; in: Harvard Business Review, Jan-Feb 1992 Kaplan, R.S., Norton, D.N. (2004): Strategy Maps — Converting intangible
assets into tangible outcomes, Boston, Massachusetts, USA Kennerley, M., Neale, A. (2002): A framework for the factors affecting the evolution of performance measurement systems; in: International Journal of Operations and Production Management, vol 22, no.11
Kugler, P., Olbert-Bock, S. (2012): Wie Schweizer Unternehmen mit Nachhaltigkeit umgehen. Nachhaltige Unternehmensentwicklung (1/3). KMU-Magazin 5/2012.105-111 Kugler, P., Olbert-Bock, S. (2011): Chancen nutzen durch nachhaltiges Management in KMU Nachhaltiges Management in KMU (1/2). KMU-Magazin 02/ 2011.18-21 Lux, W., Löhrer, A. (2012): Unternehmenssteuerung auch für kleine Unternehmen; in: CFO aktuell — Zeitschrift für Finance & Controlling; no. 4, August 2012 Lux, W. (2010): Performance Management — Effiziente Strategieentwicklung und-umsetzung; Stuttgart 2010 Merz, P. (2008): Ohne Performance Measurement kein Performance Management; in: Hannig, U. (Hrsg.): Vom Data Warehouse zum Corporate Performance Management, Ludwigshafen 2008 Porter, M. (1980): Competitive Strategy. Techniques for Analyzing Industries and Competitors, New York Prahalad, C.K., Hamel, G. (1990): The Core Competence of the Corporation; in: Harvard Business Review 3/1990 Schaltegger, S., Herzig, C., Kleiber, O., Klinke, T., Müller, J. (2007): Nachhaltigkeitsmanagement in Unternehmen — Von der Idee zur Praxis: Managementansätze zur Umsetzung von Corporate Social Responsibility und Corporate Sustainability; Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit Sveiby, E. (1997): Wissenskapital — das unentdeckte Vermögen, Landsberg am Lech
