46 ACCOUNTING FOR MANAGERS
for Quality Management (EFQM). This is an integrated self-assessment tool com-
prising nine elements that are weighted and divided into two groups: results
and enabling criteria. The results criteria are business results, people satisfaction,
customer satisfaction and impact on society. The enablers are processes, people
management, policy and strategy, resources and leadership.
Another model used in industry is the ISO 9000 quality model, while in the UK
Chartermark is used in the public sector and Investors in People is used for human
resource and training and development strategies. All require external assessment.
The difficulty with performance measurement systems is that multiple measures
are a result of multiple stakeholders inside and outside the organization. There
are inherent difficulties in the predictive model that a business explicitly or
implicitly uses to obtain resources and implement processes in order to deliver
product/services to customers.
ThePerformance Prismwas developed at Cranfield University by Neelyet al.
(2002). It differs from other non-financial performance measurement systems in
that it considers all stakeholders in the business, such as regulatory agencies, pres-
sure groups and suppliers. This ensures that the performance measurement system
used presents a balanced picture of business performance. It also differs from Bal-
anced Scorecard-type systems in that the performance measures are not developed
from strategy, as Kaplan and Norton (2001) suggest, but informs management
whether the business is going in the strategic direction that is intended.
A research study by the Chartered Institute of Management Accountants
(1993) found that most companies tend to make decisions primarily on financial
monitors of performance. Boards, financiers and investors place overwhelming
reliance – often exclusively – on financial indicators such as profit, turnover, cash
flow and return on capital. Managers mostly support the view that non-financial
performance information should only be used internally. There is no optimal
mix of financial and non-financial performance measures and the non-financial
indicators used are not fixed. The report argued that performance measures need
to mirror operational complexity, but must be kept simple to be understood.
In order to compete in a global economy, manufacturers have had to move
towards higher quality, shorter cycle times, smaller batch sizes, greater variety in
product mix and cost reduction. The development of new manufacturing philoso-
phies such as computer integrated manufacturing (CIM), flexible manufacturing
systems (FMS), just-in-time (JIT), optimized production technology (OPT) and total
quality management (TQM) has shifted the balance from financial to non-financial
performance measurement.
However, Sinclair and Zairi (1995b) argued that performance measurement has
been dominated by management control systems that are focused on ‘control’
rather than ‘improvement’. They saw management accounting and financial
performance as a limiting constraint rather than a tool for managing continuous
improvement. Sinclair and Zairi (1995a) undertook a survey of performance
measurement in companies implementing TQM and found that despite the aims
of TQM being communicated to managers, performance measurement systems
were inappropriate.