Measuring Stakeholder Value

Performance Prism

Summary of the Performance Prism. Abstract

Cranfield University

Performance Prism Framework The Performance Prism (Cranfield University) is an innovative second generation performance measurement and management framework. Its advantage over other frameworks is that it addresses all of an organisation’s stakeholders - principally investors, customers & intermediaries, employees, suppliers, regulators and communities. It does this in two ways: by considering what the wants and needs are of the stakeholders are and, uniquely, what the organisation wants and needs from its stakeholders. In this way, the reciprocal relationship with each stakeholder is examined.

The five facets of the Performance Prism:

1. Stakeholder Satisfaction

2. Stakeholder Contribution

3. Strategies

4. Processes

5. Capabilities

These five perspectives are distinct, but logically interlinked.

Philosophy

The Performance Prism is based on the belief that those organisations aspiring to be successful in the long term within today’s business environment have an exceptionally clear picture of who their key stakeholders are and what they want.
They have defined what strategies they will pursue to ensure that value is delivered to these
stakeholders. They understand what processes the enterprise requires if these strategies are to be
delivered and they have defined what capabilities they need to execute these processes. The most
sophisticated of them have also thought carefully about what it is that the organisation wants from its
stakeholders – employee loyalty, customer profitability, long term investments, etc. In essence they
have a clear business model and an explicit understanding of what constitutes and drives good
performance.

Delivering Stakeholder Value Approach: Starting with Stakeholders, not with Strategy

According to Performance Prism vision, one of the great fallacies of performance measurement is that measures should be derived from strategy. Listen to any conference speaker on the subject. Read any management text written about it. Nine times out of ten the statement will be made – “derive your measures from your strategy”. This is such a conceptually appealing notion, that nobody stops to question it. Yet to derive measures from strategy is to misunderstand fundamentally the purpose of measurement and the role of strategy. That's why the Performance Prism starts its process with thinking about the Stakeholders and what they want.

Five key questions for measurement design:

1. Stakeholder Satisfaction – who are the key stakeholders and what do they want and need?
2. Strategies – what strategies do we have to put in place to satisfy the wants and needs of these key stakeholders?
3. Processes – what critical processes do we require if we are to execute these strategies?
4. Capabilities – what capabilities do we need to operate and enhance these processes?
5. Stakeholder Contribution – what contributions do we require from our stakeholders if we are to maintain and develop these capabilities?

Complexity and the Prism

The history of Value Based Management is basically a history of increasing complexity. A prism refracts light. It illustrates the hidden complexity of something as apparently simple as white light and decomposes it in its elements. So it is with the Performance Prism. It illustrates the hidden complexity of our corporate world. Single dimensional, traditional frameworks pick up elements of this complexity. While each of them offers a unique perspective on performance, it is essential to recognise that this is all that they offer – a single uni-dimensional perspective on performance. Performance, however, is not uni-dimensional. To understand it in its entirety, it is essential to view from the multiple and interlinked perspectives offered by the Performance Prism.

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