The performance prism is a multi-dimensional performance measurement framework. It can be applied for not-for-profit and for-profit organizations alike.
The performance prism model considers all stakeholders, their needs, and their expectations, unlike other performance measurement models that primarily focus on the needs of the shareholders only.
Let us discuss the performance prism model and its key points.
What is the Performance Prism?
The performance prism is a performance management model that aims to meet the needs of all stakeholders of an organization.
The performance prism (PP) framework begins with all stakeholders’ needs and requirements, including shareholders, employees, customers, regulators, and suppliers.
Unlike other performance measurement frameworks that focus mainly on the needs of major stakeholders like shareholders and customers, the PP model focuses broadly on all stakeholders of an organization.
In that sense, the PP model also emphasizes the reciprocal relationship between the organization and all of its stakeholders. Thus, it takes a holistic approach in managing stakeholders’ relationships and an organization’s performance management.
The Performance Prism Framework
The performance prism framework begins with the stakeholders of an organization rather than the strategy. It then focuses on strategizing and managing performance through the five key elements of the prism.
The key points in the performance prism revolve around major stakeholders of an organization:
- Stakeholder needs
- Capabilities and
- Stakeholder Contribution
The five key elements of the performance prism lead us to five key questions.
- What are the wants and needs of an organization’s stakeholders?
- Which strategies an organization should follow to fulfill the requirements of the stakeholders?
- Which processes are required to pursue these strategies?
- What capabilities do an organization need to make the processes more efficient?
- What are the requirements of an organization from the stakeholders if it needs to develop and maintain these capabilities?
Thus, we can see that the performance prism connects each performance perspective with the next one.
Five Facets of the Performance Prism
The proponents of the performance prism argue that it reflects the true challenges of performance measurement and management.
Let’s briefly analyze the five facets of the performance prism.
The first facet is to identify major stakeholders of an organization. Stakeholders should be mapped in a way to reflect the power they possess and the needs and wants of each one of them.
Key stakeholders of an organization can include:
- Investors (equity and debt) that need a return on their investments
- Customers that want reliable, fast, and the best products/services
- Employees seeking career satisfaction
- Suppliers and vendors seeking profitable relationships
- Regulators that want an organization to act legally and responsibly
The PP model is unique in the sense that it evaluates the contribution from all stakeholders as well. For instance, it focuses on analyzing customers’ loyalty that other models ignore.
- Customers: Seek loyalty and profits
- Investors: Capital and Risk Tolerance
- Employees: Flexibility, Dedication, and Multi-skills
- Regulators: Understanding of regulatory requirements in a particular industry and uniform regulations.
The performance prism model articulates strategies in a way to achieve goals effectively. It differentiates strategies from the goals and objectives of the organization.
The PP model focuses on devising strategies to satisfy all stakeholders’ needs as well as the goals of the organization simultaneously.
The PP framework then evaluates the effectiveness of each strategy mainly through four aspects:
- Implementation of strategies
- Communication of strategies
- Employee willingness to implement these strategies
Once the organization has developed effective strategies; it needs to identify whether it has the processes in place to implement them or not.
There are four key elements to evaluate here:
- Product/service development
- Demand generations
- Fulfilling the demand
- Planning and managing the enterprise
The organization then moves on to the next step of evaluating performance in terms of processes.
Capabilities are the resources an organization requires for processes. These resources can include technology, employees, infrastructure, and so on.
The PP model can use benchmarking practices to evaluate the effectiveness of capabilities. The aim is to explore whether capabilities are supporting the processes effectively.
Why Do We Need the Performance Prism?
The performance prism framework was developed to evaluate the performance management of modern organizations. The proponents of the PP model say that organizations mainly exist to satisfy the stakeholders’ needs.
Thus, the PP model starts by focusing on identifying the needs of stakeholders and then devising strategies to achieve these needs effectively.
- Most performance measurement models such as the balance scorecard focus on the needs of one or two major stakeholders only. The PP model suggests that it has become inevitable for organizations to think of all stakeholders alike.
- Other performance measurement models do not feel the need for change in an organization’s strategies, processes, and capabilities to meet the needs of stakeholders.
- The PP model stresses that stakeholders and organizations must a have reciprocal relationship. The stakeholders demanding something from the organization must fulfill their roles to meet the demands of the organization as well.
How to Use the Performance Prism Model?
An organization can implement the performance prism model by taking all stakeholders into confidence. Then, it must evaluate the size and nature of the organization.
The managers must explore all key stakeholders of an organization at first. They can then develop the framework to identify their needs, build strategies, processes, arrange capabilities, and meet the organization’s goals.
A few key points to remember with the implementation of the PP Model:
- The process should start with the stakeholders, not the strategies.
- Understand the stakeholders and the organization’s relationship on a reciprocal basis.
- Performance measurement tools should be specifically designed to assess whether the needs of the stakeholders are satisfied or not.
- Managers must not forget about the interest of regulators.
- The PP model is not suitable for small or organizations with a simple structure.
Importance of the Performance Prism
The performance prism model comes with a number of benefits that other measurement models do not offer.
- It proposes a series of steps and links each step with the next one rather than just proposing a theoretical framework.
- It keeps the stakeholders at the center stage at all points.
- The PP model allows managers to measure performance from different perspectives. Each stakeholder becomes important with the PP model.
- Unlike other models, it links the needs and expectations of stakeholders and the organization on a reciprocal basis.
- It provides an alternative performance measurement tool for complex organizations that have several key stakeholders.
Limitations of the Performance Prism
The performance prism model also comes with some limitations.
- It is not suitable for simple or small organizations.
- It is up to the managers to decide the key stakeholders of an organization. As each organization comes with different objectives and goals.
- Stakeholders’ conflicts can affect the effectiveness of the PP model.
- As it focuses on a multi-stakeholder framework, it may not pursue the conventional performance maximization model.
The performance prism is an effective performance management framework that focuses on the needs of all stakeholders. It also focuses on the needs of the stakeholders rather than just strategies.
Importantly, the PP model links the needs and demands of an organization and the stakeholders on a reciprocal basis.