performance measurement in business networks; towards management and leadership models for russian...

Performance measurement in business networks; TOWARDS MANAGEMENT AND LEADERSHIP MODELS FOR RUSSIAN BUSINESS NETWORKS.

Seppo NiittymäkiHAMK University of Applied Sciences

[email protected] detail: www.hamk.fi/stroi

Seppo Niittymaki, Moscow, April 8th 2010 Performance Measurement in Business

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mailto:[email protected]

Research Questions, Approach and Research Methods

1. What are the main features of management and leadership models and Performance Measurement Indicators (PMI) used at present in Finland ?

2. How should these models and PMI be adjusted to Finnish Companies in Russian business environment?

3. Constructive approach.4. In STROI Network project both qualitative and quantitative

methods were applied, 129 interviews were reported and 64 answers for quantitative questionnaires were received. Selected quotes of interviews and answers for surveys are used in this presentation.


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Different Approaches of Research in STROI Network Project

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Seppo Niittymaki, Moscow, April 8th 2010 Performance

Measurement in Business Networks

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ConstructiveApproach

Qualitative

Business Practices

ConstructiveApproach

Quantitative

2. Russian researchers` approach

1. Finnish researchers` approach

3. Joint approach: Triangulation

The development trends in performance measurement (Kulmala and Lönnqvist, 2006).

8.4.2010Seppo Niittymaki, Moscow, April 8th 2010

Performance Measurement in Business Networks

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The first applications of cost measures at

network-level occurred at the end of 1990s.

Is non-financial measurement at

network-level the next area of development?

Performance measures such as return on

investment have been used since the beginning of the twentieth century.

Non-financial measures became

popular in companies during 1980s and 1990s.

Financial measuresFinancial and non-financial measures

One companyNetwork of several

companies

Type of performance measures used

Level of performance measurement

Uniqueness of the Russian Market (Basic comments by Prof. Alex Settles (ASe), HSE Moscow, additional comments by the author and other experts mentioned.

• Different motivations (ASe)– Company Rautaruukki: Bonus motivates more in Russia

• Differing traditions in management both Soviet and post-Soviet (ASe)– Prof. Olga Tretyak: Power shrinks, when costs are saved ...no tradition in

cost saving• Russian tradition of authoritative leadership equaling “effective”

leadership (ASe)– Naulapää (2000) and company NCC`s experience

• Lack of team building tradition – hampers network formation– Konecranes interview, “why they don`t ask neighboring room instead of

calling Finland”• Extensive informal networks

– positive and negative aspects for firm


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Cultural differences between Finland and Russia (Sources: www.geert-hofstede.com and Russian researchers Yu&N. Latov (2003) and

A.Nautov (1996), which are presented with white arrows according to Filinov et al 2009)



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PDI, Power DistanceIDV, IndividualismMAS, MasculinityUAI, Uncertainity AvoidanceLTO , Long Term Orientation N/A

White Arrows: Score results given by Russianresearchers according toanalysis of their own.

http://www.geert-hofstede.com/

Management and Leadership styles in Finnish-Russian Business Networks according to authors experience and interviews (Expressed as an application of Blake& Mouton -model)Source for basic model: http://www.leadership-and-motivation-training.com/blake-and-mouton.html (Nov 19, 2009)

Finns

Russ

ian

Direction offuture development

MANAGEMENT OF NETWORKS: CONCERN FOR TASK

No efforts to tasks Authoritarian style; money talks

Network leader

Middle of the Road (Politician)

LEAD

ERSH

IP O

F N

ETW

ORK

S: C

ON

CERN

FO

R PE

OPL

E

Country club,relationsmost important

No efforts to people


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http://www.leadership-and-motivation-training.com/blake-and-mouton.html

Topologies of Business Networks (VTT)


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STROI project perspectives: Main success factors

P1: Business sector for a networked company

P5: Customer orientation and marketing

P2: Common vision of the network

Description of the business network

P3: Competence of human resource

Development relationships in the network; HRM in Russia and Finland

P4: Internal development

Working environment (Learning organization); Network growth; Decision-making in a networked company

P6: Measuring network performance


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Learning and growth

Internal processes

Customers

Finance

Business Sector

Vision of the Business Network

Balanced Score Card -structure of the Stroi Network -project


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3) The Network Score Card (NSC) approach(Järvenpää, 2009)

Network culture (trust, community, interaction)

Network resources (e.g., know-how, relationships)


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Main aspects of the network performance measurement

(Sivadasan et al., 2002; Westphal et al., 2004)

Measuring whether materials, information or resources are delivered in the agreed cost, quantity, quality and time. There are also trust-related aspects of reliability, such as keeping information confidential when agreed, and no advantage is taken of the partners’ problems.

Identifying the ability of network members to absorb problems of other partners, and coping with them

Measuring information and knowledge sharing, decision synchronization and incentive alignment among members of the network


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Learning andgrowth

Internal processes

Customer

Finance

Business Sector

Vision of Business Network

From Balanced Score Card (BSC) to Network Score Card (NSC)

Network Resources

NetworkCulture

BSC

NSC

Networks operating

models

Networkprocesses

In Finland: competitionRussia: relationships

In Finland: purchasing department

Russia: gifts and services


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A Model for Planning and Implementing Strategy in Project Business

P1:BusinessSector

P6:Finance

P5:Customer

orientation

P4:Internaldevelopment

P2:NetworkVision

P3: Human Resources

Performance

Mea

sure

men

t

Indicator

Targe

ts

Count

rySec

tor

Scena

rioSeppo Niittymaki, Moscow, April 8th 2010


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PESTE

Dem

andFo

reca

sts

Indicators

Common Dimensions of Performance Measurement

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10

20

30

40

50

60

70

80

90

1001. Target amount of production

2. Market share target, achieved in %

3. Average price/margin cost

4. Development of sales prices/unit

5. Number of new customers

6. Share of deliveries in time

7. Successful deliveries in (%)

8. Average time of delivery dev.

9. Network meetings (impl./target, %)

10. Kept 95% (Staff turnover < 5%)

11. Skill profiles, training agreed...

12. Targets set in appraisals.13. Successor plan key persons

14. Integrated purchases/all purch. (%)

15. Accident trend (actual/targe t, %)

16. Productivity trend e.g.EBT/employee/year, target 20 000 €

17. Customer satisfaction B2B(actual/target index)

18. Recognition among B2B potential clients on area

19. Share of key customers in turnover, ideal 80%

20. Percentage of CRM use in all projects

21. EBT-achievement-%, target e.g. 6% (EBT=profit/turnove rx100%)

22. ROCE-achievement-%, target 35%(EBT+interest/(Balance-non-int. bear.)

23. Performance/capacity of network

24. Annual growth of turnover

Previous year % This year % Next year %

Performance Measurement Indicators (PMI) for Strategy Implementation

P3: Human resources

P4: Development

P5: Customer

P6: Finance P1: Business sector P2: NW Vision


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Six most important factors for each perspective

8.4.2010 16Seppo Niittymaki, Moscow, April 8th 2010


14 most important factors to be measured on the basis average values8.4.2010 17


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Most important factors to be measured.

Reliability according to method triangulation with two different methods: Red circle: difference more than 20%.Green circle: difference on results less than 20%.

Web-robolInterview

The Most Important 14 Factors to be Measured in Different Perspectives (P1-P6) on the Basis of Triangulation of Different Datasets (Interview and web-robol survey)

P1: Business Sector,• 1 company reputation

P2: Network Aspects• 2 punctuality of delivery times• 3 number of reclamations• 4 confidence within network• 5 common development and• 6 streamlining activities

P3: Human Resources• 7 staff turnover• 8 work satisfaction

P4: Internal Development• 9 trend of productivity

P5 Customer Orientation • 10 growth of turnover and • 11 order book change• 12 profit of a product

P6: Finance• 13 return on capital employed• 14 profit



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