Introduction

The explosive growth of the information-related and science-based sectors of industrialized economies has seen concomitant growth in the demand for products and services with potential to help organizations apply what they know more profitably. There are entirely new occupational categories – combinatorial chemist, network manager, software engineer, to name just a few – that produce economic value mostly by creating and manipulating symbols. Even in traditional occupations, ways of working have come to depend on intellectual activity more than physical activity. Factory workers invent and share process improvement ideas; salespeople develop novel ways to use the Web to reach or retain customers.

As the nature of work has changed, the relationship between an organization's measured resources and its market success has become tenuous. Factors that contribute substantially to a firm's market success largely elude traditional means of quantification. Unlike materials and equipment, core competencies comprised of the distinctive abilities of employees and teams are not easily captured on balance sheets. This fact not only makes valuation of individual firms harder, it also complicates traditional analyses for allocating resources, improving processes, and compensating employees.

Existing notions of performance measurement and organizational control meet with substantial challenges in knowledge work settings. In this chapter, we identify distinctive characteristics of “knowledge work” that impact our ability to measure it, and briefly discuss the research challenges and practical implications associated with those characteristics. Conceptually, these characteristics can be placed in three categories.

First, knowledge work is less observable than physical work.

Introduction

Patents and patent citations are increasingly used as measures of innovation performance (e.g. Katila, 2002). However, confusion exists over the applicability of these measures and over the appropriate patent citation lag to be used. This chapter examines the measurement of innovation performance through patents, focusing especially on how to measure the radicality of innovations by using patent data.

The existing literature provides a wide array of definitions of “radical” innovations. In this contribution I propose that the previous definitions of radicality can be arranged into four broad categories – industry-, organization-, user- and technologically radical – each addressing a different dimension of radicality (see table 14.1). The first category of radical innovations defines “radical” as new or disruptive to the industry. Radical new products at the level of the industry dominate and make obsolete the previous products in established markets, can give rise to new industrial sectors (Achilladelis, Schwarzkopf and Cenes, 1990) and affect the market power relations in the industry (Henderson, 1993).

The second category of radical innovations defines radical as new to the organization. Organizationally radical innovation may be defined as innovation that incorporates, for example, a technology that is new to the firm but may be well understood by others (Green, Gavin and Aiman-Smith, 1995). Organizational radicality has also been described as a degree of change the innovation makes in the existing practices of the organization. The third category defines radical as new to the users.

The final part of the book contains three contributions that both look to the future and explore some of performance measurement's enduring themes. Part V begins with a return to the classic question of whether pay for performance really motivates employees. It then continues by exploring how and why measurement works in some settings, even when it appears that it should not. The final chapter turns to the question of predictive performance measurement – exploring whether it is feasible to develop forward-looking measurement systems.

The first contribution, by Margit Osterloh and Bruno Frey, addresses the question of whether pay for performance really works. Osterloh and Frey review the literature and the results of a variety of field studies that explore whether intrinsic or extrinsic motivation is more powerful. They seek to develop a framework that allows practitioners to ensure that they achieve an appropriate balance of intrinsic and extrinsic methods of motivation. At the heart of their framework is the argument that “extrinsic motivation is sufficient when the work is routinized and performance is easy to measure, while intrinsic motivation is necessary when labor contracts are characterized by a high degree of incompleteness as well as ambiguity”.

The second contribution, from Rob Austin and Jody Hoffer Gittell, builds on Osterloh and Frey's chapter by identifying three basic premises that are taken for granted by most designers of measurement systems: performance should be clearly defined, performance should be accurately measured and reward should be contingent upon performance.

Introduction

This chapter introduces a method for collecting performance data in context. The method, termed Context-based Measurement (CbM), preserves a rich description of the circumstances of a measure. This contextual information is often overlooked, but essential in preserving the meaning of measurement information.

The principle of CbM can be explained using the metaphor of the Global Positioning System (GPS). In aircraft navigation, for example, a GPS receiver derives the speed and direction of an aircraft by recording over time the coordinates of longitude, latitude and altitude. This contextual data is then used to derive the distance to the destination, communicate progress to date and calculate the optimum flight path.

Now imagine if we had an equivalent of the Global Positioning System for the measurement of organizations. The coordinates of longitude, latitude and altitude might be replaced by ones of resource used, process performed and product produced. If we designed a GPS for an organization, we could measure its performance (e.g. cost or quality) in the context of the resource used, the process performed and the product delivered. Such an approach could help us specify our targets, communicate our performance and signal our strategy. This is context-based measurement.

The remainder of this chapter explains the method of CbM in more detail using a case study in the automotive industry. The reader should note, however, that the principles are not specific to an industry or discipline. We start by explaining how structures are essential to understanding in any form of measurement.

The first two parts of the book have concentrated largely on measurement theory, although many of the authors have drawn on their practical experiences as well as their research studies. The third part sees a change in tone, focusing primarily on measurement in practice, albeit measurement in difficult areas of practice.

The first contribution, from Tim Ambler and John Roberts, explores measurement from the customer perspective, introducing the concept of marketing dashboards and asking what they should contain. Ambler and Roberts explore the different measures that have been proposed over the years to track marketing performance, arguing that the search for a “silver metric” is somewhat futile. Instead, they call on marketeers to adopt marketing dashboards that reflect the complexity of marketing accountability better.

The second contribution, from Andrew Likierman, explores risk and performance measurement. Likierman reviews the link between measurement and risk from three perspectives: in assessing organizational performance, in managing the organization and in reading the individual. He argues that performance measurement and risk are inextricably linked, on the grounds that discussing performance without reference to risk makes for meaningless comparisons.

The third contribution, from Rob Austin and Pat Larkey, moves firmly inside the organization, and asks how knowledge workers should be measured. This topic is particularly important in the developed economies. There, increasing numbers of firms are finding that they cannot compete on the basis of cost and therefore have to compete on the basis of value delivered. To create value, firms rely on their knowledge workers.

Introduction

The shortcomings and dysfunctional consequences of performance measurement systems have been discussed in the academic literature for at least fifty years (Ridgway, 1956), but recently there has been a flurry of activity. Throughout the 1980s vocal and influential authors criticized the measurement systems used by many firms (Johnson and Kaplan, 1987; Hayes and Abernathy, 1980). By the 1990s the noise made by these voices had grown to a crescendo (Eccles, 1991; Neely, Gregory and Platts, 1995), and increasing numbers of firms appeared to be “re-engineering” their measurement systems, with data suggesting that, between 1995 and 2000, 30 to 60 per cent of companies transformed their performance measurement systems (Frigo and Krumwiede, 1999). By 2001 the balanced scorecard had been adopted by 44 per cent of organizations worldwide (57 per cent in the United Kingdom, 46 per cent in the United States and 26 per cent in Germany and Austria). More recent data suggest that 85 per cent of organizations should have had performance measurement system initiatives under way by the end of 2004 (Rigby, 2001; Silk, 1998; Williams, 2001; Speckbacher, Bischof and Pfeiffer, 2003; Marr et al., 2004). However, cautionary evidence was reported by three Austrian academics to the effect that 8 per cent of 174 companies from German-speaking countries decided not to implement a performance measurement system (and a balanced scorecard in particular) because they could see no advantages or “positive impact” for themselves, especially given the implementation effort required (Speckbacher, Bischof and Pfeiffer, 2003).

Sheet forming differs from bulk forming in several respects. In sheet forming, tension predominates, whereas bulk forming operations are predominately compressive. In sheet forming operations at least one of the surfaces is free from contact with the tools. Useful formability is normally limited by localized necking rather than by fracture as in bulk forming. There are instances of failure by fracture but these are unusual.

Sheet forming processes may be roughly classified by the state of stress. At one end of the spectrum is the deep drawing of flat-bottom cups. In this case, one of the principal stresses in the flange is tensile and the other is compressive. There is little thinning, but wrinkling is of concern. At the other end of the spectrum are processes, usually called stamping, in which both of the principal stresses are tensile. Thinning must occur. Rarely does the formability in sheet forming processes correlate well with the tensile ductility (either reduction in area or elongation at fracture).

CUP DRAWING

The deep drawing of flat-bottom cups is a relatively simple process. It is used to produce such items as cartridge cases, zinc dry cells, flashlights, aluminum and steel cans, and steel pressure vessels. The process is illustrated by Figure 14.1. There are two important regions: the flange, where most of the deformation occurs, and the wall, which must support the force necessary to cause the deformation in the flange.

STAMPING

Operations called stamping, pressing, and sometimes drawing involve clamping a sheet at its edges and forcing it into a die cavity with a punch, as shown in Figure 16.1. The sheet is stretched rather than squeezed between the tools. Pressure on the draw beads controls how much additional material is drawn into the die cavity. In some cases there is a die, which reverses the movement of material after it is stretched over the punch.

DRAW BEADS

Draw beads (Figure 16.2) are used to create tension in the sheet being formed by preventing excessive drawing. As a sheet moves through a draw bead, it is bent three times and unbent three times. Each bend and each unbend there requires plastic work. Over each radius there is friction. This create resistance to movement of the sheet. If the resistance is sufficiently high, the sheet will be locked by the draw bead. The restraining force of the draw bead can be controlled by the height of the insert.

The restraining force has two components. One is caused by the work necessary to bend and unbend the sheet as it flows over the draw bead and the other is the work to overcome friction. The restraining force F per length resulting from the bending and unbending can be crudely estimated with the following simplifying assumptions: Work hardening, elastic core, movement of the neutral plane, and the difference between engineering strain and true strain are neglected (ε = e).

INTRODUCTION

Slip-line field theory is based on analysis of a deformation field that is both geometrically self-consistent and statically admissible. Slip lines are planes of maximum shear stress and are therefore oriented at 45° to the axes of principal stress. It is assumed that

1. the material is isotropic and homogeneous,

2. the material is rigid – ideally plastic (i.e., no strain hardening),

3. effects of temperature and strain rate are ignored,

4. plane-strain deformation prevails, and

5. the shear stresses at interfaces are constant: usually frictionless or sticking friction.

Figure 9.1 shows the very simple slip line for indentation where the thickness, t, equals the width of the indenter, b. The maximum shear stress occurs on line DEB and CEA. The material in triangles DAE and CEB is rigid. As the indenters move closer together the field must change. However, for now, we are concerned with calculating the force when the geometry is as shown. The stress ςy must be zero because there is no restraint to lateral movement. The stress ςz must be intermediate between ςx and ςy. Figure 9.2 shows the Mohr's circle for this condition. The compressive stress necessary for this indentation is ςx= − 2k. Few slip-line fields are composed of only straight lines. More complicated fields will be considered.

An important concern in forming is whether a desired process can be accomplished without failure of the work material. Forming limits vary with material for any given process and deformation-zone shape. As indicated in Chapter 10, central bursts may occur at a given level of Δ in some materials and not in others. Failure strains for a given process depend on the material.

DUCTILITY

In most bulk forming operations, formability is limited by ductile fracture. Forming limits correlate quite well with the reduction of area as measured in a tension test. Figure 11.1 shows the strains at which edge cracking occurs in rolling as a function of the tensile reduction in area. The fact that the limiting strains for strips with square edges are much higher than those with rounded edges indicates that process variables are also important. Similar results are reported for other processes.

METALLURGY

The ductility of a metal is strongly influenced both by the properties of the matrix and by the presence of inclusions. Factors that increase the strength generally decrease ductility. Solid solution strengthening, precipitation, cold work, and decreased temperatures all lower fracture strains. The reason is that with higher strengths, the stresses necessary for fracture will be encountered sooner.

Inclusions play a dominant role in ductile fracture. The volume fraction, nature, shape, and distribution of inclusions are important. In Figure 11.2, the tensile ductility is seen to decrease with increased amounts of artificial inclusions.