Integrated Performance

Management (IPM)
Driving strategy, engaging workforces
Authors
Association of International
Certified Professional Accountants®
Nancy Marc-Thrasybule, CPA, CGMA, Peter Spence, FCMA, CGMA,
Associate Technical Director Associate Technical Director

Raluca Stroe, Manager Ken Witt, CPA, CGMA,

Research & Development Associate Technical Director

World Business Council

for Sustainable Development
Andy Beanland, Senior Consultant Khaliun Purevsuren, Associate
Redefining Value Redefining Value

Valentina Baiamonte, Senior Associate

Redefining Value

Contacts
Please reach out to us to share your insights, inquiries, or to express your interest in participating in future
research related to this report.

Association of International Certified Professional Accountants

Peter Spence, FCMA, CGMA, Associate Technical Director

[Link]@[Link]

World Business Council for Sustainable Development

Fiona Watson, Senior Director, Redefining Value

watson@[Link]

2 | Integrated Performance Management

 Contents

4 Foreward

5 Context

7 IPM Phase 2 — Rethinking performance management

8 Overview of the IPM framework

13 IPM framework components

Leadership
Processes
Performance Culture
Resource Management

33 Management information

37 Performance

40 IPM maturity model

Appendix A — Illustrative example
Appendix B — Strong matrix concept

52 Definitions

54 Acknowledgements

55 Disclaimer

56 About

57 References

3 | Integrated Performance Management

1 Foreword
In 2021, AICPA® & CIMA®, together as the Association This new Framework is designed to guide companies
of International Certified Professional Accountants, towards achieving their strategies and objectives,
and the World Business Council for Sustainable including sustainability or ESG objectives, by
Development (WBCSD) published Reimagining maximising the positive impact that people can have
Performance Management, the first significant on their business model and long-term value creation.
output on our journey to explore how performance The Framework will help businesses integrate relevant
management must evolve to respond to present- ESG factors into their organisation’s management
day business challenges. In that research report, information, decision-making, and resource-
we found that businesses across the world are allocation processes. And perhaps most importantly,
struggling with performance management because the Framework will help foster a workforce that is
there is a disconnect between strategy, operations, engaged with strategy, performance, and purpose.
performance, incentives, and people. We identified
This report marks a significant milestone towards
that leaders grapple with the complexity of connecting
IPM. With this momentum, we will continue to work
team and individual objectives with strategic
collectively and collaboratively to drive organisational
organisational objectives. Our analysis confirmed
change at scale. We are committed to supporting our
that leaders need to actively and purposefully
members and the profession on the path to IPM by
blend strategy, performance, and incentives within
developing implementation guidance, training resources,
a new culture of performance and aspiration.
and continuing professional development tools.
Fast forward to 2023’s global landscape that
We invite businesses to start their journey towards IPM
reaffirms our view that businesses must look
so they can succeed in managing performance in a
beyond traditional ways of managing performance.
volatile, uncertain, complex, and ambiguous world.
The unprecedented pace of regulatory change
and a shift from voluntary to mandatory reporting
Dr. Ian Selby
on sustainability and environmental, social, and
Vice President — Global Management Accounting
governance (ESG) matters, coupled with increasing
Research and Development
stakeholder pressures on companies to deliver positive
AICPA & CIMA
financial returns alongside positive sustainability
performance, confirms that people are at the heart
Pepijn Rijvers
of both system and business transformations.
Executive Vice President, Redefining Value
This second report continues our journey to evolve how World Business Council for Sustainable
businesses and individuals approach and implement Development (WBCSD)
performance management. We have developed an
Integrated Performance Management (IPM) framework
that builds on established good practice, which we hope
will guide businesses on a journey that leads to a more
inclusive, holistic way of managing performance through
improved workforce engagement with strategies.

4 | Integrated Performance Management

2 Context
Phase 1 of the IPM project developed by AICPA down in organisational power hierarchies.
& CIMA and WBCSD confirmed that businesses
Despite the emphasis placed on connecting
continue to struggle with decision-making and
people performance with enterprise performance
strategy execution. Previous research had indicated
and on cooperation and coordination, in most
that 70%–80% of companies fail to realise the full
businesses, finance and human resources (HR)
potential of their strategies and that there was a
work in separate silos where finance is largely
general lack of understanding of, and connection to,
responsible for business performance management
strategy.¹ Embarking on Phase 1, we also assumed that
and HR is responsible for people performance.
companies were predominantly focused on financial
capital. Accordingly, our hypotheses were (1) that few Although the information used for management
businesses thoroughly integrate relevant capitals in decision-making aligns well with information
ways that create an understanding of how value is provided to governance, challenges
created or destroyed (and influence decision-making) associated with nonfinancial data, especially
and (2) that human capital is the capital that drives environmental and social issues, remain.
the value (positively or negatively) of all the others.
In addition, emerging pressures are changing
As noted, our Phase 1 research highlighted the way business leaders need to think about
that employee engagement and multi- managing the performance of their organisations:
capital strategy execution continue to be
There is a growing expectation for businesses to
problematic. Ongoing barriers to success that
integrate both financial and nonfinancial capital
the research identified include the following:
into their strategies. This includes setting net-zero
Companies continue to struggle with employee ambitions and demonstrating progress towards being
engagement and empowerment. nature positive, as well as other ESG objectives.

The achievement of a clear line of sight between Consumers are increasingly aware of
team and employee activities and strategies that sustainability and ESG issues and want to
fosters trust in devolved decision-making and interact with businesses that share their values
accountability for results continues to be challenging. and concerns. Businesses must review their
operating models to meet changing expectations.
The widely practiced process of annually
cascading of strategic objectives down to teams Businesses are coming under increasing pressure
and individuals is bureaucratic and often limited to report on their impacts and dependencies on
by a lack of cooperation and coordination, material issues across multiple capitals. Much of
usually due to a prevailing silo mentality. this pressure is coming from investors, as well as
other stakeholder groups, and is being translated into
This silo mentality also impairs resource-
accounting standards and regulatory requirements.
allocation decisions, including the
funding of innovative initiatives. As shareholders are becoming more sensitised
to these factors, boards are positioning their
Incentives at higher levels of the organisation
businesses to meet shareholder expectations. At
are well-aligned with the overall success of the
the same time, shareholders want their businesses
business, but this alignment weakens lower
to be profitable and to generate free cash flow and

5 | Integrated Performance Management

 survive and thrive over the long term. Increasingly, requires that companies take an ‘inside out’ view,
they know that profit and free cash flow are assessing the impact that the organisation has
outcomes of the effective, economic, and sustainable on the environment, society, and the economy.4
use and production of non-financial capital. Furthermore, the EU Corporate Sustainability Due
Diligence Directive (CSDDD) is likely to mandate that
The global regulatory and standard-setting
companies with more than 250 employees conduct
landscape is rapidly evolving, which is placing
and disclose climate neutrality transition plans
additional requirements on businesses to manage
in their long-term corporate strategies and link
and disclose across a range of ESG factors.
them to the remuneration of company directors.5
— In June 2023, the IFRS® Foundation’s newly
These factors complement the rationale for the
created International Sustainability Standards
second phase of the IPM project. Today, businesses
Board launched its first two standards, IFRS
need to adapt to a world where success is no longer
S1, General Requirements for Disclosure of
solely measured through financials. Organisations
Sustainability-related Financial Information, and
need to respond to growing expectations to generate
IFRS S2, Climate-related Disclosures, which are
returns for shareholders and create long-term
intended to be the first step in the development
value for other stakeholders, including customers,
of a global baseline for sustainability reporting.²
employees, suppliers, and communities.
— Regulatory bodies around the globe have been
Businesses can thrive amid this changing landscape
actively formulating and mandating disclosure
by enhancing long-term resilience and by assessing,
requirements. In the UK, a host of reporting
adapting to, and mitigating emerging risks. This
requirements are in place, including the Financial
increased complexity for businesses, set against
Conduct Authority (FCA) rule for climate disclosure
our Phase 1 findings that businesses are struggling
by large, listed companies. In the US, the Securities
to integrate relevant non-financial capitals into their
and Exchange Commission (SEC) has developed
decision-making and to fully release the potential
an extensive plan entitled ‘The Enhancement and
of their workforces behind their strategies, sets
Standardization of Climate-Related Disclosures
the scene for our focus in Phase 2 of this study.
for Investors’.³ Similar disclosure requirements
have been, or are being, imposed in other
major capital markets around the world.

— Perhaps most notably, in the European Union (EU),

the Corporate Sustainability Reporting Directive
(CSRD) requires all companies that access the
European market to report according to the
European Sustainability Reporting Standards
(ESRS) using a double materiality perspective.
This requires not only consideration of the effect
of sustainability issues on the enterprise, often
referred to as the ‘outside in’ view, but it also

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3 IPM Phase 2 — Rethinking
performance management
Based on the findings from Phase 1, the ambition To triangulate the evolving landscape with Phase 1
of Phase 2 of the IPM project was to rethink findings and Phase 2 ambitions, additional research
performance management and develop an IPM was undertaken to explore how businesses are
framework to engage workforces with strategy and responding to this evolving landscape and explore any
create a performance-oriented culture, leading to implications for the development of an IPM framework.
resilient, sustainable, and innovative businesses. Interviews were held with 25 executives from major
companies, 7 round-table discussions were hosted
As noted above, there are many emerging pressures
with over 50 participants, and a steering group of
on businesses and the world has changed significantly
WBCSD member companies was established.
since AICPA & CIMA and WBCSD published
IPM Phase 1 findings in 2021. It is now estimated The interviews and round-table discussions
that up to 90% of company value is represented encompassed a range of questions and topics
through intangible assets,6 meaning that value is including the perception of ESG in the participants’
no longer measured by physical assets but through enterprises; strategy, risk, and governance
the thoughts, experiences, and expertise of people. considerations; and operational elements such
Success happens through talented, purposeful as how ESG was embedded into the organisation,
workforces who are engaged with their work and culture, goal alignment, and incentive arrangements.
aligned with their business’s aims and objectives. The findings from the interviews and steering group
It is this intangible value that the IPM framework supported the development of the Framework,
seeks to harness, preserve, and optimise. and summaries from these discussions can
be found throughout this document.

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4 Overview of the IPM framework
The IPM framework is designed for senior business Make incentives meaningful and motivational
executives, particularly those actively involved in for individuals at any level by better connecting
strategy execution, finance, and sustainability, to individual and team performance with corporate
inspire them to transition their organisations to focus performance, strategy, and purpose.
on strategy execution and challenge existing thinking
The IPM framework (figure 1) includes the following:
on how performance is assessed and managed. The
Framework is applicable to organisations of all sizes, Overarching concepts — The IPM framework focuses
in all sectors, and in all regions of the world. However, on strategy execution and refinement founded on
the timeframe and complexity of implementing a clear, defined organisational purpose, a robust
the IPM framework will depend on individual strategy, and effective corporate governance.
organisational circumstances and aspirations.
• Principles — The IPM framework embraces multi-
The IPM framework provides a roadmap for capital, multi-stakeholder, and long-term value-
implementing a performance management creation principles. It provides mechanisms for
system aligned with the organisation’s purpose continuous feedback on the performance of strategies
and values. The Framework embraces multi- and supports the refinement of strategies to deliver
capital, multi-stakeholder, long-term value-creation value creation for a broad range of stakeholders.
principles and places the workforce at its centre.
• Components — The IPM framework includes
The objectives of this Framework are as follows: components related to leadership, culture,
resource management, and processes. The
Guide companies in achieving their strategies
Framework requires ongoing and cyclical
by maximising the positive impact of human
application with each component providing
capital on the functioning of the business
feedback loops on the execution of strategy.
model and long-term value creation.
• Management information and performance
Support companies in adopting a multi-capital
— The IPM framework components facilitate
approach to execute strategic objectives and create
the provision of management information that
greater clarity on who is responsible for achieving
drives insights into effective strategic execution.
those objectives at every level of the organisation.
It helps drive performance by engaging and
Help businesses incorporate relevant ESG factors empowering employees and building trust.
from their strategies into their organisation’s
The IPM framework is also supported by an
management information, decision-making, resource
IPM maturity model (chapter 8), which provides
allocation, and performance management processes.
guidance on transitioning from traditional
Develop a culture aligned with the organisation’s performance management to an IPM approach.
purpose, values, and strategic objectives and to
create a workforce engaged with strategy.

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Figure 1 — Integrated Performance Management (IPM) Framework

OVERARCHING CONCEPTS

Purpose Strategy Governance

PRINCIPLES

Multi-capital Multi-stakeholder Long-term value

LEADERSHIP
Composition
Ownership
Authority

PROCESSES
PERFORMANCE Mapping
CULTURE Connectivity
IPM Impact
Performance mindset
FRAMEWORK
Strategic focus
and accountability
COMPONENTS
Enabling controls
Line of sight
and engagement
Transparency
and visibility RESOURCE
Cooperation MANAGEMENT
and coordination Operating and
capital budgets
Data-driven
Reward systems
and incentives

MANAGEMENT INFORMATION PERFORMANCE

Initiative success measures Accountability Employee engagement
Productivity Moral hazard risk Employee empowerment
Functional utilisation Trust

RESILIENT, SUSTAINABLE, ADAPTABLE, AND INNOVATIVE BUSINESS

9 | Integrated Performance Management

4.1 Overarching concepts:
Purpose, strategy,
and governance
The overarching concepts of the Framework significant barrier to success. It is important for
are purpose, strategy, and governance. These strategies to be consistently understood at all levels
elements should be considered prerequisites for any of the organisation. The better employees understand
business wishing to successfully transition to an the strategies and the connectivity with their roles,
IPM approach. There are many existing resources the more engaged they can become. Central to the
to support companies in developing purpose IPM framework is the integration of these concepts
statements, strategies, and effective corporate into every level of business operations, bringing
governance, so guidance on these concepts them to life for people everywhere in businesses.
are beyond the scope of this Framework.
Governance — Governance is how purpose and
However, these overarching concepts strategy are embedded, owned, and managed
are imperative for several reasons: within a company. A strategic focus that embraces
a multi-capital perspective requires rethinking
Purpose — A purpose statement expresses what an
how an organisation is governed. Governance also
organisation and its employees deliver for its other
encompasses how organisational performance
stakeholders (customers, suppliers, shareholders,
is assessed, investments are made, and strategic
communities, and other interest groups). A meaningful
challenges and opportunities are discussed.7
and memorable corporate purpose defines
why a business exists and can be an invaluable The IPM framework focuses on the visibility of
tool in guiding decision-making and creating a performance management processes, a key
performance culture. The IPM framework provides responsibility of audit committees. In addition to
for translating corporate purpose into meaningful being a key component of governance, enhanced
statements for every level of business operations. risk and opportunity awareness is a byproduct
of increased engagement with strategy. Ongoing
Strategy — Strategies set the priorities and direction
performance conversations in a risk-aware
of the business. Taking a multi-capital approach
environment create feedback loops that can mitigate
involves adopting a strategic focus that expands the
risks, create new opportunities, identify strategic
breadth of strategic objectives beyond results that
innovations, and drive performance. The IPM
prioritise short-term financial capital and operational
framework integrates operational risk management
or functional excellence. A lack of connection
with initiatives at all levels in businesses.
and understanding of organisational strategy is a

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 Phase 2 findings of good practice — Integrated ESG into
strategy and governance
Participants in Phase 2 research highlighted several practices they had undertaken to integrate ESG or
sustainability ambitions into company strategy and governance processes. These included the following:

• Leveraging the materiality assessment to • Ensuring that not too much emphasis
develop a broad understanding of emerging is placed on specific ESG risks (such as
ESG issues and using this process to climate change and decarbonisation) to
prioritise actions on high-impact topics the detriment of other ESG risks (like staff
engagement, well-being, and empowerment),
• Creating a ‘sustainability board’ to act as a
which highlights the importance of thinking
stage gate to ensure all projects were tied
holistically, ensuring capital allocation
back to strategy and aligned to ESG goals
reflects commitments and potential impact
• Leveraging the internal audit department as
• Developing information flows up and
a vital business partner in assessing how
down the organisation to ensure that ESG
strategic objectives, including ESG objectives,
commitments are being met at both strategic
align with operational management
and operational levels, which allows leaders to
information and decision-making processes
review whether commitments are understood
across the organisation and reflected in
practices at all levels of the business

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4.2 Principles: Multi-capital,
multi-stakeholder, and
long-term value
The IPM framework embraces three principles Long-term value — Ultimately, the long-term success
that organisations should adopt when of any business depends on thriving societies
transitioning to an integrated performance to trade with and a healthy planet for us to exist
management approach. These are as follows: on. ESG and sustainability factors are already
forcing businesses to consider their impacts and
Multi-capital — A multi-capital approach endeavours
develop strategies to continue to enhance long-
to identify all the major resources (capitals) a
term shareholder and other stakeholder value by
company relies on to fulfil its purpose, support
integrating such material externalities into their
its business model, and deliver on its strategy.
thinking about long-term business success.
Considerations may include accounting for
environmental and social impacts, considering This IPM approach aligns with the concept of integrated
aspects of planetary boundaries and social thinking, which the International Integrated Reporting
thresholds in decision-making, and identifying Council (IIRC) defines as ‘The active consideration by
non-substitutable impacts, for example, where an organisation of the relationships between its various
negative environmental impacts cannot be operating and functional units and the capitals that
compensated for with positive impacts. the organisation uses or affects. Integrated thinking
leads to integrated decision-making and actions
Multi-stakeholder — A multi-stakeholder approach
that consider the creation, preservation, or erosion
recognises that organisations create value for a
of value over the short, medium, and long term’.8
wide set of stakeholders: shareholders, employees,
customers, suppliers, communities, and governments.
Considerations may include balancing the interests
of different stakeholder groups and examining
the power and influence of different stakeholder
relationships. For example, shareholders prefer
predictable, stable, and competitive returns but
decisions taken for short-term gain can have
consequential adverse impacts on longer-term
business prospects and other stakeholders.

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5 IPM framework
components
To the extent that businesses are purpose-driven and
are integrating multi-capital, multi-stakeholder factors
into their strategies, the Framework components enable
businesses to better engage workforces and to execute
their strategies through productive, strategically focused
operations. The Framework components address
the following:

Leadership composition, ownership, and authority

options for increasing focus on strategy

Processes to map and identify connectivity

between strategies and business
activities, processes, and projects

Performance culture to facilitate the ongoing

engagement with strategy and the application
of the IPM components in the organisation

Resource management to highlight how

connectivity between strategies and business
activities can improve operating and capital
budget allocation processes and the effectiveness
of reward systems and incentives

Each component will be further discussed

in the subsequent sections.

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5.1 Leadership: Composition,
ownership, and authority
Most critical to an IPM approach is a shift in the responsibility, but where authority is balanced by
‘power hierarchy’ of the organisation. This involves input from dedicated owners of strategic initiatives.
shifting responsibility, authority, and ownership of
In a fully ‘integrated’ organisation, the relationship
strategic initiatives to affect the balance of focus of
between leadership authority and ownership of
the organisation between functional excellence and
strategic objectives is flipped. Authority resides with
strategic execution. However, the IPM framework has
strategic leaders, strategic objectives are owned by
been designed to be applied to varying approaches
Strategic Executive Officers (SEOs), and strategic
to strategic responsibility, ownership and authority.
objectives are built out with functional expertise
Literature highlights that major leading high-tech firms
being provided on a ‘supply and demand’ basis. We
have started to consider significant changes in power
characterise this as a strong matrix, where authority,
hierarchies and are transitioning to becoming more
responsibility, and accountability rest with SEOs.
project-oriented organisations like the integrated model.9
There is no ‘right’ way of assigning ownership of
The following summarises the differing
strategic objectives at the executive leadership
characteristics of leadership authority and
level. Organisations must find an approach that
ownership of strategic objectives:
works best for their particular needs and objectives.
In ‘traditional’ organisations, the primary focus of However, the IPM maturity model (chapter 8) provides
leadership is on functional excellence. The executive a summary of options to help executives think
leadership team owns strategic objectives; functional about what might best work for their business.
expertise is valued over strategic expertise and
authority resides with functional executives.

In an ‘evolving’ organisation, strategic objectives

are owned by functional executives with both
functional and specific strategic responsibility
(dual citizenship). We characterise this as a form
of a ‘weak matrix’ (appendix B) of functional and
strategic responsibilities, where responsibility for
strategic initiatives and accountability for their
success is balanced with functional responsibilities.

An ‘advanced’ organisation continues to have

functional executives who own strategic objectives
and receive input from strategic programme
owners, where these exist. Overall authority
continues to reside with functional leadership.
We characterise this as a stronger form of a
weak matrix of shared functional and strategic

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 Givaudan — Governance
and reward system strategic plans and allocate resources to
deliver our business and ESG agenda.
Our purpose, ‘Creating for happier, healthier
lives with love for nature. Let’s imagine Our compensation policies are an essential
together’, is at the heart of everything we do. component of this strategy and a key
driver of organisational performance. Our
It is our guiding star to drive sustainable
Performance Share Plan (PSP) rewards
growth and is embedded within our business
executives and selected top management
strategy, which sets the roadmap to achieve
(top 500 employees) who significantly
ambitious financial targets while progressing
influence the long-term results of the
on our longer-term ESG ambitions linked
business and our purpose ambitions through
to our purpose. Our governance structure
the award of performance shares.
is the cornerstone that allows us to be
a successful, sustainable business. Since 1 January 2021, the financial metrics
of sales and free cash flow, previously
The strategy, including ESG aspects, is set
used to calculate the PSP awards, have
and overseen by our board of directors, who
been complemented by nonfinancial ESG
discuss selected ESG topics in their meetings.
metrics linked to our purpose, as follows:
Our executive committee (EC) is responsible
• 80% financial targets (sales
for the strategy’s implementation, including
and free cash flow)
ESG ambitions. The EC agenda includes
discussion of progress and decisions • 10% environmental targets (net
linked to the strategy and ESG aspects. greenhouse gas emissions reduction)
The Sustainability Leadership Team (SLT), a • 10% social targets (employee safety
team of internal experts on key ESG topics led and diversity of senior leaders)
by the Global Head of Sustainability, supports
the EC. The SLT supports the business All the financial and nonfinancial metrics
and functional leaders in reaching relevant used in the PSP are rigorously measurable
ESG ambitions. Business and functional and audited.
leaders integrate the ESG ambitions into Case example provided by Givaudan.

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5.2 Processes
The IPM framework involves a three-step process for identifying and clarifying the relative influence that various
strategic initiatives have on the achievement of organisational strategies (figure 2). In the context of this Framework,
initiatives encompass the broad range of activities, projects, and processes that contribute to strategic success.

Figure 2 - Three-step mapping process

1 MAPPING 2 CONNECTIVITY 3 IMPACT

Identify the strategy that Identify initiatives that Assess supporting

each initiative supports. are connected. initiatives’ relative
impact on strategy

This three-step process proposes that companies 3. Assessing impact — Assessing impact includes
establish connectivity between all initiatives within the evaluation of a supporting initiative’s
strategies and each initiative’s relative impact on influence on the success of the initiative it
connected initiatives within each strategy, as follows: supports and coming to agreement about this
impact in relation to other supporting initiatives
1. Mapping initiatives to strategy — Mapping
that are connected to the same initiative.
is the process of identifying the strategy
This impact is expressed as a percentage.
that each initiative relates to or supports.
These foundational concepts are key to engaging
2. Connecting initiatives to other supporting
employees with discussions on strategy. Establishing
initiatives — Connectivity involves identifying the
connectivity between initiatives enables conversations
relationship between initiatives. For example, if
between connected initiative owners about the
one of the business strategies is ‘achieving net
impact (or contribution) these initiatives have on
zero by 2035’, some supporting initiatives might
the execution of strategy and value creation.
be ‘carbon accounting’, ‘offsetting’, or ‘engagement
of suppliers and other stakeholders’, to name a The three-step process addresses common challenges
few. This connectivity may be on a one-to-one raised by leaders in both Phase 1 and Phase 2:
basis or one-to-many basis, where initiatives
More effective resource allocation (see illustrative
may support other initiatives, and would be
example at appendix A) — Connecting initiatives
expressed as a Boolean (true/false) value.
and assessing their impact should allow for

16 | Integrated Performance Management

 more effective resource allocation, reducing strategic performance, costs, and returns are
redundancies, and identifying activities that may not determined and enforced within the context of a
be contributing significantly to strategy execution. matrix of connected initiatives. At the employee
level, this connectivity translates to individual
Improved accountability — Connectivity creates
and team goals related to strategic objectives.
a ‘line of sight’ that improves accountability at all
This is critical for managing performance and
organisational levels. Every initiative should support,
fostering the desired engagement with strategy.
or be supported by, at least one other initiative within
a strategy. This also enables managers to understand The improved line of sight, engagement, and
how their roles connect with strategic execution accountability gained from this three-step
and how their contributions impact organisational process helps make incentives meaningful and
results. When this connectivity is implemented motivational at any organisational level.
at the organisational level, accountability for

Potential challenges identified include the following:

Multiple initiatives across strategies — One of this section. These attributes, which include
challenge with establishing connectivity between ESG factors, allow the value that each initiative
initiatives is an initiative connecting with multiple generates to be discussed and better understood,
other initiatives, possibly across multiple strategies. driving wider engagement with strategy.
In such situations, conversations would be
An initiative might have ESG measures and targets
needed to resolve the complexity between the
as well as financial and other operational measures
affected initiatives and strategies. This could lead
and targets. Any trade-offs between these targets are
to simplification and prioritisation decisions.
aligned with and agreed within each strategy. Measures
Granularity — Another challenge is the level of and targets for all relevant capitals, and representatives
granularity that this process could lead to. On the one of all relevant stakeholders, are integrated into each
hand, the democratisation of decision-making implicit initiative, as agreed at the planning stage. Conflicts
in the process, coupled with the empowerment that that might arise during the execution of initiatives are
this process enables, makes granularity an issue discussed, compromises agreed, and results reported
that can be resolved at the appropriate level within so that these are visible to the wider business.
strategies. Alternatively, leaders may wish to limit
An initiative’s attributes should be recorded (phased)
the level of granularity by agreeing to a connectivity
over relevant accounting periods to monitor
target appropriate to the level of desired connectivity.
performance over time. This is especially important
To assess the performance of initiatives, the IPM where there is a significant time lag between resource
framework proposes that each initiative has attributes allocation and the benefits accruing to the initiative.
as set out in table 1, ‘Initiative attributes for IPM,’

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Table 1 — Initiative attributes for IPM
Attribute Comment

Initiative ID/code A unique identifier.

Name The name of the initiative.

Narrative  escription of the initiative, including how it fits with the purpose of the organisation
D
and why it should be resourced.

Values statement A statement on the values and expected behaviours of initiative team members.

Strategy The strategy the initiative supports (mapping).

Initiative owner Initiative owners may change over time, which should be recorded to ensure that
results and owners are linked.

Finance business partner Supports conversations between initiative owners.

Cost Phased over accounting period.

Revenue Phased over accounting period.

Output or control measures In addition to operational output measures, other measures could include, for
example, ESG measures.

Targets Phased over accounting period.

Risks Description of the risks associated with the initiative.

Risk indicator If there is an indicator (measure).

Likelihood/severity Scores of likelihood and severity.

Risk mitigation Description of mitigations.

Initiative that it connects to Initiatives should support, or be supported by, at least one other initiative.

Start date First day of the initiative.

End date Last day of the initiative.

Performance commentary For each accounting period, a brief narrative should be added that explains
performance. This would be done by the initiative owner and be reviewed by the
owner of the initiative that it supports (or owners, if more than one).

Impact The percentage contribution of a supporting initiative. The sum of the percentages
of all supporting initiatives must be 100%.

Our research suggests that leading organisations have For further insight into how the data attributes of
started to use an outline like the initiative attributes initiatives can be used to assess progress towards
table to monitor and report on the progress of strategic IPM and be used to drive performance, please
initiatives, whether capital or operational in nature. refer to the section ‘Management information’
and an illustrative example in appendix A.

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5.3 Resource management
Resource management is ‘the consideration of The latest literature also criticises goal-cascading
the priority of resource availability in the context practices, emphasising the need for companies to better
of organisational decision-making. It helps align employee goals with organisational objectives.
organisations to efficiently and effectively manage Employees become more engaged and motivated
transformational or continuous improvements to when they witness and understand how their objectives
products and processes. It involves the alignment contribute to achieving their organisation’s goals.¹¹
of resources, systems, and employees to strategic
To ensure their objectives are aligned with the
objectives and the organisation’s priorities’.¹0
organisation’s strategic goals, we recommend
Many organisations interviewed in Phase 1 use a formal giving teams and employees the responsibility for
‘goal cascade’ process, repeated annually, to connect setting their objectives, in agreement with initiative
team and individual goals with strategic goals. This owners, whilst ensuring they have access to the
process is also connected to financial budgeting and information they need about the organisational
capital-allocation conversations with the finance team. strategy. Also, engaging employees in ongoing
conversations that help connect individual
Criticisms of the goal cascade process for
performance to strategic objectives serves to
allocating capital include the following:
improve line of sight and increase engagement.
Activities are based on decision-maker biases
rather than what might be best for strategy.

Managers take a safety-first approach,

choosing tactics that play to their strengths.

Managers select initiatives that are most

likely to reward them or position them for
advancement rather than what might be
best for the business (moral hazard).

Managers have different interpretations

of strategy.

The bureaucratic nature of the process

impedes efficiency, visibility, and agility.

19 | Integrated Performance Management

5.3.1 Operating and capital budget
Finance leaders struggle with financial capital- the budgeting process, subject to enabling controls.
allocation conversations because they have less
Apart from this, it may make sense for certain
understanding of the workings of operational activity
budgets to be managed centrally, for example,
of functions than functional leaders and are not always
payroll costs, or depreciation and amortisation.
confident in capital-allocation decisions. Finance
leaders are, however, responsible for connecting
financial resources with functional activities aligned
Phase 2 findings —
with strategies and generating strategic value. As a
result, functional leaders often ‘own’ their budgets
Operationalising ESG
based on prior-period budget levels, an approach to Participants in the Phase 2 research
budgeting that entrenches an entitlement mindset shared ways in which ESG was
and constrains business responsiveness. being operationalised across their
The IPM framework addresses this challenge organisations. These actions included:
with the use of productivity measures that • decentralising the ownership of ESG
provide opportunities to determine budgets for factors so that ESG is part of each
strategies and set functional utilisation targets function’s strategy, with resource-allocation
that help determine budgets for functions. risk and controls being dependent
upon the priorities of each function.
Resource management conversations should take
place with the strategy’s SEO, supporting initiative • addressing ESG issues within their
owners, and functional leaders. Because SEOs supply chain by introducing extensive
are held accountable for productivity targets and supplier screening processes so new
functional leaders for functional utilisation, they should suppliers must provide a significant
be empowered to allocate resources to maximise amount of performance data before
their chances of achieving their respective targets. any collaboration can start.
Imposing central controls on what natural accounts • taking a broader ‘systems perspective’ that
SEOs or functional leaders allocate resources to could considers the impacts across the food
be counterproductive, entrench rigidity, and detract system to ensure suppliers are prepared for
from increasing their accountability for results. the operational impacts of climate change.
Consequently, SEOs and functional leaders should be • reviewing a broad range of organisational
empowered to determine resource allocation within processes to ensure ESG factors
their strategies and functions in ways that are most were considered. These included
likely to enable them to achieve their targets. Because reward systems and incentives,
of this, there may not be a need to budget by natural procurement processes, human
account, which can simplify the budgeting process resources processes including
and improve responsiveness when things, inevitably, recruitment, and revisiting governance
change. It should be of no consequence which natural processes so that ESG initiatives can
account receives budget. Budgeting could be done, receive the necessary support.
in total, at the initiative level, potentially simplifying

20 | Integrated Performance Management

 Ramboll — Management in a
complex project environment
Being a technically led, project-based This enabled the leadership in our business
environment, Ramboll has a complex to ensure there was a clear thread from
matrix structure, which results in inherent our strategy down through to the business,
complexities when managing resources and giving equal importance and focus to
performance in a global engineering and strategic priorities as well as the day-
management consultancy. However, this also to-day operational performance.
enables us to be agile against challenges
Importantly, it also ensured upwards
in the external environment and respond to
engagement from our people within
specific market or geographical needs.
the business, resulting in advocates for
In 2023, one of our UK market teams different elements of the strategy. Because
launched ‘strategic initiative workstreams’, people were involved in and supporting
whereby each member of the leadership the decision-making, the strategy wasn’t
team would take responsibility for a specific an ethereal concept that only leadership
thread of the strategy (e.g., our sustainability was concerned with — but instead was
offering, external market engagement, or something we could all take responsibility
people initiatives). Each then formed an in understanding and moving forward.
employee-led working group to resource
Case example provided by Ramboll.
and deliver against each of the strategic
threads. These groups were determined on
suitability (e.g., role or market placement),
with a focus on representing diverse views
and backgrounds across the business unit.

21 | Integrated Performance Management

5.3.2 Reward systems and incentives
Rewards systems and incentives are a powerful remembering the things that went badly than those
enabler for advancing strategic objectives, that went well. Annual appraisals, therefore, focus
including sustainability objectives. However, in more on improving on the bad than celebrating
many organisations, there is a disconnect between success and building performance from strengths.
organisational purpose, which may take a long-
As decision-making increasingly considers ESG
term ‘multi-capital’ view, and short-term financial
and sustainability, it is vital for every team in an
performance. Recalibrating reward systems and
organisation to take responsibility for implementing and
incentives to align purpose and strategic objectives
achieving ESG strategies and for individual objectives
for long-term incentives and short-term bonuses
to align with ESG goals. ESG-related compensation
for top executives, middle management, and
schemes that are based on ESG performance should
employees is an integral part of an IPM approach.
reflect the wider ESG agenda so that companies
Reward systems and incentives work best when can foster the required level of accountability.
people understand how their efforts are connected
Effective reward systems often have
to and influence strategy and drive value creation.
the following characteristics:
Without clear connectivity between personal objectives
and organisational objectives, incentives fail as a The incentive scheme structure links individual
way of motivating people to excel.¹² However, when or team goals to the company’s strategy
reward systems and incentives rely on quantitative through ongoing conversations that evaluate
performance ratings, this can create a culture of the performance of connected initiatives.
fear within the organisation. This is particularly true
Incentives focus on achieving company-
for employees further down power hierarchies, as
wide collaboration. Increased visibility
measuring their accomplishments at the end of
helps encourage this collaboration.
the appraisal period becomes more challenging.
However, whilst financial incentives create an Finance works with HR to ensure that shared
accountability and performance culture in some team and individual objectives are consistent
individuals or industries, in others, they may not. with initiative measures and targets, learning
and development programmes support the
We should also note that the design and
needs of strategies, and hiring and promotion are
implementation of incentive systems can significantly
aligned with the requirements of strategies.
influence perceptions of fairness, which can impact
employee engagement. Transparency, consistency, SEOs influence decisions on incentives
communication, and involvement in the decision- for teams within their strategies.
making process are factors that can impact fairness
ESG goals are fully integrated into the incentive
perceptions. Many organisations determine individual
schemes of strategies and the business.
rewards and incentives using an annual appraisal
process. But a process that looks backwards for a
year may not be the most effective way of managing
future performance. Waiting for a year to evaluate
individual performance risks managers more vividly

22 | Integrated Performance Management

 Sonae — Aligning strategy
and incentives
At Sonae, we embrace value creation in all its The progress on results and the continuous
dimensions — economic, social, and natural. challenge of our ambitious goals and
Sonae understands the paramount relevance of commitments are supervised by Sonae’s board
upholding the highest sustainability principles of directors through the board remuneration
as part of its business strategy. The Sonae committee and the executive committee.
Sustainability Advisory Group was established
Moreover, our financing approaches are
long ago, aiming to accelerate our sustainability
in line with Sonae’s goals to achieve a
path. This advisory group is sponsored by
sustainable future for all. Sonae reached an
both the Sonae chair of the board of directors
important milestone of having 75% of its
and the CEO and is led by Sonae’s chief
financing operations associated with its ESG
development officer. Sonae Sustainability
performance, demonstrating the recognition of
strategy has been reviewed in 2023: Five
national and international banking institutions
strategic axes were defined and the ESG goals
in Sonae’s sustainable development strategy.
to which we are committed. Finally, we also
As a result of the initiatives managed either
reviewed our governance model to reinforce
directly or through its businesses, the Group
the importance of the sustainability agenda
entered financing operations considered as
throughout the holding and our businesses.
‘green’ or ‘ESG linked’, amounting to almost
For those axes and commitments, roadmaps one and a half billion euros. This represents
of actions were set by Sonae’s companies 75% of Sonae Group’s medium- and long-
aligned with best practices, to minimise our term facilities (either used and available),
negative social and environmental impacts and 85% for the holding company.
and grasp opportunities to scale value for our
At Sonae, our mindset of action is
people, our communities, and our planet.
inspired by our purpose — creating
Within that context, to ensure everyone’s today a better tomorrow for all.
commitment, we integrated into the variable
Case example provided by Sonae
remuneration of all Sonae Group employees,
targets on greenhouse gas (GHG) emissions
reduction and an increase in women in
leadership positions, among other planet and
people key performance indicators.

23 | Integrated Performance Management

5.4 Performance culture
Every business is a people business. Incorporating A critical challenge for executives in today’s complex
ESG factors into strategy and operations is businesses is creating a culture that actively
challenging, but it requires a shift towards a more engages employees in the business’s strategies
inclusive approach to performance management. and drives value creation. In short, executives want
This means considering multiple capitals and to create a performance culture — an environment
stakeholder perspectives and taking a longer-term where people are empowered, trusted, and
view, in which people are the main driver of value. engaged, driving strategy and creating value.

Our research identified seven aspects of culture that

are needed for a successful transition to IPM (figure 3).

Figure 3 — Performance culture

Enabling
controls

Line of Transparency
sight and and visibility
engagement

Strategic Cooperation and

focus and coordination
accountability
PERFORMANCE
CULTURE
Performance Data
mindset driven

24 | Integrated Performance Management

5.4.1 Performance mindset
Critical elements of a performance culture are confidence to take on responsibility, enhances
the purpose and values of the business that trust, and increases engagement with strategies.
contribute to a mindset that influences workforce
In turn, the values of the organisation must be related to
behaviour and drives strategy execution.
its purpose¹³ and widely communicated. A business’s
In a performance culture, the purpose of the business purpose statement and its strategic objectives, or
is succinctly articulated, memorable, and motivational. priorities, are aspirational. Strategies are needed to
The purpose statement explains a key element of the deliver them. Values must serve to guide the behaviours
business model and describes the value the business of the organisation’s people and inspire them to
and its employees deliver to its stakeholders. deliver strategy. The values must be authentic to the
organisation and rooted in ethics and integrity. The
In the IPM framework, purpose is cascaded to and
set of shared beliefs and principles that shape the
translated for all initiatives and justifies their raison
culture must be kept front of mind, guiding employee
d’être, or reason for existence. The ‘Narrative’ field
interactions and decision-making within the business
in the ‘Initiative attributes for IPM’ table is where the
and with outside parties, driving the behaviour that
organisation’s purpose is translated into the reason
enables delivery of strategy. The ‘Values statement’ field
for the initiative. By embracing the organisational
in the ‘Initiative attributes for IPM’ table is where initiative
purpose in this way, an employee can experience
teams express the values and behaviours that guide the
a corresponding sense of individual purpose. This
ways in which they work to deliver their initiative targets.
creates a performance mindset that leads to improved

25 | Integrated Performance Management

 Phase 2 findings —
Short-term mindset
There was recognition by some of our The IPM framework enables businesses
interviewees that the increase in stakeholder to achieve such alignment through the
expectations regarding company ESG conversations around strategy that will occur as
performance provides an opportunity for a result of the Framework’s implementation.
innovation and growth. However, Phase 2 Many examples from the food producer
participants remain concerned that integrating and retail businesses we approached refer
ESG and sustainability initiatives may involve to integrating sustainability considerations
potential trade-offs with short-term financial into decision-making processes to help
performance. For example, interviewees in mitigate any trade-offs by identifying win-win
the retail food sector highlighted that circular opportunities where sustainability initiatives
economy initiatives — such as reprocessing/ contribute to long-term value creation whilst
redesign and recycling — which will reduce also generating short-term financial benefits.
environmental impact, prepare for forthcoming
regulatory development, and, over the long In addition, it is noteworthy that
term, reduce costs, may not be appropriately non-compliance with stakeholders’
valued by investors in the short term. sustainability expectations poses regulatory,
reputational, and supply chain risks, which
Although the aforementioned initiatives may
may impact short-term financial performance.
require upfront investments and potentially
Organisations should, therefore, prioritise
impact short-term financial outcomes,
achieving alignment of sustainability initiatives
organisations can adopt various approaches
with short- and long-term financial goals.
to align long-term sustainability objectives with
short-term financial performance.

5.4.2 Strategic focus

and accountability
Having a strategic focus involves balancing strategic execution with functional excellence. Business power
hierarchies tend to be based on functional structures.¹4 A more strategic focus involves creating a more even
power balance between functional excellence and strategic execution. This involves creating strategies in which
strategic objectives are connected to the business’s supporting initiatives — and appointing owners for each. This
transition to a strategic focus also emphasises strengthening accountability for achieving strategic objectives.

26 | Integrated Performance Management

5.4.3 Line of sight and engagement
Enhancing the strategic focus in an organisation This requires engaging people in ongoing conversations
involves increasing the workforce’s engagement about strategy at all levels of the organisation.
in conversations about strategy execution and These conversations are essential to connecting
refinement, improving cooperation for coordinating individual and team goals and strategic objectives.
the execution of strategies, and establishing Establishing this improved line of sight provides better
accountability for performance goals at all levels. accountability for results at all organisational levels.

This is enabled by the three-step process

(figure 2, section 5.2). In this environment,
strategies are owned by executives with strategic
responsibility in evolving, advanced, or integrated
organisations (section 5.1). Such an approach fosters
a consistent interpretation of strategy, improves
resource allocation, creates a ‘line of sight’ that
improves accountability, makes incentives more
meaningful and motivational, and enables performance
management connected to organisational strategy.

27 | Integrated Performance Management

5.4.4 Enabling controls
Historically, businesses could rely on top-down activities to succeed or fail fast and fail safe. Controls
command and control power hierarchies to get that provide guidance and clarify responsibilities can
things done. Now, there is a growing awareness of reduce stress and help individuals feel more effective.
the importance of human, intellectual, social, and Implementing controls like stage gate reviews or
natural capital in value creation and understanding setting clear boundaries for individuals to work
intangible value.¹5 A key challenge in prevailing within is more effective than exerting comprehensive
business culture is how to trust employees to have top-down control with inflexible procedures.¹7
the right motivations, even though motivations
Coercive controls, conversely, are based on
cannot be measured, monitored, and managed.
compliance-oriented systems, processes, and
This quote from a senior finance executive of a global procedures and create a culture of fear of failure that
multi-brand manufacturer captures the challenge of discourages people from taking on responsibility
empowering people to take on responsibilities, make and inhibits decision-making and risk-taking.¹8
decisions, and be comfortable with being accountable
It is important to ensure that controls in businesses
for results: ‘We have a lot of policies to put people in the
are aligned with the stated values of the business.
square and say, you cannot move out of this square.
If controls conflict with the values, this will cause
Many of them complain and say, “Oh, but it’s not aligned
confusion and disengagement, discourage people from
with our message to behave like an entrepreneur.”’¹6
taking responsibility for challenging work, and lead to
In a performance culture, prioritising enabling a culture where accountability for results is avoided.¹9
controls that allow flexibility and adaptability and
contribute to a no-blame culture is more likely to
drive performance and innovation than coercive
controls (see definitions). Enabling controls encourage
employees to take on challenging responsibilities
that could lead to better performance and innovation.
Stage gate reviews, for example, allow innovative

28 | Integrated Performance Management

5.4.5 Transparency and visibility
Transparent internal processes are crucial for conversations focused on operational excellence
achieving strategic goals and improving performance, and strategic execution, and inform employees
especially considering the increasing demand for ESG of possible career paths and opportunities.
disclosures. At a high level, this involves clarifying the
purpose and values of the organisation and articulating
expectations for strategic objectives. It is also about
Phase 2 findings — Visibility
providing information related to achieving performance
goals and the business’s strategic objectives. This Phase 2 participants noted that visibility is an
clarity serves to foster a sense of alignment and important consideration in operationalising
connectivity within and across the organisation. ESG. One organisation interviewed envisioned
merging their production and planning
To help people understand the impact of their work on
activities with their greenhouse gas (GHG)
strategy, it is important to have visibility of all major
reporting and modelling with the ambition
strategic objectives across an organisation’s business
of achieving improved visibility across the
and operating model. Embedding transparency and
organisation of the materials and quantities
visibility in an organisation involves using the three-step
used, including on recycling, content,
process (figure 2) to connect initiatives to strategies
emissions factors, and packaging data.
and making initiative attributes visible to all employees.
As illustrated in the example above, robust
It is equally important that owners of connected data collection and reporting contribute to
initiatives engage in ongoing performance enhancing visibility across the organisation
conversations. These conversations include openly and effectively operationalising ESG. This
receiving feedback about challenges and possible involves tracking environmental and social
ideas for change and innovation and providing impact as well as monitoring and measuring
guidance and feedback regularly (the feedback loop). the effect of any governance practices and
The value of the feedback loop is that frontline associated initiatives through measurement.
operational employees are often the first to To operationalise ESG goals, they should be
experience factors that could impact (positively or integrated into initiatives and comprehensively
negatively) the business. Encouraging feedback represented in the attributes table in section
loops enhances a business’s responsiveness. These 5.2 for initiatives and should form part of
ongoing conversations also build knowledge, trust, the ongoing performance conversations
and empowerment, facilitating greater employee between owners of connected initiatives.
engagement with strategies and purpose. Other examples to enhance visibility
included engaging internal and external
We propose that strategic data and related
stakeholders such as employees, investors,
management information across all strategies should
customers, suppliers, regulators, and local
be visible to all employees, subject to competition-
communities and actively seeking their
sensitive data concerns. Such visibility should
feedback on the organisation’s decision-
inculcate a culture of trust, improve understanding
making to build further trust and legitimacy.
of and engagement with strategies, encourage

29 | Integrated Performance Management

5.4.6 Cooperation and coordination
Another challenge for leaders is the need for people decision-making, and resource allocation. Rooting
to collaborate across their organisations to coordinate organisational performance to an organisation’s
the execution of their strategies. This much-needed purpose and developing a performance culture will
cooperation is often impaired by challenges presented also enhance responsibility and accountability and
by silo-based power hierarchies or mentalities. contribute to improved cooperation and coordination
between different business units and functions.
The IPM framework seeks to overcome these
challenges and improve cooperation and coordination
through the mapping and connectivity processes as
set out in chapter 5.2. These processes encourage
ongoing conversations about the impact of initiatives
on the strategic success of the organisation and
the effectiveness of cross-functional teams,

30 | Integrated Performance Management

5.4.7 Data-driven
Data-driven decision-making combines objective continuous learning and improvement so plans and
analysis and empirical evidence to guide businesses strategies can be refined, leading to more accurate
towards success. By basing decisions on factual data predictions and reliable planning. It fosters a culture
rather than gut instincts or personal biases, businesses of transparency and accountability, as decisions can
can make informed choices that minimise risks and be justified and communicated based on evidence.
maximise opportunities. Data enables a comprehensive The AICPA & CIMA Global Management Accounting
understanding of complex issues and encourages Principles contain useful guidance on data planning.

Phase 2 findings — The role

of being data-driven for IPM
Phase 2 research highlighted the vital role of being for their sustainability agenda took priority. Some
data-driven and having the appropriate systems and respondents who succeeded in identifying and
processes to monitor ESG performance and inform understanding these requirements specified
decision-making. Companies revealed challenges that data governance and ownership was the
associated with data and information that included next step. A relevant example on tackling data
access issues due to the existence of multiple
• getting data from suppliers external
data owners specified the creation of a unique
to the organisation,
place from which information could be fed to
• difficulties associated with identifying the data the business, supply chain actors, and the sales
needed from inside the organisation, and organisation to inform the many reports generated.
• how to structure and deliver data so Another business specified that investing in an
it can be of use to the business. appropriate, rigorous sustainability software tool
In response to these challenges, businesses that can streamline data collection and analysis
specified that a prioritisation exercise helped ensure was key to generating reports more efficiently
the right sustainability data was collected from and tackling any data access concerns.
the most important suppliers. The prioritisation Regarding the structure and delivery of
exercise was depicted through a pyramid, where all sustainability data to the business, there
suppliers were required to provide basic (base of the was consensus on the fact that the needs of
pyramid) sustainability data. Only certain important stakeholders, including shareholders, had to be
suppliers were asked to provide more sophisticated understood. Steps companies mentioned as
data. The more important suppliers were selected necessary included identifying the key people in
based on several criteria, which may differ for every their organisation using sustainability data and
organisation. Companies leverage both outsourced conducting analysis to understand their information
systems providers and internally developed, needs. One interviewee stressed that tailoring
cloud-based systems to facilitate the flow of data to meet specific stakeholder requirements
performance information to decision-makers. enhanced its usefulness and relevance, noting that
To tackle some of the difficulties associated with different sides of the business used data differently
identifying internal data needed, many companies and required different levels of data granularity.
agreed that establishing clear data requirements

31 | Integrated Performance Management

The following table highlights the key characteristics of the different components of a performance culture and the
expected benefits of implementing these in an organisation.

Table 2 — Characteristics and benefits of a performance culture

Performance
culture component Key characteristics Expected benefits

Performance mindset • Purpose is clear, memorable, and motivational. • Empowerment

• Purpose is articulated at the level of every • Trust
activity, process, and project. • Engagement

Strategic focus • Strategy execution prioritised • More even power balance

and accountability over functional excellence between functional excellence
and strategic execution
• Mapping of initiatives (activities,
processes, and projects) • Improved accountability
for results
• Establishing accountability for
performance goals at all levels

Line of sight • Engagement of the workforce in • Consistent interpretation

and engagement strategic conversations of strategy
• Supply-and-demand concept • Improved resource allocation
• Improved line of sight between
initiatives and strategy

Enabling controls • Enabling controls over coercive controls • Responsibility assumed

• No-blame culture • Risks taken
• Empowerment

Transparency • Clarity of purpose, values, and • Alignment

and visibility strategic intent • Connectivity
• Accessibility of performance data • Engagement
• Trust

Cooperation • Ongoing conversations — cross-functional • Enhanced decision-making.

and coordination teaming, coordination of activity • Improved resource allocation.

Data-driven Data • Better decisions

• Learning organisation
• is linked to organisational objectives.
• Increased engagement
• supports decision-making.
• is readily accessible.
• is consistently defined and labelled.
• is resilient to change.
• is efficient.

32 | Integrated Performance Management

6 Management information
Management information in the context of the IPM the extent to which an IPM approach has been
framework focuses on measuring the transition from implemented and the quality of its adoption. This
a traditional performance management system of is distinct from the management information
budgetary control to IPM over time. Management that managers use to inform their decisions,
information provided by the Framework focuses on which is unique for every business.

6.1 Initiative success measures

Decisions need to be taken throughout businesses following their instincts. For example, all initiatives
for better execution of strategy. Senior leaders should drive costs and revenues. If initiatives undertaken
know the extent to which decision-making across have no success measures, how can decision-
their business is based on measurement rather than makers evaluate how much cost could be saved
bias or hunch. Indeed, many businesses increasingly through improvements in measured performance?
leverage their analytical capabilities to gain a How much opportunity cost is at risk?
competitive edge by making data-driven decisions.
Other measures that can be derived from
This is not to say that all decisions must be the initiative attributes include:
evidence-based — some initiatives may be
the cost of initiatives with no measures of
too difficult or costly to measure — nor is it
success (decision-makers assess performance
to say that instinct shouldn’t be a factor.
instinctually or not at all). This could also be
Sometimes, it can be difficult to determine valid expressed as a percentage of total costs.
measures for activities, and proxy measures are used
the number (or a percentage of the total number)
instead. Providing that initiative owners of connected
of initiatives that have no measures of success.
initiatives agree measures with each other, then proxy
measures should be acceptable and can contribute the average cost of initiatives with no
to conversations about the execution of strategy. measures of success.

Still, where measurement is impractical, decision- the concentration of initiatives with no measures
makers should explicitly agree to not measure of success. This could be by business unit, function,
before the commencement of these initiatives. initiative (rolled up), strategy, manager, or any other
demographic that makes sense to the business.
To evaluate how well their business is implementing
This could be analysed by cost or number.
its strategy, leaders can use measures of connectivity
and impact to analyse the degree to which people In addition to these measures, it is important to be clear
rely on data to support their decisions rather than on the timescales and frequency of measurement.

33 | Integrated Performance Management

6.2 Productivity
Businesses are constantly expected to produce more has changed, leading to stagnant productivity of
for less. The challenge for leaders is understanding ongoing activity and new initiatives being starved
where such opportunities exist in their businesses. of resources.²0 Companies that reallocate budgets
Operating models have often evolved to efficiently more proactively tend to perform significantly better
and effectively execute decisions that have been than those with static resource allocation.²¹
made over years or even decades. At the same time,
Using initiative attribute data, SEOs can be targeted
businesses have sought economies of scale to remain
with productivity improvements over time where
competitive and have grown organically and by
productivity is expressed as a function of operational
acquisition. Inevitably, there will be parts of operating
(including ESG) outputs and costs (see appendix A
models that have been shaped to deliver decisions that
for illustrative example). Identifying which initiatives
are no longer relevant to success and, perhaps, should
could be reduced or cut and which to invest more
no longer be operating and consuming resources.
resources into can drive productivity improvements.
Finance leaders face challenges in determining It is then the responsibility of the SEO, in agreement
resource allocation from one year to the next with the initiative owners connected with the strategy,
due to the expectation of operational leaders to to determine how to allocate resources to achieve
receive resources based on prior-period resourcing operational (including ESG) and financial targets.
levels, regardless of how the business ecosystem

6.3 Functional utilisation

In the strong matrix management concept, functions Because SEOs are accountable for costs and
provide an optimum level of functional resources and incomes and operational outputs of their strategies,
capacity for servicing strategies. Functional leaders this should trigger conversations with functional
provide expert advice and input to SEOs on the best leaders on how to optimise functional resources
way to achieve the outputs of any given initiative. and improve the efficiency and effectiveness of the
Therefore, the main uses of budgets in functional silos execution of strategies, with the finance business
are to develop and maintain the quality and availability partner acting as an adviser and consultant.
of functional resources and expertise required to
Utilisation is calculated as the quotient of costs
support strategies. Resources and expertise are
allocated to strategies and the total functional cost base.
supplied to strategies and the strategies bear the cost.
Unassigned costs (i.e., those remaining unutilised)
are used to calculate the function’s utilisation.

34 | Integrated Performance Management

6.4 Accountability
All initiatives should have an owner. Reporting
on the extent to which initiatives are owned
highlights accountability for results. Accountability
can be assessed in several ways:

The cost of initiatives not owned. This could also

be expressed as a percentage of total costs.

The number (or a percentage of the total

number) of initiatives not owned.

The average cost of initiatives not owned.

The concentration of initiatives with no accountable

person. This could be by business unit, function,
initiative (rolled up), strategy, manager, or any other
demographic that makes sense to the business.
This could be analysed by cost or number.

This information could inform executives on the

distribution or concentration of initiative ownership.
In parallel, this could inform key people policies
and address concentration risks (where a key
person might be accountable for an excessive
number or value of initiatives). The information
could also provide insights into initiative owner
turnover and possible resulting execution risks.

35 | Integrated Performance Management

6.5 Moral hazard risk
In employer-employee relationships, moral hazard refers connectivity and impact can help lower moral hazard
to situations where an employee takes decisions with by providing opportunities for constructive challenge
the understanding that accountability for any negative discussions between owners of connected initiatives.
consequences of their decisions will be borne by their
The following measures for a strategy can help with
employer or line manager. It is common for individuals
evaluation and management of organisational risks:
in positions of responsibility to be influenced by their
personal experiences or become overly attached to Connected initiatives have the same owner
past decisions, which may not be beneficial for the (number, value, concentration).
future of a business. Goal-setting and resourcing
Initiative owners have a line management
decisions can be affected by a range of factors:
relationship with the owner of a supporting
Activities being based on decision-maker biases initiative (number, value, concentration).
rather than what might be best for strategy
Preceding measures expressed as a percentage
Managers taking a safety-first approach, of all connections (% of number and % of value).
choosing tactics that play to their strengths
The connectivity of initiatives in strategic themes
Managers selecting initiatives that are most likely provides an opportunity to lower moral hazard
to reward them or position them for advancement risk by identifying, reporting on, and minimising
line management relationships between owners
Different interpretations of strategy²²
of connected initiatives. The extent to which such
Business leaders might not be cognisant of the relationships exist (agency) indicates the degree of
motivations, fears, or biases of all decision-makers, constructive tension between them and, therefore,
so business leaders should aim to reduce situations the risk that there is insufficient challenge between
where decisions are made on hunches or personal people and teams over the execution of strategy.
biases. The initiative attributes and measures of

36 | Integrated Performance Management

7 Performance
The IPM framework organises performance management around connected initiatives rather than
traditional functional structures and seeks to improve employee engagement in strategy delivery.
Logically, this implies that workforce performance is managed through initiative hierarchies.

7.1 Employee engagement

and empowerment
The Framework can empower employees. By establishing enabling controls to provide guardrails to prevent
missteps from going too far, leaders can trust people to take risks and innovate. People are empowered
to seize opportunities, making businesses responsive and strengthening business resilience.

Managing performance is linked to connecting the workforce with strategic initiatives. Initiative owners
who rely on the performance of connected initiatives to achieve strategic objectives should

assess the performance of owners of supporting connected initiatives;

collaborate and support owners of supporting connected initiatives in delivering results,

particularly where these initiatives’ budgets or output targets are under stress; and

support owners of connected supporting initiatives on an ongoing basis, discussing

challenges together and focusing on performance development rather than reflecting on
individual past failures, which should make an annual appraisal process redundant.

Improving employee engagement about strategy delivery through ongoing conversations reduces the chances
of things going disastrously wrong. Indeed, if ‘difficult’ conversations are necessary between the owner of an
initiative and the owner of a supporting initiative, this is more likely to result from a communication breakdown.

37 | Integrated Performance Management

 Fujitsu — Engaging employees
with purpose and strategy
In 2020, Fujitsu set our purpose as ‘make the individual personal purposes and objectives
world more sustainable by building trust in society with Fujitsu’s purpose and strategic objectives
through innovation’ and refreshed our core values to create a consistent evaluation framework
as ‘aspiration’, ‘trust’, and ‘empathy’. Guided by our across the organisation. The objective is to
purpose, Fujitsu works with customers and other encourage employees’ independent growth
stakeholders to find solutions to overcome society’s and actions, ensuring their contributions align
challenges and develop new business models to with Fujitsu’s purpose and create value for
provide services that generate high added value our customers and society. To facilitate
with a cross-industry approach. communication between employees and their
supervisors, managers and all employees
Several initiatives have helped embed our purpose,
are encouraged to have guided discussions
supported the transformation of our organisational
in one-on-one meetings with new tools
culture, and accelerated collaboration across
introduced to help them prepare in advance.
different industries:
These one-on-one meetings play an important
1. A purpose-led dialogue programme to all role at Fujitsu since they enable employees to
employees called ‘Purpose Carving’. This align organisational strategy with their career
programme supports individuals to articulate and ambitions, discuss their growth opportunities
shape their personal purpose through exercises with their managers, and receive valuable
that include life reflection sessions, articulating feedback on strategic performance. As a
and refining individual purpose, and group result, scores on the employee engagement
meetings to share purpose, listen to others, and survey for company direction and expectations,
encourage collaboration and cooperation. learning and growth, and equal opportunity to
2. A human resources–led evaluation system to succeed are trending significantly upward.
establish a connection between Fujitsu’s purpose Case example provided by Fujitsu
and personal performance measures. This
evaluation system encourages dialogue between
employees and supervisors to align

38 | Integrated Performance Management

7.2 Resilience
The IPM framework improves organisational The IPM framework also reduces the risk of information
resilience by creating ongoing opportunities for asymmetry through the increased visibility of initiative
conversations on initiative performance and strategic attributes, connectivity, and impact. Boards represent
performance that enable ongoing decisions. This the interests of shareholders and other stakeholders.
should allow failure to be spotted before the scale of The audit committee provides assurance that the
failure becomes consequential (fail fast, fail small). information that boards rely on is symmetrical
Conversely, in a performance culture where employees with, although less granular than, the information
feel emboldened to explore new or risky ideas, managers use to run the business on their behalf. In
initiative owners can commission new supporting an organisation that applies the IPM framework, the
initiatives or people can recommend and discuss board narrative information and key measures should
new initiatives when opportunities emerge. This be symmetrical to the information relied upon by
drives responsiveness and improves organisational SEOs to assess the success of strategy execution and
resilience in rapidly changing operating environments. would be distilled from the initiative attribute tables.

39 | Integrated Performance Management

8 IPM maturity model
The IPM maturity model is designed to enable Organisations can use the IPM maturity model to plot
businesses to position themselves at different stages their progress towards a more strategically oriented
on their journeys to adopting an IPM approach. business across a range of indicators and use it
The transitions needed will likely be iterative and as a diagnostic to plan future progress. Ultimately,
will vary depending on where businesses want a shift in leadership authority will, organically,
to get to and their implementation journey. lead to corresponding shifts in other aspects of
the organisation over time, including underlying
relationships and resource management processes.

Figure 4 — IPM maturity model flowchart

Organisation design Traditional Evolving Advanced Integrated

and focus organisation organisation organisation organisation

Leadership Functional Strategic

excellence execution
Culture Primary focus
Resource management

40 | Integrated Performance Management

The IPM maturity model helps organisations identify their current approach to managing enterprise performance and
plan their journey towards a more integrated approach to managing enterprise performance.

Table 3 — IPM maturity model

IPM
framework Traditional Evolving Advanced Integrated
Primary focus Strategy focus Strategy focus Strategy-driven focus
on function within functions within functions,
supported by strategic
programme leaders

IPM leadership Composition Executive leadership Executive leadership team Executive leadership Executive leadership
team composed of composed of functional team composed of team composed of SEOs,
functional executives. executives. ‘As-needed’ functional executives supported by key
advice or updates on supported by strategic functional executives.
strategic projects sought. programme leaders.

Ownership Strategic objectives Strategic objectives Strategic objectives Strategic objectives

jointly owned by owned by functional owned by functional owned by SEOs;
executive leadership executives with executives with strategies built
team; functional functional and specific input from strategic out by connecting
expertise valued over strategic responsibility programme leader(s) supporting initiatives.
strategic expertise. (‘dual citizenship’). on a ‘supply and Functional expertise
demand’ basis. provided on supply-
and-demand basis.

Authority Based on functional Based on functional Primarily based on Based on strategic

authority. authority with specific functional authority. authority with input
input sought on Strategic programme from functional leaders.
strategic projects. leaders provide scheduled
advice to executive
leadership team.

IPM Performance Purpose defined but Purpose defined and Purpose defined, Purpose well-defined
performance mindset not widely articulated. articulated, but not widely articulated, and and clearly articulated.
culture Connection to understood. Functional understood but not Integration of purpose
purpose limited by focus still predominant. widely embraced into initiative attributes
functional focus. in connection drives effective
to engagement decision-making and
with strategy. employee behaviour.

Strategic Limited employee Employee understanding Increased level of Connectivity encourages

focus and understanding of of, and engagement strategy discussions conversations between
accountability strategy, subject to with, strategy is based leads to wider owners of connected
manager/ individual primarily on annual top- understanding of, and initiatives and, in turn,
interpretation. down communication engagement with, forms the basis of
No wider employee of key strategic themes. strategy. Employees improved understanding
engagement with Functional activity is encouraged to provide of, and alignment
strategy. Functional still front of mind. feedback through formal and engagement
activity front of mind. channels and processes. with, strategy.
Accountability
Performance culture established Accountability Accountability for
not conducive to for performance goals established for performance goals
fostering accountability. combining functional performance goals determined by connecting
Individual performance excellence and combining functional initiatives within
goals set by functional strategic aspects but excellence and strategy. Continuous
managers, driven by biased to functional strategic aspects, with review process.
functional excellence excellence ambitions. limited connectivity of
ambitions. Annual goal Periodic reviews. strategic objectives.
cascade process; annual Frequent reviews.
performance reviews.

41 | Integrated Performance Management

IPM
framework
components Traditional Evolving Advanced Integrated
Enabling Primarily coercive, Increasing orientation to Primarily enabling Enabling controls
controls compliance-oriented enabling controls. People controls that support aligned with values,
controls; fear-of-failure comfortable taking on empowerment, flexibility, which facilitate expected
culture. Controls may additional responsibilities and decision-making. behaviours. No-
contradict values with limited exposure People more inclined blame culture. People
and hinder expected to personal risk. to take on additional empowered to take on
behaviours. responsibilities as additional responsibilities
personal risk is reduced. freely and willingly.

Line of Connections to strategy Connections to strategy Connections to strategy SEOs responsible for
sight and not established. Poor made within functions but discussed with strategic strategic connectivity.
engagement line of sight. not challenged. Nominal programme leaders, but Degree of connectivity is
line of sight. degree of connectivity not a measure. Targets for
specifically measured. connectivity agreed with
Improved line of sight. SEOs. Clear line of sight.

Transparency No or limited visibility Key business Visibility of key strategic Full visibility of all
& visibility for employees on the results information project performance initiative attributes
information used to published. More along with key and management
manage the business. detailed information on business results. information. Connectivity,
functional performance impact, and productivity
IPM
made accessible. (and other measures)
performance
actively used in
culture
communications
(continued)
between initiative
owners and SEOs.

Cooperation Limited dialogue, Cooperation and Increased cross- Cooperation,

and cooperation, and cross- coordination driven functional cooperation coordination, and cross-
coordination functional coordination. by functional or and coordination but functional teaming
individual goals. limited to specific driven by needs of
strategic projects. Teams connected initiatives in
draw on other functions strategies. Teams are
depending on need. multifunctional and fluid.

Data-driven Data focused on Strategic objective data Data for impact of Data for impact of
functional excellence. used to track strategy strategic initiatives on strategic initiatives on
results. No connectivity strategic objectives all initiatives assembled
with supporting initiatives assembled and analysed. Data
means operating model and analysed. Data supports decisions.
impact on strategy supports decisions.
not monitored.

IPM resource Operating Driven by functional Budgets driven by ‘goal- Budget processes reflect Operating and capital
management and capital leaders’ sense cascading’ process; CFO better balance between budgets determined by
budgets of ‘ownership’ or responsible for reconciling functional excellence and continuous conversations
entitlement; often based functional activity to strategy. Increased with SEOs based on
on prior-year amounts. strategy. Functional emphasis on value productivity measures
primacy prevails. creation and innovation. and targets

Reward Centrally governed Functional leadership Functional leadership SEOs have discretion
system and reward system that is has limited discretion on has wide discretion on on rewarding system,
incentives ‘one size fits all’. Not rewarding. Goal cascade rewarding, with guiderails. with guiderails, based
clear to individuals nominally clarifies how Frequent conversations, on a balance of enterprise
and teams how their individual and team effort improved visibility, and success, strategic
efforts contributed contributes to success. better collaboration, theme success, and
to performance Limited feedback loop together with a stronger initiative success.
and, therefore, how and motivation to achieve. feedback loop,
they earned their lead to improved
discretionary reward. motivation.
Not motivational.

42 | Integrated Performance Management

9 Appendix A –Illustrative example
Pro Surf & Turf — a U.S.-originated company assessed the impact of each of these initiatives
based in Houston, TX — is an integrated fishing, towards the strategic objective. For this assessment,
farming, processing, and production company they have used a simple percentage measure to
for beef, fish, and shrimp products. stimulate thinking and conversations about the
relative value of each supporting initiative. Logically,
Pro Surf & Turf’s vision is to be the global
the sum of all supporting initiatives’ impacts on
leader in meat and seafood production whilst
another initiative is 100% and these values arise from
demonstrating continued commitment to
conversations between initiative owners and SEO.
sustainable growth and operational excellence.
identified unconnected (stranded) initiatives. During
Pro Surf & Turf has defined three strategic
this process, some initiative owners were not able to
objectives consistent with its purpose and vision
agree on the connectivity or impact of their initiative
and aligned the organisation around the strategic
on other initiatives or with the strategic objectives.
objectives in a matrix-managed structure with SEOs
responsible for delivering each strategic objective. identified the total costs of each strategic objective
These strategic objectives are as follows: and the costs of the connected initiatives.

Strong and stable growth assessed the productivity of each strategy

as a function of strategy’s cost and units
Sustainability leadership
of output and used this information to
Customer focus determine budgets for future years.

As part of their transition to an IPM approach, they have Measuring connectivity and impact

assessed the initiatives in the strategy and Table A1 shows the overall connectivity for Pro Surf
identified the connections between them. & Turf; table A2 shows the impact measurement
for the supporting initiatives of the customer focus
strategic objective. Table A3 shows productivity
measures for each strategic pillar and table A4
shows how budgets for year 3 were determined
based on previous years’ productivity.

Table A1 — Overall IPM connectivity for Pro Surf & Turf

Strategy Number of Stranded

initiatives Connections Strategy Connected initiatives
in strategy made Connectivity cost(in USD) cost(in USD) cost(in USD) Costs at risk

Strong and 10 8 80% $1,000,000 $200,000 $800,000 80%

stable growth

Sustainability 30 20 67% 1,000,000 750,000 250,000 25%

leadership

Customer focus 20 7 35% 1,000,000 900,000 100,000 10%

43 | Integrated Performance Management

Table A2 — Impact and initiative costs for Pro Surf & Turf

Strategy Impact Initiative cost (in USD) Cost/impact

Customer focus $900,000

Call centre performance 70% 500,000 79%

Digital supply chain 20% 200,000 111%

Loyalty programme 10% 100,000 222%

This process revealed 13 initiatives where the Using productivity measures to agree budget levels
connectivity to the customer focus strategic objective
Pro Surf & Turf’s senior leadership team (SLT) were
could not be agreed upon by the initiative owners,
also able to identify output measures for each
resulting in a low level of connectivity. Although this
strategy to establish productivity measures.
might appear to be a major problem, when reviewing
the connected cost, Pro Surf & Turf identified that 90% Table A3 shows how, in year 1, the productivity column
of the total cost of the strategy was made up of the is calculated by dividing the strategy’s cost and unit
seven initiatives where connections had been made. outputs. In year 2, the productivity change column
These issues still need to be explored, but the cost reflects the movement from year 1 to year 2.
at risk from the stranded initiatives is relatively low.
Table A4 highlights how the year 3 budgets
One follow-up action for the SEO with ownership of are determined by setting productivity
customer focus strategy was to dig deeper into why 13 improvement targets for SEOs and calculating
of the 20 initiatives only comprised 10% of the strategy’s the productivity per target output.
total cost. This exploration revealed the following:
These measures can address challenges for finance
Several initiatives were under-resourced and leaders at Pro Surf & Turf in trying to agree budgets for
would require further investment to make the business. A finance executive in Phase 2 agreed,
connectivity and deliver impact for the strategy. ‘I think this is a proxy for a third-party contract that
would be in place because if it was a third party, you’d
In transitioning to a matrix-performance
have a price. So, the utilisation is the equivalent of the
management approach, some initiatives
price basically. I hadn’t thought of it in these terms
had become surplus to requirements.
before, but I think it’s a very neat way of doing it’.
The performance measures of a contact centre that
SEOs have full authority (subject to any enabling
was supporting the customer focus strategy were
controls) to deploy their resources flexibly
targeting throughput (efficiency), which was having
throughout the budget period to achieve
a detrimental impact on the resolution of issues and,
their strategies’ outputs or outcomes.
consequently, a detrimental impact on customer
loyalty and, therefore, on the customer focus strategy.

Similarly, since the cost of connected initiatives

rolls up to the strategic objective level, a review
of the strong and stable growth strategy was
deemed worthwhile to understand what caused
the potential cost (investment) at risk.

44 | Integrated Performance Management

Table A3 — Productivity measures

Productivity Year 1 actuals Year 2 actuals

Strategy Output Strategy cost Output Productivity $200,000 Output Productivity Productivity
(measure) (in USD) (units) (in USD) (units) (in USD) change

Customer Customer $1,000,000 5 $200,000 $900,000 6 $150,000 25%

focus retention rate

Sustainability Reduction in 1,000,000 5 200,000 750,000 6 125,000 38%

leadership scope 1, 2, 3
GHG emissions

Strong and Intrinsic 1,000,000 5 200,000 900,000 5 180,000 10%

stable growth value

Table A4 — Budgeting year 3 using productivity

Productivity Year 3 targets

Strategy Output Targeted Targeted Targeted Year 3 budget

(measure) productivity output productivity (in USD)
change

Customer Customer 30% 7.80 $115,385 $900,000

focus retention rate

Sustainability Reduction in 30% 7.80 96,154 750,000

leadership scope 1, 2, 3
GHG emissions

Strong and Intrinsic 25% 6.25 144,000 900,000

stable growth value

If an adverse productivity target is forecast at any point, then this should trigger conversations about the factors
that could be driving the adverse forecast. These conversations could happen at any level within a strategy.

45 | Integrated Performance Management

9.1 Appendix B —
Strong matrix concept
Although structural reorganisation is by no means oriented businesses, budgets and resources are
a requirement for implementation of the IPM ‘owned’ and controlled by functional leaders, resulting
framework, the strong matrix concept summarises in a silo mindset. Capital allocation follows suit,
research findings and thinking that supported with budgets frequently being inflexible from one
the development of the IPM maturity model. year to the next. Finance functions can experience
difficulties with a culture of budget entitlement and
Many businesses organise their workforces into
entrenched budget expectations grounded in historical
functional silos of expertise (figure B1, ‘Functionally
resourcing decisions. As a result, new strategic
structured business illustrative example’). Research
initiatives are often starved of investment. ²³
suggests that there may be significant limitations
to this management approach. In these functionally

Figure B1 — Functionally structured business illustrative example

Senior Executive Team- functional leaders only (strategic responsibilities shared)

CEO

Chief Operating Chief Financial Chief Marketing Chief HR

Officer Officer Officer Officer

Operations functions Finance functions Marketing functions HR functions

Sustainability Finance Sales HR partnering

IT Risk Management Account management Payroll

Information systems

Management information

Business partnering

External reporting

Investor relations

46 | Integrated Performance Management

The matrix performance management concept, A key advantage of moving towards a matrix
where leaders are responsible for functional management concept is increased management
excellence and strategic execution, is an alternative attention on strategy. Matrix-managed businesses
to a functional, silo-based power hierarchy. typically also provide opportunities for employee
development and engagement with the ambitions
We identify two forms of matrix:
of the business, strengthening ownership,
1. A ‘weak’ matrix (figure B2, ‘Weak matrix (function communication, cooperation, and coordination.²5
bias) illustrative example’), where a senior leader
In both the weak matrix and strong matrix
has functional and strategic responsibilities
management concepts, the composition of the senior
2. A ‘strong’ matrix (figure B3, ‘Strong matrix executive team evolves to take greater ownership
(strategy bias) illustrative example’), where a of the organisation’s strategic objectives.
senior leader only has strategic responsibility²4

Figure B2 — Weak matrix (function bias) illustrative example

Senior Executive Team- functional leaders only (some with additional strategic responsibilities)

CEO

Chief Operating Chief Financial Chief Marketing Chief HR

Officer Officer Officer Officer

Operations functions Finance functions Marketing functions HR functions Strategies

Sustainability Finance Sales HR partnering Customer focus

IT Risk Management Account management Payroll Sustainability leadership

Information systems Strong and stable

Management

Business partnering

External reporting

Investor relations

47 | Integrated Performance Management

In a weak matrix, functional leaders own are split between strategic and functional
functional excellence and strategic goals (‘dual responsibilities. Leaders tend to prioritise their
citizenship’). The weak matrix combines the diverse functional responsibilities over their strategic
expertise and resources required to successfully responsibilities. This could be because authority
deliver projects, processes, and activities. remained based on functional structures.

In general, a weak matrix management Accountability in functionally managed

concept has numerous advantages over a and weak matrixed organisations is often
functionally oriented management concept: shared, fragmented, and uncertain, whereas
functional accountability is well-defined, which
Management attention is more evenly split between
may help explain this functional bias.
functional excellence and strategic execution.
Apart from occasional strategic initiatives, power
Businesses can more flexibly align
and control over budgets and resources are still
resources with strategies.
predominately held by leaders of functional silos.
It encourages people to be mobile and
Project managers operating in weak matrix
to autonomously lend their expertise
performance-managed businesses mention
to multiple endeavours.²6
that low levels of authority and weak control
However, the weak management concept is still over resources are detrimental to performance
characterised by features which may reduce the and to operating successfully.²8
focus on strategy (the first three of the following
The IPM framework proposes that businesses
bullets are drawn from Kaplan and Norton²7):
transition towards a strong matrix performance
Because functional executives dominate the management concept (figure B3) where the
senior executive team, ownership and authority power hierarchy is determined by strategy.

48 | Integrated Performance Management

Figure B3 — Strong matrix (strategy bias) illustrative example

Strategic Executive Team (Strategic Executive Officers, CFO, and Ops Officer, in this example)

Supply side CEO Demand side

Functional Officers - resources and functional expertise Strategic Executive Officers

Chief Operating Chief Financial Customer Sustainability Strong and

Officer Officer focus leadership stable growth

Other business Strategic Initiatives

Operations functions
functions Responsibilities
• Business partnering
Sustainability Finance
• Resource management

IT HR • Performance management
• Risk management
Marketing
• Data planning

Sales
• Information systems
• Reporting continuum
Account management
• Management information
• External reporting
• Investor relations

49 | Integrated Performance Management

The strong matrix performance management concept SEOs are accountable for all their initiatives’
has characteristics that shift the organisation’s financial and operational outputs (including
emphasis and focus to strategic excellence supporting initiatives), reducing bias in
and mitigate the challenges associated with selecting and resourcing activities.
functional and weak matrix management concepts. Although transitioning to a strong matrix management
These characteristics include the following: concept will be a gradual process, it will potentially
The composition of the senior executive team enable businesses to create a dynamic network of
shifts to include ‘strategic executive officers’ (SEOs) capabilities and resources that can be deployed
who have sole ownership and authority for the flexibly based on all initiative needs. Businesses
strategic objectives to which they are assigned. can prioritise maximising interactions, connections,
SEOs have ownership of their strategic and conversations, bringing together different skill
objectives and related supporting initiatives. sets and expertise to work on various initiatives.
Such organisations are less focused on hierarchy,
Supporting initiatives are ‘owned’ by managers
which means the initiative owner has the most
accountable for their initiatives’ success, connected
decision-making power over their initiative.
to higher-level initiatives, and support the SEO in
strategy development, execution, and refinement. The matrix management concept also requires a
mindset shift. Transition steps will be needed to
Budgets are allocated directly to strategies in addition
effectively engage the workforce and strengthen the
to being mainly allocated on a functional basis to
organisation’s purpose and performance management
mitigate the problem of functionally based entitlement
culture. In a strong matrix-managed business, everyone
(silo mindset). This enables SEOs and connected
is responsible for contributing to initiatives that
initiative owners to prioritise, flex, and refine their
generate value. The transition should allow employees
strategies, focusing solely on delivering targeted
to take on new responsibilities and participate in
operational, ESG, and strategic financial outcomes.
multiple initiatives within the business’s strategies.
The CEO mediates between functional officers
The following diagram provides a summary
responsible for building, maintaining, and supplying
of some of the challenges with silo-based
the capability and capacity of functional expertise
organisations, along with the advantages and
and SEOs, who require functional expertise and
challenges associated with both weak and strong
resources to achieve strategic objectives.
matrix -performance management models.

50 | Integrated Performance Management

Figure B4 – Advantages and disadvantages of performance management models.

Silo structure Weak matrix Strong matrix

• Focus on functional excellence • Improves resource alignment with strategy • Power hierarchy determined by strategy

• Cooperation hard to achieve • Improves accountability for key • Shift from “dual citizenship” to
strategic initiatives “strategic accountability”
• Accountability for results shared,
fragmented, avoided • Encourages employee mobility for specific • Resource allocation determined by strategy
projects, processes, and activities
• Connectivity between operational activities • Functions serve as suppliers to strategy
and strategic objectives unclear
• Transparency of performance drivers
• Transparency of performance drivers
• More complex resource allocation • Democratised information and
increasingly opaque lower down
and management decision-making
power hierarchies
• BAU remains siloed • Multi-disciplinary and dynamic

• Functionally biased leadership. • Resource management complexity

51 | Integrated Performance Management

10 Definitions
Corporate net-zero — According to the Science Based Double materiality — Describes how corporate
Targets initiative (SBTi) Net-Zero Standard (2021), information can be important both for its implications
achieving corporate net-zero entails the following: about a firm’s financial value and about a firm’s impact
on the world at large, particularly regarding climate
Reducing scope 1, 2, and 3 emissions to zero
change and other environmental impacts. The idea
or to a residual level that is consistent with
of double materiality comes from a recognition that
reaching net-zero emissions at the global or
a company’s impact on the world beyond its financial
sector level in eligible 1.5°C-aligned pathways
impact can be material and, therefore, worth disclosing
Neutralising any residual emissions at the for reasons other than the effect on a firm’s bottom line.
net-zero target year and any GHG emissions
ESG — An umbrella term that consists of three key
released into the atmosphere thereafter
factors — environmental, social, and governance —
Controls — Controls in business are formal, which provide investors with means to measure the
documented methods, procedures, processes, risks and the impact in these areas of the organisation,
and rules for controlling the execution of activities. evaluate companies, and make investment decisions.
There are two predominant types of controls: ESG has an outside-in perspective, focusing on the
effects of the environment and society on a company.
Enabling controls recognise that not every possible
contingency can be anticipated and, therefore, be Human capital — Defined by Brian Keely, human capital
designed into formal controls. Enabling controls ‘consists of the knowledge, skills, competencies, and
are intended to act as a guide for informed, expert, attributes embodied in individuals that facilitate the
motivated, and well-managed people to help them creation of personal, social, and economic well-being’.²9
execute their activities. Good enabling controls
Initiatives — Business activities, projects, and processes.
will include ‘guiderails’ that clarify when remedial
actions should be triggered and stop limits for Intangible assets — Nonmonetary assets which
minimising possible negative effects of unforeseen are without physical substance and are identifiable
negative events. Enabling controls may rely more (either being separable or arising from contractual
on guiding principles than fixed and inflexible rules. or other legal rights). Some examples are copyrights,
The intention of enabling controls is to provide trademarks, patents, or lists of customers.
support to people and to encourage them to use
Intangible value — Value derived from
initiative, whilst also limiting their exposure to risks.
nonmonetary assets or intangible assets.
Coercive controls are focused on compliance
Integrated performance management (IPM) — Long-
with strict rules. Coercive controls are designed
term value creation and the integration of multi-
with the assumption that all possible negative
capital drivers, like environmental, social, human, and
events have been considered and factored into
relationship, that reduce risk and improve resilience,
the set of rules. Coercive controls discourage
agility, creativity, sustainability, and trust in business.
the use of initiative, and therefore stifle creative
responses to events that have, inevitably, not
been preconceived and designed into the rules.

52 | Integrated Performance Management

Integrated thinking — The International Integrated points at which work is paused and progress is
Reporting Council (IIRC) defines this as ‘the active reviewed before commencement of subsequent
consideration by an organisation of the relationships stages of work. They are usually triggered by
between its various operating and functional units work done rather than time elapsed, although
and the capitals that the organisation uses or affects. elapsed time could also trigger a review.
Integrated thinking leads to integrated decision-making
Sustainability — Sustainability has an inside-out
and actions that consider the creation, preservation, or
perspective, considering the effects of a company
erosion of value over the short, medium, and long term’.
on the environment and society in addition to ESG.
Multi-capital – Financial, as well as
manufactured, human, intellectual, social
and relationship, and natural capitals.

Performance management — The processes and

practices companies use to measure, monitor, evaluate,
and drive enterprise performance and the execution
of strategy. This could include, for example, setting
key performance indicators and targets to track
progress towards the achievement of a company’s
strategy and objectives, or internal decision-making
functions and processes (e.g., budgeting, evaluation
and appraisal, and forecasting). The CGMA® Global
Management Accounting Principles (GMAP) set out
four key steps to the performance management
system — strategy, plan, execute, and review (SPER).

Stage gate reviews — These are pre-agreed

53 | Integrated Performance Management

11 Acknowledgements
We are grateful for the candid views that our participants shared with us during this project. We
undertook to keep all contributions confidential, but we would like to acknowledge the contributions
of leaders at these businesses, who helped us with the development of the IPM framework:

Accuron H. J. Heinz Company Ramboll UK

ADM Hanesbrands Randstad
Alexander Forbes Heidelberg Cement Asia Royal Canin
Amerifirst Hershey Sainsbury’s Supermarkets
ANEFAC Hexagon Mining Seawolf Sustainability Consulting
AstraZeneca HSBC Sedibelo Resources
B&Q IBREI Serco
BJ’s IFAC Siemens
Body Shop Ikea Sinarmas
Boohoo Indykpol Group SPAR
Bornstein Foods Intel Standard Chartered Bank
Bose Intl Legal Technology Assn. Subway
BP Isuzu Motors Suzano
Canary Wharf Group Jabil Tata
Cermaq JF Equipment Machinery Tenshi Peak Ventures
Cernucci Johnson & Johnson Tetra Pak
Coca-Cola European Partners JSL Transnet
Covestro M Dias Branco Triodos
Creative CFO Mazars True North CFO
CRH Minerals Marketing Unilever
Corporation of Zimbabwe
Cummins UNISA
Molnlycke
CurrencyFair University of Southern California
National Nuclear Laboratory
DBS Volvo
NeoEnergia
Diageo Warburtons
Nestlé
Eno River Finance Wilson Art
Nike
Exxaro Yara Asia
Olam
Finsbury Food Group Yelp
Petrobras
First Data Yeos
Prudential
Gol Zai
Raizen
Goodyear

54 | Integrated Performance Management

With additional thanks to the WBCSD
member companies who kindly participated
in the IPM steering group that has guided
the content of the IPM framework:

Ayala Corporation

Dentsu

Environmental Resource
Management Limited (ERM)

Fujitsu Limited

Givaudan International

Petroliam Nasional Berhad (PETRONAS)

Philip Morris International

PricewaterhouseCoopers (PwC)

SABIC

Sonae SGPS

This work was funded by the Gordon and Betty Moore

Foundation’s Conservation and Markets Initiative.
For more information, please visit [Link].

12 Disclaimer
This publication is released in the names of
AICPA & CIMA and WBCSD. Like other WBCSD
publications, it is the result of collaborative
efforts by representatives from member
companies and external experts, and AICPA &
CIMA. This does not mean, however, that every
member company or stakeholder agrees with
every word. The report has been prepared for
general informational purposes only and is
not intended to be relied upon as accounting,
tax, legal or other professional advice.

55 | Integrated Performance Management

13 About the World Business
Council for Sustainable
Development
The World Business Council for Sustainable Development (WBCSD) is a global community of over
225 of the world’s leading businesses driving systems transformation for a better world in which 9+
billion people can live well, within planetary boundaries, by mid-century. Together, we transform the
systems we work in to limit the impact of the climate crisis, restore nature and tackle inequality.

We accelerate value chain transformation across key sectors and reshape the financial system to
reward sustainable leadership and action through a lower cost of capital. Through the exchange of best
practices, improving performance, accessing education, forming partnerships, and shaping the policy
agenda, we drive progress in businesses and sharpen the accountability of their performance.

About AICPA & CIMA

The Association of International Certified Professional Accountants (the Association) represents AICPA
& CIMA and works to power opportunity, trust and prosperity for people, businesses, and economies
worldwide. It represents 689,000 members, students, and engaged professionals in public and management
accounting and advocates for the public interest and business sustainability on current and emerging
issues. With broad reach, rigour, and resources, the Association advances the reputation, employability,
and quality of CPAs, CGMA designation holders, and accounting and financial professionals globally.

56 | Integrated Performance Management

14 References
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³US Securities and Exchange Commission, ‘SEC Proposes Rules to Enhance and Standardize
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h16/710293/1648600589q2zQV1QZ/Ocean_Tomo_IAMV_Study_Report_03_28_22.pdf

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¹¹McKinsey, The State of Organizations 2023: Ten shifts transforming organizations, 26 April 2023,
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¹²IFRS Foundation, ‘Supporting materials for IFRS Sustainability Disclosure Standards’, 2023,
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¹³AICPA & CIMA and WBCSD, Reimagining performance management, 2021,

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57 | Integrated Performance Management

¹4 Kaplan, R. & Norton, D. (2008): The EXECUTION PREMIUM Linking strategy for competition: Linking
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¹5G. Pigatto, L. Cinquini, A. Tenucci, and J. Dumay, ‘Disclosing value creation in integrated reports according
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¹6Kaplan, R. & Norton, D. (2008): The EXECUTION PREMIUM Linking strategy for competition: Linking
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[Link]/crid/1130000796409345408

¹7H. Simon, Administrative Behavior: A Study of Decision-Making Processes in Administrative

Situations (New York: The Free Press, 1976),
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¹8P.A. Adler and B. Borys, ‘Two Types of Bureaucracy: Enabling and Coercive’, Administrative Science Quarterly 41,
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¹9 Kaplan, R. & Norton, D. (2008): The EXECUTION PREMIUM Linking strategy for competition: Linking
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²² Kaplan, R. & Norton, D. (2008): The EXECUTION PREMIUM Linking strategy for competition: Linking
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²³ Kaplan, R. & Norton, D. (2008): The EXECUTION PREMIUM Linking strategy for competition: Linking
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²5 Kaplan, R. & Norton, D. (2008): The EXECUTION PREMIUM Linking strategy for competition: Linking
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reports according to the six capitals: a holistic approach for a holistic instrument”. Emerald
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Strategy to Operation for Competitive Advantage. 2008. Harvard Business Review, pp. 35-281.
[Link]/crid/1130000796409345408

²8 A. Dalvit, ‘About the management of teams in a weak matrix environment’, LinkedIn, 18 July
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³0International Integrated Reporting Council. (2021). International <IR> Framework. Internet.

59 | Integrated Performance Management

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60 | Integrated Performance Management