Fundamentals of management control : techniques and principles (2022)

Chapter 8

Measuring an entity’s performance through dashboards

Introduction
The measurement systems studied in the previous chapters are built on the financial dimensions of
performance. We saw that while financial indicators are essential for managing company performance,
other indicators are also necessary. Dashboards are made up of these sets of financial and non-financial
indicators.
However, there are a number of preconceived ideas as to what is a "good" dashboard: which indicators
should be chosen, in what quantity, in what form, etc. There is no shortage of answers to these questions
in the management literature, although the underlying arguments are not always very explicit or, above
all, very solid. In this chapter, we present concrete methods to identify relevant indicators by
underscoring and discussing the rationality on which the indicators are based.
A fundamental element is to differentiate between the various uses and purposes of the indicators found
in the dashboards. Indeed, depending on the uses, the nature of the indicators may differ, and the
construction methods must be adapted as a result (this is the relevance principle mentioned in Chapter
1). Thus, in Section 1, we present the general aims of dashboards and identify the first two typical uses
of indicators, which we call “performance boosting” and "monitoring"1.
In Section 2, we examine the construction of dashboards aimed at boosting performance, presenting and
comparing two methods, the Balanced Scorecard (BSC) and OVAR. Then, in Section 3, we present a
method to build dashboards designed to monitor performance.
Finally, in the appendix, we provide further details on three points: the conditions for implementing the
BSC and OVAR methods, the link with strategy in the BSC method, a comparison of the typology of
indicator uses proposed in this book with that proposed by Simons.

1
Other uses will be identified in Chapter 9, devoted to articulating different dashboards within an organisation (see § 1.2).

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Section 1. The aims of dashboards and initial uses of indicators

We define a dashboard as a structured set of performance indicators that are useful for managers, and
the values (forecast or actual) they present over a defined period, which are regularly updated.

Table 8.1 Generic example of a dashboard

Indicator Actual n-1 Planned Real n Difference/n- Variance/fore

1 cast

Volume of activity

Response time

Quality index

Customer satisfaction index

Turnover

Etc.

The dashboards that can be observed in company practice are too diverse to be able to provide a more
precise definition of the tool. We therefore refer to publications on the subject, enabling us to identify
the principles that we consider useful for evaluating practices or for constructing a dashboard from
scratch.

1.1 The general aims of dashboards

In the late 1980s and early 1990s, several publications at the intersection of management literature and
management accounting research led to renewed interest in performance indicators. These publications
underscored the limits of financial indicators for managing corporate activities (Johnson & Kaplan,
1987). In particular, financial indicators help guide managers towards the achievement of short-term
objectives, focus their attention on performance for shareholders alone, and have little explanatory
power in terms of performance (cf. Chapter 3).
Four recommendations emerge from this body of literature to revitalize performance measurement and
develop 'good' scorecards KM 8.1:
- Do not limit measurement to one dimension of performance but provide a more 'balanced'
representation (expectation 1).
- Improve alignment of indicators with strategy (expectation 2).
- Adjust measurement towards a longer-term representation of performance (expectation 3).
- Facilitate managers' decision-making (expectation 4).

The first three expectations can be met if a robust performance model is developed prior to selection of
the indicators and if the list of indicators reflects the model faithfully KM 8.2, i.e., concretely:
- If the list of indicators is drawn up based on the organisation's various goals and the targeted
objectives that reflect them in an operational way, and not just on the goal of shareholder
satisfaction alone ;
- If indicators are selected not only for the different goals, but also for the main lines of action
retained in the model. This second category of indicators gives a longer-term and more
operational view of performance KM 8.3.
If the performance model is properly developed, the goals and lines of action will be balanced and
consistent with the strategy, and the dashboard indicators will also be consistent with the latter.
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The fourth expectation requires additional qualities from the dashboards: a number of indicators that are
"manageable for managers", and a way of presenting the indicators that makes them easier to read and
analyse, and that are rapidly available to the managers.

1.2 The different uses of indicators

As we saw in Chapter 1, a measure is relevant if it is appropriate to the type of decision or use under
consideration. In the previous chapters, we showed that financial measurement systems can differ,
depending on the purpose. In a similar way, the dashboard indicators (and beforehand, the performance
model indicators) can be constructed differently according to the intended managerial use KM 8.4.
Unfortunately, this question of indicator use is often overlooked by practitioners and in many of the
books on dashboards.

A first distinction must be made between indicators dedicated to self-monitoring use (autonomous
control) and reporting indicators (see Chapter 1):
- Whatever the scope of their responsibilities, managers must oversee the performance of the
activities for which they are responsible (self-monitoring). Developing a system of indicators
enables the management of an activity to be structured within an entity. This chapter examines
this first use of performance indicators.
- Managers are also expected to provide the person they report to with information on the
performance of their specific area of responsibility. Performance indicators are thus part of the
reporting process. This chapter does not examine the link between indicators and incentive
systems, which is covered in the next chapter. Chapter 9 will indeed cover the use of indicators
for the purpose of evaluating managers.

For self-monitoring purposes, we can distinguish between two sub-uses, depending on how and by
whom the indicators are used within the entity.
- A performance boosting use: in this case, the indicators are used to focus leaders’ and
managers’ attention on "a few" priorities associated with strategic and more cyclical
guidelines. This involves making choices within the performance model to prioritise
management issues. Indicators structure representations of these priorities and encourage the
entity’s different members to build a consensus on the priorities to be managed. They are
therefore constructed collectively and reviewed fairly frequently as priorities change. The
results of these priorities are systematically monitored and relate to both the ability to achieve
the targeted objectives and, where appropriate, the implementation of action plans.
- A monitoring use: in this case, indicators are defined downstream of a complete modelling of
the way performance is developed within the organisation. The aim is to take the most
important recurring levers into account in order to fully control them. Monitoring of results is
done on an exceptional basis when a significant deviation or discrepancy is identified on an
item.
We now detail the two types of use for management purposes and their impact on the nature of the
dashboards.

1.2.1 Performance boosting use of dashboards

The dashboards used for a boosting purpose are designed to focus all of an entity’s actions around a few
priorities KM 8.5. For this to happen, the entity's management committee must be involved in the
decision-making process and the management of actions pertaining to these priorities. The priorities
must therefore be scrutinized regularly in the monthly management or performance reviews.
This has an important impact on the number of "manageable" indicators (cf. § 1.1): the number of
subjects dealt with and, ultimately, the number of indicators must be limited. Indeed, it seems difficult
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to review more than four to six topics linked to priorities per committee. However, as most topics do
not require monthly monitoring, it may be possible to follow several priorities concerning about 15
topics simultaneously, with around thirty related indicators.
Given this constraint, the objectives decided on must be highly selective. This does not mean following
all the dimensions of the entity's business model, but rather its current priorities as defined in Chapter
2: i.e., change in strategic positioning, priorities linked to cyclical factors, specific internal difficulties,
and particularly ambitious aspects of the strategic positioning. Once these objectives have been selected,
the entity's management team will monitor them regularly during management reviews.
The indicators thus act as a support for the entity’s management on two occasions:
- At the time of their construction, at the beginning of the year or at the end of the previous year.
They then lead to questions about the coming year’s priorities and the subsequent action plans.
As the priorities change frequently, the indicators are likely to be modified on an annual basis.
This process can be carried out in conjunction with the preparation of budgets, which also
includes objectives to meet and identifying action plans (see Chapter 10)2;
- During the year, especially during the monthly management reviews to monitor progress in
achieving the targets set for these objectives.
Construction of the model and the dashboard should be carried out collectively in order to increase the
mobilisation of the different actors and to ensure good coordination. However, the choice of indicators
to monitor whether the objectives are being met can be delegated.
Since these are priority objectives, there must be systematic monitoring of the indicators and associated
action plans, and not only in unfavourable cases of discrepancy. Indeed, it is important to analyse the
results concerning priority issues, even when the target is reached, and a decision may be taken to
continue actions in order to exceed the target. It is thus possible to determine the management review
agenda in advance according to the frequency and timeframe considered relevant for each objective.
One of the members of the entity's management committee will be the responsible for monitoring each
indicator. It will be his or her responsibility to prepare the management review discussion by submitting
proposals to the committee. The indicators used to boost performance are thus intended to facilitate
managers’ decision-making, and the management review is the place to do this.
Given the temporary nature of the priorities, it is not always useful to add such indicators to the
information system for them to be produced automatically. This solution needs to be analysed over a
limited period of time to see whether it is more efficient than an indicator that is not produced
automatically.
Finally, the indicators used to boost performance need to be regularly updated, in line with the new
priorities.

1.2.2 Monitoring use

From a monitoring perspective, dashboards are used to follow key performance parameters KM 8.6. The
number of performance targets can be greater than those used to boost performance as the treatment of
subjects will be by exception, i.e., focusing only on significant deviations from a target. It is therefore
possible to survey several dozen indicators for monitoring purposes.
More specifically, the indicators should enable the entity to cover all its goals, i.e., meet stakeholders’
main expectations, cover key success factors pertaining to the business sector, and be consistent with
the strategic positioning in place.

2
That said, unlike budget construction, the construction of management charts is not necessarily correlated with the distribution
of resources between entities. Nor does it lead to the establishment of linked forecast accounts (forecast income statement,
forecast balance sheet, and forecast cash flow).

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With less constraint on the number of indicators monitored, the issues related to their choice are reduced.
Consequently, the performance model and the corresponding indicators can be defined by the
management controller and then validated by the manager or the team responsible for the entity.
While there is little selectivity in the number of indicators monitored in a bid to reflect the performance
model in a comprehensive and balanced way, there is greater selectivity in the choice of subjects to add
to the management review agenda. The dashboard is used to detect discrepancies that appear abnormal:
- By analysing indicator trends and looking for major discrepancies (e.g., sudden rise in a
historically stable indicator).
- By analysing discrepancies from a target or standard and selecting the most significant
deviations.
The variance analysis is prepared by the management controller in order to relieve the operational
manager who does not have enough time to study a large amount of data in a short space of time. On
the basis of this analysis, the management controller puts forward subjects to add to the agenda for the
management review.
During the management review, the topics can be tackled in a different way from those concerning the
boosting perspective that are addressed first. The aim is to work as a team to determine whether a
deviation is indicative of a problem and whether it warrants further analysis or the implementation of
an action plan. Deviations are often unforeseen, however, and participants do not necessarily have the
elements and time required to take full stock and a decision during the management review. Such
analyses are therefore done by the operational staff concerned outside the management reviews. The
primary role of the management review is therefore not to decide on an action plan, but to agree on the
need to adopt one.
Target or reference values play an essential role in a monitoring process as the analysis will be triggered
based on the divergence of results from these values.
Unless the performance model evolves, there is no reason to change the list of indicators for monitoring
purposes. Consequently, they do not evolve as frequently as those used to guide the management of an
entity.

Monitoring indicators and the information system

Should systematic performance monitoring cover all the indicators in the management information
system databases? In other words, is it useful to draw up a list of monitoring indicators and put them
together in a dashboard or is it enough to give the management controller access to the database for
analysis?

In the absence of empirical studies on the subject, we propose the following elements for reflection:

The information contained in the databases has multiple uses and users, which means there is a risk of
a profusion of information that an analyst may find too much to cope with when preparing a management
review.

Selecting the information to build a dashboard is a useful exercise to align the representations of different
actors in the entity with the goals pursued and the key aspects of the entity's performance model.

It thus seems preferable to identify the indicators used to monitor the activity to ensure that the key
parameters are indeed under control, which does not preclude the use of databases for specific analyses.
A method for identifying the indicators used to monitor activity is presented in Section 5.

1.2.3 Summary of monitoring and boosting uses

The main characteristics of the two types of use are summarised in Table 8.2.

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Table 8.2 Distinguishing features of performance boosting and monitoring uses

MONITORING USE BOOSTING USE

Objective Control of all key performance parameters Performance boosting parameters based on
priorities

Indicator Balanced/covering the organisation’s different Focused on current/circumstantial priorities

characteristics goals and associated action plans

Enough indicators to ensure effective Reduced number of indicators to focus

monitoring of the activity managers' attention on current priorities

Actors in the The management controller guides the The entity’s management team jointly
indicator construction of indicators. The team of entity determines the objectives. The choice of related
construction managers validates them. indicators can be delegated.
process

Production of Automatic via the information system Possibly manual

indicators

Assessment of Comparison with predefined values, or trend Systematic assessment of target achievement
results analysis and progress of action plans

Follow-up Only significant discrepancies or disruptions All priorities are on the agenda (the frequency
process in are added to the agenda can differ between management reviews).
management
review The management review aims to analyse the
realisation of priorities and, where appropriate,
The main purpose of the management review is to take decisions
to diagnose the extent of discrepancies and the
need to consider corrective action (which may
require an impromptu meeting)

Monitoring actors Key role of controllers in highlighting Preparation of management reviews by

significant variances operational staff in charge of indicators and
associated topics
Strong involvement of the manager in charge of
the entity (mobilisation function)

Evolution of Low (depending on the evolution of activities Strong

indicators and strategic positioning)

A widely held view is that in order to facilitate managerial decision-making, the number of indicators
in the dashboard should be limited. It is often said that "too much information kills information". While
it is certainly a good idea not to have too many unnecessary indicators, this typology of uses nonetheless
shows that the number of relevant indicators and the way to select them depends on the intended use.
For a performance boosting use, even though the number of indicators is lower than for a monitoring
use, we will see in section 2 that the methods generate around 20 to 25 indicators.3 This number is a far
cry from managers’ claims that they manage their company with two or three figures. While it possible
that some company managers only take a regular and in-depth interest in just two or three performance
indicators, it is unfeasible that their teams responsible for managing performance are satisfied with this
limited number.

1.3 Which indicators for which uses?

The nature of an indicator does not necessarily signal its use which can vary according to the context
KM 8.7. Indeed, any indicator can be used to boost or to monitor performance (as well as for reporting,
as we will see in Chapter 9).

3
Of course, for a small entity at a very operational level, it is not impossible that the number of relevant indicators is smaller.
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Let's take the example of an indicator for monitoring the design time of new products:
- It can be used by an entity for control purposes if the latter is in charge of managing this
subject, and/or it can be included in the report drawn up for management if the subject is
centralised.
- At entity level:
o It can be used to boost performance if reducing delays is considered a priority by
the entity.
o But, at some other time, it can also be used for monitoring if the managers just want
to ensure that lead times remain at an acceptable level.

In practice, it is unusual to find separate dashboards according to the indicators’ use. Thus, an entity's
dashboard generally contains indicators that serve several functions: boosting, monitoring, reporting,
KM 8.8. It may nonetheless be useful to organise the dashboard by grouping the indicators according to
their function.

Section 2. Building dashboards for performance boosting purpose

Two methods are generally associated with the construction of dashboards: the Balanced Scorecard
(BSC) method and the OVAR method. The tools on which they are based, respectively the strategy map
and the O/CPV framework, actually structure the phase prior to the choice of indicators, namely,
performance modelling. This section will therefore be organised around these two phases:
- modelling and the tools used (§2.1): the general principles of performance modelling were set
out in Chapter 2 (identify the organisation’s goals in relation to its stakeholders’ expectations,
clarify the priority lines of action chosen to achieve them, and make the cause-and-effect
relationships between goals and lines of action explicit). The strategy map and the O/CPV
framework describe these principles in a more precise and operational way so as to effectively
guide the choice of indicators.
- the choice of indicators (§2.2).
Even though their designers are not very explicit on their mode of use, these two methods appear to be
particularly suitable as indicators for performance boosting purposes since they are based on
identification of strategic priorities, and thus on a selective approach to indicators. However, they are
less suitable for monitoring purposes, for which we propose a methodological adaptation in section 3.

2.1 A first performance model construction method: the strategy map in the
BSC method
The Balanced Scorecard method, conceptualised by Robert Kaplan and David Norton (K&N), is based
on the construction of a strategy map that represents and models the company's key objectives. These
are sorted into four perspectives connected by causal links.
The main rules set out by K&N for building the strategy map are KM 8.10:
- Determine the objectives from four perspectives: financial, customer, internal business
processes, and learning & growth
- Choose objectives that are consistent with the organisation’s strategy
- Connect the objectives to each other through causality links
Below, we present the four perspectives, identification of the objectives, and the construction of the
strategy map.

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2.1.1 The four perspectives

Below, we examine the four perspectives, the objectives, and the corresponding types of indicators in
more detail.
- The financial perspective draws together the objectives related to the company
shareholders’ expectations, traditionally expressed in terms of growth, profitability, and
financing (see Chapter 3).
- The second perspective focuses on customer expectations. To formulate the objectives, we
put ourselves in the customers’ shoes by identifying their wishes regarding the product or
service, the customer relationship, and the brand, such as: "I want planes to be on time" or
"I want a brand with a reputation for reliability".
- The third perspective involves the objectives related to improving internal processes. Key
internal processes are selected to achieve the customer and financial perspective objectives:
e.g., production processes, new product development, logistics processes, etc. A
representation of the entity's value chain can be used to determine these objectives and to
identify the key objectives for each link in the chain4.
- Finally, learning & growth perspective focuses on the key resources needed to achieve the
objectives of the other 3 perspectives. According to K&N, these resources can be classified
into 3 areas: human capital (skills, training, knowledge), information capital (systems,
databases, networks), and organisational capital (culture, leadership, teamwork, etc.). K&N
also propose other classifications for action: motivation, information, and staff training;
strategic skills; strategic technologies; and climate.
It should be noted that this 4-pronged representation can be adapted by the company, either by adding
additional perspectives (e.g., an environmental performance perspective) or by changing the
perspectives to reflect the nature of the organisation's stakeholders. The financial perspective can be
broadened to include the stakeholder to whom accountability is required. For example, for a
municipality, the financial perspective can be replaced by a perspective on "how to be perceived by our
constituents". The customer perspective can be replaced by one that takes the municipality’s financial
resource constraints into account5.

2.1.2 The strategy map

The strategy map is a representation of objectives classified according to these four perspectives and the
causal links between the objectives. Figure 8.1 offers a generic representation.

4
It should be noted that K&N offer generic representations of the value chain.
5
This perspective would be of a financial nature as it would focus on financial resources, but not in the traditional sense of the
BSC financial perspective.

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Figure 8.1. Generic representation of a strategy map

2.1.3 The map’s alignment with the goals and strategy

Objectives should be chosen in accordance with the stakeholders’ expectations, the organisation’s goals,
the key success factors, the strategic positioning, and the current priorities. Identifying them is thus a
prerequisite in the strategy map’s construction.
As far as stakeholders are concerned, the strategy map includes objectives related to the shareholders’
and customers’ expectations via the finance and customer perspectives. It is possible to include
objectives related to other stakeholders (suppliers, employees, etc.) in the learning and internal process
perspectives, but the method does not explicitly suggest incorporating the expectations of these other
stakeholders into the strategic map.
In terms of consistency with the strategy, we should remember that research on performance indicators
has shown that aligning indicators with strategy is not easy to achieve (see Chapter 2). The K&N
literature argues that the strategy map allows the strategy to be represented and communicated. This
seems to us to be inconsistent with the very small number of potential objectives in a strategy map (15
to 20 objectives). We believe that covering all of the strategy's components requires a larger number of
indicators. It is therefore more accurate to say that the strategy map does not represent the strategy, but
rather the desired strategic changes or strategic priorities.
The next step is to ensure:
- that only objectives consistent with the goals and lines of action identified are included in the
strategy map.
- on the other hand, if an objective appears to be "missing" in light of these factors, it is important
to check whether this is the result of a deliberate choice linked to a performance boosting use
and not to an oversight leading to an imbalance.
It is often assumed that the organisation's strategy exists prior to fixing objectives and that the method’s
role is first to "translate" it into objectives and then into indicators. In practice, however, determining
objectives and indicators is as much a means of clarifying, or even constructing, strategic priorities as it
is of translating them into lines of action. The map representation offers a more precise discussion of
the strategy than when it takes the form of a text or general proposals, leaving considerable room for
interpretation. Hence, a modelling method such as the strategy map encourages discussion and the
creation of consensus around a common representation. The link between strategy and management is
thus not sequential, but modelling performance and the construction of dashboards actively help to
inform the strategy’s construction.
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The strategy map is also a methodological support for choosing between different priorities. Indeed,
thinking about causal links is a way to ensure the relevance of objectives: when considering an objective
from one perspective, we need to ask how it can contribute to the objectives of other perspectives. If this
contribution is not obvious, then it may better to reject the objective in question.
Representing the strategy map is a challenge in itself. Indeed, we need to show a significant number of
causal relationships in order to understand the performance model. However, a representation that seeks
to be exhaustive can make it difficult to read and understand the map. Thus, there is a trade-off between
completeness and readability. In practice, several representations of the same strategy map are
sometimes made depending on who the map is designed for and its purpose: to build the performance
model, to communicate it, to communicate the objectives with the purpose of deploying them, etc. In
some cases, the aim may therefore be to represent the objectives but not their causal relations.

2.1.4 Formulating objectives: dynamics and precision

We outlined what an objective is in Chapters 1 and 2:
- Expressed in the form of a type of result to be achieved, an objective operationally translates
a performance dimension, whether it is a goal or a line of action.
- An objective must be targetable, i.e., time-bound and quantified, and therefore measurable.
Furthermore, an objective must be carefully formulated so it can be understood by everyone in the same
way. The aim is to make it easier to understand the strategy and thus to enable the various players
involved in developing the strategy map (generally members of the management committee) to align.
Without a sufficiently precise definition of the objectives, each person may simply find what they want
in it. The subjects of debate are then erased and agreement on priorities risks remaining superficial.
In other words:
- To be operational, an objective must be expressed using a verb in order to express a dynamic
performance management goal. For example, the objective could be: " to reduce structural
costs", or " to increase market share".
- It is often useful to specify the target in order to define the objective as the levers for action
will differ depending on the target’s level of ambition. For example, if one objective of the
finance perspective is to increase market share, the objectives of the other perspectives will be
different, depending on whether the aim is to double the market share or to increase it by 10%.
In the first case, opening new sales outlets may need consideration, while in the second,
promotional actions may be sufficient.
- The verb used should reflect an action for progress, as target setting cannot refer only to past
achievements (see Chapter 10). “Increase”, “reduce”, “develop”, etc. are thus more appropriate
verbs than “maintain” (the number of clients), unless the prospect of maintaining the past level
is a challenge in view of the current situation. It is also advisable to avoid the verb “optimise”,
which is too vague, even if it is sometimes convenient.
Striving for a very precise formulation often requires two versions of the objectives: a long version
which allows for precision but cannot be included in the strategic map for reasons of space and
readability, and a short version, often reduced to just the title of the objective, which is used to present
the strategic map.
For IT service company, for example, the short formulation of an objective from the perspective of large
corporate clients might be: "I want to reduce my costs, my IS complexity and my risk". It may include
the following detailed definition: “I want an IS provider that helps me to increase my bottom line,
guarantees a quick return on investment, and reduces both my operational and my IT costs. I want a
supplier that provides rapidly implemented end-to-end solutions which result in reducing the complexity
of my IS and my risks so that I can focus on my core business.”

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Figure 8.2 shows a fictitious example of a strategy map for an airline in a former Soviet bloc country6.
The different types of lines are intended to make the map easier to read by showing coherent sub-groups.

Figure 8.2. Example of a strategy map

In short, the strategy map should be consistent with the principles of performance modelling set out in
Chapter 2. In fact, the objectives of the learning & growth and internal process perspectives in the
strategy map correspond to the priority lines of action for achieving the goals related to the shareholders
and customer stakeholders. Furthermore, the arrows between the objectives represent the cause-and-
effect links between them.

2.1.5 Discussion: the underlying generic model and its adaptability

A balanced model?

Figure 8.3: Generic BSC causal model

According to the tool’s promoters, the strategy map is intended to lead to a set of indicators that provide
a balanced representation of performance, as indicated by the name of the method (Balanced Scorecard).

6
This example was developed by for communication purposes by Nexance, a company specialising in the implementation of
Balanced Scorecards and is used here with their permission.

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The strategy map is based on a generic causal model that links various performance dimensions. The
different perspectives of the generic causal model are linked by cause-and-effect relationships, where
final performance reflects the shareholders' expectations (see Figure 8.3) KM 8.10.
The strategy map does not give equal weight to the different stakeholders (as some interpretations
suggest). One reason may be because the customer perspective 'serves' shareholders’ expectations. In
the same way, when other stakeholders such as suppliers and employees are taken into account (which
is not necessarily the case), they are linked to the internal process and learning perspectives, so are even
further up the chain of causality. The performance model to be constructed will therefore not be balanced
from this perspective.
On the other hand, the tool provides a certain balance by taking two levels of objectives into account7:
- Objectives relating to external expectations (shareholders and customers), which could be
considered as objectives relating to goals.
- Objectives covering lines of action to achieve these goals (themselves divided into two levels,
internal processes and learning)8.
The method therefore favours a balance between measuring the results pursued and the means used to
achieve them, meeting the expectations set out at the beginning of the chapter in terms of a longer-term
and more operational vision of performance.

Adapting the tool to non-profit organisations

The strategy map needs to be adapted for use with organisations that are not companies. This adaptation
is encouraged by K&N themselves, who indicate that it is possible to modify the perspectives or even
to add another one. To illustrate this, several proposals adapt the model for public hospitals (Figures 8.4
and 8.5):

Figure 8.4. Example of the adaption of perspectives to the hospital sector

7
These two 'levels' of objectives are then translated into two levels of indicators, referred to by K&N as lead and lag indicators,
terms sometimes translated as action plan indicators and result indicators.
8
It should be noted that this view corresponds to a particular view on performance. As we saw in chapter 2, employees can be
considered as external stakeholders of the company insofar they have interests/expectations that may diverge from those of the
company. However, in the BSC approach employees are considered internal parties of the company. Moreover, to consider
that the customer perspective as an end in itself is also questionable. One must remember that any definition of performance
has a subjective dimension and refers to political choices.

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In this example, the three external stakeholders - population, patients, and funders - are positioned at the
same level, and a perspective is used to express the hospital's goals or mission.
Another example shows a more radical adaptation since the financial perspective is placed at the bottom
of the strategy map. It is therefore possible to adapt the model to non-profit organisations.

Figure 8.5. Example of a strategy map for a healthcare organisation (adapted from Bisbe and Barrubes 2012)

2.2 A Second method for constructing the performance model: the

objective/critical performance variable framework in the OVAR method
The OVAR method was devised by Michel Fiol and Hugues Jordan (Fiol 2008; Fiol & Jordan 2008).
The acronym OVAR stands for Objectives (O), Critical Performance Variable (Variable d'Action in
French) and Responsibilities (R). The method is based on the construction of an "O/CPV framework"
combining objectives and critical performance variables, followed by a more complete framework
integrating the determination of responsibilities (R), which will be presented in Chapter 9.

2.2.1 Linking Critical Performance Variables/Objectives

The O/CPV framework has 3 parts:
- Identification of objectives for the entity whose dashboard is being built (O). Here, the term
"objective" should be understood in a slightly different sense than that used in Chapter 1 where

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Les fondamentaux du contrôle de gestion : principes et outils (2022)

it is expressed as a type of outcome to be achieved. Here, it mainly indicates "the direction in

which the entity wishes to go”, 9 with from 4 to 6 objectives recommended.
- Identification of critical performance variables, i.e., a selection made from the entity’s
performance levers, notably those that are considered priorities for action in order to achieve
objectives. These answer the question of “how” to attain objectives. There are generally two
to three times as many CPV as objectives.
- The framework below graphically shows the cause-and-effect relations between CPV and the
objectives, and also serves as a tool to check that the CPV and the objectives are consistent
with one another (see Table 8.3) KM 8.11.

Table 8.3 Generic O/CPV framework

Objective 1 Objective 2 Objective 3 Objective 4

CPV 1 × ×

CPV 2 × ×

CPV 3 ×

CPV 4 × ×

CPV 5 × ×

CPV 6 ×

CPV 7 × ×

CPV 8 × × ×

CPV 9 × ×

CPV 10 ×

Objectives that partially or totally overlap should be avoided.

Example

Objective 1: to increase the operating result,

Objective 2: to reduce general and administrative expenses
Either objective 1 is too broad for the entity and it is better to keep the more precise objective 2, or objective 2 is
in fact an action lever of objective 1.

2.2.2 Distinction between objectives and critical performance variables

Many examples of objectives and lines of action were given in Chapter 2 and in § 2.1 of this chapter.
However, the distinction between objectives and critical performance variables in the OVAR method
needs some clarification. For example, is "increasing product quality" an objective or a critical
performance variable?
First, it should be noted that the answer depends on the timeframe and context: in an organisation where
one of the objectives is profitability, increasing product quality can be a way to influence profitability.
As good quality results do not necessarily translate immediately into profitability, this can be an
intermediate step. Thus, if we take a long-term view, profitability is an objective and the action to

9
In Chapter 1, we adopted a broader definition of an objective: the operational translation of a goal into a type of result to be
achieved. An objective can be determined in terms of a goal (where we want to go), but also in terms of a course of action (how
we want to get there). In the OVAR method, only the first dimension is retained.

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Les fondamentaux du contrôle de gestion : principes et outils (2022)

increase quality is a critical performance variable. In the medium term, however, quality improvement
can be an objective, and the critical performance variables would then be more operational and shorter
term: reducing production incidents, managing material purchases with suppliers, etc.
Classification of a performance dimension as an objective or as a CPV also depends on level of
responsibility: for a division manager, increasing product quality may be a critical performance variable
and profitability may be an objective. For a plant manager within the same division, however, increasing
product quality will be the primary objective. This question of correspondence between indicators and
level of responsibility will be further explored in Chapter 9. Consequently, an O/CPV framework cannot
be developed without specifying the timeframe and the level of responsibility considered in advance.
The critical performance variables are distinct from action plans, in other words, sets of actions
programmed over time. For instance, "train 100% of sales staff in new technologies in the coming year"
could be a CPV within a broader action plan related to the forward-looking management of salespeople's
skills.

2.2.3 Consistency with goals and strategy

Objectives and critical performance variables must be chosen in accordance with the entity's goals and
strategy. As with the strategy map, the construction of the O/CPV framework should therefore be
preceded by the identification of stakeholders' expectations, the goals, the key success factors, the
strategic positioning, and the current priorities. All these elements constitute the settings of the
framework. The aim is the same: to compare the O/CPV framework with its setting elements to check
that:
- there are no inconsistencies between the setting elements and the objectives and critical
performance variables
- if one of these elements is not reflected in an objective, it is because it is not a priority (and
not because it has been forgotten)
The number of objectives considered (from 4 to 6) shows that we are indeed in a performance boosting
perspective rather than one of monitoring. As with the strategic map, the objectives of an O/CPV
framework must therefore correspond to priorities and not to recurrent performance dimensions.
Priorities can be linked to a change in strategic positioning, to cyclical elements’ external factors, to
specific internal difficulties, or to particularly ambitious strategic positioning objectives. While it is
important to ensure that all the entity's stakeholders and possible lines of action have been considered,
only some of these dimensions will be retained in the end.

2.2.4 Formulation of objectives and CPVs

As with the strategy map, precise formulation of the objectives is important to ensure they are understood
in the same way by all the different actors. The rules that we set out for the BSC method should be
adopted (see § 2.1.4), which also applies to the CPVs (Fiol 2008; Fiol & Jordan 200810).

2.2.5 Overall balance of the O/CPV framework

The framework offers a support to ensure a good balance between objectives and the critical
performance variables (CPV). There must be about 2 to 3 times as many critical performance variables
as objectives. In addition, the following problems need to be avoided:
- A goal without a CPV: a sign of a vague strategy.
- An objective with a single cross: in this case, there is confusion between the objective and the
CPV. Either the objective is a CPV, or examination of the CPV corresponding to the objective
has been forgotten.
- CPV without objectives: a sign that the actions do not focus on the priority objectives.

10
Fiol M., Jordan H (2008), Formuler les objectifs d’une grille OVAR, document pédagogique, HEC ; Fiol M. (2008), La
démarche OVAR au service de l’élaboration d’un projet commun au sein d’une équipe, document pédagogique, HEC.

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Les fondamentaux du contrôle de gestion : principes et outils (2022)

- Too many CPVs for one objective: a sign that the objective is too broad and needs to be
subdivided into several objectives, or that too much importance is attached to this objective.
- Imbalance in the number of CPVs between objectives: a sign of a poor choice of objectives,
or a poor choice of CPVs.
- Diagonal crosses (see Table 8.4): a sign of too narrow a focus on the causal links between the
CPV and the objectives, and of forgetting more 'transversal' CPVs in relation to the objectives
(see example of Monoprix).
- Two objectives with overlapping crosses (see Table 8.5): in this case, if objective 1 is achieved,
objective 3 is also automatically achieved. The two objectives are not independent. Either
objective 3 is in fact a CPV of objective 1 (or symmetrically so), or the thinking about CPVs
is incomplete and a specific CPV for objective 3 needs to be found.

Table 8.4 O/CPV framework: situation to avoid 1

O1 O2 O3 O4

CPV 1 ×

CPV 2 ×

CPV 3 ×

CPV 4 ×

CPV 5 ×

CPV 6 ×

CPV 7 ×

CPV 8 ×

CPV 9 ×

CPV 10 ×

Table 8.5 O/CPV framework: situation to avoid 2

O1 O2 O3

CPV 1 ×

CPV 3 × ×

CPV 4 ×

CPV 7 × ×

CPV 8

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Les fondamentaux du contrôle de gestion : principes et outils (2022)

An example of the construction of an O/VA framework

To illustrate the construction of an O/CPV framework, we apply it to the context of a speciality retailer company
(a case very loosely based on the Monoprix company) located in town centres.

Increase in Finalise the upmarket Give credibility to the Continue to

ROCE from X% city positioning of the group's sustainable diversify at the
to Y%. Monoprix brand development actions same pace

Step up achievement of ×
profitability targets for new shops

Find and develop new locations × ×

Develop personal services11 × ×

Improve perception of the private × ×

label

Reposition the Beauty Monop × ×

brand to top-of-the-range

Develop fast food products ×

Improve the quality of fruit and × ×

vegetables and develop organic
produce

Fuse the various brands’ × ×

warehouses

Train cashiers in reception and × ×

customer relations

Train buyers and department × ×

managers in sustainable
development

Communicate diversity and equal ×

opportunities actions

This framework is based on the following analyses. First, the company’s main goals correspond to three
stakeholders:
- Shareholders, with a view to profitability.
- Customers, as a particular customer segment: city dwellers.
- The environment, with sustainable development included in the group's strategic priorities: "Our mindset is
also reflected in the commitment to sustainable trade. We think, buy, and sell responsibly. We respect the
environment and promote fairness. We want to share this mindset with all our stakeholders, at every level of
the organisation”.
The business model is that of supermarkets with a significant food component: market share, ability to attract
customers, special financing structure with a negative WCR (working capital requirement), staff flexibility to the
number of customers, proximity, product freshness, etc.
The company's specific strategic positioning is upmarket ("Shopping at Monoprix today costs 15% more than at
Leclerc..."), aimed at working city dwellers in towns of over 50,000 inhabitants with relatively high purchasing
power. This implies having a well-balanced, high-quality offer, adapting to the active pace of life by way of opening
hours and accessibility, developing services linked to the product such as deliveries, developing in-store services
so that all shopping can be done in the same place, etc.
In addition, the company has extended its brands by opening Monop', Dailymonop, Beauty Monop', etc.

11
DIY, housework, childcare, computer assistance...

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Les fondamentaux du contrôle de gestion : principes et outils (2022)

Current growth needs to be both pursued and consolidated. Thus, the management committee who met to examine
the firm's priorities for the coming year (setting a clear level of responsibility and timeframe) stressed that, while
the brands and outlets have grown at the expected pace, on the other hand:
- There is significant delay in reaching the expected level of profitability objective, largely linked to the slow
take-off of new shops. A targeted objective of "increasing ROCE from X% to Y%" has therefore been set.
- Given the group's past positioning on low-price products, the upmarket urban positioning of the group's flagship
store still needs to be consolidated to differentiate it from its competitors. This objective remains one of the
group's priorities.
- The group was not perceived as being at the forefront of sustainable development, despite numerous actions
carried out in this area over the previous two years, which the committee translated into an objective: "to give
the group's sustainable development action credibility».
- Finally, the committee signalled growing challenges in opening new sales outlets. It therefore insists on the
priority of "continuing at the same pace with brand diversification".

Like the strategy map, the O/CPV framework is consistent with the principles set out in Chapter 2
concerning performance modelling. Indeed, in this framework, the CPVs correspond to the priority lines
of action to meet the goals expressed in the objectives. The crosses in the table represent the cause-and-
effect links between them.

2.3 Comparison of the strategy map and the O/CPV framework

As presented, the two methods allow the performance models to be built before reflecting on the
indicators. To this end, they are based on common principles:
- Identifying objectives
- Similar rules for the formulation of these objectives
- Qualitative identification of cause-and-effect relations
- Possibility to identify several causes contributing to the same objective. This principle leads
to a more sophisticated performance model than representations in which each objective is
translated into action plans independently from the others. This is consistent with a transversal
approach to performance, based on coordination between entities and between managers
- Identification of two levels of concepts: 1) in the case of the strategy map, one level
corresponds to external expectations (financial and customer perspectives) and one level
corresponds to levers for action (internal process and learning perspectives): 2) in the case of
the O/CPV framework: the objectives and critical performance variables
- In practice, the two levels of concepts are useful to support managers’ engagement in the
model’s construction. Indeed, levers for action or critical performance variables are usually
more concrete and therefore more meaningful concerns for many managers.
These principles are intended to promote a balanced representation of performance.
The main differences between the two methods are as follows:
- The medium for ensuring coherence of the performance model is different: double entry
framework or strategy map, which leads to differing strategic priorities
- The BSC method provides a more structured framework to achieve a balanced representation
of performance, whereas the OVAR method is more open
- The BSC method fosters identification of action levers linked to skills or information systems.
Indeed, by proposing a dual-entry framework for a given level of responsibility and a given
timeframe, the OVAR method limits analysis of causality to a first stage. The question
regarding CPVs for each objective can be raised, but the format does not allow the causes of
the CPVs to be addressed. It is therefore unusual to try to trace causes in terms of human
resources or information systems as in the BSC method, so it is important to take care when
integrating these aspects into the CPVs if they prove to be of interest
- The preferred timeframe for the construction of a strategy map is the medium term, making it
particularly suitable for performance boosting use based on priorities linked to a strategic shift.
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Les fondamentaux du contrôle de gestion : principes et outils (2022)

For the O/CPV framework, we saw that, in theory, it could be developed for different horizons.
In practice, however, the preferred horizon is a year, particularly for operational entities which
use their scorecard to guide concrete management actions. This timeframe is thus especially
suitable for focusing on performance management through more temporary priorities.
Other modelling tools exist and have their own specific features. As a result, each tool contains
possibilities for implementation, but also constrain potential uses in some respects. We will discuss some
of these issues in the appendix to this chapter.

2.4 From model to indicators

The strategy map and the O/CPV framework are modelling tools that structure the construction of
dashboards, i.e., the choice of performance indicators12.

2.4.1 A structured set of indicators

First and foremost, the models help to correctly structure the list of indicators that constitute the
dashboard: the expected qualities of the tool (a more balanced representation of performance,
consistency of indicators with strategy, longer-term representation of performance, facilitation of
decision-making) are ensured upstream when the performance model is constructed. The dashboard
itself is therefore well structured when the list of indicators faithfully reflects the dimensions of the
performance model, whether the model has been designed selectively for a boosting use (this section)
or more comprehensively for a monitoring use (next section) KM 8.3.
In concrete terms, if the BSC method has been used to develop the model, it means that the scoreboard
must include four categories of indicators, since the model’s objectives are themselves structured
according to four performance perspectives KM 8.12:
- “Finance” category: indicators such as turnover growth, ROCE, EBITDA, etc.
- “Customer” category: the corresponding indicators relate either to the products and services
themselves or to how they are perceived by customers. We should note that indicators relating
to business results such as market share or customer retention rate do not correspond to
customer expectations but reflect the financial perspective.
- “Internal business processes” category: this includes quality or productivity indicators (e.g.,
cost indicators, lead time indicators, etc.).
- “Learning and growth” category includes indicators such as employee turnover, number of
suggestions made by employees, training hours, availability of information, etc.
If the OVAR method is chosen to develop the model, the dashboard should include two categories of
indicators KM 8.13:
- Indicators reflecting the different objectives (O) of the O/CPV framework.
- Indicators reflecting the different CPVs selected in the framework.

2.4.2 Result indicators and action indicators

Each dimension of the model, whether it has been developed using the OVAR or BSC method, must be
reflected in at least one indicator in the scoreboard.
One first notice that for a given performance dimension (a goal or a line of action), some indicators
measure the achievement of the expected result, while others are more related to the levers (possibly
intermediate steps) that enable these results to be achieved. We will call the first result indicators (lag
indicators), the second action indicators (lead indicators) KM 8.14.

12
For user uses of modelling tools, see appendix 1.

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Les fondamentaux du contrôle de gestion : principes et outils (2022)

For example, let us imagine a performance model in which the objective is to increase turnover (in
line with a growth objective), for which the sales teams’ sales performance has been selected as the main
line of action, reflected in the following objective: "to energise the sales teams".
For the objective to increase turnover:
- A result indicator could be the shift in the entity's overall turnover.
- Action indicators could be the volume of products or the average basket, two distinct areas of
action for developing turnover.

For the objective related to the critical performance variable (the salespersons):
- A result indicator could be the turnover achieved by each salesperson.
- Action indicators could be the number of visits made to customers (which measures the sales
staff’s level of activity) and the transformation rate (Nb. of sales/Nb. of visits), which measures
the effectiveness of visits.

It should be noted that both the BSC and the OVAR methods already combine the two types of
indicators, since by modelling performance they lead to indicators relating to goals and others relating
to lines of action. However, our example shows that this idea can be pursued within each dimension.

2.4.3 The quality of the indicators

As we saw in Chapter 1, the criteria for assessing an indicator’s quality are the following: validity,
reliability, relevance, and effectiveness. Even though construction of a performance model and
reflections on the model's fit with the strategy are likely to foster the validity and relevance of the
objectives, other aspects should be taken into account when selecting indicators for a dashboard.
Validity
The aim is to ensure that the indicator accurately reflects the intentions behind the objective. For
example, in the case of the objective "I want innovative solutions", conducting a survey to measure the
product’s innovative image only imperfectly reflects the intention. Indeed, it is more in line with the
objective “I want to be able to say that I buy innovative products”. It is all the easier to validate suitability
with the intention if the objective has been clearly defined.
Reliability
It is important for the indicator to reflect the phenomenon observed. For example, the reliability of
indicators based on declarations is questionable (e.g., time allocation between different missions when
declared by the consultants themselves. A reliability issue also arises when there are two values in an
organisation for the same indicator, as they come from two different information systems. If an indicator
is based on unreliable information, there is a risk that the discussion during a performance review will
focus on the value of the information and not on the results and their interpretation.
Relevance
Is the measure appropriate for the type of decision or use envisaged?
Effectiveness
To allow a manager to easily understand the situation in order to make a decision, several criteria need
to be considered:
- Cost of obtaining the indicator.
- Time needed to obtain the indicator.
- Readability: an indicator may be more or less understandable to the people who have to use it.
Readability is not only linked to the nature of the indicators, but also to the way they are
presented. Thus, the following types of presentation are preferable: graphs, visuals, colours
codes rather than large tables presenting figures KM 8.15.

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Les fondamentaux du contrôle de gestion : principes et outils (2022)

Possibility to set targets

Is it possible to associate a target with the indicator?
Effect on behaviour
Will the measure selected induce behaviour or decisions in line with the intention expressed by the
objective? In other words, is it possible for the employees concerned to manipulate the level of the
indicator?
In practice, to choose indicators for an objective, we can:
- Bring together 4 or 5 people with some knowledge of the subject related to the objective.
- Ask them to think of all the indicators that come to mind and write them down, unfiltered, onto
a chart.
- Then collectively score each indicator on the criteria proposed, giving them a score, for
example, from 1 (if the indicator is considered very bad in relation to the criterion) to 5 (if the
indicator is considered very good in relation to the criterion).
- The indicator or indicators with the highest score are then chosen.

Example of quality ranking of indicators

For example, consider a telephone installation company, and the objective: "I want innovative solutions", specified
as follows: customers want to be convinced that the solutions introduced correspond to the state of the art in
technology. Table 8.7 illustrates the method to find an indicator for this objective given the validity criterion and
several of the effectiveness sub-criteria.

Adequacy
Effect on Potential to set Reliabi
of intent Cost Score
behaviour targets lity
(Validity)

Measure the innovative image of 3 2 5 1 4 15

the product using a survey

Number of products less than x 3 3 5 3 3 17

months old in the facilities

% of products less than x months 5 5 5 3 3 21

old in the cost of the facilities

Number of products less than x 3 4 5 3 3 18

months old in the offers

% of products less than x months 4 5 5 3 3 20

old in the cost of the offers

% of products less than x months 2 1 5 5 3 16

old in the catalogue

Number of new services compared 2 3 4 3 1 13

to the previous installation

Section 3. Building dashboards for performance monitoring

In Section 2 we saw that the BSC and OVAR methods seem more suited to a performance boosting use,
even if their designers do not address the issue of the different uses of indicators. However, inspiration
can be drawn from them, and they can be adapted for monitoring purposes.

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Les fondamentaux du contrôle de gestion : principes et outils (2022)

The goal, it should be remembered, is to monitor the key parameters in order to control the entity's
performance. To this end, the challenge is to build a performance model that reflects the entity's business
model.
Referring to the OVAR method, a framework can be constructed in which:
- The entity's recurring objectives corresponding to the stakeholders’ various expectations are
placed in lines and are not limited in number. They do not necessarily contain action for
progress and can be planned for the longer term (3 years)
- The main lines of action that are important to monitor are placed in the columns. They are also
recurrent in nature and may be more numerous.
We call this method OOAA for Ongoing Objectives and Action Areas. We present it by contrasting its
principles with those of the OVAR method.

3.1 Determining ongoing objectives (OO)

The following recommendations should apply:
- The number of objectives is not limited to 6.
- Objectives correspond to shareholders’ or customers’ expectations. They must be consistent
with the company’s strategic positioning.
- Objectives do not necessarily have to correspond to progress. The parameters to be controlled
can also include factors where the concern is simply that performance does not decline. If
progress is sought, it is not expressed in the objective itself, but rather in the target value
attached to it (see below). On the other hand, as we explained above, it is better if the objective
expresses the scale of ambition, since this can influence the kind of performance levers chosen
(e.g., maintain market share, increase market share, or increase market share dramatically).
- In planning objectives, the time horizon under consideration is three years rather than one year.
The idea is not to set a reduced number of priorities but to determine ongoing parameters that
must be controlled.
- This does not mean trying to identify what will cause problems next year, but rather
determining the key expectations of shareholders and customers in a more structured way.

3.2 Determining action areas (AA)

The choice of performance levers to be used to achieve objectives is no longer a restricted. Instead, the
ones considered important to control are chosen, which we call “action areas” (AA).
While objectives express shareholders’ and customers’ expectations considered to be structural for the
entity, key action areas correspond to internal elements. The differences with the CPVs of the
performance management dashboard are as follows:
- They can be higher in number.
- They correspond to more perennial performance levers, in other words, key elements of the
business model or important performance factors with respect to the strategic position adopted.
- AA are areas where it is considered important to make improvements to meet objectives, but
they are also areas where it is important not to have any deviations without organising specific
corrective actions or fixing objectives for improvement.
- For action areas that concern processes, a representation of the value chain can be used with
the dual aim of identifying key elements in the chain to achieve objectives and not overlook
important factors in the business model.

Example of OO/AA framework

We now go back to the example introduced in Chapter 8, inspired by the Monoprix company case. Based on the
elements already provided, we can build the following OO/AA framework:

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Finally, with regard to performance boosting use, indicators must be chosen for each objective and each
line of action.
This example illustrates how the objectives and action areas are formulated and the differences with the
O/CPV framework. By modifying the principles concerning the number of objectives, levers for action,
and their formulation, we obtain very different objectives and, ultimately, very different indicators.

3.3 Determining targets

We should keep in mind that setting targets is essential as the principle at work here is control by
exception. Contrary to the OVAR method, targets are not set during the dashboard building process as
these indicators have a longer lifespan. In general, targets are set annually during the budgeting process.
It is not always necessary however to set new targets; in some cases, it is enough to monitor trends.
Moreover, targets do not necessarily correspond to annually negotiated objectives (linked to incentive
schemes). Instead, they may be alert levels that are set for longer timeframes (which are nonetheless still
validated when the budget is being drawn up).

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Les fondamentaux du contrôle de gestion : principes et outils (2022)

Bibliography
BISBE J., BARRUBÈS J. (2012), “The Balanced Scorecard as a Management Tool for Assessing and
Monitoring Strategy Implementation in Health Care Organizations”, Revista Española de Cardiología,
65(10), pp. 919–927.
ITTNER C.D., LARCKER D.F. (2003), “Coming Up Short on Non-Financial Performance
Measurement”, Harvard Business Review, novembre, pp.88-95.
FIOL M., JORDAN H., SULLA E. (2004), Renforcer la cohérence d’une équipe, Dunod.
KAPLAN R.S., NORTON D.P. (1998), The Balanced Scorecard, Harvard Business School Press, 1996.
KAPLAN R.S., NORTON D.P. (2001), The strategy focused organization, Harvard Business School
Press, 2000.
KAPLAN R.S., NORTON D.P. (2004), Strategy Maps: Converting intangible assets into tangible
outcomes, Harvard Business School Press.
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Strategic Management Journal, 15, pp.169-189.
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Definitions
● Action indicator (lead indicator): measure chosen to quantify a performance objective (linked to a
goal or a line of action) by focusing on the means adopted to achieve the objective. It is distinct
from a result indicator.
● Balanced Scorecard: a method of constructing a dashboard, initiated by R. Kaplan and D. Norton,
proposing a visualisation of the performance model in the form of a strategic map that structures
performance according to four perspectives: financial, customer, internal business processes,
learning & growth. These perspectives are linked by causal relationships.
● Dashboard: a structured set of financial and non-financial performance indicators that are useful to
managers, and the values these indicators assume over a defined period.
● Monitoring use: indicators are used to monitor all key parameters of the entity's performance.

● O/CPV framework: A form of performance model representing the priority objectives in the form
of a double entry table - objectives and critical performance variable - and indicating with crosses
the causal links between the critical performance variables and objectives.
● OVAR: method for constructing a dashboard, initiated by M. Fiol and H. Jordan, that offers a
visualisation of the performance model in the form of a framework linking objectives (O), Critical
Performance Variables (Variable d'Action in French) and Responsibilities (R). It indicates how to
correctly define an objective and a CPV and distinguishes several types of managers.
● Performance boosting use: within an entity, indicators aim to focus attention on a few priorities.

● Result indicator (lag indicator): a measure chosen to quantify a performance objective (linked to a
goal or a line of action) by directly discerning the result expected for this objective. It is distinct
from an action indicator.
● Strategy map: form of performance model representing the priority objectives as bubbles by
classifying them into four perspectives (financial, customer, internal business processes, and
learning & growth) and indicating the causal links between the objectives by arrows.

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Les fondamentaux du contrôle de gestion : principes et outils (2022)

Key messages
8.1. Dashboards are expected to measure performance in a "balanced" way, to integrate a long-term
perspective, to be consistent with the strategy, and to facilitate managers’ decision-making.
8.2. The indicators chosen for a dashboard must be preceded by the construction of a performance
model, as most expectations regarding dashboards are based on the development of a quality
model. A dashboard cannot be built by simply listing indicators and choosing from among them.
8.3. A good dashboard for an entity includes a list of indicators that accurately reflects the dimensions
of the entity's performance model: it includes both indicators linked to the goals and indicators
related to the main lines of action. This allows managers to have a balanced, longer-term, more
operational representation of performance.
8.4. Dashboards should, above all, be adapted to their intended use (relevance principle): autonomous
control or reporting. For autonomous control, two sub-uses must be distinguished, boosting and
monitoring, and dashboards have different characteristics depending on the use.
8.5. Performance boosting use involves focusing managers’ attention on a few priorities. The
dimensions of the performance model are thus selective, and choices are made from the general
strategic areas and the cyclical priorities. The indicators used for boosting are therefore limited in
number and are monitored directly and systematically by managers. These indicators are subject
to frequent change, as the priorities they reflect evolve.
8.6. Monitoring aims to ensure that the organisation is under control. The indicators are more varied
and balanced with regard to the entity’s different goals and lines of action. This does not exclude
certain choices as a model cannot claim to be exhaustive and as the indicators must remain
consistent with the strategy. Consequently, the number of indicators is higher than for
performance boosting use. They aim to cover the key dimensions of the performance model. They
are more recurrent in nature and can be assessed against pre-established values, which means that
only abnormal deviations can be brought to the attention of managers. Management controllers
are heavily involved in monitoring them.
8.7. Any indicator can be potentially used for any type of use.
8.8. In practice, it is unusual to have separate dashboards for each type of use. Therefore, an entity's
dashboard usually contains indicators for the different functions: performance boosting and
reporting use or monitoring and reporting use.
8.9. It is important to have a method to build the performance model in a structured way. Two
modelling methods - the strategy map and the O/CPV framework - are based on common
principles that aim to promote a balanced representation of performance: the way objectives are
formulated, causal links, the possibility to link objectives to several other objectives, and the
identification of two levels of concepts (expected results and action levers).
8.10. The strategy map organises the performance dimensions into four perspectives: financial,
customer, internal business process, and learning & growth perspectives. In the BSC approach,
the objectives are ultimately geared towards the financial perspective and shareholders’
expectations. However, the strategy map perspectives can be adapted to non-profit organisations.
8.11. The O/CPV framework organises the performance dimensions into two categories: objectives and
CPVs. The OVAR method framework does not use a predefined framework method to create the
content of each of these categories. The model’s construction process is therefore a little less
structured than for the strategy map. It is also more open.
8.12. In the BSC method, indicators should be selected for each performance category and for each
objective within these categories.
8.13. In the OVAR method, indicators should be selected for each objective and for each CPV.
8.14. For each objective and each CPV, it is useful to distinguish between lag indicators, which focus
on the expected result, and lead indicators, which focus on the levers for achieving these results.
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8.15. To facilitate management decision-making, a dashboard must also be effective, i.e. it must deliver
the indicators within a short timeframe and present them in an easily readable form (graphs, colour
codes, etc.).

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Appendix 1
The conditions for implementing the methods

There is a lack of empirical evidence in the literature on the practices associated with the BSC and
OVAR methods. They are thus not 'off-the-shelf' methods. We noted above that the BSC and OVAR
methods are loosely defined. Here we illustrate this point and draw some conclusions on how to
implement these methods.
With regard to the strategy map and the BSC method, several elements support this statement:
- Kaplan & Norton's books give many examples of strategy maps (and indicators), but do not
explain how to construct these maps (actors involved, stages, etc.).
- The recommendations made in this chapter regarding the formulation of objectives from the
customer's point of view correspond to practices that we have observed. Kaplan & Norton's
recommendations are not as precise.
- The importance of the causal links between the objectives and the way they are represented
varies significantly between successive books, without the reasons for the differences being
made explicit.
- Kaplan & Norton attribute several functions to the method without specifying that certain
aspects of it should differ depending on its use. For example, the method can be used to align
a management team around priorities and to communicate these priorities across the
organisation (K&N refer to this as communicating the strategy). Experience shows that this is
not neutral when it is done through the strategy map representation. Indeed, using a strategy
map made up of objectives inscribed in bubbles linked by arrows is effective in collectively
building a performance model among a small number of actors (typically, members of the
committee of an entity). On the other hand, such a map is not easily understood by those who
are unfamiliar with this type of representation and is thus not effective as a medium for
communicating the strategy. In practice, it is common to see a detailed strategy map and a
simplified strategy map, the latter without arrows. They are thus two different tools for two
different purposes.

As far as the OVAR method is concerned, its designers use the O/CPV framework for other purposes
than the construction of dashboards (Fiol 2008), like creating cohesion within a management team
around shared strategic objectives, for instance. In this case, they recommend:
- the joint construction of an O/CPV framework by the management team.
- to look ahead 3 years to determine the priority objectives.
- to involve the different members of the management team in pursuing the ambitions defined
by the objectives and CPVs, asking each participant which CPV he or she wishes to take
responsibility for.
The use of the O/CPV framework differs from that presented above in that the time horizon considered
leads to a different choice of objectives. Furthermore, it does not necessarily result in the construction
of a dashboard: each person responsible for a CPV is free to determine how to monitor its
implementation. However, the O/CPV framework is often presented as a method for constructing a
dashboard. There is a certain ambiguity about its use.

These remarks indicate that it is important to improve our understanding of the conditions and modalities
of the implementation of methods.
However, they are often presented as ready-made solutions. In the case of the BSC, Kaplan & Norton
present the tool in the introductions to their books as a universal solution to improve performance. This
runs counter to the idea that the tool needs to be adapted. Furthermore, while some of the method’s more
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specific objectives, such as communication and strategy implementation, are stated by its designers, the
link between the tool and achieving these objectives is not explained. Lack of understanding of these
links makes it difficult for users to take ownership of the method.
In the case of OVAR, the authors do indeed attempt to describe different uses of the method, but the
same name is retained for all the variants. However, we have seen that the method needs to be adapted
to each use (the reasons why the method is used), both in its principles and in the definition of terms.
This lack of terminological precision contributes to a conceptual approximation being maintained on the
issue of performance modelling, the resulting dashboards and their use, inhibiting their appropriation by
users of the different methods grouped under the term OVAR.
For these reasons, we feel it is important to pursue both a conceptual reflection of these methods and to
study how they are implemented in practice in companies.

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Appendix 2
The link between BSC and Strategy: Strategy map and strategy
types

Here we present some arguments by Kaplan & Norton following their initial publications on the BSC
method, since they may have created some confusion about the link between BSC and strategy.
In their 2000 and 2004 books, Kaplan & Norton use their four-perspective representation to define
typical strategies: operational excellence, customer intimacy, and product superiority. They use their
generic representation of customer and internal process perspectives to specify these three typical
strategies13. Thus, Kaplan and Norton define the salient elements of the customer value proposition
for each of these strategies by using their generic description of the customer value proposition in three
categories and seven dimensions (see Figure 8.5. The other aspects of performance should not be
neglected, but there is less requirement for them14).

Figure 8.5: Customer value propositions and typical strategies

Product/service Related
Image
attributes services

Price Quality Dea Assortment / Service Relationship Brand

dlin
e Features

Operational
excellence ≠ ≠ ≠ ≠ √ √ ≠
Customer √ √ √ √ ≠ ≠ ≠
privacy
Product
superiority √ √ ≠ ≠ √ √ ≠

≠ differentiation element √ standard level

Similarly, they associate each typical strategy with the value chain elements whose required level of
performance is standard and those whose performance must be high (see Figure 8.6).

13
It should be noted that these typical proposals are evolving. In their 2004 book, the typical strategies are best cost, product
leadership, total customer solution and system lock. We chose the 2000 version here because it more directly illustrates our
point about the link between strategy and BSC.
14
There should therefore be no corresponding objectives and indicators in a strategy map. Instead, we will see in Chapter 9
that these dimensions of the value proposition should be covered by the indicators used to monitor activities.

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Figure 8.6: Internal process perspective and typical strategies

•Supply chain management

•Efficiency (cost, quality,
Operational
excellence √ √ cycle time)
•Capacity management

•Solution development
•Customer service
Customer intimacy √ •Relationship management √
•Advisory services
•Invention
•Product development
Product superiority
•Speed to market √ √

√ meets basic requirements

This presentation of typical strategies cannot be equated with the BSC method or the strategy map, as it
is not designed to build an organisation-specific performance model. It uses the BSC’s analytical
framework as a support to make these strategies explicit. The strategy map framework can thus be
applied without reference to these typical strategies. However, they can structure the process of building
a performance model by providing a guide for the choice of objectives. In our opinion, the association
that Kaplan and Norton make between BSC and strategy increases confusion by wrongly reinforcing
the idea that the BSC method is one that breaks down the strategy into indicators.

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Appendix 3
Typology of dashboard uses according to Simons

Robert Simons is one of the first authors to study the way in which management control systems are
used. Based on the observation of the practice of some fifteen managers in contexts of strategic change,
he distinguishes two modes of use of formal management control systems: diagnostic use and interactive
use15.
- Diagnostic use, or diagnostic control, is carried out via a battery of indicators reflecting the
different dimensions of the company's performance. The aim is to be as comprehensive as
possible in measuring performance (Simons, 1995, 59). It is important to find corresponding
information processing processes that free up time for managers and controllers, as the
information to be processed is voluminous.
- Interactive use, or interactive control, is specific to a subject corresponding to a strategic
uncertainty (Simons, 1995, 95). This uncertainty depends on the chosen strategic
positioning. Thus, if the company's strategy is a volume strategy in a mature market, the
interactive system can be centred on the weekly monitoring of sales by segment and by
geographical area. If a new manager chooses a strategy focused on new products and
innovation, the system will more logically focus on market research, competitor monitoring,
marketing, brand profitability. Segment and geographic sales will still be tracked, but in a
diagnostic way. The objective of the interactive use is to allow the general manager to have
a quick reporting of detailed information to orientate his strategy or take more operational
decisions. He can interact with the operational levels, without going through the
intermediate hierarchical levels, to ask for explanations on the developments or
discrepancies that he notices thanks to the information provided by the system.
Simons (1994) observes that in the context of a strategic turnaround, after having decided on the new
strategic direction, the manager adapts the systems used diagnostically to this new direction. It is only
in a second phase, after a few months, that he puts in place the system used interactively.
This typology of the uses of control systems has similarities with the distinction made in this chapter
between boosting and surveillance uses. Is the reflection on a subject measured by an indicator linked
to the existence of a deviation or is it systematic?
Diagnostic use is close to monitoring use because it involves a large number of indicators and highlights
the importance of limiting the time spent on these indicators by managers.
On the other hand, interactive use is different from boosting use, both in its aims and in its practices.
The interactive use does not aim, like the boosting use, to mobilise teams around priorities, but to create
a dialogue along the hierarchical line around a key strategic uncertainty, it is part of a perspective of
decision-making by the general management and orientation of the strategy. This use focuses on a single
subject, the major strategic uncertainty determined for the entire entity by the general manager, whereas
in the case of a dynamic use, the indicators relate to several subjects, strategic or cyclical priorities, and
may differ according to the hierarchical levels. Finally, in the interactive use, the exchange of
information can take place directly between the general management and the operational levels, whereas
in the case of the boosting use, the subjects are dealt with at each hierarchical level. Therefore, the
interactive use of a dashboard seems to us to be different from the boosting use. It is another type of use
that complements the monitoring and boosting uses.

15
His typology of control levers includes, in addition to formal systems used diagnostically and interactively, belief systems
and boundary systems.

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