Case Study

Design and Implementation

of Performance Management Systems,
KPIs and Responsibility Centers:
À Case Study
Dwarkanath Prabhu* and Sateesh Hegde**

Responsibility centers, balanced score cards, EVA, performance management system, KPIs,
etc., are organizational systems of great significance for creating corporate performance.
Glories of successful corporate transformations using these systems have been well documented
and studied in depth. However, there have been also multitudes of partial or total failures of
such organizational transitions which are often neglected by researchers. Study of failure
cases can provide the control group necessary to test the critical factors influencing successful
transformations which are often credited to top management involvement, charismatic
leadership, capacity building, etc. Moreover, most case studies are about large, especially
fortune 500 companies, usually headquartered in the VS or Europe the lessons from whose
experience may rwt be applicable to Asian companies, particularly those in the SME and
MME sectors. This paper describes and discusses a case study of a small Indian enterprise in
order to highlight the issues required to be considered when designing and implementing
organizational transformation programs for smaller Asian organizations.

A s Binoy Roy, CEO of TechEdge, walked out of the meeting room followed hy
the Vice Presidents of the different departments, the expressions ori their
faces hetrayed various feelings ranging fiom relief to fiustration. It is not easy
to develop a consensus even among the top management team on such a critical issue
as performance management.
TechEdge is a system integration company in core husiness of providing IT solution
and services for multiple industry verticals. The company partnered with various
technology vendors in various capacities such as System Integrator, Value Added
Technology Partner, Technology Consultant, etc. It is a B2B husiness model. TechEdge
sold their technology consulting services, 'Business Technology Optimization' services,
project implementation services and maintenance services for complex information

* Founder and CEO of Restore Waste Management and Research Pvt. Ltd, Dombivli East, Thane, Maharashtra,
:, India. E-mail: prabhu.db@gmail.com . •• .
** Corporate Head, Edubridge Learning Pvt. Ltd:, Bangalore, India. E-mail: hegde.sateesh@gmail.com
 SOUTH ASIAN JOURNAL OF MANAGEMENT

technology infrastructure. The main departments of the company are sales, consulting,
support and services, back office operations, and finance and software. The formal
structure of the company is very lean. Each department is headed by a Vice President
who is assisted by managers who in turn handled teams independently. The branch
offices across the country has a sirnilar structure with the branch manager (aVP level
position), reporting directly to the GEO.
All the Vice Presidents are at the same level in the hierarchy, but at different
payscales depending on their experience and perceived importance or criticality of
the department for the company. Sales was supposed to be the most powerful department,
followed by support and services, and finance. All VPs reported directly to the GEO in
terms of day to day business activities, intemal financing for new assets,, salaries, etc.

REPORTING STRUCTURES AND THE ROLE OF HR

Though the roles and responsibilities of each department are clearly defined within
the department, members of all departments are required to work in temporary teams
with members of other departments for delivering projects. The role of HR is reduced
to routine recruitment. The individual department needs of training, appraisal,
performance measurement, and the like was completely driven by individual VPs.
The HR department is never taken into confidence on people management issues
and they responded to such issues as if they are under 'learned helplessness'.
Though all the departments worked together to deliver the final project, none of
them are answerable to each other. Each department had a clear focus on their
individual tasks. Within each temporary team, the project leader is responsible for the
team's performance but each member of the team reported directly to his/her own VP
The project leader usually from the support and services team. The entire business
transaction comprised broadly of understanding the customer's business problem,
creating a feasible solution to address the problem, selling the contract for concept
design, consulting and delivering the desired service, mobilizing resources to meet
the contract obligations, and collecting the payment. All the departments had clearly
mandated goal to provide the best service to the customers.

THE PEOPLE
Binoy is a soft spoken person with a great individual charm and ability to motivate
people by his sheer conduct.' He had a keen sense of organizational ethics, people
orientation, work culture, employee satisfaction, organizational culture of honesty,
independetice, flexibility and such other softer and finer qualities of the organization.
To that effect, he set high standards through personal excellence and commitment by
example. He is a great believer in the efficacy of efforts, and worked hard for the
singular reward of personal satisfaction. Yet, as a GEO he is equally concerned about
the revenues, profitability and cost control. His management style is a unique

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KPIs AND RESPONSIBILITY CENTERS: A CASE STUDY

combination of consultative and authoritarian where he made people a part of the

decision making process, hut at the same time pushed the organizational agenda in a
rather unohtrusive manner. He only served as a convenor of the think tank meetings,
usually making each one feel that he/she has played a significant role in the decision
making and that each one has an important stake in the organization's strategic
directions and business initiatives.
The Vice Presidents are also excellent and dedicated performers, worked closely
with each other and shared a great sense of bonding. However, each one had concerns
of his or.her own. Ram, VP-Sales, are concerned ahout the increasing difficulty in
getting new contracts due to increased competition in the market and increasing
customer demands. Kishore, VP-Services, are constantly overstretched and there is a
tremendous strain on talent due to attrition. He also seemed to complain that his
people are overworked fulfilling unreasonable customer demands which he helieved
are due to the tall promises made by the sales teams. This feeling is also echoed hy the
VP-Software who felt that the sales team often undersold their value. All the teams
felt that they had inadequate support from the operations department while Aparna,
VP-Operations, had her own story of woes. She complained about overload of work
and dependencies on external factors beyond her control such as delays firom other
suppliers. She also felt that the other departments took her for granted and never
gave enough time to mohilize the resources required for a project. Rajesh, VP-Finance,
complained ahout lack of funds and issue of collections. He seemed to he convinced
that the sales team did not do enough to follow up on the outstanding payments.
Ram's stand on this, that they could not ask for payments in the absence of proper
documentation, timely and satisfactory achievement of milestones, for which the
administration and the support delivery teams are responsible. All the VPs shared a
common feeling that there are never enough people and pressed hard for additional
resources. Given the cost of headcount, getting people is a highly competitive activity
and more often than not, they tried to squeeze in more people within the same hudget
allotted to them, just to take care of attrition and provide for redundancy. The VP-
HR, Monica, was perennially challenged for recruiting high quality talent at lower
costs. "You cannot get the hest at the lowest costs", she argued.

THE CHALLENGES
With increasing competition, Binoy is under pressure to increase sales and profits.
Ram shared the opinion that the sales team is performing at suboptimal levels. He
attributed this to 5 major reasons—a weak level of motivation to perform, low quality
of people, cost and time required for training and re-training, attrition of trained
resources and low visihility of the company in the market place. "Trained performing
people are lured away by the competition such as IBM, CAP Gemini, Accenture, etc.,
even though we pay as handsomely as they do. What is the point in training people for
competitors?", is his remark. At the same time he also had a point that people are not

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motivated enough. The sales teams worked at fixed salaries and yearly increments are
based on their annual performance. The sales team therefore focussed on getting the
large and complex contracts which had a much higher contract value and a long sales
cycle. Also since the organization culture supported a value system where efforts,
skiUs and knowledge are perhaps more important than results, the sales team found
higher 'respect' in working with a few larger cases rather than a large number of small
quick opportunities. Such larger cases are intensely competitive and often resulted in
substantial price cutting situations, reducing the overall profits. In addition, since the
projects are also long term, the revenues are delayed. Finally, when it came to really
large contracts, their brand also mattered. Though the company possessed the skills,
proven expertise, a rich history of projects, it is seen as a 'small' company by most
customers in comparison to its competitors. Customers chose the larger competitors
such as IBM or Wipro simply because they felt it to be a safer choice.

EARLY INITIATIVES TOWARDS CREATING A PEREORMANCE-

DRIVEN ORGANIZATION
Between the two of them, Binoy and Ram agreed to settle the problems one by one,
starting with the motivation issue. Ram is convinced about the potency of money as a
motivator. Binoy is of the opinion that money would motivate people only till a certain
limit, beyond which the marginal motivation derived fiom increase in pay would start
diminishing. "But this threshold may be the function of an individual's attitudes and
behavioral characteristics within his own context", argued Ram. He further reasoned
that money is slightly different fiom other motivating factors in the sense that it operates
across various levels of needs and wants. "For example, even at the self actualization
level, a certain amount of money may be required to pursue the self actualization
needs. Or in case of the deontic motivation which arises fiom a sense of duty, money
may be the means through which a sense of loyalty and obligation are induced in the
employees. Since money is a medium of exchange, in any effort to fulfil one's needs,
money becomes an intrinsic factor". Ram insisted. Binoy had other concerns; "The
thing that worries me is one major uncertainty. How much money really motivates
people? How do we know whether we are offering too less or leaving too much on the
table?" Finally they agreed to start with Ram's money-based motivation plan. If and
when it may soon lose its charm they would replace it with something else. In line
with the organizational culture of participative decision making. Ram got together his
sales team to hammerout a formula for an incentive-driven pay structure. Initially it
came as a surprise to the team. However given that the industry worked at a fixed/
variable pay structure of 60:40, the sales team settled for a ratio of 70:30. Since, it did
not fit in with Binoy's ideology to cut down people's monthly cheques overnight, he
adopted a very generous approach. The prevailing salaries aré treated as the fiixed
70% component, and 30% variable component is declared over and above that as
performance-based variable pay, for which challenging but achievable targets are set.
The achievement slabs are fixed in such a way that it seemed very fair and just to the
entire sales team (see table below).

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KPIs AND RESPONSIBILITY CENTERS: A CASE STUDY

Table 1: Achievement Slabs

Sales Achievement Entitlement
Upto 60% of the target Fixed salary component only
61-80% of the target Fixed plus 50% of variable component
80-95% of the target Fixed plus 75% of variable component
96-100% of the target Fixed plus 100% of variable component
>100% Fixed + Variable + Acceleration points
The acceleration point treatment seemed to be quite complex on which there are
serious differences of opinion. The entire team seemed completely drained out after
hours of deliberation, and hence, Binoy proposed to decide on it at a later stage.
However, Ram is keen on pushing his way through till the end. He knew that it would
be difficult to make any changes later. Besides, he also wanted to use this opportunity
to address the burning issue of attrition. "Since we have already come so far, let's go
the extra few steps to give at least an outline rather than keep it for yet another day".
Ram persisted. "Let's get it over in a few minutes. I think that keeping a track of all
sales records and making claims on a monthly basis will be very difficult for the team.
I suggest that we have a quarterly system of the incentive payout. Let us also have the
flexibility of adjusdng the targets by balancing over two consecudve quarters, but keep
the year-end as sacrosanct." The team is not too happy about the prospects of postponing
their monthly incentives to the end of the quarter. Ram is able to convince them about
the pracdcal difficuldes in processing the data and payments on a monthly basis due to
long sales cycles, time required for the claim process, and the advantage that once a
quarter they would get a little fatter sum rather than getting smaller payments each
month. "Lastly, I suggest that for every 1% extra achievement, one gets a bonus point.
These bonus points will be used for considering the next year's appraisal. In addidon 5%
of the entire gross profit generated by the team in the year would be distributed as an ex-
grada payment on a pro-rata basis within the entire sales team." By then the energy
levels of the team were already running very low. Sensing this. Ram kept pushing the
scheme gently, but firmly and managed to get his way through.
The very next morning Ram circulated a mail with a few additional eligibility
conditions such as timely payment collections, customer satisfaction, minimum profit
margins to be met to qualify for incentive everi if one had met or surpassed the revenue
targets, and minimum achievements across multiple business lines, etc. Though none
of these conditions had been discussed in the meeting, they are not contested too
much because they are perceived as legitimate. "One cannot argue much against
what is ethically correct", is the view of Ram.
The initiative is a decent success (through not grand) in the first year. The sales
team seemed to have, picked up a competitive spirit. .Yet there are a few who still
refused.to run that extra mile for the additional incentives. There are also other issues

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 SOUTH ASIAN JOURNAL OF MANAGEMENT

and some dissatisfaction about losing out on incentives because of somebody else's
problems and inefficiency. Ram privately agreed. Another concem on his mind is that
while they had all reached or surpassed the collective profit targets, none of the sales
persons had crossed the 100% mark in terms of revenue, though it should have easily
been possible for at least a few of the lot. He wondered what could have heen wrong.
Also he had been getting complaints that disbursement of incentives was not timely.
The finance team had to check the claims made hy the sales teams and more often
than not they found disparities within their accounts and the claims. On further
investigation, he found that these disparities are more due to allocation of the customer
payments across multiple invoices. Neither the sales team nor the accounts maintained
a consistent method. Often, customers also added to the confusion due to their own
cost allocation methods resulting in multiple queries and clarifications that went back
and forth. Ram decided to keep an eye on such 'teething problems' and arrive at a
permanent solution in the next year. However, he had a constraint that the problem
did not entirely lay in his domain.

INITIATIVES FOR ORGANIZATIONAL ORIENTATION TOWARDS A

PEREORMANCE-DRIVEN CULTURE
Monica had been watching the entire sales appraisal system and the sales team dynamics
throughout the year. There had not been a single attrition case fiom the sales department
this year. She thought it would be a good idea to implement a performance-based pay
system for the entire organization. The tirouble was that sales were easy to measure.
The other departments' functions needed to be quantified first and a measurement
scale needed to be established. She decided to talk to Binoy about it.
Binoy welcomed the idea. He suggested that Ram and Monica chart out the
scheme. He urged them to involve the other VPs as well. Monica offered to take the
challenge of creating the yardsticks of measurement. Ram is more than happy to let
her do it. "Some worthwhile work for HR, finally!" he teased. Monica didn't seem to
mind it and came out with a nice-looking plan in ahout a month. She had charted out
the entire organization's workflow process and identified all the time intervals required
at each stage in the workflow that added up to the entire delivery cycle. At a glance.
Ram is convinced that there is a lot more work to do. They called for a meeting of all
the VPs. After much deliheration, they decided to keep Binoy out of this in the
beginning. He would be called in at a later stage.
The group's reaction is short of a commotion. While it is ohvious to everyone that
the workflow chart is as accurate as it possibly could be, they refiased to accept the
internal time lags that holdly stared out at them. "Please understand, these time lags
are not just due to us. We are dependent on someone else too. How do we cut down
that time?", argued Apama. Kishore said that many times customers demanded out-
of-turn services which caused delays in other cases as well. How he rectify that prohlem?
He could not possibly antagonize the customer just to keep his time lines look neat.

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 DESIGN AND IMPLEMENTATION OF PERFORMANCE MANAGEMENT SYSTEMS,
KPIs AND RESPONSIBILITY CENTERS: A CASE STUDY

Rajesh argued that his team is always short of manpower and especially with such
kind of system, he would be needing even more people to absorb the additional load.
It is time Monica did something about her own deadlines rather than talk about other
department's timelines Ram and Monica sensed that the meeting is not going anywhere
and is leading to more and more intemal allegations about who should own the
responsibility of sticking to timelines. Arguments and accusations flew in the air. Finally
the comprehensiveness of the workflow itself got under scanner and each member
claimed that the process is far more complex than the chart could possibly cover.
Heated arguments finally ended with a simple question. "If all this is in the
organization's interest, why is Binoy not here?" The meeting is adjoumed without any
concrete decision, a very unusual occurrence at TechEdge. Usually they had always
been able to come to quick solutions and consensus on issues. This is the first time a
VP-level meeting had ended without any conclusion.
Ram and Monica spent a rather uneasy time for the rest of the entire week in
office. Their otherwise nice colleagues are suddenly not as nice any more. No one is
being nasty, and work did not suffer; however the under current seemed to be full of
strains. One could almost feel it in the air. Even Binoy could feel the tension among
his VPs. He could guess that it must have been because of some discussion on Monica's
performance-based pay-plan. Though he himself liked the idea because it ensured
that good money was spent only on good work, he is not sure how it could be
implemented for other departments. He mulled over the idea of hiring an external
consultant and decided to discuss this with Monica and Ram.
"Binoy, I think we can understand our business and our people much better than
an external consultant", reasoned Monica and promised him to figure out a way.
Binoy knew his people's capabilities too well to doubt her. But his dilemma is to choose
between the cohesive integration of the team versus the mathematical precision of
efficiency. He decided to leave the matter to the team and keep a close tab on the
relationship factor so that he could step in when appropriate.
Ram and Monica decided to put to use the learning they had acquired from their
MBA courses which has been pushed to the background in the rush of daily routines.
They changed their approach and decided to win over the VPs one by one instead of
all together. Another change is that they constructed a whole new performance
measurement instrument with a minor weightage to the time of response for each
activity being measured, but with a large weightage to all those factors that would
ensure the response times. Further the tool would adjusted for each department's
needs with some of the parameters common and others changed to suit the needs of
different departments. Each department head is to specify the parameters unique to
their department. It almost looked like a balanced score card. This time they first
took it to Binoy. Their first experience had taught them that it won't move without
Binoy pushing it himself.

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 SOUTH ASIAN JOURNAL OF MANAGEMENT

Binoy liked the overall idea, hut could not attend to it hecause he is under
tremendous pressure for time due to his other commitments. He also wanted to postpone
it a bit in the view of the strains that has developed recently in the relationship among
his chieftains.
Besides he isn't very much convinced ahout the success of Ram's initiative in the
last year. The team had delivered better results than the previous year. But the team
had not completely met their target. None of the sales people had been able to cross
the 100% mark. Yet, their revenues had gone up by about 30%. The PAT had increased
hy 25% over the previous year. The collection had remained at the same level as
previous year The creditor column in the halance sheet was disturhing him. Some of
the projects would run for more than 3 years. Though the contracts looked profitahle
on paper, the uncertainties of long term contracts are too many to say that the company
would actually be profitable at the end of those projects. The attrition rate with services
and software departments is as high as ever. That had a potential to create future
customer satisfaction prohlems. There are too many questions on his mind that he first
had to attend. He is also mulling over the idea of designating the sales, services and
software teams as profit centers. But he is not sure whether to convert the internal
administration, IT, and finance into some sort of responsihiUty centers.
Notwithstanding Binoy's reservations. Ram and Monica are determined to push
this through and after ahout a month of their persistence, Binoy called a meeting of all
VPs. Monica and Ram hriefed Binoy completely about the entire Key Performance
Indicator (KPI) system and the reward workings. Binoy is not fully convinced that all
the KPIs are required. He is also not very sure ahout the efficacy of thé reward system.
He held the view that KPIs should be specified only for external customer-facing and
finance-related activities, where measurements are easy. For internal activities, it is
impractical and unnecessary according to him. He believed that people have a certain
value system inculcated in them and they hehave accordingly. "A KPI-based formal
workflow will never work. People don't work by looking at charts. They work through
their hahits", is his argument. "But we need to re-orient their habits of working. KPIs
serve as the directions for them. Once they start working in this way, it would
automatically become a new habit over a period of time", reasoned Monica. Finally
after intense discussion, they decided to go ahead with the KPIs as defined hy Ram
and Monica. But Binoy's outlook prevailed over the rewards and penalties. Both Ram
and Monica felt that the rewards are too less for internal KPIs, though for the external
facing KPIs, they are comparatively-high. The penalty system also seemed to bè skewed
towards tbe external-facing teams. The^internal 'misses' faced much lower penalties.
Though the lower penalties are consistent with lower rewards for the internal-facing
teams, and vice-versa for the external-facing teams, Monica is not completely
convinced that there should be such discrimination in the first place. Ram crihbed
about the penalty part, hut decided to go along with Binoy. Furthermore, the sales

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 DESIGN AND IMPLEMENTATION OF PERFORMANCE MANAGEMENT SYSTEMS,
KPIs AND RESPONSIBILITY CENTERS: A CASE STUDY

team, consulting team, service and support team and software project delivery teams
are constituted as profit centers. The backoffice team is designated as an investment
center and finance team was made the cost center.

THE ROLLOUT AND THE RESULTS

The proposal is rolled out by Binoy, which is a bit abnormal. He usually had someone
else put forward any proposal and would endorse it. However considering that Monica
and Ram had already gone through the first round of discussions and had faced bitter
resistance, Binoy felt it would be good to neutralize that effect. The meeting went not
without resistance. The internal-facing teams felt that their KPIs are too stringent
and the rewards are not commensurate with the same. The external-facing teams felt
their penalties are stiff and they are not really directly responsible for many of the
KPIs. Moreover, since this is the beginning of recession, they had apprehensions that
their performance targets may not be met. After prolonged resistance, finally the
proposal was accepted without change on the condition of a 'pilot year'. TechEdge
would run with the new system of performance management for a year and revisit the
same later. They would have a quarterly audit of the new system and a final review
after one year wherein the necessary modifications would be made.
Three months into the new model, there were serious inter-departmental allegations.
Each department claimed to have incurred a loss of incentive due to the lethargy of
the other department. The finance team is annoyed since the payment collection had
fallen almost 15% below the normal rate. The sales team defended it alleging that the
payments had been delayed due to late commissioning of projects. The services team
seemed to say that the sales team had overcommitted, and the scope of the project
had extended much beyond the initial agreement. The sales team did not agree to
this allegation and blamed the services team that they themselves had agreed to
service the customer's extended demands for which the sales team should not be held
responsible. The sales team also pointed out that the overall Customer Satisfaction
(C-SAT) for existing customers had come down due to call-ageing. Support team
declared that C-SAT had come down due to hardware and software resources not
being available in time fiom the logistics people in the back office operations. The
back office team promptly pointed out to the finance team saying that they did not get
.approval for purchases in time. Finance defended its delays saying that they are
restricted by cash flows as well as their mandate of cutting costs at least by 10%.
While the bickering amongst managers intensified, employees are continuously
demanding for their increments which had been stalled due to recession. This added
to the fiustration of the VPs including Monica. Every VP had a resource crunch, and
Monica had no extra resources to give to anyone due to budget constraints. Finally, in
the 4''' month, Binoy called a meeting of all VPs. In an unusually abrupt way, Binoy
simply announced the roll-back of the performance-management initiative.. " Well,

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 SOUTH ASIAN JOURNAL OF MANAGEMENT .

guys, I am doing away with this performance-management system that we piloted

some time back. It's causing too much of unnecessary conflict and bittemess, among
all of us. I don't think this system works for an organization such as ours. At 120 crores
we are too small for these things. Perhaps we may adopt the system in the next 3 years
when we reach our 500 crore target. We may go back to our original working style.
The sales team shall continue to work on the variable compensation plan like earlier.
But all others can forget the KPIs and measurements. The team spirit is more important
than a program-driven behavior. We are an IT consulting company. Such balanced
score-card-oriented methods may be great for manufacturing. Perhaps not for a services
company like us. Let us get back to our earlier ways of working together as a family
and give our complete cooperation to all so that each one of us performs in the larger
interests of the organization" is the decisive statement by Binoy.
Binoy's talk ended in a deafening silence. Ram looked crestfallen, angry and
humiliated. Kishore looked confused. Apama is relieved. Rajesh seemed happy. Monica
appeared thoughtful. Though each one tried to hide their emotions, it is all out in the
open when Ram simply said with an audible sigh, "I guess the meeting is over, Binoy.
Let's hope we get to 500 crores soon." "But its not possible without this throttle",
blurted out Kishore. He is among the worst faring in terms of performance. Such
reaction fiom him surprised everyone including Binoy. "I was the one complaining the
most, I agree. But that does not mean we should throw out the system. I was only
unhappy about the way it was implemented and the amount of load it was exerting on
my team." Rajesh seemed to want to object, when Ram calmly responded, "I guess
Binoy is right. This can't work here. We will need the system w"hen we become large
enough." The way he said it, Monica instinctively guessed it would have to be without
Ram.

TEACHING NOTE
Money as a control instrument is observed to produce mixed results. It can be effectively
used as an incentive through performance-based pay systems, but not without its pitfalls
(Hertzberg et al, 1959; Eisenberger et al, 1999; and Banker et al, 2000). The TechEdge
case brings out various aspects of design and implementation of a performance
management system. It also illustrates how the organizational culture and history which
is a part of its corporate identity have an impact on implementation of such systems
(Steiner, 1979; Mintzberg, 1994a and 1994b; and Mooraj et al, 1999). It may be noted
that the KPIs in this case were decided considering the entire organization as a single
monolithic entity. The responsibility centers were created later, and the same KPIs
were adopted for all. The pilot implementation of the KPI system in the sales team
where they introduced a performance-based variable pay also did not see much success
in terms of increase in revenues or profits. It may be interesting to investigate whether
the variable component is not attractive enough or whether the fixed component
itself was above industry standards, so much so that the sales team may have been
 DESIGN AND IMPLEMENTATION OF' PERÍFÓRJvIANCÉ M A Ñ A G E M E N T ' S Y S T E M S , ''' '' '
KPIs AND RESPONSIBILITY CENTERS: A CASE STUDY

satisfied with the fixed component itself The impact of various leadership styles and
issues related to each style, ranging fiom leading by example to authoritarian decision
making can also be illustrated using this case. Internal relationships among the managers
are also an interesting point of study. It is observed that in the absence of any control
structures, the managers are extremely cooperative. As control systems are implemented
through KPIs and performance starts getting measured objectively, managers start
behaving with a selfish motive resulting fiom competition and driven by the desire for
performance-numbers which may mean different things to different people—ranging
fiom monetary incentives to recognition and ego satisfaction. Also, as performance
starts getting reflected and documented in numbers, managers may engage in fault
finding exercises in the event of shortfalls fiom targets which may eventually turn the
employees attention away fiom the organizational goals. Whether this means that the
laissez faire system is hetter than using controls for directing managerial behavior is a
point to ponder. The CEO's leadership style contexts and constraints are Very different
fiom the VPs' style, constraints and contexts. Another important point to think about
is what criteria should be used for creating responsibility centers. For most companies,
the change fiom a monolithic organization to a structure based on responsibility centers
needs to be gradual, so that the required temperamental capacities may he developed
so that the people are able to accept and implement the change (Chenhall and Euske,
2007). It may be a good idea to initially start with one or two least critical responsibility
centres and then gradually expand the system to other departments, one at a time.
Notwithstanding this, it may be noted that there is no single clear formula for a
successful implementation of change. For a big bang approach to change to be successful,
an organization needs to have a dedicated change management team (Brumback,
2003). This change management team needs to guide the organization through the
troubled waters of change by gradually building empathy and engaging people in the
transformation-generating energy, who in turn pump in the energy and vibrancy
required for facilitating enforcement of the new norms (Marks, 2007). The effectiveness
of the change management team depends on many aspects such as their charisma,
vision, persuasiveness, commitment, etc. Apartfiromhaving these intrinsic capabilities,
change managers further need to be empowered with the ability and authority to
administer rewards and penalties and they must use these as tools to enable desirable
behavior (Brumback, 2003). Even with the best of intentions, halfhearted approach
towards ushering in structural and/or processual changes in an organization is bound
to fall flat. Lastly, growing to a large size is not a pre-requisite for an organization to
create appropriate management systems for itself. In fact, it may be better to have
systems in place while the organization is small and young rather than bring in radical
changes at a later stage (Chenhall and Euske, 2007). It is easier to bring in desirable
transformations in a smaller company and more often than not, a transformed small
company holds the potential of growing into a well organized large business organization.

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 SOUTH ASIAN JOURNAL OF MANAGEMENT

The TechEdge case may also be used to discuss issues such as efficacy of
performance-based pay and effects of performance-based pay on inter personal
relationships among individuals, teams, and managers. Finer subjects such as self
gratification, tendencies to push personal agenda ahead of organizational goals, agency
behavior, etc., may be explored as potential results of a mis-managed performance-
based incentive system. In organizations where cross departmental teams are formed
for temporary projects, inter-departmental conflict is usually the most common fallout
of performance ihanagement systems. The TechEdge case may be useful to highlight
and discuss cause-effect relationships of such conflicts. The case also brings forth
aspects of intrapreneurial leadership. Based on this case, the GEO-intrapreneur
relationship may be highlighted. How should CEOs empower, encourage and manage
ambitious intrapreneurs and how intrapreneurs should support their CEOs in
organizational building may be an interesting point for study.
Finally, as highlighted earlier, if self regulation is the best form of control system,
how such self management may be embedded in an organizational culture may be
explored.

BIBLIOGRAPHY
1. Banker R, Lee S-Y, Potter G and Srinivasan D (2000), "An Empirical Analysis of
Continuing Improvements Following the Implementation of a Performance Based
Compensation Plan", Journal of Accounting and Economics, Vol. 30, No. 3, pp. 315-350.
2. Brumback G (2003), "Blending 'we/me' in Performance Management", Team
Performance Management: An International Journal, Vol. 9, Nos. 7/8, pp. 167-173.
3. Ghenhall R H and Euske K J (2007), "The Role of Management Control Systems
in Planned Organizational Change: An Analysis of Two Organizations", Accounting
Organizations and Society, Vol. 32, Nos. 7/8, pp. 601-637.
4. Eisenberger R, Rhoades L and Gameron J (1999), "Does Pay for Performance Increase
or Decrease Perceived Self Determination and Intrinsic Motivation", Journal of
Personality and Social Psychology, Vol. 77, No. 5, pp. 1026-1040.
5. Hertzberg F Mausner B and Synderman B (1959), The Motivation to Work, 2"''
Edition, John Wiley and Sons, New York.
6. Manimala M J (1987), "Deontic Motivation", The Economie Times, March 19.
7. Manimala M J and Pearson A W (2005), "Entrepreneurial Motivation Revisited",
Entrepreneurship Theory at the Crossroads: Paradigms and Praxis, Ghapter 14, Wiley.
8. Marks, M. L.,(2OO7), "A Framework for Facilitating Adaptation to Organizational
Transition", Journal of Organizational Change Management, Vol. 20, No. 5,
pp. 721-739.

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 DESIGN AND IMPLEMENTATION OE PERFORMANCE MANAGEMENT SYSTEMS,
KPIs AND RESPONSIBILITY CENTERS: A CASE STUDY

9. Mintzberg H (1994a), "Rethinking Strategie Planning Part I: Pitfalls and Fallacies",

Long Range Piannjng, Vol. 27, No. 3, pp. 12-21.
10. Mintzberg H (1994b), "Rethinking Strategic Planning Part II: New Roles for
Planners", Long Range Planning, Vol. 27, No. 3, pp. 22-30.
11. Mooraj S, Oyon D and Hostettler D (1999), "The Balanced Score Card:
A Necessary Good or an Unnecessary Evil?", European Management Journal,
Vol 17, No. 5, pp. 481-491.
12. Steiner G (1979), Strategic Planning : What Every Manager Must Know, The Free
Press, New York.

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