EP2M Model, Efficiency Pyramid, and Maisel’s Balanced Scorecard

Balanced Scorecard is not the only performance management framework. There are some business tools that might be not that popular, but still worth reviewing and learning from. For example, EP2M is a great starting point for the discussion of the strategy, while Efficiency Pyramid provides an excellent way to link to level strategy with operational goals.

EP2M Model, Efficiency Pyramid, and Maisel's Balanced Scorecard

ЕР2M model – Effective Progress and Performance Measurement

In 1993 Christopher Adams and Peter Roberts offered another model which they called ЕР2M that stands for Effective Progress and Performance Measurement. The model is visually represented in the following scheme.

According to Adams-Roberts, the company should focus on the following 4 directions:

  • Serving customers and markets
  • Enhancement of internal processes (efficiency growth and profitability increase)
  • Strategy and changes management
  • Freedom of actions

ЕР2M model – Effective Progress and Performance Measurement

This theory implies that strategic management has 2 consecutive stages:

  • Strategy development and
  • Strategy implementation.

Development of strategy is an analytical process which answers the question, “What needs to be done?”

Implementation is a two sided process:

  • On the one hand this is organization process which answer the question “How goals will be achieved?”  and “Who will achieve them,”
  • While on the other hand it contributes to development of managerial skills and change management.

The goal of the system is not only implementation of company strategy.  The company management should also get used to the fact that frequent changes are quite normal.  Employees who are involved in decision-making and implementation of strategy should be armed with effective feedback system.

Efficiency Pyramid Model

In 1990 C.J. McNair, Richard L. Lunch and Kelvin F. Cross introduced a model which they called efficiency pyramid. The key concept of efficiency pyramid was connection of customer oriented corporate strategy with financial indicators, supplemented by several key quality (non-financial) indicators.

Efficiency Pyramid Model

Traditional managerial information should come only from the upper level. Efficiency pyramid is based on concepts of total quality management, industrial engineering and counting based on actions.  Actions imply everything done by people and machines (equipment, mechanisms, and computer systems) to satisfy customers’ needs.

Efficiency pyramid has four different levels that show organization structure with feedback and communication systems necessary for decision making at different managerial levels.  Objectives and indicators communicate organization strategy with its operational activity.  In other words, objectives are transferred top to bottom, while indicators are gathered vice versa (bottom to the top).

Efficiency pyramid

  • At the top level company management formulates corporate vision.
  • The second level includes objectives for departments and subdivisions in accordance to a certain market and financial indicators.  Customers and shareholders define what needs to be evaluated.
  • The third level is virtually non-organizational.  It consists of a number of aspects focusing on satisfaction of customer needs and flexibility of production process.  Indicators here are measuring customer and financial objectives.
  • The last level deals with quality, delivery terms, production cycle, losses, etc.  Quality and time for delivery are related to external environment, while production cycle and losses are indicators for internal processes of an organization.

It needs mentioning that indicators in the bottom of pyramid are measured every day, every week or every month.  In the top of the pyramid financial indicators dominate, and thus they are not measured very often.  Of course, indicators in the bottom levels should be subordinated to indicators in the top.  This system makes it possible to show what financial indicators are based on, and what drives them.

This model was first introduced in Management Accounting magazine, the article “Do financial and nonfinancial performance measures have to agree?” in November 1990.

Maisel Balanced Scorecard Model

The model by Lawrence S. Maisel was offered in 1992.  It has the same name as the model by Norton-Kaplan. Maisel also defines four perspectives based on which business activity should be evaluated.

Maisel Balanced Scorecard Model

Instead of learning and growth perspective Maisel uses human resource perspective which measures innovation, as well as such factors as education, development of production services, enhancement of competence and corporate culture.  It is possible to say that these systems have very slight differences. The reason why Maisel uses perspective of human resources is explained by the fact that the company management should be more attentive to personnel and measure not only efficiency of processes and systems, but also evaluate performance efficiency of employees.

Maisel BSC model was first introduced in the article “Performance Measurement. The Balanced Scorecard Approach,” in Journal of Cost Management.

What do you think about these models? Have you tried some of them? Feel free to share your experience in the comments.

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