Performance management in the South African motor manufacturing industry: a framework

Abstract

South African motor manufacturers should find ways to improve their performance management systems to ensure survival in the face of strong competition in the market. The main objective of this study is to evaluate the industry’s approach to performance management and to make recommendations about a framework for performance management that can be implemented to obtain a competitive advantage. A well‐known instrument that proves to be highly effective in performance management is the balanced scorecard. This instrument manages performance on four distinct levels, namely from the financial perspective, the customer perspective, internal business processes and learning and growth. It is apparent from the results of this study that performance management is still very much a one‐way process, and that a lack of communication is the primary reason for unsatisfactory workforce performance. Furthermore, the majority of motor manufacturers consider the customer perspective as the most important of the four above‐mentioned perspectives. Motor manufacturers also disagree about the number of performance measures that need to be included in the performance management system, and the majority feel that both controllable and non‐controllable fixed costs must be included in the measurement of management performance. Shareholder value measures are also largely neglected in practice.

Drivers Creating Shareholder Value In South African Manufacturing Firms

“…The same applies to the examples in Rappaport (1998) and Copeland et al (2000). This gap in knowledge is even more profound in South Africa, as is seen from the findings by Van der Merwe and Visser (2008). In a study among South African motor manufacturers they found that of the four BSC perspectives, the most important was the customer perspective.…”

“…Research by Van der Merwe and Visser (2008) among South African motor manufacturers showed that profitability and growth were most popular as performance measures, and that shareholder value-based measures such as EVA were used by only 9% of the respondents. This is a matter of concern, as the goal of the firm is to create value and the difference between value and profit could differ substantially (Stewart, 1991;Rappaport, 1998;Ehrbar, 1998).…”

Defining the Integrated Performance Measurement Systems in Small and Medium Enterprises: An Advanced Model

“…The performance measurement systems (PMS) facilitate the corporate strategies implementation and the improvement of organizational performance (Adair et al, 20016;Davis and Albright, 2004;Nielsen, 2019;van der Merwe and Visser, 2008). The internal management and reporting systems are tailored to offer a more holistic representation of the firm (Lev and Daum, 2003) to "provide stakeholders and managers with a comprehensive evaluation system of value creation, of the various factors of production, assets, processes and procedures, and their different combinations" (Pirozzi and Ferulano, 2016).…”

“…The INM* model deals with the challenge to implement all the measurement functions (IC and financial and non-financial data) in an integrated measurement system as advanced system by PMS (Davis and Albright, 2004;Nielsen, 2019;van der Merwe and Visser, 2008), to assure the interpretation and coherence assessment of SMEs activities.…”

“…In this perspective, SMEs' characteristics have to be identified to adopt an adequate PMS (Adair et al, 2006;Davis and Albright, 2004;Nielsen, 2019;van der Merwe and Visser, 2008). Jennings and Beaver (1997) identifies SME's peculiarities in the structural and managerial aspects of the coordination process, and in the specificities of the risk-taking, innovation and of the interfaces toward the market.…”