Resolving Performance Measure Conflicts in a Supply Chain Using Systems Thinking Methodology

Performance measurement and management have received a great deal of attention in the literature in recent years. However, to date, there is scant attention to dynamics and trade-offs amongst performance indicators in theory and in practice (Santos, Belton et al. 2002). Thus, performance management systems (PMS) have remained static, fragmented, and backward looking (Bourne et al. 2000) leading to adverse outcomes, often unknown to managers and organisations. A systems view of performance, on the other hand, calls for a holistic approach to performance measurement integrating multiple dimensions, functions and time horizons across the enterprise. A systemic performance measurement would take into account the interdependencies of functions and their dynamic influence on the performance of the organisation as a whole. This paper addresses this challenge using the four level thinking (Senge, 1991) and causal loop models to highlight the inter-relationships between the KPIs and their trade-offs within and across different functions. The study reports on an action research within a multinational company where through real case scenarios we demonstrate how KPIs influence, contribute or impede one another in a manufacturing/supply chain setting. The paper reveals how the use of systems thinking concepts and causal loop models by novice users facilitated an open environment for cross-functional communication and collaborations, leading to team and organisational learning and enhanced performance.