Performance measures for sustaining and developing competences and capabilities

Performance measurement systems are being seen as an effective way of translating strategy into action (Kaplan & Norton, 1996). However, there is more than one way of looking at strategy and, although much attention has been focused on deriving performance measures using an external, or market, perspective, less attention has been paid to deriving performance measures from an internal, learning, or competence, perspective. There are many competing definitions surrounding competence, capabilities and resources. Here, competencies are defined as “what the company does” and “important competencies” are the competencies from which the company sets its competitive advantage (e.g. Sony´s miniaturization (Prahalad & Hamel, 1990) or Honda´s dealer handling (Stalk et al., 1992). Resources on the other hand are “what the organization has” or “has access to”. Current methodologies for designing and implementing performance measurement systems take an external perspective. As such they embed a competitive strategy derived from an external view in the tradition of Porter (1980). The objective of this paper is to compare an external approach to performance measurement with an internal (or competence based) perspective