## Learning Outcomes

After reading this article, you will be able to explain Fitzgerald & Moon’s Building Block model for service performance. You will distinguish between the key performance dimensions, standards, and rewards. You will know how to use the model to align service targets with organisational objectives and motivate desirable performance. This will prepare you to tackle scenario questions on performance measurement in service settings.

## ACCA Advanced Performance Management (APM) Syllabus

For ACCA Advanced Performance Management (APM), you are required to understand models used in measuring and improving performance, particularly in service organisations. When revising, focus on your ability to:

- Describe the structure and key elements of the Building Block model for services.
- Explain the six dimensions of performance and why both financial and non-financial indicators are essential.
- Discuss how standards should be set (ownership, achievability, fairness) in a service context.
- Evaluate how rewards can drive desired behaviours and performance, considering clarity, motivation, and controllability.
- Apply the Building Block model to analyse or design effective performance measurement for service businesses.

## Test Your Knowledge

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, look more closely at that area during your revision._

1. Which two categories are Fitzgerald and Moon’s performance dimensions divided into in the Building Block model?
2. Name three principles that should be applied when setting standards within the model.
3. What is a potential risk if employee rewards are not linked to controllable factors?
4. Briefly describe how effective rewards influence staff motivation and service performance.

## Introduction

Measuring performance in service organisations poses challenges not always found in manufacturing. The Building Block model, developed by Fitzgerald and Moon, addresses these by combining multiple dimensions, clear standards, and effective reward systems. This structure links organisational objectives to key performance areas and motivates staff by recognising achievements that matter.

> **Key Term: Building Block model**
> A performance measurement system for service organisations, organising measures into dimensions, standards, and rewards to align staff behaviour with organisational objectives.

### The Three Building Blocks Explained

The Building Block model consists of three elements: dimensions of performance, standards for each dimension, and reward systems. Each element must support the others for the system to encourage goal congruence, fair evaluation, and motivation.

![Service performance dimensions classified as downstream results and upstream determinants, with competitiveness and financial performance outcomes supported by quality, flexibility, resource utilisation, and innovation.](https://static.pastpaperhero.com/images/acca-apm-building-block-model-and-service-performance-dimensions-standards-and-rewards_00.png)

_Performance dimensions are separated into downstream results and upstream determinants, covering competitiveness, financial performance, quality of service, flexibility, resource utilisation, and innovation._

### Dimensions of Performance

The first block identifies **what** aspects of performance matter. There are six dimensions:

- **Competitiveness:** How well the organisation sustains or grows its position (e.g. market share, repeat business).
- **Financial performance:** Measures of profitability, cost control, or revenue growth.
- **Quality of service:** Accuracy and reliability of the service provided.
- **Flexibility:** Ability to adjust to customer requirements or market changes.
- **Resource utilisation:** Efficient use of people, assets, and other inputs.
- **Innovation:** Introduction of new services, processes, or improvements.

These are grouped into:

- **Downstream results**: Competitiveness and financial performance.
- **Upstream determinants**: Quality, flexibility, resource use, and innovation (drivers of future performance).

> **Key Term: performance dimension**
> A key area or critical success factor measured to assess how well a service organisation is operating.
> **Key Term: upstream determinant**
> Factors such as quality, flexibility, resource utilisation, and innovation that drive future service and financial outcomes.
> **Key Term: downstream result**
> Performance outcomes like competitiveness and financial performance, reflecting past or current success.

### Setting Effective Standards

For each key dimension, standards or targets guide staff towards desired behaviours and results. The model emphasises:

- **Ownership:** Those being assessed should participate in setting standards, so they accept and understand them.
- **Achievability:** Targets should be realistic but challenging, encouraging improvement rather than demotivating staff.
- **Fairness:** Comparable roles should have similarly demanding standards, and external factors must be considered.

> **Key Term: standard (in performance measurement)**
> The expected or target level of achievement set for a performance dimension against which results are judged.

### Reward Systems

Rewards motivate staff to meet, or exceed, standards. An effective system considers:

- **Clarity:** Employees must know exactly what behaviours and results are rewarded; targets should be specific and not excessive in number.
- **Controllability:** Staff should only be held accountable and rewarded for factors they can influence.
- **Motivation:** Rewards align personal goals with organisational aims; these may be financial (bonuses), career progression, or recognition.

> **Key Term: controllability**
> The principle that individuals should be assessed and rewarded only for outcomes they have the ability to influence.

### Applying the Model: From Dimensions to Rewards

The model’s design ensures that performance measures are not limited to financial targets. By aligning standards and rewards with both results and their determinants, organisations can improve service quality and drive sustainable success.

### Worked Example 1.1

A call centre wants to evaluate depot managers using the Building Block model. Current measures focus heavily on call handling time, with bonuses for lowest call duration.

Question:
Identify two issues with the current system and suggest how the Building Block model could improve performance measurement.

> **Answer:**
> One problem is that the emphasis on speed may discourage staff from resolving customer issues properly, harming quality. Second, the system overlooks aspects like customer satisfaction, flexibility, and service innovation. Using the Building Block model, the company could add targets for first-time resolution, customer feedback scores (dimensions: quality and flexibility), and rewards linked to these wider measures. Involving managers in setting fair, achievable targets (ownership, achievability) could further boost motivation and improve service.

### Worked Example 1.2

An IT support firm tracks resource use (engineer hours) but has high staff turnover. Review the Building Block approach to address this.

Question:

> **Answer:**
> Focusing solely on resource utilisation risks undervaluing factors like staff flexibility and innovation. Introducing performance indicators for training completed, response to new technologies, and successful implementations (dimensions: flexibility, innovation) with standards agreed upon by staff (ownership) would encourage wider development. Rewards could include career development or recognition, boosting retention and quality.
>
> **Exam Warning:**
> A frequent exam error is listing only financial targets and ignoring upstream determinants like innovation or service quality. In scenario questions, always discuss both result and determinant dimensions, with suitable standards and reward principles for each.
>
> **Revision Tip:**
> When applying the Building Block model, clearly classify your chosen performance indicators under the six dimensions and justify how each standard and reward supports organisational objectives.

## Summary

The Building Block model links diverse service performance areas to standards and rewards, ensuring both measurable results and the drivers of long-term success are addressed. Effective use of the model depends on identifying the correct dimensions, setting fair and achievable targets, and rewarding what staff can control.

## Key Point Checklist

_This article has covered the following key knowledge points:_

- Identify and describe the six performance dimensions in the Building Block model.
- Explain the importance of upstream determinants and downstream results.
- Outline principles for setting fair, achievable, and owned standards.
- Discuss the design of rewards focusing on clarity, motivation, and controllability.
- Apply the model to practical service scenarios, linking measures to standards and incentives.

## Key Terms and Concepts

- Building Block model
- performance dimension
- upstream determinant
- downstream result
- standard (in performance measurement)
- controllability


Building Block model and service performance - Dimensions standards and rewards