## **Learning Outcomes**

After reading this article, you will be able to explain the Building Block model for service performance measurement, describe how targets shape behaviour in service organisations, and evaluate the risks and management of dysfunctional effects from inappropriate targets. You will also learn to apply the Building Block framework to typical exam scenarios, recommending actions to optimise motivation and service quality.

## **ACCA Advanced Performance Management (APM) Syllabus**

For ACCA Advanced Performance Management (APM), you are required to understand how performance measurement frameworks such as the Building Block model apply to service businesses and how behavioural impacts of targets can influence overall results. For revision, focus on:

- The structure, dimensions, and principles of the Building Block model for services
- The role of standards and rewards in driving performance
- The connection between targets, motivation, and employee behaviour
- Identification and management of behavioural risks, such as gaming or loss of service quality, when targets are poorly designed
- Evaluation of reward systems in service contexts to ensure alignment with strategic objectives

## **Test Your Knowledge**

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

1. Which of the Building Block model's three main pillars directly impacts employee motivation by linking performance to tangible outcomes?
   a) Standards
   b) Rewards
   c) Dimensions
   d) Benchmarks

2. A call centre sets a target for agents to handle calls in under three minutes. Employees begin to end calls abruptly, causing customer dissatisfaction. This is an example of:
   a) Efficient target setting
   b) Standard achievable targets
   c) Dysfunctional behaviour induced by poorly designed targets
   d) Achievement of flexibility

3. True or false? Measuring only final results, such as revenue, is sufficient for optimising service performance in a service business.

4. Briefly list the three core components of the Building Block model.

## **Introduction**

Service businesses require performance measurement systems that reflect the complexities of intangible outputs, staff-customer interactions, and quality expectations. The Building Block model provides a structured approach to evaluating service performance by aligning dimensions, standards, and rewards. Targets play a key role in shaping behaviour, but if poorly set, they can trigger dysfunctional consequences like gaming or neglect of unmeasured aspects.

This article introduces the Building Block model, explains the effects of targets on staff behaviour, details the risk of performance measure fixation, and recommends ways to manage these risks for optimal service delivery.

> **Key Term: Building Block model**
> A performance measurement framework for service organisations, structured around three pillars: dimensions, standards, and rewards, to ensure comprehensive and motivating performance evaluation.
>
> **Key Term: Dimension (Building Block)**
> A key area of service performance that is essential for long-term results, such as quality, flexibility, innovation, or resource utilisation.
>
> **Key Term: Standard (Building Block)**
> The target or benchmark set for a performance measure that is ideally owned, achievable, and fair, providing a clear expectation for employees.
>
> **Key Term: Reward (Building Block)**
> The method of recognising or incentivising employees for achieving performance standards, designed to be clear, controllable, and motivating.
>
> **Key Term: Dysfunctional behaviour**
> Actions by staff or managers to achieve measured targets at the expense of service quality, ethics, or long-term goals, often due to poorly designed performance measures.

## **The Building Block Model: Structure and Application**

The Building Block model assists in designing performance measurement systems that balance long-term service quality with immediate operational results. It contains three main components:

### Dimensions

The model distinguishes between ‘results’ (such as competitiveness and financial performance) and ‘determinants’ or ‘upstream’ drivers (such as service quality, flexibility, resource utilisation, innovation). Service businesses must identify which dimensions are most critical to their competitive success.

### Standards

For each dimension, standards are set to define acceptable or desired levels of performance. Three principles are critical:

- **Ownership:** Standards should be developed with staff input to increase commitment.
- **Achievability:** Targets should be realistic but challenging, avoiding demotivation.
- **Fairness:** All employees should be subject to equally demanding but attainable standards.

### Rewards

Linking achievement of standards to rewards is essential for motivation. Effective rewards are:

- **Clear:** Staff must understand precisely what is rewarded.
- **Controllable:** Staff should only be rewarded for outcomes within their control.
- **Motivating:** Rewards should have value for the recipient, whether financial or non-financial.

### **Worked Example 1.1**

A logistics company measures depot managers on the number of deliveries completed and speed of dispatch. However, complaints about lost and damaged parcels increase sharply.

**Analyse why this has occurred using the Building Block model.**

> **Answer:**
> The dimensions measured are quantity and speed, but quality is neglected. The standards focus only on output volume and quick dispatch, and the rewards strengthen these metrics. As a result, managers prioritise quantity over care, causing quality to fall—an example of dysfunctional behaviour from incomplete or poorly balanced targets.

## **Managing Behavioural Effects of Targets**

Targets strongly influence how staff behave. When measurement and rewards focus too narrowly, employees may fixate on those aspects, ignoring others. Service performance suffers if critical factors, like customer satisfaction or ethical conduct, go unmeasured.

### Risks When Targets Are Poorly Designed

- **Measure fixation:** Only what is measured gets staff attention; unmeasured priorities may be ignored.
- **Gaming:** Staff manipulate activities or data to hit targets, without real improvement.
- **Short-termism:** Focus shifts to hitting immediate numbers at the expense of long-term service quality.
- **Demotivation:** Targets perceived as unfair or unattainable reduce effort and morale.

### **Worked Example 1.2**

A cleaning contractor introduces a bonus for the number of rooms cleaned per shift. Some staff begin recording rooms as cleaned without actually performing the cleaning to boost bonus payments.

**What behavioural risk does this demonstrate?**

> **Answer:**
> This is gaming—staff manipulate records to achieve bonuses without delivering actual service value, a classic dysfunction due to rewards linked to quantity not quality.

### Shaping Appropriate Behaviour

To manage these effects:

- Select a balanced set of dimensions, including both result and determinant measures.
- Set standards through consultation, ensuring ownership and fairness.
- Limit the number of targets—avoid overwhelming staff.
- Regularly review and revise targets to reflect changing priorities.
- Design rewards that encourage the right behaviours, such as teamwork and service quality, not just output.

### **Exam Warning**

> In APM scenarios, be prepared to critically assess performance management systems that trigger dysfunctional behaviour. Look for evidence of measure fixation or gaming. Explain how changing targets, standards, or rewards could resolve these issues.

### **Revision Tip**

> Always link rewards to both short-term performance and long-term service quality. Avoid recommending targets or pay systems that consider only one outcome.

## **Summary**

The Building Block model structures service performance management by combining carefully chosen dimensions, owned and achievable standards, and motivating rewards. Behavioural impacts of targets can undermine results and quality if not managed. Using a mix of outcome and driver measures, well-designed standards, and appropriate rewards ensures alignment between employee actions and service objectives.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Explain the Building Block model's dimensions, standards, and rewards
- Assess how dimensions link upstream drivers to results in service organisations
- Identify risks of dysfunctional behaviour from poorly designed targets
- Describe the importance of ownership, achievability, and fairness in setting standards
- Advise on balanced target setting and reward design for service quality
- Apply the Building Block model to typical ACCA exam scenarios

## **Key Terms and Concepts**

- Building Block model
- Dimension (Building Block)
- Standard (Building Block)
- Reward (Building Block)
- Dysfunctional behaviour

Building Block model and service performance - Managing behavioural effects of targets