## **Learning Outcomes**

This article explains the Building Block model for assessing performance, with a focus on service quality delivery and flexibility. You will learn the three components—dimensions, standards, and rewards—and understand how to apply these to evaluate and improve service performance. By the end, you should be able to recommend performance measures for service delivery and flexibility, and comment on how these drive business success in exam scenarios.

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

For ACCA Advanced Performance Management (APM), you are required to understand performance measurement in service organisations and the practical use of models like the Building Block model. Revision should concentrate on:

- The purpose and structure of the Building Block model for assessing service performance
- The identification and application of appropriate performance dimensions for service delivery and flexibility
- The setting of effective standards (ownership, achievability, fairness) around service quality and flexibility
- The alignment of rewards with desirable service behaviours and flexible responses
- How these measures improve service quality, responsiveness, and organisational performance

## **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 following is a dimension used in the Building Block model for service organisations?
   a) Liquidity ratios  
   b) Flexibility  
   c) Inventory turnover  
   d) Share price growth

2. What principle ensures that performance standards motivate staff to improve service quality?
   a) Rigidity  
   b) Arbitrary imposition  
   c) Achievability  
   d) Random selection

3. True or false? The Building Block model applies only to financial performance indicators in manufacturing companies.

4. Briefly describe an appropriate performance measure for service delivery in a call centre.

## **Introduction**

Effective service organisations need to manage more than just financial performance. High service quality and flexibility are key drivers of customer satisfaction and competitive advantage. The Building Block model, developed specifically for service organisations, provides a structure for measuring and managing these areas by breaking performance down into three components: dimensions, standards, and rewards. This ensures targets are aligned with both organisational goals and employee motivation.

> **Key Term: Building Block model**
> A performance measurement approach with three components—dimensions, standards, and rewards—designed for evaluating service businesses.

## Performance Dimensions in the Building Block Model

Performance measurement begins with identifying what should be measured. The Building Block model lists six core dimensions for service organisations:

- Competitiveness
- Financial performance
- Quality of service
- Flexibility
- Resource utilisation
- Innovation

Of these, quality of service and flexibility are especially critical to customer-facing environments.

> **Key Term: service quality delivery**
> The extent to which a service meets or exceeds customer expectations in consistency, speed, accuracy, and responsiveness.
>
> **Key Term: flexibility**
> The ability of a service organisation to adjust quickly and efficiently to changes in customer requirements or demand.

### Focus on Service Quality Delivery

Service quality is assessed by looking at the reliability, responsiveness, competence, and overall customer experience. Typical performance measures may include:

- Customer satisfaction scores
- First-contact resolution rates
- Delivery time against agreed deadlines
- Number of complaints received
- Repeat business rates

### Focus on Flexibility

Flexibility relates to how well a service provider can adjust to new requests, fluctuating demand, or custom needs. Common performance measures for flexibility include:

- Average time taken to implement customer changes
- Range of customised service offerings completed
- Proportion of service requests fulfilled outside standard specifications
- Speed in redeploying staff or resources for urgent tasks

### **Worked Example 1.1**

A technical support centre aims to deliver solutions within two hours of a customer request and accommodates urgent ad-hoc technical requirements.

**Question:**  
Suggest one relevant service quality delivery measure and one flexibility measure for the centre.

> **Answer:**
> For service quality delivery, "Percentage of support calls resolved within two hours" is suitable.  
> For flexibility, "Number of urgent support requests completed within the agreed timeframe" is appropriate.

## Setting Effective Standards

Once relevant dimensions and measures are chosen, targets (standards) must be established. Standards should fulfill three criteria:

- **Ownership:** Staff should help set standards, increasing commitment.
- **Achievability:** Standards must be realistic but challenging.
- **Fairness:** Targets should be equally challenging across teams and functions.

For service quality, an achievable standard might be resolving 90% of calls within two hours. For flexibility, it could be fulfilling 85% of last-minute requests on time.

> **Key Term: standard (in performance management)**
> A specific, agreed target for a given performance measure, designed to motivate and guide employees.

## Designing the Reward Structure

Rewards ensure that meeting (or exceeding) standards is encouraged and sustained. Rewards can be financial (bonuses) or non-financial (recognition, promotion), and must be:

- **Clear:** Linked directly to measurable outcomes.
- **Controllable:** Within the influence of staff.
- **Motivational:** Valued by the recipient.

### **Worked Example 1.2**

A call centre introduces a quarterly bonus if staff achieve a customer satisfaction score above 95% and can handle at least 20% more requests during seasonal peaks.

**Question:**  
How does this reward system support service quality and flexibility?

> **Answer:**
> The bonus directly encourages staff to prioritise high-quality service and to be more responsive to peak demands, aligning rewards with the desired behaviours in service quality and flexibility.

### **Revision Tip**

When applying the Building Block model, always specify both the measurable KPI and the standard or target for each dimension. Avoid generic statements such as "improve flexibility" without defining how it will be tracked.

## Practical Application

The key to effective service performance management is selecting dimensions and measures that reflect what matters to customers and the business, setting challenging but fair targets, and rewarding performance in a way that motivates desired behaviours.

### **Worked Example 1.3**

A logistics firm finds delivery punctuality is dropping and customers are requesting more same-day deliveries.

**Question:**  
Apply the Building Block model to address the issues of quality and flexibility.

> **Answer:**
> Dimension: Quality—Measure and set a standard for "Percentage of deliveries on time" (e.g., target of 98%).  
> Dimension: Flexibility—Measure "Same-day delivery requests fulfilled on time" (e.g., target of 90%).  
> Reward: Introduce a monthly team bonus if both targets are met, giving staff ownership and motivation to focus on both areas.

### **Exam Warning**

In exam scenarios, avoid only listing generic measures. Always justify why your chosen measures, standards, and rewards fit the organisation's context and drive improvement in service quality or flexibility.

## **Summary**

The Building Block model structures service performance management around selecting relevant dimensions (like service quality and flexibility), setting fair and attainable standards for each, and linking rewards to actual achievement. This ensures all staff are focused and motivated on delivering high-quality, flexible service in line with customer demands and business strategy.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Explain the structure and purpose of the Building Block model in service organisations
- Identify performance dimensions for assessing service quality delivery and flexibility
- Set ownership-driven, achievable, and fair standards for service delivery and flexibility measures
- Align reward systems to desired service behaviours and outcomes
- Apply the model to practical service performance management scenarios in exams

## **Key Terms and Concepts**

- Building Block model
- service quality delivery
- flexibility
- standard (in performance management)

Building Block model and service performance - Service quality delivery and flexibility