Archive for November, 2010

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Data visualization of the Ireland debt crisis

Thursday, November 25th, 2010

Facilitated by improved data access and visualization software, infographics are today the pinnacle of the saying ‘a picture speaks a thousand words‘.

The image below is a representation of the web of debt between several key European economies, having at the center a group of countries currently called PIIGS: Portugal, Italy, Ireland, Greece and Spain.

PIIGS

Source: The New York Times, 2010

References:

New York Times (2010), Europe’s Web of Debt, available at: http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html, accessed 24/22/2010

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Global measurement of luxury and wealth – The Cost of Living Extremely Well Index (CLEWI)

Wednesday, November 24th, 2010

Forbes lauched in 1976 the Cost of Living Extremely Well Index (CLEWI) that measures the price of a basket of luxury goods, being considered to be for the very rich what the Bureau of Labor Statistics’ Consumer Price Index is to ordinary people. The index is based on the selection of 40 goods and services reserved to very rich customers, such as:

  • Dinner costs at the famous La Tour d’Argent in Paris: decreased with 15%, to $ 1,704;
  • Average cost for a yearling racehorse from championship lines: decreased with 16% to $271,551;
  • Cost of Bombardier Learjet 40XR aircraft: $10.6 million versus $9.3 million one year ago.

The Cost of Living Extremely Well Index (CLEWI) was set to 100 in 1976 and had been continuously increasing since then.

Source: Forbes (2010)

Over the 12 months ended in August the CLEWI rose 1%, keeping pace with the Consumer Price Index’s 1.1%. During this period,  the aggregate net worth of the  Forbes 400 Richest People in America rose 8%, from $1.27 trillion up to $1.37 trillion (Forbes, 2010).

This index is tracking the cost of luxury items, being a relevant indicator both for the luxury market and the wealthy population. Conventional wisdom once dictated that no matter the turbulence within economy, the richest segment of the population would stay above the fray, allowing makers of luxury products to maintain their sales. However, as shown by CLEWI, this statement is questionable today, as not even luxury, nor richness can be immune to the global economic slide.

References:

Forbes (2010), Forbes Price Index of Luxury Goods Keeps Pace With Inflation, available at: http://blogs.forbes.com/scottdecarlo/2010/09/23/forbes-price-index-of-luxury-goods-keeps-pace-with-inflation/ (accessed 21 November 2010).

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The value of pre-built Performance Dashboard solutions

Tuesday, November 23rd, 2010

A recent Aberdeen Report, released in October 2010, looks into the strategies and tactics used by companies in order to forge stronger linkages between execution and corporate strategy using performance dashboards.

A particular part of the research investigates the overall performance and capabilities of organizations that are using pre-built dashboard solutions by comparing them with organizations that chose to build their own custom dashboards, either using a development kit or build it from the ground.

A pre-built dashboard solution is defined for the purpose of the research as ‘dashboards that are purchased with specific industry or line of business Key Performance Indicators (KPIs) already built-in’. Examples of such pre-built solutions can include performance dashboards from a wide range of functional areas and industries such as Human Resources, Retail or Real Estate Development.

Pre-built dashboard solutions as described in the report can be implemented in many ways, including traditional on premise deployment or using Software as a Service (SaaS) approach.

Key report findings

One of the main findings of the study is that pre-built dashboard solutions are much faster to be deployed within organizations than other custom made solutions. In average an organization that uses a pre-built dashboard solution was able to deploy their first dashboard project in 51 days, 60% of the time required by organizations that were using custom dashboard solutions, which needed 88 days in average for implementation, as shown in the graph below.

Source: Aberdeen Group, 2010

A key benefit of pre-built dashboards is that they enable rapid deployment through modification. As the Aberdeen Report (2010) shows, the time needed to modify a dashboard pre-built solutions is in average only half from the time needed to bring changes to a custom developed dashboard solution.

Source: Aberdeen Group, 2010

Another advantage of pre-built dashboard solutions is that they allow customization and tailoring according with the organizational own needs. The research results show that companies using pre-built dashboard solutions are 45% more likely to have dashboards that can be tailored within the organization cutting time and saving money for the business.

Source: Aberdeen Group, 2010

Despite the fact that many would thing that organizations choosing to implement pre-built dashboard solutions don’t have the necessary business intelligence to implement such solutions by their own, and thus prefer a hands off approach, the Aberdeen Group (2010) report presents a totally different situations. According with the study, organizations that pursue pre-built dashboard solutions ‘are twice as likely as other organizations to possess a Business Intelligence Competency Center (40% to 19%)’

Additionally, as the report shows, these organizations have a clearer understanding of the organizational performance culture both in terms of aligning Key Performance Indicators used at the operational level with the strategic objectives from the corporate level, and understanding of the strategy execution process overall.

Source: Aberdeen Group, 2010

Key benefits of pre-built performance dashboard solutions

  • Pre-built dashboards enable a faster deployment process;
  • Are easily adaptable to rapid change and modification;
  • Are more likely to be customized from inside the company through configuration, not coding;
  • Pre-built dashboard solutions are often coming with “out-of-the-box” functionality, such as relevant Key Performance Indicators, pre-built reports and visualization solutions.

Key recommendations

Despite the fact that pre-built dashboard solutions are fast to implement, adaptable to change and easily to customize a certain amount of effort needs to be allocated in order to integrate them with other enterprise systems as well as configure them to the organization specific needs. Some of the things that need to be taking into account are:

  • As pre-built solutions are likely to include a broader range of Key Performance Indicators and reports that the business actually needs, they need to be mapped and configured to best serve the functionality required by the business;
  • The implementation of pre-built dashboard solution might require defining new Key Performance Indicators and creating new reports or modifying existing ones in order to best translate organization’s strategic direction;
  • Security controls and privileges must be set in place and data custodians must be named for each KPI.

References

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Electronic medical records (EMR) data visualization

Monday, November 22nd, 2010

Just half of century ago, patient records in the medical practice were kept in the form of traditional written / typed documents. One of the most important developments in the medical practice that was possible with the technological enhancement of computers and, later on, the internet, is considered to be the electronic medical record (EMR). Not only did it permit a better and easier management of patient information within the healthcare unit, but is also made possible the integration of patient intelligence at local or even national level, this integration being vital in the perspective of treating or moving the same patient to other hospitals.

The patient record arose in the 19th century as a highly personalized ‘lab notebook‘ that clinicians would use to record their observations and plans so that they could be reminded of pertinent details when they would next see that same patient (Shortliffe, 1999).

In 1994, Edward Tufte, one of the most respected authorities in the field of data visualization, predicted that ‘medical records will soon be computerized‘, which will overcome the disadvantages of handwritten of printed documents. He best described the traditional, written medical record with the acronym WORN (write once read never), by contrast with the acronyms WYSIWYG (what you see is what you get) and WORM (write once read many) (Powsner and Tufte, 1994).

The authors further on suggest a graphical summary of patient status that illustrates the course of an illness and the treatment outcomes for a patient under examination. Both previous patient data and most recent results are included and complex clinical relations can be shown in order to test hypothesis. The graphics are supported by commercially available software and hardware and were created by extracting information from the traditional patient record and introducing it into the software used. As the authors finally put it, instead of a 5 cm thick record, a single page reveals the patient status graphically.

Source: Powsner and Tufte (1994)

In 1999, Edward Shortliffe argued that, at that point, ‘no clinical computing topic is gaining more attention than electronic medical records‘. He then described electronic patient record as the ‘medical record in a new incarnation: electronic, accessible, confidential, secure, acceptable to clinicians and patients, and integrated with other, non-patient-specific information‘ (Shortliffe, 1999).

He took the discussion further and described the concept of integrated clinical workstation, representing a single entry point into a medical facility in which computational tools not only assist with clinical matters (results reporting, order entry etc.), but also with administrative work (Admission-Discharge-Transfer process, materials management, payroll), research (quality assurance, clinical trials) and scholarly information (digital libraries, drug information databases etc.).

While the electronic medical record would be at the heart of this integrated clinical workstation, the author argues that it would represent not an object in itself, but rather a set of processes that involve automation, such as processes for data collection and integration from various sources, as well as tools for displaying the data, analysis and sharing (Shortliffe, 1999).

Along with the complexity of systems and processes EMRs require, another issue associated with the electronic patient records is the security and confidentiality of patient information. However, considering the results of s study conducted in U.S. in 2009, it seems that it is not a matter of patients’ security concerns (as in electronic banking and ecommerce, if benefits are high and security guarantees the same, people will finally resort to it), but rather a matter of hospital and doctor choice or possibility. The study revealed that less than 2 percent of U.S. hospitals have adopted fully functional electronic medical records, most citing the required costs as being the biggest barrier (Steenhuysen, 2009).

References:

Powsner, S., M. and Tufte, E. (1999), Graphical summary of patient status, The Lancet, Vol. 344, pp. 386-389.

Shortliffe, E., H. (1999), The Evolution of Electronic Medical Records, Academic Medicine, Vol. 74 No. 4 , pp. 414-419.

Steenhuysen, J. (2009), Few U.S. hospitals have electronic medical records, available at: http://www.reuters.com/article/idUSTRE52O6WO20090325 (accessed 22 November 2010).

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2010 top 50 most attractive employers in the world

Friday, November 19th, 2010

There is no doubt that finding and attracting the best talent is a top priority for today’s organizations, especially for those activating in the global competitive markets. While attracting best people depends on the company’s image and how it is perceived as an employer, employer attractiveness studies are of great interest to inform both the employers on their image in the labor market and the employees on their decisions to choose a company.

Universum, an employer branding company, publishes on an annual basis the Top 50 most attractive employers report. It measures the frequency of being selected as an “Ideal Employer” by career seekers in the world’s 12 largest economies: U.S., Japan, China, Germany, France, U.K., Italy, Brazil, Spain, Canada, Russia and India. The respondents are career seekers in the business or engineering fields, who are studying in one of the world’s reputed academic institutions, the target group being made of almost 130,000 persons (Universum Group, 2010).

Below are the top ten most attractive employees in 2010, for both business and engineering:

Source: Universum Group (2010)

In 2010, Google has managed to stay on top position from the precedent year and it leads in both business and engineering fields. In the business field, it is followed by the Big Four auditing firms, while in the engineering field, the IT firms still have the lead.

What the researchers have seen as the most important trends in 2010 is the consolidation of auditing and FMCG firms, whereas companies in the financial services and resources, probably due to the fact of being more involved in the economic recession, faced decreases in their attractiveness as employers. So, it was revealed that the perception of industry influenced the perception of employer brand (Universum Group, 2010).

Regarding the origins of the most attractive employers, in both categories, business and engineering, from the 50 firms that made it to the top, 24 in each list are American companies. For the first time a Chinese company, Lenovo, made it to the list of top 50 most attractive employers in engineering, on the 44th position (Universum Group, 2010).

For the complete Top 50 World’s most attractive employers 2010 visit: http://www.universumglobal.com/Top50.

Reference

Universum Group  (2010), The World’s Most Attractive Employers 2010,  Stockholm, Sweden.

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Erecting a 15-story Building in 6 Days – Changsha, China

Thursday, November 18th, 2010

Last week, Yahoo News reported that in June this year, a Chinese construction crew completed a 15-story building in only six days (Dykes, 2010 & Jia, 2010).

The steel building is located in south-central city of Changsha. It covers 610.83 square meters and is of 49.95 meter height. 200 workers with over 200 transport vehicles brought all the building components, which had been previously produced in factories, to the site and the construction was only to install and assemble the parts.

Source: Yahoo News

After full completion, the building was launched into service as a commercial building in August.

The swiftly-constructed building is called Sustainable Building. The quickness is only part of the story, according to Broad Air Conditioning Co, Ltd., the construction company of the 15-story building and partner of Shanghai Expo.

Specific performance results include:

  • Safety and quality of the building

# Magnitude of earthquake resistance

# Life span

The building is tested to withstand a magnitude 9 earthquake and the expected usage life is over 50 years of use.

  • Productivity and Efficiency

# Time for construction

The technique of fast building called modular construction enables workers to assemble eight stories in one day, which reduces the time for overall completion.

  • Cost Efficiency

$ Cost for construction

$ Cost in use

Compared to traditional buildings, the sustainable building saves raw materials during construction and energy after it is put to use by about 80%.

  • Health and Safety

# Reportable accidents

# Lost-time accidents

There were zero reported accidents during the two-day construction.

From long-term perspective, the new construction technique is expected to be applied to the industry in China.

For more details on Key Performance Indicators specific to the Construction and Capital Works – Construction of Buildings or Production & Quality Management functional areas, please visit the KPI examples section on smartkpis.com.

References

Dykes, B. M. (2010), Chinese Workers Build 15-story Hotel in just Six Days, Yahoo News, Business Section, available at http://news.yahoo.com/s/yblog_upshot/20101112/bs_yblog_upshot/chinese-workers-build-15-story-hotel-in-just-six-days (accessed 17 November 2010)

Jia, H. (2010), Broad Air Conditioning Co. Ltd. Constructed a 15-story Building in 48 Hours, Economic Observation, Real Estate Section, available at http://www.eeo.com.cn/industry/real_estate/2010/07/14/175499.shtml (accessed 17 November 2010)

smartkpis.com, Key Performance Indicators from the Construction and Capital Works – Construction Industry areas, available at http://www.smartkpis.com/kpi/industries/construction-capital-works/construction-of-buildings/ (accessed 17 November 2010)

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Global measurement of retail theft

Wednesday, November 17th, 2010

The Centre for Retail Research recently launched the Global Retail Theft Barometer 2010 report, revealing that total global shrinkage (stock loss from crime or waste expressed as a percentage of retail sales) cost retailers and the puCover of 2010 GRTBblic US$ 107.3 billion, equivalent to 1.36% of their retail sales.

The results indicate that the top European country with the highest losses from employee theft is the UK, with 36.8% of product losses, while Austria has the lowest figure (22.7%).

In the U.S., Canada, and Australia employee theft was estimated to be greater than shoplifting losses. In the U.S. for example, employee fraud contributing to 43.7% of shrinkage ($17.2 billion) , while shoplifting for 34.9% ($13.7 billion).

Retailers apprehended 6.2 million store thieves in 2010, with the most stolen items including branded expensive products, such as perfume and fine fragrances, alcohol, cosmetics and skincare.

Source: Centre for Retail Research (2010)

The Key Performance Indicators used within the 2010 Global Retail Theft Barometer are:

  • $ Shrinkage cost – reached  US$ 107.3 billion, equivalent to 1.36% of the retail sales. Shrinkage has decreased by 5.6% as retailers put almost 10% more funds into security and loss prevention.
  • $ Global cost of crime per family (household) was $185.59.
  • # Shoplifting attempts: 31% of retailers declared that shoplifting had increased compared to the previous year, when 41% had found that shoplifting attempts had increased. Note that this proportion is not the increase in net shoplifting but the percentage of store groups affected.
  • $ Cost of shoplifting was $45.5 billion. Though the main crime problem that retailers faced was shoplifting, this was accounted for 42.4% of shrinkage, as retailers were organised enough to prevent the increase in shoplifting from pushing up shrinkage.
  • $ Employee theft reached $37.8 billion, accounted for 35.3% of shrinkage.

Source: Centre for Retail Research (2010)

The internal error and administrative failure (e.g. pricing or accounting mistakes) was 16.9% ($18.1 billion), and supplier or vendor theft and fraud was 5.4% of shrinkage ($5.8 billion). Both these totals had improved over the previous year (Centre for Retail Research, 2010).

The 2010 edition of the Global Barometer covers 42 countries, including the U.S., China, Australia, France, Germany, Brazil, UK, South Africa, Turkey, and India, having 1103 respondents from large retail corporations. The report reached its tenth edition, being initiated and compiled by the Centre for Retail Research, originally a university research group, providing authoritative research and analysis of the retail and service sectors in Britain, Europe and globally.

References:

Centre for Retail Research (2010), Global Retail Theft Barometer 2010, available at: http://www.retailresearch.org/grtb_globaltrends.php (accessed 15 November 2010)

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Performance Measurement Maturity Model – assessing organizational performance measurement capabilities

Monday, November 15th, 2010

Performance Management and Measurement

In scientific management performance is associated with two key processes, performance management and performance measurement which cannot be separated from one another. Performance management both proceeds and follows performance measurement.

Performance measurement appears as a sub process of performance management that mainly focuses “on the identification, tracking and communication of performance results, by the use of performance indicators” (Brudan, 2010).

Performance Measurement roles and importance

Increasingly, authors and commentators are discussing the multiple roles of measurement, as it is recognized that performance measurement allows managers to do far more than simply check progress (Neely, 2002).

The performance measurement system is a process supporting continuous learning in which feedback is used for identifying achievements and making adjustments to agreed-upon strategies or initiatives to ensure continued excellence of activities and services, and to progress for the attainment of organizations mission, vision and objectives. It also can provide a balanced and systematic attempt to assess the effectiveness of organizations operations from different points of view: financial, business performance, clients and employees.

In this setting performance measurement is a must and it is imperiously required to support the performance management system. One way to assure that a streamlined and mature performance measurement process is in place, is to assess the current measurement capabilities against a Performance Measurement Maturity Model.

About Maturity Models

In a previous blog, describing the Performance Management Maturity Model, we’ve presented the main reasons that stay behind why organizations might choose to use a maturity model in order to assess their current capabilities, such as:

  • Gaining a better understanding of strengths and weaknesses in order to enable improvement to happen
  • Gaining recognition of service quality in order to support proposals
  • Justifying investments in process improvement
  • Providing a map for continual progression and improvement
  • Focusing on the organization’s maturity rather than specific initiatives

Thus, maturity models prove to be important tools to help organizations align their processes to a common standard, and guide their process maturity, step by step following a structured and predefined path.

Performance Measurement Maturity Model

The Performance Measurement Maturity Model proposed below is informed by an academic research project (Brudan, 2009) supported by further insights from the experience gained as implementers of Performance Management Systems and developers of smartKPIs.com, one of the most comprehensive repositories in the world with Key Performance Indicators (KPIs).

The model is built on five key dimensions each describing an important characteristic or step of a performance measurement process.

Source: eab group, 2010

  • KPIs Identification & Selection – The selection of right Key Performance Indicators (KPIs) has a major impact on the organizational strategic directions. Indicators should focus on actions and services provided at each organizational level in order to achieve the organizational strategic objectives. Most important it must be considered at all times the measurement of what is important and not necessarily easy.
  • KPIs Documentation and Alignment – The process of KPIs documentation secures that the selected indicators are actionable, by establishing definitions, purpose, calculation formulas, targets, methods of data collection and reporting and data owners and custodians.
  • KPIs Collection and Interpretation – The process of KPIs collection and interpretation needs to be supported by a well defined and optimized system solution that responds to the performance measurement collection needs of the organization. Responsible for data gathering must be identified and it must be assured data availability for each KPI tracked in the Performance Scorecards and Dashboards.
  • KPIs Reporting & Visualization – Regardless of the parties involved in the performance reporting process it must be assured that the process is effective and efficient. An inefficient and ineffective reporting system will not generate any significant positive effect on improving the performance of an organization. Another important part of the measurement process is data visualization. Data visualization involves processing information in a graphic description of it in order to be understood and transmitted more easily, faster and more efficiently.

  • KPIs Feedback and Re-alignment – This process is one of the most important parts of the performance measurement cycle. It secures that the KPIs are kept on track and aligned with the organizational strategy, in order to provide with valuable information that will allow improved organizational practices.

The Performance Measurement Maturity Model uses a five level maturity framework which is adapted from The Capability Maturity Model Integration (SEI, 2001) and Portfolio, Programme and Project Management Maturity Model (OGC, 2008). Using this framework, organizations can assess the maturity level of their performance management practices in each of the five dimensions of the model against the 5 maturity levels.

Source: eab group, 2010

The model presented above represents a new tool that organizations can employ for assessing the maturity of  their performance measurement capability. For more details about how such a model can generate value in an organizational context, contact eab group.

References

  • Brudan, A.N. (2010), Rediscovering performance management: systems, learning and integration, Measuring Business Excellence, Vol. 14, Iss. 1, pp. 109-123
  • Brudan, A. (2009), Performance Management Maturity Level in  Business Organizations, Master thesis, Arhus School of Business, Denmark
  • Neely, A. (2000), Business Performance Measurement: Theory and Practice, Cambridge University Press, UK
  • Office Of Government Commerce – OGC, (2008), Portfolio, Programme and Project Management Maturity Model (P3M3), Pubic Consultation Draft, available at www.p3m3-officialsite.com (accessed  15 November, 2010)
  • Software Engineering Institute – SEI (2001), Capability Maturity Model Integration  (CMMI), Carnegie Mellon University, available at www.sei.cmu.edu/cmmi (accessed 15 November, 2010)

Additional resources

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eurobrand 2010: LVMH Group, Nokia and Vodafone, Europe’s top valuable brand corporations

Thursday, November 11th, 2010

The European Brand Institute, Europe’s leading research institute for intangible assets, based in Vienna, Austria, has released the 2010 results for its annual brand valuation study, ‘eurobrand’.

The study provides a ranking of Europe’s most valuable brands, both individual and brand corporations, as well as detailed brand analyses from country and industry perspectives. More than 3.000 brand corporations in 24 countries and 16 industries are examined (European Brand Institute, 2010a).

Below are top 5 valuable single brands:

Source: European Brand Institute (2010b)

The most valuable 5 brand corporations are:


Source: European Brand Institute (2010c)

According to Gerhard Hrebicek, Director of the European Brand Institute, the highest growths in brand values were registered in Pharma, Health and Biotech Industries (i.e. GlaxoSmithKline, Sanofi Aventis and Novartis). The highest decreases in brand values, as affected by the economic recession, were in IT and financial services (RBS, UniCredit and Deutsche Bank) (European Brand Institute 2010a).

References

European Brand Institute (2010a), eurobrand 2010 Press release, Vienna.

European Brand Institute (2010b), Brand Ranking – Single Brands, Vienna.

European Brand Institute (2010c), Brand Ranking – Brand Corporations, Vienna.

Note

To access the documents above and more information on eurobrand 2010, visit  http://www.eurobrand.cc and register for the eurobrand2010 PRESS KIT.

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Employee Performance Management – a Manufacturing sector perspective

Wednesday, November 10th, 2010

The traditional level at which performance management concepts are used in organisations is the individual level. Individual performance management is the organisational level with the longest history, as it mirrors the evolution of organizational complexity .

A recent Aberdeen Group Report, released in September 2010, provides more insight into the characteristics of the employee performance management practices in manufacturing organizations.

The study took in consideration the responses of 65  human resources and line of business professionals from the manufacturing sector and was based on the analysis of these organizations employees performance against three important Key Performance Indicators (KPIs):

  • % Employees that indicate that are engaged;
  • % Employees that exceeded performance goals or expectations according to last performance review;
  • % Year over year improvement in customer satisfaction.

Results

The results of the study suggest that when compared with their counterparts from other industry sectors, companies activating in the manufacturing sector are overall 15 % less likely to achieve Best-in-Class Status. (top 20% of aggregate performance scores)

Source: Aberdeen Group, 2010

The most common challenges indicated by the survey respondents as hindering the employee performance management efforts were:

  • The lack of follow-up between managers and employees regarding progress against  goals and performance expectations – indicated by 59% of respondents;
  • Difficulty in communicating the organization’s strategy – indicated by 40% of respondents; and
  • Too much reliance of manual processes – indicated by 35% of survey respondents.

Required actions for employee performance improvement

For reaching Best-in-Class Status, as defined by the Aberdeen Group (2010) analyses performance framework, several directions can be followed by manufacturing companies as outlined below:

  • Automate inefficient or manual processes – facilitating the process of performance management by making easier to record employee performance feedback, capture KPIs or organize and access this data;
  • Integrate employees goals with the business – by aligning the employees goals to the organizational strategic objectives;
  • Drive development and engagement through performance – by building a learning and innovative culture in the organization that fosters commitment to the company, talent development and retention of top performers.

Although the Aberdeen Group (2010) report results and suggestions are directed specifically towards the organizations activating in the manufacturing sector, they can be looked as valuable insights for all types of organizations activating in different industrial sectors. This is due to the fact that employee performance management or individual performance management is recognized as an important part of an integrated approach to how performance is addressed by organizations overall. For more details on Performance Management at different organizational levels please visit integratingPerformance.com.

Additionally a large number of Key Performance Indicator examples for the Human Resources Functional area are available in the KPI examples section of smartKPIs.com.

References

Aberdeen Group (2010), Employee Performance Management in Manufacturing: Goal Alignment is Key, available at http://www.aberdeen.com/aberdeen-library/6815/SI-employee-performance-management.aspx, (accessed 8 November 2010)

Additional resources

smartKPIs.com (2010), Key Performance Indicators examples from Human Resources functional area, available at http://www.smartkpis.com/kpi/functional-areas/human-resources, (accessed 8 November 2010)

integratingPerformance.com (2010), Individual Performance Management, available at http://www.integratingperformance.com (accessed 8 November 2010)

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Measuring the ease of doing business around the world

Tuesday, November 9th, 2010

A recent International Bank for Reconstruction and Development (IBRD) & The World Bank report, Doing Business 2011: Making a difference for entrepreneurs, presents a series of quantitative indicators on business regulation and the protection of property rights in 183 economies, from Afghanistan to Zimbabwe. This year’s edition is the eighth in a series of annual reports benchmarking the regulations that enhance business activity and those that constrain it.

The report aims to supply business leaders and policy makers with a fact base for informing policy making and to provide open data for research on how business regulations and institutions affect such economic outcomes as productivity, investment, informality, corruption, unemployment and poverty. However, its scope is limited, as it does not measure all aspects of the business environment that matter to firms and investors or affect the competitiveness of an economy.

The report presents two types of indicators:

  • ‘Time and motion indicators‘ - measuring the efficiency and complexity in achieving a regulatory goal by recording the procedures, time and cost to complete a transaction in accordance with all relevant regulations from the point of view of the entrepreneur.
  • ‘Legal scoring indicators‘ - measuring aspects with regards to the investor protections and legal rights for borrowers and lenders, as well as legal provisions in the laws and regulations on the books.

The indicators are used to analyze economic outcomes and identify what reforms have worked, where and why. In this year’s aggregate ranking on the ease of doing business is based on indicator sets that measure and benchmark regulations affecting 9 areas in the life cycle of a business: starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.

Source: The International Bank for Reconstruction and Development & The World Bank (2010)

Main conclusions of the report are:

  • Lower barriers to start-up are associated with a smaller informal sector.
  • The country’s contracting environment is a source of comparative advantage in trade patterns. Countries with good contract enforcement specialize in industries where relationship-specific investments are most important.
  • Lower costs of entry encourage entrepreneurship, enhance firm productivity and reduce corruption.
  • Simpler and increased number of start-up translates into greater employment opportunities.
  • Greater information sharing through credit bureaus is associated with higher bank profitability and lower bank risk (The International Bank for Reconstruction and Development & The World Bank, 2010).

Since its launch in 2003, Doing Business has stimulated debate about policy through the data and benchmarks offered, both by exposing potential challenges and by identifying where policy makers might look for lessons and good practices, recording more than 1,500 important improvements since 2004.

References

The International Bank for Reconstruction and Development & The World Bank 2010, Doing Business 2011: Making a Difference for Entrepreneurs, available at: http://www.doingbusiness.org/reports/doing-business/doing-business-2011 (accessed 7 November 2010).

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