The Building Block Model

The Building Block Model

The Building Block Model

Introduction to the Building Block Model

The Building Block Model by Fitzgerald and Moon is a tailored framework for the service industry. It organizes performance metrics into three blocks: dimensions, standards, and rewards, fostering organizational efficiency and employee motivation.

3.1 Dimensions of the Building Block Model

In the Building Block Model, dimensions serve as the pillars or core elements that the performance is measured against. They represent both the present operational parameters and the future predictors of success.

  1. Competitiveness: The ability of the company to stand out and perform better than its competitors.
  2. Financial Performance: A snapshot of the company's financial health and profitability.
  3. Quality of Service: The level of excellence in delivering services to customers.
  4. Flexibility: The capacity to adapt and change as per the market or customer needs.
  5. Resource Utilisation: How efficiently a company utilizes its available resources.
  6. Innovation: The drive and capacity to introduce new ideas, processes, or products.

3.2 Criteria for Setting Standards

Standards are predetermined benchmarks that help to gauge the performance for each dimension. Effective standards should:

  1. Ownership: Involve managers in the setting process, promoting acceptance and motivation.
  2. Achievability: Set goals that are tough but possible, so they motivate instead of discourage.
  3. Fairness: Equitably set across the organization, ensuring no department or individual faces undue pressure.

3.3 Criteria for Setting Rewards

Rewards serve as motivational incentives given upon achieving or surpassing the set standards. When setting rewards:

  1. Clarity: Rewards should be transparent and understood by all - what's being rewarded and why.
  2. Link to Standards: Directly tie rewards to the performance standards, ensuring a clear line of sight between effort and reward.
  3. Desirability: Ensure that the rewards offered are genuinely sought after by employees, be it monetary, recognition, or opportunities for growth.

3.4 Practical Examples:

3.4.1. Amazon Web Services (AWS):

Dimensions:

  • Competitiveness:
    • KPI: Market Share among Cloud Providers
    • Standards: 5% growth in market share within the year.
    • Rewards: Bonus for the sales team for each % increase in market share.
  • Financial Performance:
    • KPI: Growth in annual cloud revenue
    • Standards: 10% YOY increase in AWS revenue.
    • Rewards: Stock options for meeting or exceeding revenue targets.
  • Quality of Service:
    • KPI: Uptime and Service Reliability
    • Standards: Maintain 99.99% uptime across services.
    • Rewards: Team retreats for teams maintaining service reliability.
  • Flexibility:
    • KPI: Time to Deploy New Service
    • Standards: Average of 1 month to roll out new updates or features.
    • Rewards: Extra R&D budget allocation for teams showcasing innovation.
  • Resource Utilisation:
    • KPI: Server Utilization Rate
    • Standards: Achieve 85% optimal server utilization without service disruption.
    • Rewards: Bonuses for optimization teams reaching the goal.
  • Innovation:
    • KPI: New Services or Features Launched
    • Standards: Introduce 3 new cloud services/features per year.
    • Rewards: Innovation award for the team behind the most adopted new feature.

3.4.2. Marriott Hotels:

Dimensions:

  • Competitiveness:
    • KPI: Occupancy Rate against Competitors
    • Standards: Above 75% occupancy throughout the year.
    • Rewards: Performance bonus for hotel managers exceeding the rate.
  • Financial Performance:
    • KPI: Annual Revenue Growth
    • Standards: Achieve 7% YOY revenue growth.
    • Rewards: Incentive trips for top-performing hotel managers.
  • Quality of Service:
    • KPI: Guest Satisfaction Scores
    • Standards: Average score of 9 out of 10 in post-stay guest surveys.
    • Rewards: Employee of the month award for staff with best reviews.
  • Flexibility:
    • KPI: Customization Options for Guests
    • Standards: Offer a minimum of 5 different customization options per guest room.
    • Rewards: Recognition and bonus for staff offering innovative customization suggestions.
  • Resource Utilisation:
    • KPI: Energy and Water Usage Efficiency
    • Standards: Reduce energy and water consumption by 5% YOY.
    • Rewards: Sustainability award for hotels achieving the target.
  • Innovation:
    • KPI: New Amenities or Services Introduced
    • Standards: Introduce at least two new amenities/services per year.
    • Rewards: Managerial promotions for those who implement successful innovations.

3.4.3. Uber:

Dimensions:

  • Competitiveness:
    • KPI: Market Share in Ride-Sharing
    • Standards: Grow market share by 8% YOY.
    • Rewards: Bonuses for regional managers exceeding the growth target.
  • Financial Performance:
    • KPI: Annual Revenue Growth
    • Standards: Achieve 10% YOY growth in revenue.
    • Rewards: Stock options for top-performing employees.
  • Quality of Service:
    • KPI: Passenger Satisfaction Scores
    • Standards: Maintain an average rating of 4.8/5.
    • Rewards: Incentives for drivers maintaining a 4.9+ average rating.
  • Flexibility:
    • KPI: Ride Options Offered
    • Standards: Ensure availability of at least three types of rides (e.g., UberX, UberXL, UberBlack) in major cities.
    • Rewards: Bonuses for areas with the highest ride diversity.
  • Resource Utilisation:
    • KPI: Average Trips per Driver per Day
    • Standards: Average of 20 rides per driver daily.
    • Rewards: Cash bonuses for drivers exceeding the average.
  • Innovation:
    • KPI: New Features in App
    • Standards: Roll out two new app features or enhancements per year.
    • Rewards: Recognition and bonus for the tech team behind successful features.

3.5 Pros and Cons of the Building Block Model

3.5.1Pros:

  1. Tailored for the Service Industry: The model is specifically designed with the characteristics of service companies in mind, ensuring a more tailored and effective approach.
  2. Incorporates Human Resources: By explicitly linking rewards to performance, the model fosters alignment between corporate strategy and HR.
  3. Clear Differentiation: The model differentiates between downstream results and upstream determinants, making it clearer how present actions will influence future results.

3.5.2 Cons:

  1. Less Suitable for Non-Service Companies: The model may not fit manufacturing or other non-service industries as effectively.
  2. No Explicit Strategic Link: Unlike the balanced scorecard, this model doesn’t have an overt link to strategic objectives and mission in its diagram.
  3. Complexity: Ensuring the "standards" set are owned, achievable, and fair across a large organization can be complex, and there’s potential for inconsistency.

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Categories: : Advanced Performance Management (APM)

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