Running Head: KEY PERFORMACE INDICATORS 1

Key Performance Indicators

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Introduction

For any business to be able to succeed, it is important that the business has put in

place a mechanism that is used to quantify the performance of the business in a given

period of time. Among others, some of the commonly used approaches to measures the

performance of a given organization comprises of sales forecasts, Key Performance

Indicators (KPIs), and performance reviews. This paper focuses on the topic of KPI and

why it is crucial to negotiate KPIs with alliance partners. After that, the paper analyzes

the impacts of foundation accords, governance accords, and change accords on the

success of a strategic alliance.

What is Key Performance Indicators?

Prior to evaluating the importance of negotiating KPIs with alliance partners, it is

ideal to first define what KPIs entails. From a review of the various definitions that have

been used by different scholars, KPI can be expounded on as a quantifiable value that

shows how successful an organization has been in attaining the main business

objectives. From that perspective, KPIs can be said to be used by organizations in order

for them to be able to examine the effectiveness at achieving targets (Cronin 2007).

Importance of negotiating key performance indicators with alliance partners

Alliance partners come together to establish an alliance that is aimed at achieving

specific objectives. In that perspective, when the alliance partners establish agreements

that are specific to the alliance, KPIs would be crucial since they will ensure that

measures that will be used to identify whether the alliance has been successful or not

will be identified. Indeed, by having KPIs, that focus on a specific aspect of the
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performance of a business, the alliance will be in a better position to achieve its

objectives. Thus, the KPIs will play a critical role in ensuring that each party to the

agreement will ensure that it does whatever it needs to do in order to ensure that

alliance will succeed.

In view of how KPIs alleviate potential problems with alliance partners, it can be

pointed out that KPIs prevent possible problems in various ways. To begin with, KPIs

ensures that all the alliance partners have the same views and opinions when it comes

to the measures that will be used to examine the success or failure of the partnership

implying that there will be no chance of the partners having disagreements on what is

going to be used to measure the success of the alliance. In addition to that, KPIs helps in

ensuring that the objectives of the partners are aligned to the objectives of the alliance

and by doing that, the likelihood of conflicts between the partners is avoided (Marr

2012).

From a review of the literature expounding on negotiating KPIs, it is clear that

there are various barriers that can get on the way during the negotiations. One of the

barriers entails cultural barrier that is common in situations where the negotiations

involves parties who are from different cultural backgrounds. Precisely, in such

situations, the parties might have different views and opinion on KPIs and how they

could be pursued. For example, a party coming from a collectivist culture might

advocate for the KPIs to be based on teamwork while a party coming from an

individualistic culture would advocate for KPIs to be based on individual performance.

Another barrier that could be encountered when negotiating KPIs entails legal barriers
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since it is paramount that the KPIs are compliant to existing rules and regulations. For

example, the partners cannot have a KPI that demands the employees to work for

number of hours that are more than what is allowed by existing laws and regulations.

The third barrier that could be encountered when negotiating KPIs may entail different

motives from the different alliance partners since in the event that one of the partners

have a motive that is different to the other partners, it will be challenging for the

partners to come to an agreement on the KPIs to be used (Parmenter 2015; Mar 2012).

In order to remove or address the barriers, it will be important that the partners

are aware of the fact that they come from different backgrounds and by doing that, they

should ensure that they are not judgmental of others. Moreover, it would also be ideal if

the partners acquaint themselves with the cultures where other partners come from

since they will be able to understand each other better and come to an agreement when

they have a better understanding of the reason why a given partner is of certain views

and opinions. In view of the legal barriers, the partners need to acquaint themselves

with the legal environment so that they ensure that KPIs developed are in line with the

existing rules and regulations. Finally, in order to ensure that all partners are of the

same motive, it is important that the main aim of the alliance is specified before any

negotiations on the KPIs commences (Marr 2012).

Effects of foundation accords, governance accords, and change accords on the success

of a strategic alliance

A strategy plays a major role in an organization since it is responsible for

ensuring that the aims and objectives of the organization are achieved. From that
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perspectives, the overall strategy of given organization will play a major role when it

comes to making of decisions pertaining to the organization as it will drive the accords.

For example, the overall strategy of an organization will determine the objective of the

organization and by doing that, it will also be crucial when it comes to driving accords.

Apart from that, the overall strategy will also drive accord as it is going to determine

various aspects of the accords hence the reason that Fuller (2012) explained that the

overall strategy drives the accord as it enhances consistency in an organization.

In view of potential risks and benefits associated with each type of accord on the

success strategic alliances, it can be pointed out that the benefits comprise of improved

capital ratio and enhancing the competitiveness of the business. On the other hand, the

potential risks comprise of different views that could result to conflicts and the loss of

independence of an organization as decisions have now to be made from the group. As

far as change accords are concerned, they are beneficial to a strategic alliance as they

enhance competitiveness while at the same time also making the organization been

better placed to react to changes taking place in the external environment. Nevertheless,

it is also important to note that the change accords could be time consuming and at the

same time expensive (Fuller 2012).

While considering the type of accord that will be most important for the long-

term success of the strategic alliance, it can be noted that the governance accord is the

most important type of accord. The reason why that is the case is due to the fact that

this type of accord encourages unity among all involved parties. With the unity being in
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place, it is easy for strategic roles to be effectively carried out while at the same time

ensuring that the resources available are all mobilized in pursuing the objectives.
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References

Cronin, G. (2007). Measuring strategic progress. Choosing and using KPIs. Accountancy

Ireland, 39 (4), 30 -31.

Fuller, S. (2012). Knowledge management foundations. New York: Routledge.

Marr, B. (2012). Key Performance Indicators (KPI): The 75 measures every manager

needs to know. New York: Pearson.

Parmenter, D. (2015). Key performance indicators: developing, implementing, and

using winning KPIs. New York: John Wiley & Sons.