Strategic Performance Measurement of Research and Development: A Case Study

Abstract

The paper used an in depth case study to investigate how firms can integrate the strategic performance measurement of R&D with the Balanced Scorecard. Moreover, the paper investigated the crucial role of controller in the decision making process of this integration. The literature review of R&D management evidenced the limits of Balanced Scorecard to manage and monitor the R&D activities. Therefore, the firms have to create a specific performance measurement system and to link it with the macro-indicators of Balanced Scorecard. The controller has a central role in the selection of non-financial ratio as the R&D measures to introduce in the Balanced Scorecard. In choosing our case study, we have selected the pharmaceutical industry because of its relevant R&D investment. Within the sector we chose the Italian affiliate of a traditional industry leader, Eli Lilly Italia,that was characterized by the reorganization of R&D performance measurement systems and its consequent simplification. The Balanced Scorecard of Eli Lilly Italy were categorized into four perspectives: Financial Perspective, Customer Perspective, Competence Perspective and People Perspective. The competence perspective was linked to the R&D dashboard, composed by several key performance indicators: cycle time, cycle time AMR, publication, corporate productivity, capacity, rating audit quality. Furthermore, when the company has implemented the Balanced Scorecard, the controller has assumed a crucial role in choosing indexes and in the organizational learning process connected to the feed-back process. The study offers an example of integration of R&D performance management with Balanced Scorecard and it contributes to the literature review about the role of controller in a complex system control environment