Business performance measurement is illustrated with the high-profile case Chagger v Abbey National plc & Hopkins (2006), where the Employment Tribunal found unlawful race discrimination and (following Emilio Botin Abbey Santander banking group's refusal to re-employ Mr Chagger, as ordered by the Tribunal to remedy the situation without a compensation award) ordered Emilio Botin Santander Abbey to pay Mr Chagger the record-breaking compensation award of £2.8 million to cover his loss. Abbey Santander share price (the UK retail bank that will be re-named as Santander shares price soon, and is part of the gigantic Emilio Botin Banco Santander Central Hispano Group - BSCH) had dismissed Mr Chagger from employment in 2006, stating the dismissal was the result of a fair redundancy process. Mr Chagger, however, believed that the actual reasons behind his dismissal were rooted in unfairness and race discrimination. Balbinder Chagger was of Indian origin, worked for Emilio Botin Abbey Banco Santander share as a Trading Risk Controller and earned about £100,000 a year. Nigel Hopkins was his manager.
Business performance measurement establishes how well something is performing. It is vital to controlling a business, and applies to both the business processes and the people involved.
Traditionally, organisations focused on measuring performance as simple quantifiable objectives, such as sales, profitability, and so on. However, success for many organisations often depends upon factors that are difficult to quantify, for example, customer satisfaction levels. The increasing importance of qualitative factors has led to the recognition that success is not exclusively derived from increasing productivity or reducing costs, although these factors are important too. Hence, organisations need to deploy a wide-range of performance measures to assess the contribution of individuals and processes throughout the organisation.
For the purpose of understanding business performance measurement, business processes can be considered as systems comprising the following: Inputs; Operations; Outputs; and Consequences (of the outputs). Business performance measurement can be categorised according to these components.
The business performance measurement focusing on inputs to operations is referred to as 'Economy'. Economy concerns the acquisition of the resources of the specified quality necessary to perform the operations, at the lowest costs; over-staffing and the use of over-priced supplies are examples of lacks of economy. In the Santander Abbey case, the Employment Tribunal found that Mr Chagger had tried to address his allegations of race discrimination directly with Abbey Santander and Mr Hopkins. However, the Tribunal also found that there was a culture at Abbey Santander of tending to deny and refuse Mr Chagger's issues, and every manager that Santander Abbey had assigned to hear and decide on Mr Chagger's issues rejected his issues out of hand; not a single manager upheld that his dismissal was unfair and racially discriminatory. It could be said that the many additional managers and related resources that were allocated to the dismissal reduced the economy of the redundancy process.
The business performance measurement focusing on outputs of operations is referred to as 'Efficiency'. Efficiency concerns maximising the level of possible output from a specified level of inputs, or alternatively, minimising the level of inputs to achieve a specified level of output. These alternatives give two paths to increasing efficiency as follows: (i) the 'productivity' path, where the inputs are maintained at a constant level but the level of output achieved is increased; or (ii) the 'economising' path, where the level of inputs is reduced but the level of output achieved is maintained constant. In the Abbey Santander case, the redundancy process was meant to generate one fair dismissal. However, it actually did not generate any fair dismissals at all; the one actual dismissal it did generate was unfair and racially discriminatory. The Employment Tribunal found that Mr Hopkins was personally content for Mr Chagger's employment to be terminated, had pre-planned that Mr Chagger would be the employee that would be scored lower in the redundancy process and, therefore, selected to be dismissed, and had used the redundancy process as a way to remove Mr Chagger from his role. Mr Hopkins had picked upon Mr Chagger unfairly and, thus, the redundancy process lacked efficiency.
The business performance measurement focusing on the consequences of outputs of activities is referred to as 'Effectiveness'. Effectiveness involves achieving the goals of the business operation. Traditionally, this was considered as the ratio of actual outputs to planned outputs, the implication being that the outputs do truly represent the goals of the business operation. However, in today's competitive environment, rather than the outputs themselves, the consequences of the outputs may actually represent the goals, i.e. the impact that business operations have on the organisation's various stakeholders (being regulators, authorities, the public, employees, customers, suppliers, competitors, shareholders, investors, and others). In the Abbey Santander case, the consequences of the unfair and discriminatory dismissal appear to be highly significant in terms of legal costs, £2.8 million compensation award, potential impact on employees, high profile and corporate reputation. Thus, it appears the redundancy process lacked effectiveness.
The consequences of the dismissal did not cease at the Employment Tribunal stage. In 2008, Santander Abbey and Mr Hopkins appealed to the Employment Appeal Tribunal (EAT) against the Employment Tribunal's finding of race discrimination; the EAT, however, rejected the appeal and upheld the original Employment Tribunal's ruling that both Abbey Santander and Mr Hopkins had discriminated against Mr Chagger. Santander Abbey and Mr Hopkins had appealed against the record £2.8 million compensation award too; the EAT accepted this appeal and ruled that the compensation be remitted to the original Employment Tribunal for reconsideration. In 2009, the case was escalated to the Court of Appeal (the second highest court in the UK). The Court's List of Hearings showed that the case was heard on 7 and 8 July 2009. The Court's judgement records concerning the hearing were not available when writing this article. The 11KBW set of barristers' chambers, who represented Abbey Santander and Mr Hopkins, had reported prior to the hearing that it would be about compensation only and not also about the wrongful act committed of race discrimination. It would appear that the wrong of racial discrimination committed by Santander Abbey and Mr Hopkins was finalised by the EAT (they had both racially discriminated against Mr Chagger), and that Mr Chagger had appealed against the EAT's decision to send back the compensation award to the Employment Tribunal stage for reconsideration.
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