Research concept updated


The impact of performance management on corporate performance

Why do some companies perform better using corporate performance measurement and management systems than others?

To cope with the increasing complexity of the business environment, management teams must prioritize effectively and focus their attention on activities that lead to higher performance. For that reason many organizations have invested substantial resources in the implementation of various performance measurement and management techniques. They believe, that performance measurement and management might help them to improve the performance somehow (see illustration below).

However, the added value of that investment often remains unclear with only few organizations reporting tangible payoff on the performance measurement systems. Consequently, managers of today need a clear guidance for their efforts to manage performance and on how to get the most value out of the existing performance measurement systems.

Since Kaplan and Norton (1992) first introduced their Balanced Scorecard, a substantial body of research around the design, implementation, and usage of performance measurement systems (PMS), has emerged (see Neely, 2005, for literature review). Despite the growing academic and professional interest, there is currently little knowledge regarding the impact of PMS on organizations (see Bourne, Kennerley, & Franco-Santos, 2005 for literature review). Furthermore, existing research provides contradictory results concerning performance effects of the PMS usage (Martinez, Kennerley, & Neely, 2004). While some authors clearly see positive effects (Davis & Albright, 2004; deWaal, Kourtit, & Nijkamp, 2009; Ukko, Tenhunen, & Rantanen, 2007; de Geuser, Mooraj, & Oyon, 2009), others found no evidence of increasing performance after the implementation of PMS (Meyer, 2007). Therefore, a consensus in the ongoing discussion regarding the effect of PMS on organizations has not yet been achieved.

Based on results from literature, this study is set to identify the success factors leading to a better use of performance management systems. The research problem is to find out how companies can be successfully managed with measures (see illustration below).

The starting point for the research is the believe, that performance management systems (PMS) can lead to a greater performance only when PMS are used by people to make better business decisions (Chenhall, 2003). If this is the case, and other variables can be controlled for, the interesting question is what makes people take better decisions with PMS. Consequently, the conceptual model includes a link between decision making based on PMS information and performance. This link has been often described qualitatively (Goold & Quinn, 1990; Gunasekaran & Kobu, 2007; Laitinen, 2009; Lipe & Salterio, 2000), but quantitative analysis is rare (e.g. Foster, Swenson, 1997). Thus, this study wants to contribute to the research and provide evidence why some companies use PMS better than others (see illustration below).

To provide a solid answer to that question the study is organized as following:

  1. Identify relevant factors leading to an effective performance management from literature.
  2. Define a solid conceptual model.
  3. Create instrument for measuring concepts based on suggestions from literature.
  4. Gather empirical data and analyse the data.
  5. Arrive at conclusions.
  6. Provide final report.

Key characteristics of the research:

  1. Literature based.
  2. Quantitative, positivistic approach.
  3. Company as unit of analysis.
  4. Cross sectional non probability sample of profit oriented firms.

References:

Bourne, M., Kennerley, M., & Franco-Santos, M. (2005). Managing through measures: A study of impact on performance. Journal of Manufacturing Technology Management, 16(4), 373–395.

Chenhall, R. H. (2003). Management control systems design within its organizational context: findings from contingency-based research and directions for the future. Accounting, Organizations and Society, 28(2-3), 127–168.

[PDF] Davis, S., & Albright, T. (2004). An investigation of the effect of Balanced Scorecard implementation on financial performance. Management Accounting Research, 15(2), 135–153.

de Waal, A., Kourtit, K., & Nijkamp, P. (2009). The relationship between the level of completeness of a strategic performance management system and perceived advantages and disadvantages. International Journal of Operations & Production Management, 29(12), 1242–1265.

[Summary] Foster, George; Swenson, Dan W. (1997): Measuring the success of activity-based cost management and its determinants. In Journal of Management Accounting Research 9, pp. 109–141.

Geuser, F. de, Mooraj, S., & Oyon, D. (2009). Does the balanced scorecard add value? Empirical evidence on its effect on performance. European Accounting Review, 18(1), 93–122.

Goold, M., & Quinn, J. J. (1990). The paradox of strategic controls. Strategic Management Journal, 11(1), 43–57.

Gunasekaran, A., & Kobu, B. (2007). Performance measures and metrics in logistics and supply chain management: A review of recent literature (1995-2004) for research and applications. International Journal of Production Research, 45(12), 2819–2840.

Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard: Measures that drive performance. Harvard Business Review, 71–79.

Laitinen, E. K. (2009). Importance of performance information in managerial work. Industrial Management & Data Systems, 109(4), 550–569.

Lipe, M. G., & Salterio, S. E. (2000). The balanced scorecard: Judgmental effects of common and unique performance measures. Accounting Review, 75(3), 283.

Martinez, V., Kennerley, M., & Neely, A. (2004). Impact of PMS on business performance: A methodological approach. Cranfield.

Neely, A. (2005). The evolution of performance measurement research: Developments in the last decade and a research agenda for the next. International Journal of Operations & Production Management, 25(12), 1264–1277.

Ukko, J., Tenhunen, J., & Rantanen, H. (2007). Performance measurement impacts on management and leadership: Perspectives of management and employees. International Journal of Production Economics, 110(1-2), 39–51.

Advertisements
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: