Integration of performance measurement system and performance – theory

Integration of performance measurement systems is a frequently named success factor for performance measurement. For example, 35% of senior executives surveyed for the recent study by IBM (2010) reported that performance data integration was on the top of their agenda. Other reports by consulting companies indicate the importance of PMS integration for strategy success (Accenture, 2010) and identify the lack of integration as a source of performance management failure (Townsend, Smith, Richards, & Wennekes, 2009).

Peer reviewed articles also identify PMS integration as one of the critical success factors of business management. In fact, claims that the degree of PMS integration, both vertical and horizontal, may have a positive impact on performance are not new (Bititci, 1994). For example in her literature review Langfield-Smith (1997) argues that theoretical and normative research in that area began to appear in the mid-1980s, but still lacked empirical evidence in the mid-1990s. More than a decade later, empirical studies that explicitly model PMS integration as the independent variable and performance as the dependent variabel are still rare.

Since the publications by Kaplan and Norton (1996a, b) integration of PMS has been frequently refered to in academic literature. However, the review by Franco-Santos and Bourne (2005) showed that this concept is not uniformally understood. According to them, two perspectives on integration can be identified (see figure below). The first perspective refers to the integration as the vertical allignment along the reporting chain. This understanding includes the interaction of performance measurement with the organizational strategy, cascading the strategic goals down to operational divisions and the linkage to individual incentives (Bititci, 1994; Chenhall, 2005). The second perspective refers to the horizontal integration, which is the cross functional connection of the performance measurement system along divisions. Horizontal integration includes the interconnection of PMS with other management control systems, such as planning and budgeting (Henri, 2008), strategic accounting systems (Cadez & Guilding, 2008), costing (Anderson, 2006), ERP (Kallunki, Laitinen, & Silvola, forthcoming) and benchmarking (Herzog, Tonchia, & Polajnar, 2009). Both perspectives have been reserached by scholars – with limited results.

For example, the impact of integration (vertical and/or horizontal) on performance is not clearly researched. While some authors state that integration is one of the critical success factors of performance measurement initiatives (Chenhall, 2005; Chenhall & Langfield-Smith, 2007; Franco-Santos & Bourne, 2005), others doubt that integration is important per se (Rom & Rohde, 2007). In fact, it has been argued that companies may need a certain level of PMS integration (Chapman & Kihn, 2009), but may be better off with specialized stand alone solutions instead of creating fully integrated systems (Pike, Tayles, & Abu Mansor, forthcoming). An interesting research question would be therefor, if there is an impact of integrated performance measurement systems on performance. And if there is an effect, through which mechanisms does it take place.


[PDF] Accenture (2010). Swedish match: Enterprise performance management framework. Retrieved from

Anderson, S. W. (2006). Managing costs and cost structure throughout the value chain: Research on strategic cost management. In C. S. Chapman (Ed.), Handbooks of Management Accounting Research (pp. 481–506). Elsevier.

[PDF] Bititci, U. S. (1994). Measuring your way to profit. Management Decision, 32(4), 16–24.

Cadez, S., & Guilding, C. (2008). An exploratory investigation of an integrated contingency model of strategic management accounting. Accounting, Organizations and Society, 33(7/8), 836–863.

Chapman, C. S., & Kihn, L.-A. (2009). Information system integration, enabling control and performance. Accounting, Organizations and Society, 34(2), 151–169.

Chenhall, R. H. (2005). Integrative strategic performance measurement systems, strategic alignment of manufacturing, learning and strategic outcomes: An exploratory study. Accounting, Organizations and Society, 30(5), 395–422.

[PDF] Chenhall, R. H., & Langfield-Smith, K. (2007). Multiple perspectives of performance measures. European Management Journal, 25(4), 266–282.

[PDF] Franco-Santos, M., & Bourne, M. (2005). An examination of the literature relating to issues affecting how companies manage through measures. Production Planning & Control, 16(2), 114–124.

Henri, J.-F. (2008). Taxonomy of performance measurement systems. Advances in Management Accounting, 17, 247–288.

Herzog, N. V., Tonchia, S., & Polajnar, A. (2009). Linkages between manufacturing strategy, benchmarking, performance measurement and business process reengineering. Computers & Industrial Engineering, 57(3), 963–975.

IBM (2010). Analytics: The new path to value: How the smartest organizations are embedding analytics to transform insights into action: IBM Institute for Business Value. Retrieved from

Kallunki, J.-P., Laitinen, E. K., & Silvola, H. (forthcoming). Impact of enterprise resource planning systems on management control systems and firm performance. International Journal of Accounting Information Systems,

Kaplan, R. S., & Norton, D. P. (1996a). The balanced scorecard: Translating strategy into action. Boston: Harvard Business School Press.

Kaplan, R. S., & Norton, D. P. (1996b). Using the balanced scorecard as a strategic management system. Harvard Business Review, 74(1), 75–85.

Langfield-Smith, K. (1997). Management control systems and strategy: A critical review. Accounting, Organizations and Society, 22(2), 207–232.

Pike, R. H., Tayles, M. E., & Abu Mansor, N. N. (forthcoming). Activity-based costing user satisfaction and type of system: A research note. The British Accounting Review,

[PDF PhD] Rom, A., & Rohde, C. (2007). Management accounting and integrated information systems: A literature review. International Journal of Accounting Information Systems, 8(1), 40–68.

Townsend, P., Smith, S., Richards, G., & Wennekes, K. (2009). Performance management matters: Sustaining superior results in a global economy: PricewaterhouseCoopers.

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