Designing a performance measurement system: A case study

Abstract

Performance measurement (PM) by means of local performance indicators (PIs) is developing into performance management at a company-wide scale. But how should PIs at various levels in the organization be incorporated into one system that can help managers, working at levels that range from operational to strategic? How do we convince potential users and obtain their support when starting to develop such a system? How can we aggregate PIs? How do we present results? This paper addresses these and related questions. It is based on a case study carried out at the European Operations department of Nike, a company producing and selling sportswear worldwide. The study resulted in a prototype system that basically is a balanced scorecard tailored to the needs of the company. The empirical findings differ in some ways from the literature on developing performance measurement systems (PMSs) in Operations. Discussing these differences provides new theoretical and practical insights. They relate to the role of parallel initiatives for PM, the role of standardized metrics, the continuous improvement of PMSs, and the normalization and aggregation of measures. Our findings suggest that developing PMSs should to a large extent be understood as a co-ordination effort rather than a design effort. The lessons learned cannot have universal validity, but may be helpful in similar kinds of initiatives.