Factors influencing effective implementation of performance measurement systems in small and medium-sized enterprises and large firms: a perspective from Contingency Theory

Abstract

This article investigates the influence of organisation size on the effective implementation of performance measurement systems (PMSs). Contingency theory suggests that size effects are relevant for many operations management practices and extant studies confirm this to be true for practices such as total quality management, Lean and business process re-engineering. However, robust empirical evidence of size effects on PMS implementation has not yet been produced. We draw upon fundamental differences between small and medium-sized enterprises (SMEs) and large firms to develop eight hypotheses about size effects for PMS implementation. Using empirical data from 349 UK manufacturing firms we find support for seven out of the eight hypotheses which confirms the presence of size effects in PMS contexts. Our findings help managers to recognise that practices which enable PMS implementation in large firms are not necessarily the most relevant ‘levers’ in SMEs and vice versa. The results provide guidance on where to focus attention and resources during PMS implementation and on the most likely sources of any missing knowledge and expertise. Our findings also provide a mandate for further investigation of size effects on PMS implementation in a wider range of contexts.