Integrated performance measurement system for firm's human capital building

Abstract

PurposeThe purpose of the study is to explore the relationship between performance measurement systems (PMSs) and organizational learning (OL) and the impact on firm human capital building.Design/methodology/approachData were collected using a survey instrument. Then, a structural equation model (SEM) was used to test the proposed model.FindingsThe results reveal that PMS, which is designed with three main qualities – valid, comprehensive, and coherent with its environment – has an overall positive relationship with OL and firm's human capital (employee satisfaction and work‐related competencies). First, the validity of the individual performance measure is found to be positively linked to employee satisfaction. Second, the comprehensiveness of the PMS and work‐related competencies are positively associated. Third, the coherence of the PMS with its environment has a positive relationship with OL but not directly with the human capital indicators. Thus, OL, which is positively associated with both work‐related competencies and employee satisfaction, mediates the relationship between the coherence of the PMS and the work‐related competencies.Originality/valueThere are some linkages among these three concepts (PMS, OL and human capital) that have not been specifically explored in the existing relevant studies. Previous studies have asserted that human capital could not be utilized and nurtured without supporting infrastructure. Therefore, this study explores the relationships among the three constructs to uncover the additional benefits of PMS and OL for different purposes such as building firm's human capital. This could help firms to improve the utilization of their existing management tools and their competitiveness.