Performance measurement system design: Should process based approaches be adopted?

Abstract

Performance measurement system design is a topic of increasing concern to both academics and practitioners but is complicated by its multi-dimensional nature. When designing measurement systems managers need to resolve issues such as: conflicts between performance measures; the appropriate balance of internal and external measures; the linking of measures and strategy; etc. One way of overcoming the inherent complexity of performance measurement system design might be to employ structured design methodologies. This paper reports the preliminary results of a study into the use of structured processes for the design of performance measurement systems in the UK. Over 850 companies from a variety of industries were surveyed and data on the formality of their performance measurement system design processes were collected. The data show that although few firms use structured methodologies for performance measurement system design, those that do often find it significantly easier to: (a) decide what they should be measuring; (b) decide how they are going to measure it; (c) collect the appropriate data and (d) eliminate conflicts in their measurement system.