Strategic Performance Measurement: Benefits, Limitations and Paradoxes

Abstract

Strategic Performance Measurement (SPM) can be both functional and dysfunctional for organisations. SPM can help organisations define and achieve their strategic objectives, align behaviours and attitudes and, ultimately, have a positive impact on organisational performance. However, SPM has also been criticised for several reasons, such as encouraging perverse behaviours, stifling innovation and learning, and having little effect on decision-making processes. If both perspectives are valid, how can organisations make SPM more of an asset and less of a liability? In this article, we argue that the design of an SPM system (SPMS) and the definition of its roles are fundamental factors determining its success and impact on business performance. Indeed, only by carefully considering characteristics and roles will managers reap the full benefits, and SPMSs make a substantial contribution to the achievement of organisations' strategic goals. Building on the papers selected for this Special Issue, we draw conclusions that are relevant for both the theory and the practice of SPM. First, the benefits and limits of SPM depend on the very definition of what SPM should be, and on whether the measurement of performance is linked to both formulation and implementation of strategy. Secondly, the types of behaviour promoted by the SPMS are determined primarily by the uses of the system, particularly whether it is adopted for control or learning purposes. Thirdly, organisations should regard their SPMS as a means of fostering alignment to an existing strategy, but also of supporting empowerment and the continuous adaptation of strategy and tactics. Finally, in order for SPM to support decision-making processes and positively impact on organisational performance, targets and indicators have to be linked to strategy and considered in strategic reviews. Following an introductory section on the theme of SPM, we examine the benefits, limits and paradoxes of SPM. We conclude by arguing for intelligent and purposeful designs of performance measurement systems, and for research that breaks the barriers of academic silos and puts an end to sterile contrapositions between advocates and critics of SPM.