The Design of Performance Measurement Systems for Management Learning

Abstract

For several years there has been an increased emphasis on the need for a systematic measurement system as the key means for organizations to assess their present condition and to plan appropriate actions for desirable improvements. The results in most cases have been of limited value to stakeholders, while in some cases the reported measurements of performance have been quite frustrating or misleading. If medical science practice is a useful metaphor for management practice, then there is a critical gap to bridge in our attempts to diagnose, with accuracy, the health and future prospects of our organizations. Managerial measurement systems, as diagnostic tools for current performance and required improvements, need careful examination so that we may use them to learn how to adapt organizations to new conditions in a continually changing environment. This need becomes urgent as more organizations use various assessment frameworks for business excellence. The purpose of this paper is to focus on certain central issues that management must consider in the design and operation of a reliable measurement system, to facilitate and expand the learning required. The two key assumptions that make such learning imperative involve the nature of organizations as living systems and the increasing rate of significant environmental change that requires more frequent adaptation of measurement systems.