Role Of Performance Measures Research Articles

Developing an Organizational Perspective to Management Accounting

B eing asked to make a short speech as part of accepting the award inevitably leads to some introspection and reflection on major factors that have influenced one’s career, be they events or individuals. Past recipients of the award have been very influential in putting management accounting on the map. Some have been instrumental in developing the way we think about management accounting and teach the subject; some have developed important perspectives such as information economics, combining economics with psychology, the importance of national culture, activity-based cost management, and balanced scorecards. The way these recipients developed their thoughts is well told in their acceptance speeches and collectively provides a wealth of ideas and a historical perspective on the development of our discipline. I commenced my studies in economics, and I maintain a keen interest in economic approaches to management accounting. However, early in my academic career, I was pressed into considering an organizational approach to management accounting, not because it was an easier option; rather it addressed the world of management accounting within which I found myself. In this address, I will share with you some personal reflections on the process of my discoveries in the area of organizational approaches to management accounting from the mid-1960s. The backdrop to this address is that research is something of a growth model. Stage 1: starting from a baseline of skills and knowledge gained at undergraduate studies; stage 2: progressing through refinement of skills with more graduate study; and stage 3: consolidating through work toward publications and other academic outputs. Stages 1 and 2 are somewhat planned and incremental, while stage 3 is more often associated with less ordered processes, often stumbling across potential research areas by way of reading and personal interactions. Research projects can be focused around existing ideas, sometimes being somewhat formulaic, sometimes highly innovative. Often ideas can be serendipitous and develop in unpredictable ways. The key is to recognize when there is a management accounting angle that will relate to an important organizational or social issue.

Role of Performance Measurement in a Major Redevelopment Project: The Case of the McGill University Health Centre Transition Support Office

Healthcare is currently in the midst of a construction boom. An increasing number of hospitals are being constructed using the principles of evidence-based design to improve the quality and safety of patient care while at the same maximizing efficiency. As the McGill University Health Centre embarks on a redevelopment journey, performance measurement has been deemed to be a key requirement for monitoring progress toward established objectives. This article discusses the role played by performance measurement in supporting the redevelopment project. Specifically, the importance given to performance measurement, the need for a performance evaluation framework, a description of the framework and the measurement process are presented.

Integrating the Global with the Local: Performance Measurement in Multinational Corporations

For multinational corporations (MNC) operating as global businesses with global workforces, the challenge of managing diverse operations in diverse markets has never been greater. These MNCs are concerned with the constraints in integrating dispersed units without stifling local subsidiary initiatives while simultaneously facilitating cross-border transfers of resources and information. Both academics and practitioners have been urged to develop better metrics that ease the process of performance management. While rigorous research has been conducted in relation to generic performance measurement systems, little research has been done regarding the implications of measurement paradigms for MNCs. In order to align adequately the worldwide processes, decisions and actions with corporate goals, a cross-functional, cross-process and cross-border approach is needed. By addressing this deficiency, this paper explores the role of performance measurement within the context of managing MNCs, and presents an integrated framework for performance measurement, which is stated from the viewpoint of both the global headquarters and local subsidiaries. This framework incorporates both financial and non-financial measures, and gives the adequate consideration to intangible assets. This paper has practical implications on firms seeking international expansion.

Portfolio performance evaluation with loss aversion

In this paper we consider a loss-averse investor equipped with a specific, but still quite general, utility function motivated by behavioral finance. We show that, under certain concrete assumptions concerning the form of this utility, one can derive closed-form solutions for the investor's portfolio performance measure. We investigate the effects of loss aversion and demonstrate its important role in performance measurement. The framework presented in this paper also provides a sound theoretical foundation for all known performance measures based on partial moments of the distribution.

The Role of Performance Measures in the Intertemporal Decisions of Business Unit Managers

Accounting performance measures are often argued to lead to short-sighted behavior by managers facing intertemporal decisions. We assess the association between different types of performance measures and the time horizon of business unit managers who have profit responsibility. Our results, based on a sample of 105 managers, indicate that accounting return measures direct business unit managers’ attention toward longer-term activities. Non-financial measures similarly direct managerial attention toward longer-term activities, although not to the same degree as accounting return measures. We conclude that accounting return measures can balance out potential congruity problems associated with the profit measures by directing managerial attention to activities that have longer term consequences on firm performance.

Benchmarking and valuation issues in measuring depreciation for European office markets

PurposeThe paper addresses the practical problems which emerge when attempting to apply longitudinal approaches to the assessment of property depreciation using valuation‐based data. These problems relate to inconsistent valuation regimes and the difficulties in finding appropriate benchmarks.Design/methodology/approachThe paper adopts a case study of seven major office locations around Europe and attempts to determine ten‐year rental value depreciation rates based on a longitudinal approach using IPD, CBRE and BNP Paribas datasets.FindingsThe depreciation rates range from a 5 per cent PA depreciation rate in Frankfurt to a 2 per cent appreciation rate in Stockholm. The results are discussed in the context of the difficulties in applying this method with inconsistent data.Research limitations/implicationsThe paper has methodological implications for measuring property investment depreciation and provides an example of the problems in adopting theoretically sound approaches with inconsistent information.Practical implicationsValuations play an important role in performance measurement and cross border investment decision making and, therefore, knowledge of inconsistency of valuation practice aids decision making and informs any application of valuation‐based data in the attainment of depreciation rates.Originality/valueThe paper provides new insights into the use of property market valuation data in a cross‐border context, insights that previously had been anecdotal and unproven in nature.

Assessing Organizational Effectiveness: The Role of Performance Measures

A brief overview of the challenges associated with demonstrating organizational effectiveness and the role of performance measures as surrogates for demonstrating effectiveness are provided. The complexity of analysis and the importance of use of performance measures provide a way to review the strengths and weakness of eight different ways to utilize performance measures. Among the topics to be addressed are dashboards, process improvement initiatives, self-assessment award frameworks, and integrated management frameworks including the Balanced Scorecard. Finally, the article discusses which frameworks should be used for what purposes and what criteria should be used to select a framework.

The Role of Performance Measurement, Consultation and Information Sharing in Managing Interfirm Relationships: Survey Evidence

The Role of Performance Measurement, Consultation and Information Sharing in Managing Interfirm Relationships: Survey Evidence

The role of performance measurement and evaluation in building organizational capabilities and performance

This study examines the processes through which the availability of broad-based strategically relevant performance information impacts on the performance outcomes of organizations. We explore the role of evaluation mechanisms in influencing managers’ use of broad-based performance measurement information for feedback and feed-forward control. We hypothesize that these resultant decision-making patterns impact the exploitation and identification of strategic capabilities within an organization and in turn organizational performance. Using a structural equation model, we find support for a model in which the degree of commonality between measures identified as decision-facilitating and decision-influencing is significantly associated with the use of decision-facilitating measures for both feedback and feed-forward control. In turn, the extent to which decision-facilitating measures are actually used by strategic business unit managers impacts on the strategic capabilities of the organization and subsequently its performance. Overall the results suggest that to encourage managers to use the multiple financial and non-financial performance indicators increasingly incorporated in contemporary performance measurement systems it is imperative that performance evaluation schemes are also designed to reflect these measures. To the extent performance evaluation schemes do not reflect such decision-facilitating measures it is less likely managers will use these indicators to effectively manage performance. The resultant performance implications for the organization arise from the impact of these decision effects on the exploitation of existing capabilities and the search for and identification of new strategic opportunities.

Managing without measuring: a study of an electricity distribution company

PurposeThe purpose of this paper is to present an exception to the common belief “If you can't measure it, you can't manage it”. It aims to show how in certain situations particular practices, attitudes and cultures can remove the need for individual performance measurement.Design/methodology/approachFirst, the paper identifies the usual roles of performance measurement in managing individual employees as described by control and motivation theorists. Second, it identifies a market‐leading organisation where managers deliberately refuse to use their top‐level performance measurement system to manage the performance of individual employees. A case study is carried out to test what non‐measurement mechanisms fulfil the roles of individual performance measurement in this organisation.FindingsBuilding on situations observed at this company, a set of possible characteristics of companies that do not require formalised individual performance measurement systems in order to achieve high performance standards is put forward.Practical implicationsManagers should not always assume that individual performance measurement is the only way to achieve excellent performance. This study shows that, by granting responsibilities and providing appropriate support, managers can channel workers' enhanced motivation towards meeting wider organisational goals.Originality/valueThis work broadens the understanding of how excellent performance can be achieved. It shows that excellence can be achieved through practices based on shared values linked to motivation, trust, and a common sense of mission, without the need to install individual performance measurement systems based on cybernetic principles.

Hitting the Target…but Missing the Point: Resolving the Paradox of Strategic Transition

Many firms are undertaking a strategic shift from cost leadership (through process management) to differentiation based on radical product innovation. Success in such transitions has been mixed, as have findings on the role of performance measurement and management in the process. This study explores the challenges of managing this transition, with specific focus on the role of performance metrics. Conventional wisdom indicates that top management can use metrics – measures, standards and rewards – to communicate new directions and priorities. Based on findings reported in this paper, this approach is found to be potentially fatally flawed when applied to a situation where both the corporate goals and the means of achieving these goals have changed. Using detailed data drawn from a multi-level analysis of a major international corporation undertaking such a strategic shift, this study explores the process by which metrics are formed and deployed, and the impact of this process on the ability of the firm to successfully achieve the change. Using measures such as the percentage of sales from new products, top management in the case study had the impression that the strategy was being successfully carried out by the various operating divisions. However, radical innovation (the desired result) had been replaced by incremental innovation. This study identifies the reasons for this situation. A major finding is that the performance measurement and management system can both allow and conceal this failure. Firms trying to significantly change their strategic directions must change their selection of performance metrics to focus less on the intended outcomes and more on the means by which these outcomes are to be achieved.

Performance measurement practices and organisational strategy: a study of Indian leisure enterprises

The purpose of this paper is to investigate the performance measure used by the leisure enterprises in India with different organisational strategies. It provides an empirical measurement of the relationship between strategy adopted by Indian leisure enterprises and the performance measures used for performance evaluation. A structured instrument was developed to examine the performance measure practices. Mail surveys were used to collect the data. This study found that identified prospectors leisure enterprises were predominately focused on innovation and research. On the other hand, defenders leisure enterprises were found to be less innovation and research oriented than prospectors leisure enterprises. The results indicate that there is a relationship between the operating activities and the performance measures used by Indian leisure enterprises. However, no relationship was found between organisational strategy and the performance measures in the evaluation process. This clearly highlights a significant gap, which may be narrowed by increasing management awareness regarding the role of performance measures to help organisations achieve their business strategies.

Role Variations of Performance Measurement in Dutch Local Government

This paper examines differences in roles of performance measurement in Dutch local government under diverging contexts – businesslike and political – and varying degrees of standardisation of activities. The research shows that some of these roles apply irrespective of the values of both contingency variables. This holds for the so called standard roles of diagnostic control, influencing future budgets and reporting. However, other roles of performance measurement, especially signalling and learning, only emerge related to specific contextual circumstances. If a policy field is, for instance, highly politically sensitive, these additional roles are important, and can even lead to tight controls. In these circumstances the standard roles also become more pronounced.

Creating a playing field for assessing the effectiveness of network collaboration by performance measures

This contribution addresses the question of how the effectiveness of network collaboration can be assessed and how performance measures may be helpful in doing so. The first part of the article discusses the difficulties of determining effectiveness in network collaboration and the limitations of ex ante formulated objectives and performance measures. The analysis of three cases in the second part of the contribution shows the differences between assessing effectiveness in a coordination network, where there are not initial agreed upon goals, as compared to collaborative networks in which parties share a common policy program. In the latter situation, objectives are shared and possibilities exist for prior agreements regarding performance. Conditions for establishing effectiveness seem to be more favorable then in coordination networks. In practice, however, assessing effectiveness of networks often happens in an erratic and unstructured way, using ad hoc performance criteria which may differ from the original objectives, and which parties may not share. This may lead to a power struggle and a blame game. Improvement may be expected from a more conscious way of arranging processes by which effectiveness is assessed. Such arrangements should include agreements on the content and role of performance measures.

Competitive strategy and performance measurement in the Malaysian context

PurposeThe purpose of this paper is to contribute to a better understanding of competitive strategy and performance measurement in the Malaysian context by applying a modified version of Conant et al's generic strategy scale and categorizing Malaysian firms along the Miles and Snow business strategy typology.Design/methodology/approachCompetitive strategy and performance measurement were assessed via survey. A total of 975 firms were randomly selected from the directory of Federation of Malaysian Manufacturers (FMM) as listed in 2003. Overall, 133 surveys were returned, 120 of which were usable for analysis.FindingsResults suggest that Malaysian firms view competitive strategy differently and are more likely than their Western counterparts to emphasize the use of financial measures of organizational performance. Findings also highlight the difficulties faced when Western measurement scales are employed in non‐Western emerging nations.Research limitations/implicationsBecause greater emphasis was placed on financial rather than non‐financial measures, results indicate a statistically significant different improvement only in sales growth and ROI performance among the three strategy categories. Strategy researchers should focus their attention to the use of multiple performance measures in assessing firm's performance as shown by the significant different in the use of customer satisfaction and loyalty measures, as well as employee satisfaction and training measures.Originality/valueThese findings hold relevance for executives responsible for the formulation and implementation of business strategy. A better understanding of the relationship between business strategy and performance measures using the BSC perspectives of measures has been provided. The study provides some useful insights into the role of performance measures. In addition, this study conveys the message to top managers and designers of performance measurement tools–most notably the balanced scorecard– should pay particular attention to non‐financial performance measures in implementing their organization's strategy.

The Role of Performance Measurement in Management of Energy Suppliers: Indications from Germany and California

The Role of Performance Measurement in Management of Energy Suppliers: Indications from Germany and California

REVIEWING MANAGING THROUGH PERFORMANCE MEASUREMENT

Performance measurement is a control of a company for track progress. In traditional measure that focus only financial measure and ignore all factors that not associated with financial. According to Kaplan and Norton (1996), the balanced scorecard emphasizes that financial and non-financial measures must be part of the information system for employees at all levels of the organization. The process of blending all measures is the most important factor in managing the organization performance measurement system.First of all, this conceptual will explained regarding the main performance measurement, the need of performance measurement, the roles of performance measurement, critics of having performance measurements, and types of performance measurements that including financial and non-financial measures. Because of in this new era, the nonfinancial measurement will be significantly used in management and measurement. It will focus on usefulness and deficiency of financial and non-financial measures. Financial measures are stressed on using profit, Return on Investment (ROI), Economic AddedValue (EVA) and the applicant in Just In Time (JIT) practices. Non-financial measures will stress on JIT practices, manufacturing, investor and analyst, and management compensation. This is because not all management use financial as a main measure.Further research will be done regarding performance measurement system in Government Link Companies (GLCs).

New Challenges for Performance Management: Exploratory Evidence on Organisational Responses to Identity Fraud

Available evidence indicates that identity fraud is a significant risk to organisations. Despite this, a lack of research exists on the role of performance measurement and costing systems in supporting organisational responses to this problem. This paper presents exploratory evidence on the challenges for performance measurement and costing systems if organisational responses to the identity fraud problem are to prove effective.

Roles of performance measurement in SMEs' management processes

This paper describes key activities that were undertaken to assist SRC Enterprise, under the so-called Small and Medium Enterprise (SME) Revitalization Program. The Department of Industrial Promotion under the Ministry of Industry sponsored this programme. The programme aimed to improve competitiveness and to strengthen the management practices of participating SMEs in Thailand. In this paper, the activities specifically discussed included the assessment of SRC Enterprise's management system, development of performance measurement (to help strengthen the management system), initiating of performance analysis, and addressing of ongoing challenges as a demonstration of information usefulness. Two critical challenges were used to demonstrate the importance of providing quantitative information to the company's management. Improvement decisions to respond to these challenges were the document-control process of customer drawings and the change in the company's procurement policy. Finally, the future work for SRC Enterprise and the research in the area of SMEs are proposed and discussed.

The Role of Performance Measures in a Federal‐state Context: The Examples of Housing and Disability Services

High hopes were held for performance measures in the reform of the administration of joint federal‐state programs in the early 1990s. They were seen as enabling the Commonwealth to take a ‘hands‐off’ role in the administration of joint programs and as ensuring the accountability of the states to the Commonwealth in a direct way through the application of sanctions for non‐performance. Despite considerable effort in developing performance measures their role became confined to achieving accountability in an indirect way through negotiations on policy. This article examines the operation of performance indicators under the Commonwealth State Housing Agreement and the Commonwealth State Disability Agreement to identify why the earlier intentions for performance measures could not be achieved.