Performance Measurement Systems

Topics: Management, Strategic management, Balanced scorecard Pages: 12 (3267 words) Published: October 19, 2011

The subject of performance measurement is encountering increasing interest in both the academic and managerial worlds. This, for the most part, is due to the broadening spectrum of performances required by the present-day competitive environment and the new production paradigm known as Lean Production or World Class Manufacturing (Hall et al., 1991). In addition there is the need to support and verify the performance improvement programmes such as Just-in-Time, Total Quality Management, Concurrent Engineering, etc. (Ghalayini and Noble, 1996).

These programmes are characterised by their ability to pursue several performances at the same time, for example the increase in the product quality together with the lowering of the production costs and the lead times, following the reduction in discards, waste, reworks, and controls. Performance measurement is how organisations, both public and private, measure the quality of their activities and services. An influential 1982 book, "In Search of Excellence," sparked interest in measuring performance. Since then, business, government and other organisations have sought to measure the extent to which they meet organisational goals. Performance measurement may sound simple, but is often a complicated process that requires deep strategic thinking and assessment.

Performance measurement systems (PMS), such as Kaplan and Norton’s (1992, 1996a) Balanced Scorecard, focus on organisational performance and, although the impacts of these systems on organisational performance is a much debated question, they may be considered as a means of reaching performance objectives, thus the interest in these systems and their use. Considering their support role in both tactical and strategic decision making (Kueng et al., 2001), PMS are designed for executives, although not exclusively, and thus have an executive information system (EIS) component (Turban et al., 2002, 2007). PMS can be used collectively by the managers of the organisation (Kaplan and Norton, 1996b). As internal systems, they have either been acquired as packaged software or developed for the specific needs of the firm (Kueng, 2000; Sharif, 2002). As external systems, they are accessible in the form of external diagnostic tools (Cagliano et al., 2001; Delisle and St-Pierre, 2006), with or without a benchmarking function, and are used on an ad hoc and discretionary basis. Since the early 1990s, a number of researchers have shown interest in PMS that support organisational and managerial development in both large and small business enterprises (Bourne et al., 2000; Garengo et al., 2005), and in public or government organisations (Ho and Chan, 2002).

Literature Review

Definition, History and Formulation

There has been an evolution in the conceptualisation and definition of these systems since they first appeared as objects of management research. In conjunction with the evolution of information technologies, including web-based technologies, PMS can be enriched with new system functionalities that allow them to move beyond simple measurement by providing more extensive and customised support for decision making in the firm. Through this enrichment, PMS now play a more important role in the organisation, extending beyond control toward support for continuous improvement and managerial development (Sinclair and Zairi, 2000).

In light of this evolution, there is a need for a renewed conceptualisation and better definition of PMS as a research object, in terms of their essential characterisation as information systems (IS), if one wishes to study these systems, and understand in particular the individual and organisational behaviours associated with PMS usage and management practices. In this regard, the conceptualisations and definitions of PMS in the literature require more precision and completeness. For instance, a definition wherein a PMS “is a balanced and dynamic system that is able to...
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