Academic journal article Journal of Business Economics and Management

Management Control Systems in Madeira Island Largest Firms: Evidence on the Balanced Scorecard Usage/ Valdymo Sistema Madeiros Salos Didziosiose Imonese: Rezultatu Apskaitos Sistemos Naudojimo Pavyzdziu

Academic journal article Journal of Business Economics and Management

Management Control Systems in Madeira Island Largest Firms: Evidence on the Balanced Scorecard Usage/ Valdymo Sistema Madeiros Salos Didziosiose Imonese: Rezultatu Apskaitos Sistemos Naudojimo Pavyzdziu

Article excerpt

1. Introduction

Information access and use allows for a more correct decision making, following organizational strategic goals (Cadez and Guilding 2008). Information systems support strategic control and decision making. Evaluation and measurement systems are among the most commonly employed organizational information systems managers make use of (Neely and Al Najjar 2006), their main function is to give managers a control tool. Information systems quality and composition present clear evolution over the last decades. Since the 80's academic literature and recommendations from practitioners suggests the use of non financial indicators as powerful instruments to assist organizational management (Malina and Selto 2001). Pun and White (2005) offer the evolution of performance management systems, which reflects the different kinds of management information systems characteristics managers have available. Traditional performance management systems are based on costs and efficiency indicators, they stand on data from the traditional accounting systems. Short-term and profit orientation are highly valued in these systems. The prevalence of individual and functional measures along with the comparison with standards set the tone. Emerging performance management systems on the contrary are based on company strategy and performance compatibility, they are value-based. Long term and customer orientation are highly valued in these systems. The prevalence of team and transversal measures enable continuous improving monitoring. Traditional management information systems essentially present a financial substance (Kaplan and Norton 1996a). The quality and adequacy of such information alone is questioned in literature and deficiencies allegedly affect them. Table 1 provides a list of deficiencies in traditional systems from relevant literature review.

Traditional management information systems imperfections led to an organizational search for more suitable systems and forcing to improve previous ones. Traditional management information systems solely based upon financial indicators suffered great changes, developing into more complete ones and presenting a strategic role (Cadez and Guilding 2008; Malina and Selto 2001; Sioncke and Parmentier 2007). Strategic management benefits from the use of emerging systems that allow decision makers to access more quality and critical information (Kaplan and Norton 2005, 2008). Table 2 presents a catalog of emerging systems.

Strategic management information systems do not eliminate the need for traditional ones, on the contrary, they complement them, allowing for managers to make their decisions based upon financial as well as non financial indicators (Kaplan and Norton 1992; Ittner and Larcker 1998). Financial indicators got improved over time leading to current ones like EVA, [R]--Economic Value Added, or CFROI--Cash Flow Return on Investment, that focus on the organizational need to create value (Ittner and Larcker 1998; DeBusk et al. 2003). Non financial indicators include consumer and employees satisfaction indexes or quality ratios, which focus on controlling now to guarantee long term organizational survival (Ittner and Larcker 1998). The use of both, financial and non financial, indicators will support and facilitate the decision making process and the organizational performance appraisal. In addition, the combined use of them captures the present value of the firm in a more comprehensive way and allows for the depiction of the business value creation factors that may ensure future organizational success (Ittner and Larcker 1998). Adopting non financial indicators enlightens the causes over the results, enabling managers to predict future organizational performances Wiersma (2008). The BSC is among fresh strategic management information systems sharing many similarities with the predecessor Tableax de Bord, and easier to implement Bourguignon et al. (2004). Both systems convert organizational strategy and vision in goals and associated indicators, emphasizing proactive moves over reactions and enabling top management decision to match employees' actions. …

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