Toward Contingency Theory of Performance Measurement*
Rejc, Adriana, Journal for East European Management Studies
Performance measurement, although extensively studied in the last two decades, has been given relatively little consideration in terms of the factors that influence the design of performance measurement systems. Few organisations appear to have systematic processes in place for managing the evolution of their measurement systems and few researchers appear to have explored the question, what determines the design of an organisation 's measurement system? The paper addresses this gap by providing empirical evidence on performance measurement contingencies based on a sample of large Slovenian companies.
In den letzten Jahren sind in der Entwicklung von Performance-Messung als einer wissenschaftlichen Disziplin grosse Fortschritte erzielt worden, aber mangelhaft aus der Perspektive von Faktoren, die auf die Bildung von Performance-Messungsystemen Einfluss ausüben. Wenige Unternehmen entwickeln systematische Prozesse, um die Evolution der PerformancemessungSystemen zu leiten und auch wenige Forscher setzen sich mit der Frage auseinander, wodurch das Design eines Performance-Messungsystems determiniert wird. In diesem Artikel werden die empirischen Daten aufgrund einiger slowenischen Mustergro3unternehmen ermittelt.
Key words: performance measurement, contingency theory, companies, Slovenia
Since the late 1980s performance measurement has become very topical with ever-increasing interest in the subject. The increasing interest has been driven by the increased rate of change in the business environment in both the private and public sectors (McAdam/ Bailie 2002). According to Bourne et al. (2000) this rapid change has led to general dissatisfaction with traditional backward looking performance measurement systems, identifying their shortcomings and arguing for change. In his Performance Measurement Manifesto, Eccles (1991) suggested that it would become increasingly necessary for all major businesses to evaluate and modify their performance measures in order to adapt to the rapidly changing and highly competitive business environment. He questioned the dominant role of financial performance measures and proposed the shift from treating them as the foundation for performance measurement to treating them as one among a broader set of measures. Numerous other authors (Johnson/ Kaplan 1987; Garrison 1990; Kaplan/ Norton 1992; Maskell 1992; Hronec 1993) laid out arguments against judging performance based solely on financial criteria. They highlighted the failure of financial performance measures to reflect changes in the competitive circumstances and strategies of modern organisations. Businesses today require better information across a wider scope than that of the traditional, and often linear, financial measures, to achieve understanding of the factors that create the foundations of future success. While profit remains the overriding goal, it is considered an insufficient performance measure, as measures should reflect what organisations have to manage in order to profit.
Consequently, attention in practitioner, consultancy and academic communities has turned to how organisations can replace their existing, traditionally cost based, measurement systems with ones that reflect their current objectives and environment (Kennedy/ Neely 2002). Many frameworks have been proposed to help organisations define a set of measures that reflects their objectives and assesses their performance appropriately, such as the SMART pyramid (Lynch/ Cross 1995), the balanced scorecard (Kaplan/ Norton 1996), or the stakeholder approach to performance measurement (Atkinson/ Waterhouse/ Wells 1997). Overwhelmingly, the frameworks are multidimensional, explicitly balancing financial and non-financial measures, leading and lagging indicators, and relating performance measures with the corporate (business) strategy.
The issue of effectiveness of the contemporary performance measurement released mainly through the empirical evidence of analysed companies spread quickly among managing directors. …