Contemporary performance measurement systems: A review of their consequences and a framework for research

TLDR: In this article, a conceptual framework for understanding the literature on the consequences of contemporary performance measurement (CPM) systems and the theories that explain these consequences is developed. But this framework is based on an in-depth review of 76 empirical studies published in high-quality academic journals in the areas of accounting, operations, and strategy.

About: This article is published in Management Accounting Research.The article was published on 2012-06-01 and is currently open access. It has received 479 citations till now. The article focuses on the topics: Balanced scorecard & Performance indicator.

Figures

Table A.1. Summary of studies selected

Table 5. Consequences of CPM systems on performance

Figure 1. Conceptual framework about the impact of CPM

Table 3. Consequences of CPM systems on people’s behaviour

Table 2. Number of studies classified according to CPM type and research method used

Table 4. Consequences of CPM systems on organisational capabilities

Frequently asked questions

Q1. What are the contributions in "Contemporary performance measurement systems: a review of their consequences and a framework for research" ?

In this paper, the authors classify the consequences of CPM systems into three categories: people 's behaviour, organizational capabilities, and performance consequences. 

Q2. What have the authors stated for future works in "Contemporary performance measurement systems: a review of their consequences and a framework for research" ?

Two research guidelines and several areas for further research emerge from their review. Regarding the research guidelines, the authors believe that future studies should clearly specify the CPM features being investigated along with the level at which they are examined in order to avoid confusion and increase comparability. 44 As for the new areas for further research, the authors emphasize the following. Further research in this area could benefit from current work taking place in the fields of operations and corporate entrepreneurship ( e. g., Goodale et al., 2011 ). 

Q3. What are the main characteristics of CPM systems?

Regarding CPM systems design, researchers agree that to be effective these systems must comprise performance measures and targets that have high strategic alignment, controllability, timeliness, and technical validity (especially when used for compensation purposes). 

Q4. What does the study suggest about the effect of CPM systems on employees?

When subjectivity is understood as perceptions of unfairness, existing evidence suggests that employees might be disappointed with the use of CPM systems. 

Q5. What is the main argument used for justifying the importance of using ‘technically valid’?

In the CPM literature, goal-setting theory premises and constructs tend to be used for justifying the importance of using ‘technically valid’ performance measures in CPM systems (e.g., Burney et al., 2009). 

Q6. What is the main reason why CPM systems are likely to generate performance biases?

In conclusion, it can be argued that CPM systems are likely to generate performancejudgement biases mainly due to their complexity and the subjective nature of some of the measures used. 

Q7. What are the main theories that have been proposed to explain the effects of CPM?

Theories such as agency theory and goal-setting theory present strong arguments as to how the use of CPM affects behaviour and motivation. 

Q8. What is the key to the balance between the diagnostic and the interactive use of CPM systems?

Based on the insights from the above studies, it can be argued that the appropriate balance between the diagnostic and the interactive uses of CPM systems can encourage the utilization and development of strategic firm capabilities such as organizational learning, entrepreneurship, and market orientation. 

Q9. Why do individuals dissatisfy with the CPM system?

When individuals perceive that their performance evaluation is not based on a fair process (sometimes due to the ambiguity or inconsistency of the measures), they will behave accordingly and will be dissatisfied with the CPM system (e.g., Ittner, Larcker, and Meyer, 2003). 

Q10. What does the research suggest about the cost of developing a CPM system?

Research suggests that the development of CPM systems brings about additional costs in terms of time and money due to the resources needed for defining and selecting performance measures, involving employees, and collecting performance data.