Evaluation and revision of performance measurement systems

Abstract: Performance measurement is a topic that has received considerable attention during the last decades. There are many motives for using performance measures in a company but perhaps the most crucial one is that they will help to improve productivity when used properly. Productivity is of vital importance to a company’s ability to compete and make profits over time. A company that is not able to efficiently utilise its resources in creating value for its customers will not survive in the competitive business environment of today. However, the development of fully functional and suitable performance measurement systems (i.e. set of measures) has proven to be a very challenging task. This research has focused on the last phase of the development of performance measurement system, namely the continuous updating of the performance measures, which still have not been explored in a satisfactory manner. The objective is to investigate and clarify how to evaluate and revise performance measurement systems. In order to reach this objective, several obstacles that contribute to the complexity of the research area are treated. In the beginning, the thesis thoroughly investigates the confusing terminology within the field and frequently used terms like productivity, profitability, performance, efficiency and effectiveness are explained. Then, a categorisation of ways to measure performance is presented along with advantages and shortcomings of different productivity and other performance measures. Several key-factors found to affect the productivity of a manufacturing company are also discussed, such as: design of processes and equipment, disturbances and losses, management and control, product design, and job design and work organisation. Much attention is given to the different requirements that performance measurement systems must fulfil, both on the system level and the measure level. Finally a method called the performance measurement progression map is finally proposed, which has been developed in order to give measurement practitioners a comprehensive guide of how to evaluate and revise performance measurement systems. The thesis is concluded with the results from several empirical investigations in which the usefulness of the developed method is validated. Keywords: Performance measurement, Performance measurement systems, Productivity, Evaluation