Performance Measurement and Management Control: Behavioral Implications and Human Actions: Volume 28

Subject:

Table of contents

(20 chapters)
Purpose

While management control and performance measurement research and practices have advanced significantly in the last decades, the research and applications to social impacts and social purpose organizations are underdeveloped. This chapter reports on three research studies that have important implications for future research and practice in the use of management control and performance measurement to solve global societal challenges.

Approach

This chapter provides new frameworks and performance measurement approaches used in three recent series of research projects. It also provides the results of this extensive research in using existing theories and managerial practices to improve success and the measurement of success in for-profit and nonprofit organizations that are focused on increasing their positive social impacts.

Findings

This research that spans more than 20 years and includes numerous projects and research methods in many countries has discovered a prior lack of application of existing theories, approaches, tools, and measures that are fundamental to management control and performance measurement. It found that much work is still needed in both academic research and managerial practices to apply them effectively in social purpose organizations and suggests areas for future research.

Originality

By reviewing the literature comprehensively and doing a series of related research projects, this analysis provides a foundation for future research in the applicability of management control and performance measurement approaches to the measurement and improvement of the social impacts of both for-profit and nonprofit organizations.

Purpose

The present study investigates whether companies that exhibit high performance characteristics in the pre-financial crisis period can maintain their high performance in the financial crisis period of 2007–2009 and, in particular, the post-financial crisis period of 2010–2011.

Methodology

The current study of 1,473 companies in 25 countries and 66 industries (MSCI index) (1) extends the empirical research of prior studies through the year 2011; (2) identifies the operating characteristics (performance drivers and performance measures) and associated risk factors which were most critical with regard to sustaining, exiting, and entering HPC companies during the five 10-year periods since 1998–2007, and (3) summarizes conclusions about HPC results from the 13 ten-year periods (1989–1998 to 2002–2011) in this stream of research.

Findings

(1) Companies that sustain high performance over periods of financial stress clearly excel in asset turnover performance driver and on the performance measures of growth in revenues, profit margin, return on equity and return on assets. Sustaining HPC had less debt than other companies and consistent cash flow yields. Operating turnover ratios became less important in recent years as an indicator of high performance. (2) Although exiting companies maintained profitability, financial risk and liquidity, the key factor in their dropping out of HPC status is their failure to grow revenues. (3) Entering companies did not exhibit the superior performance in all categories.

Practical implications and value

The results provide strategic direction for management of companies that aspire to HPC status and to maintain HPC status once gained, particularly in times of global financial stress.

Purpose

To integrate environmental management systems into daily operations, the environmental aspects of management control systems (MCS) are enhanced. Although different approaches and concepts for Environmental Management Control Systems (EMCS) have been developed, two main problems appear: First, insights into how to implement EMCS are rare. Second, concepts are constructed mainly for large companies rather than for SMEs.

Methodology/approach

To close these research gaps, an implementation framework for SMEs is developed based on Epstein’s corporate sustainability framework. By using an action-oriented research approach, the implementation framework is analysed and tested on three Logistics Service Providers (LSPs).

Findings

The framework worked well with two of the firms analysed and failed with the third firm. The case study results enable a first evaluation of the implementation requirements that are essential for implementing EMCS in SMEs.

Purpose

We utilise the actor-network theory (ANT) – based especially on Latour (2005) – to examine how management accounting tools affect physicians’ representations and new managerial practices in French public hospitals currently undergoing reform.

Design/methodology/approach

We conducted a longitudinal case study – based on interviews and observations – in a large French public hospital in which dashboards are diffused to physicians and nurses dealing with both medical and managerial activities.

Findings

The case shows that head physicians and nurses are implicated in their new managerial tasks and spend time analysing dashboards. Management accounting tools thus play a role, as mediators, in organising new managerial practices, and dashboards are a means of materialising and giving structure to new managerial practices and enabling discussions and exchanges to take place between actors who were previously separated.

Research implications

The case shows that management accounting tools are not necessarily useful because they help in decision-making or control – as in the dominant paradigm; rather, they are beneficial because they may help in changing representations and building a new collective organisation. Future research should therefore expand on the organisational and social roles of management accounting tools, especially in the healthcare field.

Originality/value

Most ANT-inspired studies in management accounting focus on explaining changes in accounting practices, which are perceived as a consequence of an ANT process. This chapter, however, analyses the practices by which management accounting tools act as a vehicle to organisational change.

Purpose

To study the use of budgeting in the uncertain and unpredictable context of seasonal logistics in the Arctic. Specifically addresses the question of why and how budgeting turns out to be the main management control tool in an extremely unstable environment.

Design/methodology/approach

Built on a case study of a Russian oil-producing company operating in The High North, this chapter reports on the rationales for use of budgetary slack by different divisions within the company.

Findings

Inflexible budgeting better fits into the (natural/geographical) context than into the business process. In this respect, excessive budget detalization and informational update may be not facilitating the operational process but confusing. Decoupling demonstrated by a budgetary slack is the normal condition for stable organizational performance.

Practical implications

Instead of setting up fences between the divisions, budgeting may be considered a converging and an adjusting factor to assess collective performance. Social embeddedness of budgetary slack in contemporary organizations sets the scene for other types of budgeting games based on trust, norms of reciprocity and collective performance.

Originality/value

The new – cultural – dimension introduces decoupling in a new perspective by demonstrating the integrating or coupling meaning of cultural practices.

Purpose

The current study aims to advance the understanding of the role of performance measurement systems (PMS) in the improvement of companies’ performance, as well to contribute to the limited knowledge of this issue in transition economies. In order to do so, performance effects of PMS are examined, testing both dominant approaches: the performance measurement diversity view and performance measurement alignment view.

Methodology

A survey using questionnaire was conducted on a sample of large- and medium-sized manufacturing companies in Serbia.

Findings

The results of the research support the performance measurement diversity view, as we found evidence that a broader scope PMS is positively associated with performance. However, we also found partial support for the influence of the strategy–PMS alignment on performance.

Originality/value of chapter

This study investigates the complex mechanism of PMS effect on performance in a particular context – the transition economy. Moreover, this study represents a pioneering attempt to evaluate the state of performance measurement practice in Serbia and is one of the rare studies of this type on transition economies.

Purpose

Team performance frequently is not reached because of motivation losses. The individual identified motivation best fits in team contexts. However, management control systems research has mainly focused on the external motivation. This chapter analyses how identified motivation and team performance can be enhanced through the interactive use of management control systems and the team identity.

Methodology

An experimental study is conducted among 144 postgraduate students. We manipulate the interactive use of management control systems and the team identity. We controlled its effects on team members’ motivation and performance.

Findings

The results show an indirect effect of the interactive control systems on team performance via team members’ identified motivation. Furthermore, the effect of team identity on team performance is also mediated by the identified motivation.

Practical implications

Managers can increase employees’ motivation by using the control information interactively. Controls focused on socialisation processes and shared values best fit with collaborative environments.

Originality/value of chapter

The results provide empirical support for the recent calls about the effect of interactive control systems at individual levels. Despite the considerable attention to the relation between the design of management control systems and team performance, this chapter provides empirical evidence of the positive relation between the style of use of management control systems and individual behaviour in team-based settings.

Purpose

The aim of this chapter is to highlight the role of organizational reflectiveness as a possible enabler for innovation. In order to support the process of innovation, we need to understand organizational learning on a more detailed level, including reflection as an elemental sub-process in experiential, transformational, and action learning.

Findings

We present a tool and preliminary empirical findings for measuring an organization’s level of reflectiveness. We also provide some preliminary empirical results regarding whether reflectivity results in the generation of new innovations relating to work practices and processes.

Value

The chapter fills two research gaps, and in doing so contributes to measuring and controlling organizational learning and innovation activities. First, we complement the existing conceptualization of reflective practice by utilizing the management control system (MCS) (Malmi & Brown, 2008) in the analysis of reflectiveness on the organization level. Finally, in the conclusion, we present reflective practice as a potential concept and practical tool for enhancing the interactive use of MCS. The interactive use of MCS has been recognized for its potential in boosting learning, creativity, and innovations in certain contexts (Davila, Foster, & Oyon, 2009), but so far the definitions for interactive use remain descriptive and varied among management accounting theorists.

Approach

The approach in this study is predominantly conceptual, with empirical and exploratory findings derived from measuring the level of reflectiveness in three organizations. The study enhances the understanding of management control based on the theoretical notion of multilevel reflection on a practice-based level. Empirically, reflective practices are often studied as a learning phenomenon on the individual and collective levels. However, such an approach generally does not incorporate managerial pragmatism regarding the causes of institutionalized learning or the means of managerial control for enabling reflection and, in consequence, innovations.

Purpose

The widespread adoption of the Balanced Scorecard has led to a need to understand how performance measures affect employees’ attitudes and behaviors. Despite the growing trend in the implementation of the Balanced Scorecard, there is little research evidence available on the behavioral outcomes resulting from the use of nonfinancial performance measures. This study seeks to address this gap by examining several behavioral outcomes, including job satisfaction, organizational commitment and managerial performance, resulting from the use of financial and nonfinancial performance measures.

Methodology

Data were collected using a mailed questionnaire survey to manufacturing organizations in Singapore. Path analysis technique was employed in this study to investigate the relationships.

Findings

The results of the study show that behavioral outcomes are indifferent regardless of the nature and type of performance measures used. However, the relationships between performance measures and behavioral outcomes are indirect through procedural fairness and trust in supervisor.

Research limitations

Survey questionnaire method was used in this study and there are limitations associated with survey questionnaire method. As our sample was selected from large organizations, it is unclear if our results are generalizable to small organizations. Also, as our sample was selected from the manufacturing sector, generalizing our results to the nonmanufacturing sectors should be made with caution.

Practical implications

This study highlights the need for organizations to pay attention to issues pertaining to procedural fairness and interpersonal trust in the design and implementation of performance measurement systems.

Purpose

The 2008–2009 financial crisis has renewed concerns about managerial short-termism and its negative effects. Based on intertemporal choice theory, this chapter aims to identify the role that performance measurement and compensation systems can play in orienting managers toward building long-term performance potential in addition to achieving short-term results.

Findings

The findings suggest that certain types of measures used – in particular broader, more inclusive financial indicators, risk-adjusted measures, and key nonfinancial value drivers – as well as the timing of measurement and payment of rewards can lead to reduced time discounting and a lower devaluation of the future, and consequently to a prioritized managerial attention focus on long-term company goals.

Research implications

This chapter contributes to a better understanding of the institutional determinants of managerial long-term orientation and the influence of organizational systems on goal prioritization in managerial intertemporal choice processes.

Practical implications

The findings have practical relevance for the design of incentive systems that aim to place an emphasis on ensuring long-term value creation.

Social implications

Systems that guide managerial behavior toward the long term can help to increase economic and societal sustainability.

Originality/value

Despite the emergence of more integrated performance measurement approaches, time horizon has not been in the main focus of research in the field yet. This review provides a first structured overview of the temporal effects of different elements of performance measurement and compensation systems.

Purpose

This work provides an empirical analysis to determine whether directors’ compensation is lower (“transparency control effect” and “transparency deterrent effect”) or higher (“effects of transparency on increasing competition in pay”) among firms with greater transparency in terms of directors’ compensation.

Methodology/approach

A disclosure index about board compensation and different models based on linear panel-data regression have been developed, on a sample of 73 Spanish firms for the period 2007–2012.

Findings

Our results suggest that disclosure on pay strategy to directors leads to an increase in directors’ compensation, therefore, in this case, the effect of transparency on increasing competition in pay seems to prevail. Conversely, the disclosure on individual directors’ compensation and payment leads to a decrement in directors’ compensation, prevailing the transparency control effect and transparency deterrent effect.

Social implications

The results of this study might be of interest to investors (to take into account these effects before they implement additional corporate governance reforms) and regulators (to be aware of the importance of this issue).

Originality/value

First, we study the effect that transparency and voluntary disclosure regarding board compensation has on the level of directors’ compensation. Second, in this study we go one step further in the transparency of board compensation disclosures by constructing a disclosure index. Finally, the results contribute to the necessary debate that is currently taking place in the Spanish, European and international context regarding this issue.

Purpose

The aim of this chapter is to study innovation in the public sector, to get a better understanding of what is considered as an innovation, to show how that can be measured and to define different types of observed innovations. The chapter addresses to study all significant changes and improvements made within 12 Luxembourg public organizations.

Methodology/approach

The first part is a literature review with presentation of the key definitions and concepts; it illustrates the themes related to innovation and its measurement in the public sector. The second part presents the methodology applied to 12 Luxembourg public administrations. I based my study on a follow-up interviews conducted in 2008 within certain public organizations, followed by a second phase of satisfaction surveys completed from the rest of the administrations in 2012. I analyzed the results and measured public services’ degree of innovation. I adopted the Australian case of conceptual framework and presented its application into the Luxembourgish context taking into account national problematic in the discussion section. Comments and feedback are directly extracted from the interviews are added in the conclusion.

Findings

After analyzing the self-assessment’s final reports of 12 Luxembourg public organizations, my team and I, grouped the areas to innovate in different categories in order to identify the origins of the most recurrent causes. These self-assessment reports have also highlighted the lack of outcome evaluation in public organizations.

Practical implication

This study will help public sector organizations to develop strategies to improve innovation capability. First by implementing the continuous improvement program and second by measuring the public sector innovation, it will help organizations to identify their strengths and weaknesses on various aspects of innovation.

Purpose

This chapter presents the cases of two State-owned companies in Uruguay: ANTEL (telephone company) and ANCAP (oil company). Since 2008, these firms have been preparing value-added statements (VAS), a report that shows how value is distributed to stakeholders.

Methodology/approach

Qualitative methods, particularly interviews, and analysis of documents.

Findings

VAS reporting became a highly accepted practice in both firms. VAS reports help to better explain the impact of public policies implemented through these companies – a situation that seldom happens in a private firm. This accounting practice is also consistent with the political decision of increasing accountability in State-owned firms.

Research limitations

Since it is a case study research, we cannot generalize conclusions. This study has focused on the beginnings of this experience; further research may adopt a longitudinal approach by exploring how this accounting practice evolves over time.

Practical implications

These reports are not much read by external audiences (e.g., members of parliaments, public officials, journalists, NGOs). In a similar vein, these reports have not been used much for internal managerial purposes. The use of VAS reports for both public policy and management purposes remain untapped opportunities to explore.

Social implications

These companies consider value distribution as a core commitment in their CSR policies and have consequently decided to make that value distribution explicit in a reporting model.

Originality

There are few studies about VAS reporting in Latin America.

Purpose

German universities (GU) require an active control to ensure fulfillment of the strategic goals and to strengthen their competitiveness against other national and international institutions for higher education. Implementing a performance measurement and management (PMM) is one possible way of achieving this. But, the instrument has not yet arrived in GU. Therefore, this chapter describes the specific requirements for implementation of PMM in a GU.

Methodology/approach

With the intention to deeply understand processes, structures and decisions, and in order to derive the necessary transformations for PMM in GU as well as to contribute profound recommendation for an appropriate implementation of PMM in GU we investigated a GU using a case study design. Hence, the case university, which illustrates phenomena in real-world context.

Findings

The findings of the case study are threefold. First, the traditional categories of PMM are inadequate for GU and have to be adapted to the specific requirements of every university. Second, performance measures differ from those in companies concerning addressees, complexity of data supply, and goal conflicts. Third, the basic principle of controllability is not valid for GU. These differences to PMM systems in business companies have to be considered during implementation of PMM in universities and highlight needfulness of transformations.

DOI
10.1108/S1479-3512201428
Publication date
2014-06-10
Book series
Studies in Managerial and Financial Accounting
Editors
Series copyright holder
Emerald Publishing Limited
ISBN
978-1-78350-377-3
eISBN
978-1-78350-378-0
Book series ISSN
1479-3512