The evolution of performance measurement systems : a case study

Abstract

Purpose: The main purpose of this research is to analyse the evolution of the Performance Measurement System (PMS) of the case company over the past, present and future. Specifically, it aims to understand how the features of its PMS evolved over the years with company growth and other triggers, to evaluate the current PMS and, based on this evaluation, to enhance the future of performance measurement by suggesting and designing the Balanced Scorecard (BSC). Design: To achieve the research objectives, a qualitative case study method was selected. Primary data was obtained by conducting in-depth semi-structured interviews with members from top management and other appropriate employees from different departments. Additionally, secondary data was obtained through the reports provided by the case company. Thereafter, a validation interview with the Chief Financial Officer (CFO) supported this research study. Findings: The findings indicate that due to particular limitations which the case company endured as a Small and Medium Enterprise (SME), the PMS during the initial phases of the growth stage of the business lifecycle tended to be more traditional and had certain shortcomings. However, the introduction of the Enterprise Resource Planning (ERP) system revolutionised its PMS, becoming more contemporary. The current system is broad, strategic and detailed but lacks formal linkages between objectives and with the strategy. Moreover, although this system might satisfy current business needs, anticipated growth implies that its PMS would need to advance even further. Therefore, based on tried and tested metrics, the study designed a BSC and strategy map. Conclusions: The study concluded that while SMEs face limitations in measuring performance, PMSs adapt and become more sophisticated with company growth and other triggers. The case study also concluded that companies with an advanced PMS, such as those utilising an ERP system, could build on their existing PMS to evolve, rather than revolutionise, into the BSC without requiring a significant outflow of resources. The BSC is an ideal tool for the case company as it enhances integration and advances the PMS to a performance management system as required for future growth. Value: The study is valuable to the case company as it proposes and designs a PMS model which proactively addresses future needs and is believed to be feasible. This study is also valuable to other companies on a similar path of growth by suggesting simple improvements which could be made to the PMS and highlighting the need to evolve their PMS in preparation for growth. It also fills a research gap identified in the local literature on the design of the BSC for a fire and security company.