What is the vision and mission of the organization and how is this brought to the attention of managers and employees? What mechanisms, processes, and networks are used to convey the organization's over-arching purposes and objectives to its members?
The design and use of performance management systems: An extended framework for analysis
Introduction
The literature in the area of performance management systems (PMSs) and management control systems (MCSs) increasingly recognises the need for research to be based on more coherent theoretical foundations (Chenhall, 2003, Covaleski et al., 2003). Researchers suggest that theory be used to contextualise findings and to provide a more systematic development of knowledge in the field (Chapman, 1997). Others note that the difficulty in making significant progress in the field partially derives from the compartmentalised approach typically followed by empirical research (Chenhall, 2003, Covaleski et al., 2003). There has been a tendency to focus only on specific aspects of control systems, as opposed to adopting a more comprehensive and integrated approach (Chenhall, 2003, Dent, 1990, Malmi and Brown, 2008). Although this may be due to access or time limitations, or to the difficulty of generating and managing such complex datasets, the lack of a more complete description of the totality of a control system contributes to spurious findings, ambiguity, and potentially to conflicting results (Chenhall, 2003). Others have maintained that our understanding of MCSs will remain ‘piecemeal’ for as long empirical research continues to ignore the interdependency between different control mechanisms operating at the same time in the same organization (Abernethy and Brownell, 1997). Therefore, we argue that research would benefit from a framework that provides a broad view of the key aspects of a MCS and that allows researchers to obtain an holistic overview in as efficient way as possible. This paper proposes such a framework.
It is organized as follows. The following section outlines some of the frameworks found in the literature, placing particular emphasis on the two that our study builds upon. Section 3 puts forward the performance management systems (PMSs) framework itself, with its theoretical development being elaborated in Section 4. This is followed by a discussion on the use of the framework and a conclusion. Two applications of the framework to specific organizations are briefly presented in Appendix A.
Section snippets
Management control systems
Much of the early literature on this topic has been categorized under the heading of management control systems, following the seminal work of Robert Anthony (1965). However, in our view, this has become a more restrictive term than was the original intention and we prefer to use the more general descriptor of performance management systems (PMSs) to capture an holistic approach to the management and control of organizational performance. We see this term as including all aspects of
The performance management systems framework
Considering the widespread acceptance of the need to adopt a more comprehensive approach to the study of MCS (Chenhall, 2003, Covaleski et al., 2003) that takes research beyond specific aspects of control systems (Malmi and Brown, 2008), and the limitations of existing frameworks, we put forward a proposal for an extended framework. The extended framework aims to provide a broad view of the key aspects of PMSs and to form the basis upon which further investigations can be developed.
The approach
Vision and mission
Performance management begins with purposes and objectives. It has been long established that a fundamental requirement for control is the existence of objectives, which are the used to evaluate performance (Otley and Berry, 1980). Organizations
Discussion
It is believed that the PMSs framework represents a considerably improved tool to that originally developed by Otley (1999) for describing many important aspects of PMSs design and use. Nevertheless, it is acknowledged that despite our belief, empirical evidence, especially (but not exclusively) from case study research, is required to assess its robustness and validate its adequacy. The fact that the issues addressed by the PMSs framework have been informed by our experience in conducting case
Conclusion
The PMSs framework proposed in this paper draws on the extant literature, but also on personal observations of MCS design and use in a variety of organizations over the years. It represents the result of inductive reasoning applied to a variety of studies known to the authors. The PMSs framework is put forward as a research tool for examining the structure, operation and use of PMSs in an holistic manner.
We believe that the PMSs framework provides a tool which researchers can employ to describe
Acknowledgements
The authors are grateful to Bob Scapens, Joan Luft, Teemu Malmi, Sven Modell, Kim Langfield-Smith, Carolyn Stringer, Paul Collier, Axel Schulz, Ralph Kober, David Smith, Greg Van Mourik, Andrzej Ceglowski, and Anna Stamatelatos for their comments and suggestions. We are also thankful to participants of the AFAANZ Annual Conference, BAA Annual Conference, of the 2nd Conference on Performance Measurement and Management Control, and of the Portuguese Accounting Research Network (Grudis). Aldónio
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