Association between performance measurement systems and organisational effectiveness

The purpose of this paper is to investigate the role of performance measurement systems in organisational effectiveness in the context of the financial services sector within a developing country.

Using the mail survey method data were collected from 69 financial institutions operating in Nepal. Multivariate analysis, in particular multiple regression analysis was employed to test the hypotheses.

The results suggest that non-financial measures and feedback are tightly intertwined with organisational effectiveness. While institutions are focused on using the performance measures concerning internal business process perspective, less emphasis is placed on using customer and employee-related performance measures because they are considered less significant to organisational effectiveness. The findings also reveal that strategy-related feedback is considered more critical by management, as opposed to performance and staff. The study also provides evidence that 40.58 per cent of the financial institutions in Nepal had implemented the Balanced Scorecard, which is considered to be high when compared with other developing countries.

The findings provide managers with valuable insights pertaining to the role of non-financial performance measures and the importance of feedback in improving organisational effectiveness, which could assist them in (re) aligning their performance measurement practices.

The findings of this study contributes to the limited management accounting literature on performance measurement and the impact on organisational effectiveness by providing evidence from the financial services sector within the context of a developing country.