Explaining success of performance management systems

Abstract

Purpose The purpose of this paper is to use the logical chain of key factors (KFs) to explain the success of performance management systems (PMS) and corporate performance. Design/methodology/approach The authors use the strength of the KFs chain to capture PMS success. First, the authors assume that perceived environmental uncertainty (PEU) is positively associated with the strength (H1). The higher the PEU, the stronger is the chain as a response to uncertainty. Second, the authors assume that the strength improves performance (H2) but third, that the impact of the strength is negatively moderated by competition (H3). Fourth, the authors assume that this improvement leads to superior corporate performance (H4). The research model is tested by applying the partial least squares method for a sample of 61 Estonian and Finnish firms. Findings Empirical evidence shows that PEU is negatively correlated to the strength of the chain but when controlled for a set of control variables, the path coefficient is positive. The strength of the chain is positively associated with improvement in performance. The impact of the strength of the chain on financial performance is negatively moderated by competition. The improvement in performance is positively associated with the attainment level of strategic goals. The improvement in non-financial performance does not significantly affect corporate profitability. Practical implications The levels of PEU and competition should be taken into the account when designing, adjusting and assessing the PMS of organization. Originality/value The authors give explanation why evidence about the effects of PMS on the performance of the firm is mixed.

The role of sustainability control systems in translating CSR into performance in Iran

“…The tension that may trigger the effective synthesis of compliant actions and innovative practices is crucial for corporate growth (Kruis et al. , 2016; Laitinen and Kadak, 2019). Conflict literature advocates that tension is not necessarily undesirable and has its own advantages for organizations (Nicotera, 1995).…”

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How Different Are Performance Management Systems? Empirical Typology of Performance Management Systems

“…The chain approach can be considered contemporary as it includes the elements and features of contemporary PMSs: 1) a PMS uses financial and non-financial performance measures (Cheng et al, 2007;Franco-Santos et al, 2007;Ittner et al, 2003); 2) translates business strategies into deliverable results (Hall, 2008); 3) aligns management processes, such as target setting, End of Table 1 decision-making, and performance evaluation, with the achievement of chosen strategic objectives (Matos et al, 2019;Ittner et al, 2003); and 4) adopts diverse key performance indicators (KPIs) and the KPIs are linked to the organization's business strategy (Matos et al, 2019;Franco-Santos et al, 2012). The chain model has been used as a framework for analysing the formality of PMSs (Kadak & Laitinen, 2016b) and the success of PMSs (Laitinen & Kadak, 2019). In this study, the KFs of the chain model will be used to extract the typology of PMS.…”

Corporate social responsibility and performance measurement systems in Iran: A levers of control perspective

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