Performance Measurement In Large Slovenian Companies: An Assessment Of Progress

Abstract

The prevailing literature and empirical studies on management of organizational performance stress the increasing importance of non-financial performance measures and propose companies to implement some kind of integrated performance measurement system. The purpose of our study is to investigate the characteristics of performance measurement and management in large Slovenian companies, focusing also on the progress made in the 5-year period. The analysis is based on two surveys conducted in the spring 2003 and summer of 2008. We investigate what do companies understand by “successful performance”, what are the most and the least important performance measures for companies, and what performance measurement systems do companies use. By answering these questions we discuss the impact of our results on the future development and growth of firms. The research results show that large Slovenian companies consider “successful performance” mostly in terms of implementing the strategy, followed by pursuing the goals of the owners and achieving the goals of different stakeholders. Most large Slovenian companies perceive financial performance measures as more important than non-financial, although they claim they measure both perspectives of their business. Our research results also suggest that 68% of large Slovenian companies in our sample use balance scorecard or some other integrated performance measurement system. These findings are generally in line with the existing theory and empirical evidence from other countries. Our main conclusion is that the prevailing role of financial key performance indicators in large Slovenian companies is appropriate for monitoring the effects of the current financial crisis but if companies want to succeed in the long-run they have to base their decisions also on non-financial measures that enable monitoring of many important capabilities for achieving long-term strategic goals.

Views of CEOs on Firm Performance

“…Despite many theoretical and empirical studies, the definition of performance often remains unclear (Marc et al, 2010). In general, it is associated with the measurement of the performance and efficiency of business activity and decision-making in a firm (Waggoner, Neely & Ketmerley, 1999).…”

“…Performance is also linked to setting objectives, developing strategies and implementing actions. Business processes and activities must be coordinated with the firm strategy and focused on those critical activities that lead to competitive advantages and the long-term growth of the firm (Marc et al, 2010).…”

“…Models of performance measurement can be divided into financial and non-financial (Marc et al, 2010) or into financial and marketing models (Venkatraman & Ramanujam, 1986). The financial models are linked with sales growth, return on assets, profitability, cash flow and other financial performance measures, while the marketing models are linked with market position, market share, product quality and customer loyalty (Venkatraman & Ramanujam, 1986;Coates, Davis & Stacey, 1995).…”

“…Traditionally, managerial performance measurement has focused mainly on financial performance (Anthony & Govindarajan, 2001;Berry, Broadbent & Otley, 2005;Marc et al, 2010). In the 1980s, several researchers criticized financial performance measures in terms of e.g.…”

“…In the 1980s, several researchers criticized financial performance measures in terms of e.g. their one-sided perspective, lack of strategic focus, creative limitation, neglect of customers and competitors, and the time-delay accompanying financial performance measures that consequently fail to provide timely and relevant information to managers (Marc et al, 2010). As a result, the importance of non-financial performance measures became apparent.…”