The impact of contingency fit on organisational performance: an empirical study

Abstract

Purpose The research investigates the effectiveness of the performance measurement alignment approach which claims that measurement diversity (multiple performance measures) should be aligned with organisational contingencies to enhance organisational performance. Design/methodology/approach The theoretical framework is contingency theory. The study is an empirical investigation of the indirect relationship between three contextual factors (business strategy, information technology and organisation size) and organisational performance via multiple performance measures. The results are derived from cross-sectional questionnaire survey data from 132 Libyan companies (response rate of 61%). For data analysis, the research uses mediation regression analysis via Preacher and Hayes' (2004) macro. Findings There is a significant indirect effect of business strategy and information technology, but not organisation size, on organisational performance. The measurement diversity approach plays a core mediating role in the relationship between the contingencies and organisational performance. Practical implications The study helps to provide a better understanding of the usefulness of the fit/match between contingencies and Multiple Performance Measures in improving organisational performance. Originality/value The empirical evidence supports the central proposition of contingency theory that there is no universally appropriate performance measurement system which applies equally to all organisations in all circumstances. It also provides evidence relating to non–manufacturing and an emerging market context. This research significantly extends the relevant literature by highlighting the relationship between information technology, multiple performance measures and organisational performance. This study is the first to use Preacher and Hayes' (2004) macro to analyse mediation design in the field of contingency-based performance measurement.

Aligning performance metrics with business strategy

“…First, many studies that deal with the fit or alignment of performance measurement and strategy are conceptual or theoretical (Ferreira and Otley, 2009;Fleming et al, 2009;Wadongo and Abdel-Kader, 2014), which underscores the need for more empirical studies such as this one. Second, the empirical studies in this area, few and far between, test alignment or fit as a mediating effect, an indirect effect (Teeratansirikool et al, 2012;Amhalhal et al, 2022), or using the sub-group analysis (Taylor and Taylor, 2014). Thus, there is a need for studies that use a moderation approach.…”

“…Jukka (2023), however, used archival accounting and top management team data as proxies for management control systems archetypes and business strategies. Amhalhal et al (2022) defined the strategy variable as a continuum of two extremes: namely the "defender" and "prospector" types. Latifah et al (2021) used only the differentiation strategy based on Porter's framework to study its impact on organisational performance, with innovation as a mediating variable.…”

“…Fourth, most studies are conducted in the West, with some exceptions, such as in Libya (Amhalhal et al, 2022), Malaysia (Jusoh, 2010), Estonia (Haldma and Laats, 2002) and some in Europe. For example, Ven der Stede et al (2006) used a combined sample of Belgium and the and Hristov et al (2022) used data from Italy.…”

“…Fifth, most studies are based on data from manufacturing organisations, except for Amhalhal et al (2022). With the increasing role of services in today's world, there is a need to include services in the study samples.…”

“…Underscoring the inconsistency of results, Amhalhal et al (2022) noted "there is a need for further investigation of how PMS can be designed and implemented with different strategies to achieve better performance " (p. 2217). Managers also need a clear direction on the right type of performance metrics for a particular business strategy.…”