Guest Editorial Introduction
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Guest Editorial Introduction Performance measurement for governance in a context of dynamism and professionalism Lino Cinquini • Falconer Mitchell • Hanne Nørreklit
Published online: 9 May 2012 Ó Springer Science+Business Media, LLC. 2012
Performance measurement has been a high profile issue over the last few decades. Several, systematic approaches have been proposed including critical success factors, the balanced scorecard, and the performance pyramid. Such performance measurement packages can be used for multiple purposes and have several potentially functional and dysfunctional implications. However, a major objective of such systems is to install a governance system of quantified performance contracts. Through financial and non-financial measurement the aim of these systems is to solve principal–agent problems of goal conflicts between individual employees and their management and between the management and the overall interest of the company. The objective of the systems is to make employees and the management team act in the overall interest of the company. From this perspective, the functionality of the system is to induce effective decisionmaking and action at various organizational levels, to monitor the actual outcome of the decisions and actions made, and to link reward to performance. Crucial for the effectiveness of the performance measurement system is the ability to make valid measurements. For solving the principal-agent problem, the performance measurement system should be designed in an appropriate way. In particular, the right norm for performance should be known by the principal, the results should be controllable by the agent, and the results should be measurable in a L. Cinquini (&) Istituto di Management, Scuola Superiore Sant’Anna of Pisa, Pisa, Italy e-mail: [email protected] F. Mitchell University of Edinburgh Business School, Edinburgh, Scotland, UK e-mail: [email protected] H. Nørreklit Norwegian School of Economics, Bergen, Norway e-mail: [email protected]
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quantitative and unequivocal way (Merchant 1985). This logic assumes the environment and organisation structure are basically stable (Chua 1986; Ryan et al. 2002: 41) and human beings act in a rational manner (Anthony and Govindarajan 2007). However, given lack of information and abilities to observe and obtain knowledge of all aspects of the phenomenon that is the object of measurement, these assumptions are not met in many practical situations. For many activities, desirable results are not known beforehand and it is difficult to measure the particular performance in a quantitative unequivocal way. In particular, there will be specific discretionary work contexts and dynamic business environments where such ideal assumptions for a performance measurement system are not reasonable. Put differently, it might be rather difficult to assess the performance of discretionary activities such as medical and strategic work. For such work activities the quantitative performance measures may face major
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