Design and Utilization of Performance Measurement Systems as a Method of Control in a Manufacturing Firm
Permanent address of the item is
Suorituskyvynmittausjärjestelmien suunnittelu ja käyttö osana johdon ohjausjärjestelmiä valmistavassa yrityksessä
Performance measurement systems are one of the most important tools of management control. Performance measurement provides managers tools for planning, coordinating, focusing, monitoring, and evaluating. Most of all it is a way of deploying higher level strategies into action in the lower levels of the organization. This thesis examines the design and usage of performance measurement systems. The usage aspect will be considered from the perspective of the overall usage process, and also the way the managers use performance measurement as a method of control. The main goal is to clarify the structure and role of performance measurement systems as part of the organization’s control systems, and managerial work. The research problem chosen is “what is the role of performance measurement systems as a method of control in managerial work?” The thesis consists of two parts. First, in the literature review part, the theoretical foundation is built by examining the literature on performance measurement system design and usage. In the design section, the recommendations on measure selection and system structure are discussed, after which the process of using performance measurement systems is introduced and linked to management work. In the second part, based on the literature review, analysis of internal documents, and interviews, a performance measurement system and a usage process for the case organization are developed. The thesis indicates that the performance measurement system design should encompass the whole organization, being able to integrate the different divisions and functions of the organization, as well as deploy organizational vision from the top level to the shop floor, and contain a balanced view of the different sides of business such as customers, shareholders, operational excellence and future growth. Managers use performance measurement systems as control systems through feedback loops. As performance information is compared to set targets and communicated to the management, the managers will then act depending on the nature of the information. Managers may use diagnostic control, taking corrective actions to variations from target, or in the case of strategic uncertainties, adopt an interactive form of control, where through debate and dialogue the performance measurement information is rigorously used in order to counter the uncertainties.