Are More Formal Performance Management Systems More Successful?

DOI

10.2991/icaat-16.2016.19How to use a DOI?

Keywords

Performance management systems, formal PMS, informal PMS, key success factors; performance

Abstract

This paper focuses on the levels of formality of performance management systems (PMSs). The objective of the paper is to investigate the impact of the formality of PMS 1) on the key success factors (KFs) of PMS and 2) on the achievement of performance. The formality of PMS is investigated on three different levels: structured & formal PMS, formal PMS, and informal PMS. We define a PMS structured & formal when it is designed and built upon a well-known existing system structure, such as the BSC. It is regarded as formal when it is formal and designed by the own staff of the firm. PMS is considered informal when the firm does not use any formal system. The paper makes use of the chain framework developed by Kadak and Laitinen (2016) to assess the links between the formality and KFs. The links between the formality and performance are assessed by three different impact measures on performance. The results implicate that the usage of a structured & formal PMS has stronger links to KFs of PMS than the usage of the formal in-house designed PMS. Moreover, the usage of a formal PMS leads to stronger links with KFs than using an informal PMS. Formal PMSs make a stronger impact on financial performance than an informal PMS. The same finding can also be observed for achievement of strategic objectives and non-financial performance but the results are not statistically significant due to the small number of informal PMS (5) in the sample. Thus our empirical findings encourage organizations to implement PMSs based on the existing system structures rather than own in-house design and to move from the usage of informal PMSs to formal systems.

Copyright

© 2016, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Tarmo Kadak
AU  - Erkki Laitinen
PY  - 2016/12
DA  - 2016/12
TI  - Are More Formal Performance Management Systems More Successful?
BT  - Proceedings of the 5th International Conference on Accounting, Auditing, and Taxation (ICAAT 2016)
PB  - Atlantis Press
SP  - 173
EP  - 189
SN  - 2352-5428
UR  - https://doi.org/10.2991/icaat-16.2016.19
DO  - 10.2991/icaat-16.2016.19
ID  - Kadak2016/12
ER  -