Performance Measurement Systems - Beyond Generic Strategic Actions

Performance measurement systems (PMS) like the BSC are not strategy neutral. They embed empirical postulates of generic strategic actions (cause-and-effect relationships) driving successful business performance and make specific prescriptions for managerial action. This paper shows that the underlying assumption of causality between the immediate control of such qualitative PMS indicators and financial performance is merely implied based on unsound interpretation of complex studies like the Profit Impact of Market Strategy (PIMS) (Buzzell & Gale, 1987). In this study, we witness that the link to financial accounting measurements vanishes. Instead, generic management guidelines and exploratory statistics replace accounting-based cost-benefit-analyses. We discuss examples that document deteriorating performance due to over-emphases on non-financial indicators (customer satisfaction/willingness-to-pay, quality, innovation, and empowerment). Also, we point to examples where performance increased due to an intentional disregard of factors like customer satisfaction or quality. Finally, we explain why assumptions of strategic generic relationships ignore or even deteriorate financial performance. We call for a revision of contemporary PMSs, re-linking non-financial measures to financial calculus, and less reliance on guidelines that are based on exploratory statistics