Management Accounting Research 23 (2012) 79–119

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Management Accounting Research

journal homepage: www.elsevier.com/locate/mar

Contemporary performance measurement systems: A review of their

consequences and a framework for research
Monica Franco-Santos a,∗ , Lorenzo Lucianetti b,1 , Mike Bourne a,2
a
Cranfield School of Management, Cranfield University, Cranfield, Bedfordshire, MK43 0AL, United Kingdom
b
Department of Management and Business Administration, University of Chieti and Pescara, Viale Pindaro 42, 65127 Pescara, Italy

a r t i c l e i n f o a b s t r a c t

Keywords: The main purpose of this paper is to develop a conceptual framework for understanding the
Contemporary performance measurement literature on the consequences of contemporary performance measurement (CPM) systems
systems and the theories that explain these consequences. The framework is based on an in-depth
Balanced scorecard
review of 76 empirical studies published in high-quality academic journals in the areas
Levers of control framework
Strategic performance measurement
of accounting, operations, and strategy. The framework classifies the consequences of CPM
systems into three categories: people’s behaviour, organizational capabilities, and performance con-
Key performance indicators sequences. This paper discusses our current knowledge on the impact of CPM, highlighting
Diverse performance measures inconsistencies and gaps as well as providing direction for future research.
© 2012 Elsevier Ltd. All rights reserved.

1. Introduction Larcker, 2001, 2003). This may explain why many orga-
nizations are investing heavily in the development and
The use of performance measurement systems is maintenance of CPM systems (Neely et al., 2008). From a
frequently recommended for facilitating strategy imple- research point of view, we have some knowledge about
mentation and enhancing organizational performance why organizations adopt these systems (e.g., Chenhall and
(e.g., Davis and Albright, 2004). Today, contemporary Langfield-Smith, 1998; Henri, 2006a; Hoque and James,
performance measurement (CPM) comprises the use of 2000). We are, however, less knowledgeable about their
financial as well as non-financial performance measures actual consequences (Lee and Yang, 2010).
linked to the organization’s business strategy. For instance, Accounting, operations, and strategy researchers have
balanced scorecards (BSC) (Kaplan and Norton, 2001) and examined the effects of CPM systems. Researchers have
multi-criteria key performance indicators (KPI) can be con- used an array of research methods, such as case study
sidered CPM systems (Cheng et al., 2007; Hall, 2008). The research (e.g., Bititci et al., 2006; Kolehmainen, 2010), sur-
adoption of this type of system has increased steadily in vey research (e.g., Burney and Widener, 2007; Cheng et al.,
the last two decades (Rigby and Bilodeau, 2009). Organiza- 2007; De Waal et al., 2009), quasi-experimental research
tions are under great pressure to deliver value not only to (e.g., Davis and Albright, 2004; Griffith and Neely, 2009),
their shareholders but also to other stakeholders, and they and experimental research (e.g., Lipe and Salterio, 2000,
believe CPM systems can help them in this task (Ittner and 2002; Tayler, 2010). Researchers have focused on differ-
ent levels of analysis. For instance, the work of Hall (2008,
2010) focuses on how CPM systems affect the behaviour
and performance of individuals, whilst the work of Scott
∗ Corresponding author. Tel.: +44 0 1234 751122;
and Tiessen (1999) concentrates on how CPM systems
fax: +44 0 1234 754332.
affect team performance. Researchers have also investi-
E-mail addresses: monica.franco@cranfield.ac.uk (M. Franco-Santos),
llucianetti@unich.it (L. Lucianetti), m.bourne@cranfield.ac.uk (M. Bourne). gated the effects of CPM systems taking into consideration
1
Tel: +39 085 4537603; fax: +39 085 4537603. aspects such as their particular design, implementation, or
2
Tel. +44 0 1234 751122; fax: +44 0 1234 754332. use (e.g., Speckbacher et al., 2003). Nevertheless, there is

1044-5005/$ – see front matter © 2012 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.mar.2012.04.001
80 M. Franco-Santos et al. / Management Accounting Research 23 (2012) 79–119

still a lack of consensus on the actual consequences of CPM. We also outline here the limitations of our study. Finally,
Furthermore, to our knowledge, no integration study has in Section 6, we draw our research conclusions.
been conducted to better understand the diverse effects
of CPM systems as well as how these effects occur. Inte- 2. Defining contemporary performance
grating our research knowledge in this area is important measurement systems
to progress the CPM field and to support evidence-based
management initiatives (Rousseau, 2006). Before conducting a review of the consequences of CPM
The aim of this paper is to integrate our knowledge on systems, we first need to clarify what we mean by CPM
the consequences of CPM systems by conducting a review systems. Most scholars define CPM3 systems in terms of
of the existing empirical evidence on this topic. Specifi- their features. For example, Cheng et al. (2007) hold that
cally, we pursue two objectives. Our first objective is to “contemporary performance measurement systems, such
identify and categorize the consequences of CPM systems as the balanced scorecard, advocate the use of an array
studied in the literature, providing a guiding framework of financial and non-financial performance measures” (p.
that integrates them. We classify the consequences of 221). Other scholars have defined CPM systems not only
CPM into three categories: people’s behaviour, organiza- in terms of their features but also in terms of their role or
tional capabilities, and performance consequences. This main processes. For instance, Hall (2008) defines CPM as a
comprehensive yet parsimonious categorization allows us system that “translates business strategies into deliverable
to accommodate the numerous variables that may be results [. . .] combining financial, strategic and operating
affected by CPM systems, thereby facilitating the under- business measures to gauge how well a company meets
standing of this complex phenomenon. Our category its targets” (p. 43). Similarly, Ittner et al. (2003b) suggest
encompassing people’s behaviour refers to consequences that CPM “provides the information [financial as well as
related to the actions or reactions of employees (e.g., nonfinancial] that allows the firm to identify the strate-
motivation, participation) and their underlying cognitive gies offering the highest potential for achieving the firm’s
mechanisms (e.g., perceptions). Our organizational capa- objectives, and aligns management processes, such as tar-
bilities category refers to consequences associated with get setting, decision-making, and performance evaluation,
specific processes, activities, or competences that enable with the achievement of the chosen strategic objectives” (p.
the organization to perform and gain competitive advan- 715). As there are different perspectives used to study CPM
tages (e.g., strategic alignment, organizational learning). systems, the literature lacks an agreed definition. This issue
Finally, our performance category comprises the differ- creates confusion, limiting the potential for researchers to
ent effects that CPM systems can have on financial and compare different studies in this field.
non-financial results at all levels of the organization (e.g., To overcome this limitation and facilitate our review,
firm performance, managerial performance, and team we follow the approach suggested by Franco-Santos et al.
performance). (2007). We clarify the definition of a CPM system by focus-
Our second objective is to explain the different mech- ing on its necessary and sufficient conditions. We argue
anisms by which CPM is presumed to affect people’s that a CPM system exists if financial and non-financial per-
behaviour, organizational capabilities, and performance. formance measures are used to operationalize strategic
In the literature, several theories have been proposed to objectives. This definition is based on a number of assump-
explain the consequences of CPM. Theories such as agency tions. Firstly, the definition assumes that the role of CPM
theory and goal-setting theory present strong arguments systems is to evaluate performance for either informational
as to how the use of CPM affects behaviour and motiva- or motivational purposes (regardless of the organizational
tion. However, there are other less widely used theories level at which performance is evaluated). Secondly, it
that have also been adopted in the literature and deserve assumes that CPM systems comprise a supporting infras-
some attention. For instance, Schiff and Hoffman (1996) tructure, which can vary from being a simple method of
use attribution theory to explain how executives use multi- data collection and analysis (using, for example, Excel) to a
criteria performance measures and how these measures sophisticated information system facilitated by enterprise
affect their decision-making processes. Another example is resource planning platforms or business intelligence solu-
the work of Malmi (2001), who adopts neo-institutionalism tions. Finally, it assumes that CPM systems involve specific
theory to explain why companies adopt CPM systems and processes of information provision, measure design, and
the consequences of these decisions. Understanding the data capture, regardless of how these processes are con-
underlying mechanisms that generate the different conse- ducted.
quences of CPM is critical for determining how to maximize According to the definition proposed, systems such as
the effectiveness of these systems. those based on the BSC (Kaplan and Norton, 1992, 1996,
The remainder of this paper is structured as follows. In 2001), the performance prism (Neely et al., 2002), or the
Section 2, we provide a definition of CPM and a full descrip-
tion of the three categories of CPM effects. In Section 3, we
discuss our method of literature review, explaining in detail 3
It is important to note that in the literature, the phrase “contempo-
the process adopted and our research selection criteria. In rary performance measurement” is often used interchangeably with other
Section 4, we present our framework for research, compris- phrases such as “integrated performance measurement” (Bititci et al.,
1997), “comprehensive performance measurement” (Hall, 2008), “strate-
ing the findings of our literature review. In Section 5, we gic performance measurement” (Burney and Widener, 2007; Ittner et al.,
discuss the findings of our review, along with their impli- 2003b), or “business performance measurement” (McAdam and Bailie,
cations for practice and suggestions for further research. 2002).