Performance Measurement System Adoption and Effects

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Table of Contents

Introduction
Critical Analysis
Practical Implications
Learning Reflections
References

Introduction

The primary goal of the literature review is to conduct a sufficient analysis of the reading while determining and defining the impact of the adoption of a performance measurement system. In turn, it is essential to understand the uses and implications of this instrument and discover the relevant ways of its application. It could be said that the differences and similarities will contribute to the discovery of the issues from dissimilar perspectives.

I hope to increase my knowledge about the importance of performance management systems, its adaptation, its features, its shortcomings, and its usefulness in the business.

Big Issues/highlights from the literature

Each article highlights a different aspect of the topic, but it is generally working in similar frameworks. The article Performance Measurement Adoption and Business Performance: An Exploratory Study in the Shipping Industry (Article 1) by Otheitis and Kunc emphasizes the drivers of adopting PMS, which are originated from the regulation (Otheitis & Kunc, 2015). In turn, the article depicts the difficulty of the application of the performance measurement system in the shipping industry and determines the role of the PMS as a driver for the enhancement of the organizational performance due to the ability to monitor the strategic alignment (Otheitis & Kunc, 2015).

In this instance, the big issue is the ability to utilize the PMS efficiently due to the specifics of the shipping industry. The utilization of various approaches based on TMSA, TMSA2, and the principles of ISO creates the confusion in the application of PMS, as no universal strategy is presented due to the differences in regulations (Otheitis & Kunc, 2015). Nonetheless, these aspects determine the timeframe for the adoption and underline its significance in the industry. In turn, it highlights the difficulty of monitoring whether success was a primary consequence of the adaptation of PMS due to the presence of a variety of external influences (Otheitis & Kunc, 2015).

The article Exploring the Performance Effects of Performance Measurement System Use in Maintenance Process (Article 2) by Tätilä, Helkiö, and Holmström pays vehement attention to the design of the PSM (Tätilä, Helkiö, & Holmström, 2014). In this instance, the primary issues lay the understanding of the vitality of the behavioral patterns to the sufficient formation of the relevant PMS. In this instance, the actual design implies the emphasis on motivation and leadership while depicted the ability to influence the competitiveness, behavioral patterns, and organizational performance positively (Tätilä, Helkiö, & Holmström, 2014). In this instance, the big issue is to find the interdependence of the components of the design to be able to create a relevant strategy to enhance organizational performance.

The article New Performance Measurement and Management Control Systems (Article 3) by Watts and McNair-Connolly focuses on the shortcoming of the PMS and depicts its ability to enhance the organizational performance of the company, which applies its principles (Watts & McNair-Connolly, 2012). Nonetheless, the primary issue is the inability to the application of the PMMs in other contexts (Watts & McNair-Connolly, 2012). Consequently, these matters can be considered as the primary weaknesses of the PMS. In turn, the authors suggest the utilization of the performance wheel to find a solution to the issue (Watts & McNair-Connolly, 2012). In this instance, the definition of the PMS covers its consistency out of various components, which are interdependent and specific.

The article Understanding the Features of Performance Measurement System: A Literature Review by Choong focuses on the description of the particular measures, indicators, and characteristics of the PMS (Choong, 2013). Nonetheless, the big issue is the necessity to maintain balance while selecting the rights metrics to measure the efficiency of the organizational actions. In turn, the primary difficulties, which businesses tend to face, are related to finding the balance between qualitative and quantitative measures.

Lastly, the article Measuring Performance of a Service System – From Organizations to Customer-Perceived Performance by Laihonen, Jääskeläinen, and Pekkola addresses the implications of the PMS and the significance of the customer as a primary component of the service industry (2014). In this instance, the major issue is the lack of the ability to discover the customer’s perspective while selecting the indicators and measurements of the organizational performance. Lastly, a new approach has to be created to revolutionize the existent application of the measurement system.

Critical Analysis

Article 1. Definers of adopting a performance management system in the shipping industry.
Article 2. Proper design of PMS is crucial, and motivation has a major role.
Article 3. Shortcomings of performance management systems. Performance wheel.
Article 4. Features of PMS; measures, metrics, and indicators and finding the balance between selecting the suitable ones to measure the progress.
Article 5. Focus is on the customer and a new way of thinking is needed.

The similarities and differences of the big issues

Speaking of similarities, all the researches are trying to relate the aspects of the studies to the importance and benefits of using a PMS. In turn, the publications tend to define the PMS by emphasizing its components and features. In the end, they determine the beneficial impact of the PMS of organizational performance.

As for the differences, each article addresses a different aspect of the performance management system. For instance, Otheitis and Kunc pay high attention to the shipping industry, as not the universal approach of the KPIs’ and other measurements’ identification is established due to the significant differences in the operation and management of different ships (2015). In this instance, the authors focus on the complexity of PMS and its ability to be adopted more rapidly due to the positive modifications in the shipping industry. Nonetheless, Article 1 by Otheitis and Kunc also highlights the perception that it is unclear whether PMS has a beneficial influence on the performance, as the company cannot be isolated from the external environment (2015).

In turn, Tätilä, Helkiö, and Holmström discover the PMS from the communicational perspective while paying high attention to the design and interactions of the managerial processes in the organization (2014). It remains evident that motivation has a positive influence on the competitiveness and organizational performance of the company. In the end, the emphasis on the social matter is vital, as it contributes to the development of the understanding of the necessity of the social interactions and paying attention to the individual motivation while designing and selecting the suitable KPI for the efficient PMS.

Additionally, Watts and McNair-Connolly emphasize the drawback of PMS by emphasizing the presence of PMMs as the core components of the organization (2012). The focus on this aspect contributes to the understanding of the problem from the dissimilar perspective since these features can be considered as the core sources of the drawback. In turn, it highlights the primary disadvantage of the PMS, which can be formulated as the inability to be applicable in different contexts (Watts & McNair-Connolly, 2012). The findings from this article bring light to the definition of PMS and portray the changes in the application by proposing the performance wheel.

Furthermore, Choong discovers the definition and implication of the Performance Measurement System from the general perspective while providing the descriptions of measurements, features, characteristics, and indicators (2013). Nonetheless, all of the terms are described without considering the specific details and peculiarities of the issues. In this instance, the findings and results of the article are applicable in different situations, as the publication does not highlight the particular industry or specific case scenario.

Lastly, Laihonen, Jääskeläinen, and Pekkola highlight the dissimilar perspective by cultivating the understanding of the customer as a core component while forming a perspective (2014). In this instance, other publications focus on internal operations while establishing the metrics. However, this method is not applicable in the context of the operations, which are related to providing services, and a new strategy has to be developed.

The articles address the impact of applying a PMS on the performance of the business. All articles indicate that applying a performance management system has a positive impact on the performance of the business, but the lack of understanding of the PMS is still present. In turn, the similarities are present due to the complexity of the PMS and the existence of similar issues in different spheres.

Practical Implications

What I found in the literature means that managers should focus on the proper adoption of such systems to achieve the maximum efficiency of their businesses. The adoption of a performance management system benefits businesses in managing and evaluating performance, which in turn helps managers make better decisions in planning and organizing different business processes. The key idea is to have the right PMS adapted and fully integrated into that specific organization.

Learning Reflections

My objective of this research was to find if the adoption of a performance management system can influence the performance of the business. In turn, it is vital to learn more about the details and specifics of PMS and not just its intended purpose. Also, how different businesses should modify each aspect to optimize it for their specific needs. After reading the five articles, I conclude that a PMS is beneficial and positively impacts the performance of the business. It is important to understand its mechanism and how to apply it correctly, as it contributes to acquiring the most from the application. To improve the performance, I believe it is important to understand, integrate, and adapt the design properly to utilize the system efficiently.

References

Choong, K. (2013). Understanding the features of performance measurement system: a literature review. Measuring Business Excellence, 17(4), 102-121. Web.

Laihonen, H., Jääskeläinen, A., & Pekkola, S. (2014). Measuring performance of a service system – from organizations to customer-perceived performance. Measuring Business Excellence, 18(3), 73-86. Web.

Otheitis, N., & Kunc, M. (2015). Performance measurement adoption and business performance.Management Decision, 53(1), 139. Web.

Tätilä, J., Helkiö, P., & Holmström, J. (2014). Exploring the performance effects of performance measurement system use in maintenance process. Journal of Quality in Maintenance Engineering, 20(4), 377. Web.

Watts, T., & McNair-Connolly, C. (2012). New performance measurement and management control systems. Journal of Applied Accounting Research,13(3), 226-241. Web.

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