The Consistency of Performance Management System Based on Attributes of the Performance Indicator: An Empirical Study
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consistency, performance management system, attributes of performance indicator, empirical study
Abstract
Purpose: The performance management system (PMS) is a metasystem over all business processes at the strategic and operational level. Effectiveness of the various management systems depends on many factors. One of them is the consistent definition of each system elements. The main purpose of this study is to explore if the performance management systems of the sample companies is consistent and how companies can create such a system. The consistency in this case is based on the homogenous definition of attributes relating to the performance indicator as a basic element of PMS.
Methodology: At the beginning, we used an affinity diagram that helped us to clarify and to group various attributes of performance indicators. The main research results we achieved are through empirical study. The empirical study was carried out in a sample of Slovak companies. The criterion for selection was the existence of the certified management systems according to the ISO 9001. Representativeness of the sample companies was confirmed by application of Pearson´s chi-squared test (χ2 - test) due to above standards.
Findings: Coming from the review of various literature, we defined four groups of attributes relating to the performance indicator: formal attributes, attributes of target value, informational attributes and attributes of evaluation. The whole set contains 21 attributes. The consistency of PMS is based not on maximum or minimum number of attributes, but on the same type of attributes for each performance indicator used in PMS at both the operational and strategic level. The main findings are: companies use various financial and non-financial indicators at strategic or operational level; companies determine various attributes of performance indicator, but most of the performance indicators are otherwise determined; we identified the common attributes for the whole sample of companies.
Practical implications: The research results have got an implication for business practice. If companies applied the homogenous set of attributes of performance indicator it would increase the effectiveness of the PMS. Effectiveness can be increased by faster response to non-conformity or performance gap. Our proposal targets the perception of the PMS as a management metasystem independently of the industry, size of enterprises or products. We also suggest a minimum set of attributes of performance indicator toward a consistent PMS.
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