Can Performance Studies Create Actionable Knowledge if We Can’t Measure the Performance of the Firm?

Abstract

The modern conception of the performance of the firm—future cash flows—makes performance difficult to measure and most performance measures inherently flawed. Moreover, the reliability of inferences about the performance of the firm declines as performance measures are used. The balanced scorecard does not improve the quality of performance measurement and can add further complications. Reducing the firm to its activities, their costs, and their revenue consequences may offer a partial solution to endemic problems of measuring performance. Long-term organizational adaptation, however, may require a conception of performance that makes all performance measures problematic and hence avoids lock-in to particular measures.

Keywords

organizational performance performance measurement balanced score card

Get full access to this article

View all access options for this article.

References

Bellefante, G. (2004, October 29). A new-age general manager helps end an age-old curse. New York Times, pp. C1, C7.

Fisher, F. M. (1988). Accounting data and the economic performance of the firm. Journal of Accounting and Public Policy, 7, 233-260.

Gould, S. J. (1988). Trends as changes in variance: A new slant on progress and directionality in evolution. Journal of Paleontology, 62, 319-329.

Gould, S. J. (1996). Full house: The spread of excellence from Plato to Darwin. New York: Harmony House.

Granick, D. (1960). The red executive: A study of the organization man in Russian industry. Garden City, NY: Doubleday.

Ittner, C. , Larcker, D. , & Meyer, M. W. (2003). Subjectivity and the weighting of performance measures: Evidence from a balanced scorecard. The Accounting Review, 78, 725-758.

Kaplan, R. L. , & Norton, D. P. (1992, January-February). The balanced scorecard: Measures that drive performance. Harvard Business Review, pp. 71-79.

Kaplan, R. L. , & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Boston: Harvard Business School Press.

Lewis, M. (2003). Moneyball: The art of winning an unfair game. New York: Norton.

10.

Merton, R. K. (1940). Bureaucratic structure and personality. Social Forces, 18, 560-568.

11.

Meyer, M. W. (2003). Rethinking performance measurement: Beyond the balanced scorecard. Cambridge, UK: Cambridge University Press.

12.

Meyer, M. W. , & Gupta, V. (1994). The performance paradox. Research in Organizational Behavior, 16, 309-369.

13.

Oxford English dictionary (2nd ed.). (1989). Oxford, UK: Clarendon.

14.

Shakespeare, W. (1992). Macbeth. Folger Shakespeare Library Edition. New York: Washington Square Press.

15.

Weitzman, M. (1980). The ratchet principle and performance incentives. Bell Journal of Economics, 11, 302-308.