53 / 188
51
3.2.2 Guidelines for performance measurement instruments
Further guidelines focus on the performance measurement system or, if applicable,
the instrument as a whole. This set of criteria focuses especially on the set of elements
and on the relationships between the elements within the system respectively the design
and the functioning of the instrument.
Multidimensionality
Whereas past performance measurement approaches and performance measurement
systems mainly focused on the simulation or prediction of the financial outcome of
the focal organisation by using financial measures, later contributions claimed that
this was not enough to support management. In order to do better, it was proposed
that non-financial measures should be integrated in a multidimensional performance
management system [2]. Those dimensions could be grouped into different categories.
Among the most used categories are [4], [16], [26], [48]:
• Financial vs. non-financial indicators.
• Internal vs. external oriented indicators.
• Past vs. future oriented indicators.
• Leading indicators vs. outcomes.
The idea of this claim is when managers consider different areas and dimensions of
performance and aim to keep them in balance.The result should be amore comprehensive
picture of how the business is functioning and thus make better decisions [40]. For
supply chain management, this is a very important guideline as supply chains are very
complex organisational structures. At the same time, this criterion is easy to fulfil as it is
seen today as common sense to observe the performance from different points of view.
Understandable and evidence-based cause-effect-relationships
In order to support management to better understand how the business is
functioning not only is a mix of different dimensions important. It is also necessary
to close the gap between the often financial outcome indicators and at the very basis
of management’s work the actions taken. Therefore, it is argued that cause-and-effect-
relationships which firstly are understandable and secondly are based on empirical
evidence should be modelled in the PMMS [42], [51].
But even though modern performance measurement systems such as the Balanced
Scorecard take into account also cause-and-effect-relationships between financial KPIs
and its driver-KPIs there is still a gap between the driver KPIs and the actions and
improvement measures that have to be taken (see Figure 3.6). This aspect is often
neglected by PMMS. Therefore, a crucial issue for modern performance management
systems is how effect-mechanisms could be modelled in order to induce precise
management actions based on the analysis of financial and driver KPIs.