A review of performance measurement:
Towards performance management
Paul Folan *, Jim Browne
Computer Integrated Manufacturing Research Unit (CIMRU), National University of Ireland, Galway, Ireland
Received 4 September 2004; accepted 18 March 2005
Available online 10 May 2005
Abstract
Describes the evolution of performance measurement (PM) in four sections: recommendations, frameworks, systems and
inter-organisational performance measurement. Measurement begins with a recommendation, which is a piece of advice related
to the measures or structure of performance measurement; frameworks can be dichotomised into a structural and procedural
typology that suggests structural framework development has outstripped procedural framework development. The basic
requirements for a successful PM system are two frameworks—one structural and one procedural as well as a number of other
performance management tools. Inter-organisational performance measurement may be divided into supply chain and extended
enterprise performance measurement: the former relying solely on traditional logistics measures, while the latter incorporates
the structural aspects of the supply chain system and adds non-logistics perspectives to its measurement arena. Finally, the
encroachment of the performance measurement literature into the processes related to performance management is examined,
and areas for future research are suggested.
# 2005 Elsevier B.V. All rights reserved.
Keywords: Recommendations; Frameworks; Systems; Inter-organisational performance measurement; Performance management
1. Introduction
Organisational performance has always exerted
considerable influence on the actions of companies.
Consequently, the ways and means of accurately
measuring this performance is perceived as being an
increasingly important field of research for both
organisations and academics alike. Indeed, in the last
15 years or so performance measurement (PM) has
been seen to occupy the minds of academics in an
ever-increasing number of fields. The mid to late
nineties seem to have seen the peak of this activity.
Neely [63] estimated that between 1994 and 1996,
some 3615 articles on performance measurement were
published alongside the statistic that in 1996 books on
the subject appeared at a rate of one every 2 weeks in
the USA alone. A vast array of disparate information
concerning PM has been made available through the
www.elsevier.com/locate/compind
Computers in Industry 56 (2005) 663–680
* Corresponding author. Tel.: +353 91 750 414;
fax: +353 91 562 894.
E-mail address: paul.folan@nuigalway.ie (P. Folan).
0166-3615/$ – see front matter # 2005 Elsevier B.V. All rights reserved.
doi:10.1016/j.compind.2005.03.001

efforts of a number of researchers in different
functional silos [58] and the field is now well
recognised as being an important part of the
manufacturing strategy literature [20]. As a conse-
quence of this flourishing PM research, however,
organisations and academics are facing a comprehen-
sion predicament: it has been suggested that the multi-
disciplinary character of the research is hindering
developments in the field of PM [58,64]; while the fact
that PM is not owned by academics in any particular
discipline has resulted in a reluctance to leave behind
traditional functional boundaries when research upon
the topic is performed [63]. The results have been an
abundance of isolated PM information produced that
may be duplicated and/or contradictory in nature.
PM is also evolving at a considerable rate to combat
new organisational realities; owing to the fight for
industrial supremacy, the concept of performance, as it
is measured and evaluated, is undergoing a transfor-
mation in modern business organisations. The external
environment is becoming identified as the next frontier
of PM: in the coming years, there is expected to be a
significant increase in inter-organisational PM devel-
opments—such as supply chain PM, and, more
particularly, extended enterprise PM. The extended
enterprise is a formation of closer co-ordination in the
design, development, costing and the co-ordination of
the respective manufacturing schedules of co-operat-
ing independent manufacturing enterprises and related
suppliers [37]; and is the consequent result of a move
away from the traditional view of manufacturing
companies with clear boundaries, limited relation-
ships with other companies and a focus on internal
efficiency and effectiveness only [15]. This is having a
profound impact upon PM practices in many
organisations—an impact that is starting to be felt
in the PM literature.
The purpose of this paper is to contribute towards the
clarifying vision of PM as espoused by Neely [63], and
more latterly, Marr and Schiuma [58]. The diverse
nature of the review that follows is indicative of the
richness of the PM literature, which for clarification
purposes, has been divided into a number of sections so
that the evolution and development of PM can be
comprehended. In the following section, PM recom-
mendations—the initial starting-point of all PM
initiatives—are briefly reviewed; then a review of
PM frameworks and their categorisation into a
structural and procedural typology is performed; this
is then followed by a brief examination of the PM
systems literature. The literature upon supply chain and
extended enterprise PM initiatives is then examined,
followed by a theoretical discussion of the evolving PM
literature’s place in the distinct concept of performance
management. Given the exploratory nature of this
paper, some future research areas are suggested in the
conclusions that complete the article.
2. Performance measurement recommendations
The initial building blocks of all PM initiatives—be
they PM frameworks or PM systems—may be termed
PM recommendations. PM begins with a recommen-
dation, which is a piece of advice related to the
discipline of PM—its measures or its structure, for
example. When a series of these recommendations
have been collected, a PM framework may be
developed which use these recommendations as the
basis for development. Recommendations concerning
PM can be divided into two core areas:
! recommendations for performance measures;
! recommendations and issues for PM framework and
system design.
The first places emphases upon the requirements of
good performance measures, while the second
examines the recommendations that have been made
regarding the design and development of PM frame-
works and systems. Recommendations that represent a
spin-off from the first core area are those that attempt
to document the process of selecting performance
measures, which pre-suppose particular selection
mechanisms are in place. Since the procedure of
selecting a particular performance measure is, to a
certain extent, a subjective process—often involving
top management sitting around a table and choosing
one measure from a number of alternatives—more
research is required upon the actual selection activity.
Kaplan and Norton [38] have suggested a series of
workshops and interviews to meet this purpose, while
Neely et al. [67] have described a pilot process,
consisting of a number of subjective phases—ranging
from check sheets to brainstorming—in a 12-phase
model to overcome selection issues.
P. Folan, J. Browne / Computers in Industry 56 (2005) 663–680664