Performance Measurement System: Towards an Institutional Theory

Abstract

In recent years, interest in no financial performance measures has grown, as evidenced by the large number of literature investigating balanced scorecard, value based management, total quality. The increased attention to no financial measurement reflects increased requirement of information for managing and decision making processes because of strong competition, constantly changing environment of organization. Those processes are based on organizations' relations with an environment. The dimensions that lead to the deeper analysis of relations between performance measurement system and environment of organization are very important for today organizations. According to this aspect, it could be stated that performance measurement system (PMS) which covers financial and no financial measurement and fits with environment of organization should be critical for today's organizations and need deeper and continue researches. It is important to contribute to a better understanding of the factors that affect the features and content of PMS in organizations and the relationship between these factors, performance measurement practices and environment of organization (Alas, Sharifi & Sun, 2009; Ginevicius & Podvezko, 2009; Gudas, 2009). The dimensions that lead to the deeper analysis of such factors and relations were disclosed in this article according to different theoretical assumptions - institutional, contingency and complexity theories. Institutional theory will answer the question - what factors form and influence internal and external environment of organizations and herewith the features and content of PMS. Contingency theory will answer the question - what external environment is surrounding the organization and influencing its internal environment. Complexity theory will answer the question - how organization reacts to its external environment. Combining the main presumptions of institutional, complexity and contingency theories it could be maintained that the level of environmental uncertainty and organizations reactions to it could be dimensions according to which features and content of PMS in different organizations could be researched. Those two dimensions form four types of organization's environment peculiarities of which performance measurement system should be reflected. In order to point out the features and content of performance measurement according to the environment of the organization, quantitative research (survey) was performed. Survey was performed in Lithuanian organizations, which were chosen by a handily selection method. The purpose of the research is to analyze the internal and external environment of Lithuanian organizations, features and content of performance measurement system: transparency of the strategy, homogeneity of the goals and correctness of the processes.