Performance Measurement System Design as Link Between Strategy Formulation and Performance Information Use in Public Sector Organizations

Abstract

There has long been calls for improving the link between strategic planning and performance management. Despite such calls, there are few empirical studies of how performance management system design is related to performance information use in public sector organizations, which can be important for implementing and evaluating strategies to improve public sectors organizations’ performance. Utilizing data from 135 public sector organizations consisting of municipalities, counties, central government owned higher education institutions, and agencies in Norway, this paper analyzes how strategy formulation and performance measurement system design relate to purposeful performance information use. Multivariate analysis with partial least squares path modeling (PLS-PM) found a positive relationship between formal strategic planning and logical incrementalism with performance measurement system design as well as a positive relationship between performance measurement system design and performance information use. There were no significant direct relationships between formal strategic planning or logical incrementalism and performance information use, or between organizational size or government sector and performance information use. Therefore, performance measurement system design seems to be an important link between strategy formulation and performance information use.