Question

Cooper and Ezzamel (2013) examine the role of management control systems, in particular the importance of designing effective performance measurement systems in a multinational context. Outline and discuss any four performance measurement systems that can be usefully developed and used by multinational corporations. (Minimum word limit 500 words).

Answer 1

Following are four performance measurement systems which are being used by the MNC's-

1. 360 degree feedback- Feedback is obtained from all the stakeholders viz. supervisor, team members, clients and others for obtaining feedback and measuring performance of an individual. 360 degree feedback ensures that all the stakeholder's views are considered before concluding the performance appraisal.

2. Balanced scorecard- It was developed in the early 1990’s by Robert Kaplan, an accounting professor at Harvard Business School, and David Norton, president of Renaissance Solutions, Inc.. The core of the system lies in elaboration and the implementation of a vision and the strategy of an organization into fixed targets and intelligible set of financial and nonfinancial performance indicators. The goals, the indicators and the strategic actions are assigned to a concrete point of view or the so-called perspectives.

The general BSC model is looking at organizations from four strategic perspectives: the financial, the customer, the internal processes, and the learning and growth, all of them need to be balanced. The balance means the equability between the short-term and the long-term goals; required inputs and outputs; internal and external performance factors; and financial and nonfinancial indicators.

3. The SMART Performance Pyramid - Another system is the SMART Performance Pyramid, i.e. the SMART system, which was created by Cross and Lynch. Main aim of the this system is to connect through organization’s strategy with its operations by translating objectives from the top-down with customer priorities in sight and measures from the bottom-up.

The Performance Pyramid contains four levels of objectives that affect the organization’s external effectiveness and simultaneously its internal efficiency. At level 1 is -an overall corporate vision, which is then divided into individual business unit objectives. At the second-level is set short-term targets (e.g. of cash flow and profitability) and long-term goals of growth and market position (e.g. market, financial). The third level contains day-to-day operational measures (e.g. customer satisfaction, flexibility, productivity). Last level includes four key indicators of performance measures: quality, delivery, cycle time, waste.

4. Performance Measurement Matrix- It measures performance of internal and external, financial and nonfinancial performance measures linked to strategy of the organisation. Performance measurement has set KPI's and performance is measured against the set and agreed KPI.