Theories of performance management

1. Theories of performance management
Business performance is probably one of the must widespread dependent variable used by
scholars, while at the same time its remains one of the most vague variables (Rogers and
Wright, 1998). In order to minimize the level of ambiguity regarding the construction and
definition of business performance, as well as to suggest for performance measurement
alternatives in a way to provide with the most accurate and effective measurement, both
for small business and large business, I present a series of articles focusing on seminal
papers discussing the issue of performance measurement and a literature review of
studies using business performance as dependent variable.
The first article presents a discussion on organization theory by Murphy, Trailer and Hill
(1996), which argue that much of the research on performance has come from
organization theory and strategic management. The view taken by Venkatraman and
Ramanujam (1986) in their paper was that business performance, which reflects the
perspective of strategic management, is a subset of the overall concept of organizational
effectiveness.
Murphy et al., (1996) argue that in organization theory, three fundamental theoretical
approaches to measuring organizational effectiveness have evolved: The goal-based
approach - suggests that an organization be evaluated by the goals that it sets for itself
Etzioni (1964). However, organizations have varied and sometimes contradictory goals,
making cross-firm comparisons difficult. Reinforcement for the notion that organization
are varied in various aspects is that scholars often restricted their study sample to definite
industries in order to control the disparities between the various industries with respect to
performance and the firm's profitability (Beard and Dess, 1981; Miller and Tolouse,
1986). The systems approach - this approach partially compensates for the weakness of
the goal-based approach by considering the simultaneous achievement of multiple,
generic performance aspects (Georgopolous and Tannenbaum, 1957; Yuchtman and
Seashore, 1967; Steers, 1975). Both the goal and system approaches fail to adequately
account for differences between stakeholder groups perspectives on performance. The
multiple constituency approach - this approach factors in these differences in perspectives
and examines the extant to which the agenda of various stakeholders groups are satisfied
(Thompson, 1967; Pennings and Goodman, 1977; Pfeffer and Salancik, 1978; Connolly,
Conlon and Deutsch, 1980).
Venkatraman and Ramanujam (1986), which discuss organizational performance
measurement in terms of three hierarchically construct (i.e., organizational effectiveness,
operational performance, financial performance) argue that these three organization
theoretic perspectives are reflecting the writings on organizational effectiveness
construct. The coming articles discuss about the other two constructs - operational
performance and financial performance.
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