eThesis - School of Business electronic theses

This qualitative commissioned case study aims at developing a strategic performance measurement system (SPMS) to a Finnish subsidiary of a multinational organization for its construction -related division's Service Business. Furthermore, this study analyzes the perceived challenges in performance measurement as well as the meaningful includable key performance indicators (KPIs) and the critical factors that need to be taken into consideration in the development process of a SPMS.

Based on the perception of Kolehmainen (2010), this study suggests the implementation of an individual-level SPMS that is structurally different in comparison with the more traditional, organizational-level SPMSs. The individual-level SPMS has been argued to enable balance between empowerment and alignment and build dynamism into the SPMS (Kolehmainen 2010). Also, it has been suggested that by empowering middle-level managers to take primary responsibility of measures, and to provide them sufficiently enough leverage to account for timely, strategically and operationally relevant changes (Kolehmainen 2010).

The study found evidence of a diagnostic and financial control in the case company that lead to the lack of both strategic focus and the ability to explain future performance. The measures were backward-looking, sometimes erroneous and did not reflect the critical success factors (CSFs) of the defined strategy. Therefore, consistent with the former management accounting literature and strategic performance measurement -related research, this study suggests the inclusion of non-financial measures to be implemented in order to translate the business strategy and objectives of the company as well as to overcome the challenges related to financial measures (Chenhall & Langfield-Smith 2007, Malmi & Brown 2008). The non-financial measures are believed to enable managers to better follow the progress of CSFs and enhance strategy implementation as well as reliably indicate the performance of the business unit (Tuomela 2005, Dossi & Patelli 2010, Vaivio 1995, Malina & Selto 2001). In addition, non-financial indicators minimize the diagnostic control and allow continuous dialogue, promoting intended behaviors and making timely strategic revisions and changes (Micheli & Manzoni 2010, Kolehmainen 2010). This study suggests the use of the SPMS as a dynamic communication tool, and therefore the non-financial indicators are regarded particularly appropriate for the interactive use of SPMS offering a more comprehensive representation of performance results and avoiding myopic, diagnostic approaches to performance measurement (also Dossi & Patelli 2010).

Based on the analysis of the challenges and requirements found in this study, an individual-level SPMS is developed. Furthermore, the study concludes by discussing managerial implications in terms of successfully implementing a new SPMS.