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Performance measurement and management (PMM) is a management and research paradox. On one hand, it provides management with many critical, useful, and needed functions. Yet, there is evidence that it can adversely affect performance. This paper attempts to resolve this paradox by focusing on the issue of “fit”. That is, in today’s dynamic and turbulent environment, changes in either the business environment or the business strategy can lead to the need for new or revised measures and metrics. Yet, if these measures and metrics are either not revised or incorrectly revised, then we can encounter situations where what the firm wants to achieve (as communicated by its strategy) and what the firm measures and rewards are not synchronised with each other (i.e., there is a lack of “fit”). This situation can adversely affect the ability of the firm to compete. The issue of fit is explored using a three phase Delphi approach. Initially intended to resolve this first paradox, the Delphi study identified another paradox – one in which the researchers found that in a dynamic environment, firms do revise their strategies, yet, often the PMM system is not changed. To resolve this second paradox, the paper proposes a new framework – one that shows that under certain conditions, the observed metrics “lag” is not only explainable but also desirable. The findings suggest a need to recast the accepted relationship between strategy and PMM system and the output included the Performance Alignment Matrix that had utility for managers.
In this paper we have presented the results from a Delphi study involving a senior and experienced panel looking at the future environmental and business trends together with the consequences for PMM. Our premise was that PMM had to fit the strategy and the environment to be effective. This initial premise also had resonance with the academic PMM literature where Franco-Santos et al.’s (2012) recent literature review of empirical studies concluded that the fit between the organisational setting and PMM is important for performance. However, the literature provides little guidance on the exact nature ofthis type of fit and on tools that can help managers better manage performance in more volatile settings. Our Delphi study led us to construct a framework to help managers understand the implications of how they design and use PMM systems, and the framework was found to have utility. However, the main contribution of this paper is the suggestion that the role and position of PMM in the literature is incorrect. This study questions the feasibility of developing PMM from strategy in volatile environments; it questions the utility of strategy under such conditions and suggests that a resilient PMM system would be a better approach. We are not suggesting that PMM should replace strategy but we are suggesting that a more nuanced approach to the co-creation of strategy and PMM would be beneficial for turbulent environments. Unfortunately, on the subject of the interface between strategy and PMM, the strategy literature is currently silent. In terms of the wider research agenda, there are three immediate conclusions and recommendations for further research. First, there is a need to better understand the strategy design and deployment process, especially the linking with PMM and how they should be dovetailed together in their formulation to better cater for more turbulent environments. Second, the findings of this study reinforce the literature that PMM needs to be researched in different contexts (Franco-Santos et al., 2012). Third, the matrix developed only partly addresses the need to better understand and manage risk and performance together. This need has been mentioned in this paper but there was a section of the panel that believed the integration of performance and risk management needed significantly more study and development. In conjunction with the two prior suggestions,this provides a rich breeding ground for future research on this topic that is both theoretically timely and highly relevant for practice.