Strategic Performance Measurement System

Running head: STRATEGIC PERFORMANCE MEASUREMENT SYSTEM
Strategic Performance Measurement System
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Executive Summary
The primary purpose of this report is to discuss about the nature pertaining to strategic
performance measurement system. It elaborates on the issues in relation to strategic
performance measurement system for that of a multi-national corporation. It also elaborates
on the implications of strategic performance measurement system on the aspect of strategic
alignment.

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Table of Contents
Introduction................................................................................................................................3
Nature of Strategic Performance Measurement System............................................................3
Issues of Strategic Performance Measurement System in MNC...............................................4
Implications of SPMS on strategic alignment............................................................................8
Conclusion:................................................................................................................................8
References:...............................................................................................................................10

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Introduction
Strategic Performance Measurement System are designed that helps the managers in
relation to financial and non-financial measures. This process can help in translating strategy
into performance measure (Hill, Jones and Schilling 2014). Popularity has grown in the
recent age in relation to strategic performance measurement system in various organizations.
Most of the companies make use of balanced scorecard along with cost management
technique in relation to performance measurement. This report discusses about the
implementation in relation to strategic performance measurement system in a company. It
also expounds on the effects of strategic performance measurement system in the field of
strategic alignment.
Nature of Strategic Performance Measurement System
Strategic Performance Measurement System (SPMS) can link the employee
performance with the performance of the organization. It helps in augmenting performance
orientation related to compensation system. SPMS ensures that employee achieve the
objectives that can aid the company for the setting of the strategic plan. Team approach is
adopted by SPMS in relation to performance measurement. SPMS helps to link
organizational performance and societal goals (Wheelen et al. 2017). SPMS can be said to be
complementary to that of performance measurement system that is result based. Balanced
Scorecard helps in the process of strategic management and it can improve internal functions
of a business. It can bring improvements to the aspect of external outcome. Balanced
Scorecard helps in the process of measurement and it helps in providing valuable feedback to
the organization. The managers and executives in an organization gather information and it
helps them in the aspect of making better decisions ( Slack 2015). Good behaviours can be

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reinforced with the help of balanced scorecard and companies can understand the factors that
acts as a barrier in relation to performance of an organisation.
Issues of Strategic Performance Measurement System in MNC
A multinational company finds it difficult to implement Strategic Performance
Measurement System because in most of the cases the goals of the subsidiary and parent
company is different. The differing objectives becomes a challenge for the implementation of
SPMS. The values in relation to an organization are expressed with the help of the mission
statement. The mission statement of the subsidiary and the parent company being different
becomes a barrier in the path of strategic performance measurement system (Rothaermel
2015). The process of performance measurement hence becomes more difficult. Global value
chain activities are possessed by the MNC’s and they need well-organized accounting system
that helps to monitor operations of corporation. The development of an organization is
reviewed by taking recourse to performance evaluation. International context makes the
process of performance evaluation difficult for a multi-national corporation. A multi-national
corporation cannot decide as to whether foreign operations should undergo evaluation on the
basis of cost, profit or investment (Lasserre 2017). Environmental circumstances can affect
the process of performance evaluation and thus the performance measurement system
becomes difficult for that of an MNC. It becomes difficult for a multi-national corporation to
understand the basis that can help in performance evaluation that can give rise to a valuable
result.
Subsidiary performance along with that of management performance should be
differentiated that can help in the aspect of achieving positive results. The system of
performance evaluation should support the separation of managerial along with subsidiary
performance that can help in providing remuneration to that of good managers. This would
help to ensure that the managers whose performance is poor does not get rewards (BELHADJ

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2016). Performance measures pertaining to foreign subsidiary gets influenced with the help
of various factors that goes beyond control of local manager. Individual managers will not be
accountable for the costs over which they cannot exercise any kind of control. Multinational
corporation finds it difficult to locate uncontrollable variables in performance evaluation
which is related to foreign subsidiaries (Martello, Watson and Fischer 2016).
Organizational culture can prove to be immensely helpful in describing the
behaviours that are appropriate in relation to an organization. Positive culture plays an
important role that helps the employees in the aspect of achieving success. Negative culture
can decrease the employee performance within an organization. Parent division and
subsidiary has different set of cultural values which makes the process of implementing
performance measurement extremely difficult. It has been seen that the employee
performance are awarded based on the organizational culture. The integration of SPMS at the
global level can offer much help in the aspect of strategic planning. The culture is not
uniform in different places which proves to be a hindrance for implementing the system of
performance management. The procedure of feedback is held at the local level which makes
the measurement of performance really difficult (Hoque 2014). It has been found that cultural
diversity has an effect on behaviour of employees within an organization. The differences
existing between parent company and subsidiary can impact directly performance
management. There are different kinds of methods in relation to performance measurement
and a particular method may not be suitable for a particular kind of culture. The individual-
based performance appraisal will not be conducive for the regions having collectivist culture
(Cooper, Ezzamel and Qu 2017). Group cohesion is greatly stressed in case of collectivist
culture. The regions having high power distance culture find criticizing work of subordinates
inappropriate. The organizational culture having high power distance does not find suitable
the aspect of participative goal setting. The workers belonging to uncertainty avoidance

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culture are reluctant in the arena of participating. Rewards preferences are found to differ in
the case of different cultures.
The process of SPMS becomes extremely difficult due to the differences that exist
between that of different cultures. Work-life balance is preferred by the organizations having
a feminine culture and masculine culture show preference for the employees who are
endowed with status. Multinational corporations hence find it difficult the arena of
performance evaluation. People have different kinds of opinions in relation to the way in
which feedback is received. Certain cultures exist that favour the aspect of negative feedback
and they conceive it to be important for learning from that of previous experience (Busco and
Quattrone 2015). There are cultures that lay focus on positive feedback that can help in
augmenting employee performance. Employees coming from Asian culture feel bad when
they receive negative feedback when compared to that of Irish employees.
Cultural dimension helps in stating clear how the performance of the employees are
viewed. In the case of group work, collectivism becomes the predominant anchorage in
regard to relationship. The society of Asia, Africa and that of South America bears evidences
of having the collectivist culture. These societies give more importance to that of group work.
This can prove to be a hurdle in relation to SPMS. Balanced scorecard can prove to be of
great help in conveying the mission pertaining to an organization. A balanced scorecard can
be of help for the management of an organization in building consensus pertaining to strategy
of company (Gibbons and Kaplan 2015). This process can help in guiding action of the
company at local level. It has been found that there are cultural differences between parent
and subsidiary company and the visions being different makes implementation difficult. The
integration of business plan along with financial plan can help a company in the aspect of
business planning (Bergeron 2017). The financial planning being different for parent
company and that of subsidiaries makes difficult the process of performance measurement.

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The different elements in relation to a strategic-based accounting system are that of
financial, process, customer and that of infrastructure measures. The individuals can be
rewarded on the basis of their promotions, bonus, gain-sharing and that of increase in salary.
The multi-national corporations find the implementation of performance measurement
difficult since the parent company and the subsidiaries have different means by taking
recourse to which the employees are rewarded. The evaluation of the balanced scorecard
becomes difficult as it is difficult to ascertain whether the right things are being measured.
The strategy map provides a visual representation that can help in explaining cause along
with effect relationships in an organization (Keyes 2016). It helps in identifying the linkage
between the lag along with the lead measures. The lag indicators help in providing the
summary of the financial measures, customer satisfaction along with the market share.
Formulation of a competitive strategy depends on the competitive forces within which an
industry is competing. The balanced score card helps in the translation of the vision into that
of measures in different areas like financial, customer, internal business and that of growth
perspective (Anjomshoae et al. 2017). The way a company would want to be viewed varies
from that of the parent and the subsidiary company. The customer perspective can help in
assessing how the company should be viewed by the customers and the area of operation of a
parent company and subsidiary being different it becomes difficult to understand the needs of
the customers. Internal business process is indicative of the factors which the company is
good at for the satisfaction of the shareholders. The growth perspective focusses on the areas
that involves improvements that the company should make so that the vision of the company
becomes true (Jones 2016). The internal business conditions vary for the parent company
along with the subsidiaries and this can lead to differing level in relation to satisfaction of
shareholders. The lack of the commitment on the part of the senior management can pave the
path for failure of strategic performance measurement system. Senior leadership should work

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together in a team that can help in supporting the process in relation to implementation of
balanced score card (Hill, Jones and Schilling 2014). For supporting the process of
implementation the balanced scorecard should be shared with all the members of the
organization and a multi-national company finds it difficult to distribute the balanced
scorecard to all the subsidiary companies. An organization tries to make use of the key
performance indicators without any kind of screening that can help in linking to the strategy.
The organizational strategy will not be translated into action in the event of a multi-national
corporation since the key performance indicator in relation to each company will be different.
Financial measures acts as the dependent variables and they are the lagging indicators
(Bergeron 2017). There are some organisations that wants to make the linkage quantifiable
but owing to the difficulty of measuring the lag time the establishment of a quantitative link
becomes difficult in the case of a multi-national corporation.
Implications of SPMS on strategic alignment
Effectiveness pertaining to SPMS is dependent on the aspect of information quality.
High quality pertaining to information can cause an organizational system to be effective. It
has an overall good impact on the performance of organization. The motivation of the
employees can be augmented with the help of balanced scorecard and it can help in
promoting strategic alignment. The right steps undertaken by the management can improve
the performance of employees. Strategic performance system can bring about internal
changes in organization and it can help the company in gaining financial results (Wheelen et
al. 2017). SPMS can pave the path for value creation and it has an effect on different aspects
of the organization.

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Conclusion:
Strategic performance Measurement System can help in linking employee
performance with that of organizational performance. SPMS can improve the performance
orientation of the employees that is related to that of the compensation system. Employees
can attain their aims which in turn proves to be of great benefit for the organization. The
process of strategic performance measurement system of a multi-national company becomes
difficult since the objective of parent company and subsidiary is different in relation to
different areas. Performance evaluation in an organisation should support separation of
managerial and subsidiary performance. This process can help in ensuring that the good
managers are rewarded accordingly. The organisational structures that have high power
distance culture does not want to involve in participative goal setting. The availability of high
quality information can have an overall good impact on company performance. Balanced
score card has an impact on employee motivation and it can promote the aspect of strategic
alignment.

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References:
Anjomshoae, A., Hassan, A., Kunz, N., Wong, K.Y. and de Leeuw, S., 2017. Toward a
dynamic balanced scorecard model for humanitarian relief organizations’ performance
management. Journal of Humanitarian Logistics and Supply Chain Management, 7(2),
pp.194-218.
BELHADJ, Y.A., 2016. Empirical study on the variables of the Balanced Scorecard model.
Bergeron, B.P., 2017. Performance management in healthcare: from key performance
indicators to balanced scorecard. Productivity Press.
Busco, C. and Quattrone, P., 2015. Exploring how the balanced scorecard engages and
unfolds: articulating the visual power of accounting inscriptions. Contemporary Accounting
Research, 32(3), pp.1236-1262.
Cooper, D.J., Ezzamel, M. and Qu, S.Q., 2017. Popularizing a management accounting idea:
The case of the balanced scorecard. Contemporary Accounting Research, 34(2), pp.991-1025.
Gibbons, R. and Kaplan, R.S., 2015. Formal Measures in Informal Management: Can a
Balanced Scorecard Change a Culture?. American Economic Review, 105(5), pp.447-51.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an
integrated approach. Cengage Learning.
Hoque, Z., 2014. 20 years of studies on the balanced scorecard: trends, accomplishments,
gaps and opportunities for future research. The British accounting review, 46(1), pp.33-59.
Jones, P., 2016. Strategy mapping for learning organizations: building agility into your
balanced scorecard. Routledge.

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Keyes, J., 2016. Implementing the IT balanced scorecard: Aligning IT with corporate
strategy. CRC Press.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
Martello, M., Watson, J.G. and Fischer, M.J., 2016. Implementing a balanced scorecard in a
not-for-profit organization. Journal of Business & Economics Research (Online), 14(3), p.61.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Slack, N., 2015. Operations strategy. John Wiley & Sons, Ltd.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic
management and business policy. pearson.