The impact of multi-criteria performance measurement on business performance improvement
Abstract: The purpose of this
paper is to investigate the relationship between multi-criteria performance
measurement (MCPM) practice and business performance improvement using the raw
data collected from 33 selected manufacturing companies. In addition, it
proposes modified MCPM model as an effective approach to improve business
performance of manufacturing companies.
Design/methodology/approach:Research paper. Primary and secondary data
were collected using questionnaire survey, interview and observation of
records. The methodology is to evaluate business performances of sampled
manufacturing companies and the extent of utilization of crucial non-financial
(lagging) and non-financial (leading) performance measures. The positive
correlation between financial business performance and practice of MCPM is
clearly shown using Pearson’s correlation coefficient analysis.
Findings –This research paper indicates that companies which measure
their performance using important financial and non-financial measures achieve
better business performance. Even though certain companies are currently using
non-financial measures, the researchers have learned that these financial
measures were not integrated with each other, financial measures and strategic
objectives.
Research limitations/implications: The limitation of this paper is that
the number of surveyed companies is small to make generalization and they are
found in a single country. Further researches which incorporate a large number
of companies from various developing nations are suggested to minimize the
limitation of this research.
Practical Implication: The paper shows that multi-dimensional performance
measures with the inclusion of key leading indicator are essential to predict
the future environment. But cost-accounting based financial measures are
inadequate to do so. These are shown practically using Pearson’s correlation
coefficient analysis.
Originality/value: The significance of multi-dimensional performance
measures for business improvement in developing countries has been an issue
among researchers. The originality of the paper is evident in the proposal of
MCPM model, considering the problems being faced by some manufacturing firms
leading to low performance.
Keywords: Performance measure,
Performance improvement, Benchmark, Business performance, manufacturing
Author: Fentahun Moges Kasie,
Alemu Moges Belay
Journal Code: jptindustrigg130017
