EDITORIAL

Performance Management Measures that Enhance Organisational Value: A Review

Corporate financial performance, measured either in terms of profitability or return on capital invested (ROI) has been viewed as inadequate as firms began focusing on shareholder value as the primary long-term objective of the organisation. Subsequently, financial-based value measures and value-metrics were devised that explicitly acknowledged that both equity and debt have costs, and thus there was a need to incorporate financing risk-return into performance calculations.
In more recent times, however, the importance of evaluating a firm’s performance in executing its strategies was recognised, and financial measures alone (be they profitability measures or value measures) were seen as inadequate to evaluate the totality of performance against strategic objectives. Non-financial measures and non-traditional valuation approaches to performance management and value creation were seen as equally important. Two such approaches, the Balance Scorecard (BSC) framework and the CEVITATM measure are discussed in this paper, the latter based on the underlying premise that an organisation’s value in not based on what it has (its assets) but what it can do with both its tangible and intangible assets (i.e. its capability)in the execution of its strategies.

Janek Ratnatunga
Lorenzo Montali

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ARTICLES

Balanced Scorecard Design and Performance Impacts: Some Australian Evidence

This study examines the impact of the scope of risk management and ethical environment on internal audit activities and the quality of accounting control procedures (ACPQ). The conceptual framework for the study is guided by COSO’s frameworks on internal controls and enterprise risk management and data from a questionnaire survey of 64 Australian firms are analysed using a structural equation model. The results of the study support that (1) internal audit activities have a significant intervening effect on the relationship between the scope of risk management and ACPQ, and (2) a direct and positive relationship exists between ethical environment and ACPQ. Our findings suggest that widening the scope of risk management activities do not directly improve ACPQ, but that it leads to more extensive internal audit activities and in turn such activities promote better ACPQ. Further, the results indicate that fostering a more ethical environment directly leads to higher ACPQ. These results have implications for the design of internal controls, namely with respect to the role of internal audit activities and ethical environment in enhancing ACPQ.

David Bedford
David A Brown
Teemu Malmi and
Prabhu Sivabalan

17

Effectiveness of the Balanced Scorecard: The Impact of Strategy and Causal Links

Many of the claimed benefits of the Balanced Scorecard (BSC) rely on the linkage of its performance measures to strategy and on causal relations among its measures. Using a survey research method, this study examines the extent to which adopters of BSC consider these features and whether they result in more effective performance measurement systems.
A survey of medium and large Australian manufacturing organisations reveals that varying forms of scorecards are used in practice and that managers who perceive that their scorecard measures are linked to strategy and affect each other in a causal manner also perceive a higher level of effectiveness of the BSC. The study also suggests that strategic use of BSC is not as widespread as might be expected.

Lichen Yu
Sujatha Perera and
Susan Crowe

37

Performance Measurement Management for Small and Medium Enterprises: an Integrated Approach

The paper reviews the literature in the field of performance measurement and management (PMM) for small and medium enterprises (SMEs) and it proposes a framework for PMM system design. The results of the literature review carried out reveal the need for developing real integrated PMM frameworks. Based on such a structured literature review, we propose an integrated framework that rectifies the drawbacks in previous frameworks while incorporating their strengths.  The integrated framework proposed is a contribution to enhance SME adoption of PMM systems and provides milestones for PMM system design. Future research would involve an in-depth examination of such milestones to facilitate implementation

Paolo Taticchi
Kashi R. Balachandran
Marco Botarelli and
Luca Cagnazzo

57

The Factors Impacting Managerial Performance in Local Government Authorities within an Islamic Cultural Setting

This study examines the effects of accountability forces, budget participation and the use of performance measures on managerial performance in local government authorities (LGAs) in Malaysia. The findings reveal that accountability forces, both endogenous and exogenous, have a positive effect on the managerial performance of public servants in LGAs, although this effect is mediated by the extent to which they make use of performance measures. 
This study extend prior research by addressing the way in which accountability and management accounting mechanisms can be inter-related to provide explanations of managerial performance. The results are interpreted in the context of Malaysian public sector management culture, a largely Islamic workforce and changing public demands. Practical implications arise from the findings for improving performance of LGAs in Malaysia through the behaviours of their public servants.

Dennis Taylor
Fadzlon Abdul-Hamid and
Zuraidah Mohd-Sanusi

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