Organization structure, competition and performance measurement systems and their joint effects on performance

This study examines the effect of organization structure and competition on the design of performance measurement systems (PMSs) and their joint effects on performance. The design of performance measurement systems is investigated using two dimensions: the use of integrated measures related to the four perspectives of the balanced scorecard (BSC) and the stage of development of PMSs. The data for this study were collected from 168 valid responses (25.19%) of Taiwanese firms listed on the Taiwan Stock Exchange. The results indicate that organization structure is significantly associated with the design of PMSs. Compared to mechanistic organizations, organic organizations make greater use of integrated measures and the higher developmental stages of PMSs. The findings also partly support the presence of joint effects on performance involving organization structure, competition, and the use of PMSs. Specifically, the results show that when there is greater competition among firms, a positive relationship between the stages of PMS development and performance is of higher significance. Another conclusion derived from this study is that the use of integrated measures is more relevant with respect to organizational performance in mechanistic organizations than in organic ones.

Research highlights▶ Compared to mechanistic organizations, organic organizations make greater use of integrated measures and the higher developmental stages of PMSs. ▶ When there is greater competition among firms, a positive relationship between the stages of PMS development and performance is of higher significance. ▶ The use of integrated measures is more relevant with respect to organizational performance in mechanistic organizations than in organic ones. ▶ As the adoption of an innovative PMS requires organic structures, while its effective implementation and utilization depends on mechanical structure, there is thus a need for organizations to adopt a hybrid structure.