JAMAR Summer 2008

THE JOURNAL OF APPLIED MANAGEMENT ACCOUNTING RESEARCH

JAMAR Information

Table of Contents

SPECIAL ISSUE ON PERFORMANCE MANAGEMENT SYSTEMS

EDITORIAL

 


Performance Management Measures that Enhance Organisational Value: A Review

Abstract
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 valuemetrics 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.

Keywords
Profitability Measures
Performance Metrics
Valuation Measures
Economic Value Added (EVA)
Strategic Value Added (SVA)
Balanced Scorecard (BSC)
Capability Economic Value
(CEVITATM)

Janek Ratnatunga and Lorenzo Montali

1

ARTICLES

 

 

Balanced Scorecard Design and Performance Impacts: Some Australian Evidence

Abstract
Academic literature is giving increased consideration to the use of performance measurement systems, notably the Balanced Scorecard (BSC). However, there has been limited empirical investigation into the particular benefits that result from the use of the BSC (Ittner and Larcker, 1998). This study empirically examines how the BSC has been applied in practice and whether different BSC designs result in varying performance outcomes. Data is from a cross sectional survey, which provided a sample of 92 Australian firms using BSC. It is hypothesised that the BSC provides greater benefits when 1) cause and effect logic is used between measures 2) nonfinancial measures are tied to compensation and 3) implemented at multiple levels within the organisation. Results support the first proposition, although cause and effect logic appears to be more important if the BSC is tied to compensation. These results are discussed, and implications for practice and future research are presented.

Keywords
Balanced Scorecard
Performance Measurement
Causal Links
BSC Implementation

David Bedford
David A Brown
Teemu Malmi and
Prabhu Sivabalan

7

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

Abstract
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.

Keywords
Balanced Scorecard
Performance Measurement Systems
Performance Measurement and
Management Systems
Strategy Link
Casual Links

Lichen Yu
Sujatha Perera and
Susan Crowe

7

 

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

Abstract
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

Keywords
Performance Measurement and Management
Small and Medium Enterprises
Literature Review
Framework

Paolo Taticchi
Kashi R. Balachandran
Marco Botarelli and
Luca Cagnazz

57

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

Abstract
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.

Keywords
Endogenous Accountability
Exogenous Accountability
Budget Participation
Use of Performance Measures
Managerial Performance
Local Government
Islamic Cultural Setting

Dennis Taylor
Fadzlon Abdul-Hamid and
Zuraidah Mohd-Sanusi

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