The role of performance management systems in managing tensions in a servitisation setting - The case of a multinational manufacturing company

Abstract: As a result of increased global competition and falling industry profitability, Western multinational manufacturing companies are increasingly adding value to their market offer by adding after-sales services to their product portfolio, a phenomenon commonly referred to as 'servitisation'. This thesis explores the organisational tensions in integrating multinational companies in a servitisation setting, by conducting an in-depth case study at a Swedish multinational manufacturing company. Specifically, we look at the role of performance management systems (PMS) in managing the tensions in a servitisation setting. The thesis builds mainly on the work by Busco et al. (2008) on the role of PMS in managing three main organisational tensions: centralisation vs. decentralisation of decision-making, vertical vs. lateral relations, and convergence vs. differentiation of practices. The study found that only the tension related to centralisation vs. decentralisation could be found in relation to the servitisation setting. This tension was caused by the creation of service divisions that centralised the aftermarket business while simultaneously decentralising decision making authority over the product value chain. The formal PMS was found to be insufficient in managing this tension and informal control mechanisms were found to be insufficient in complementing the role of formal PMS. Similar to Busco et al. (2008), we found that informal control mechanism has the potential to both reinforce and damage the role of PMS in managing tensions. Different from Busco et al. (2008), the formal PMS was found to have the potential to aggravate organisational tensions.