Employee Performance Measurement Systems and their Links to the Management Control System Package - A Study of Strategic Business Units within Large Swedish Companies

Abstract: Performance measurement systems (PMS) is one of several management control systems (MCS) which is used within organisations in order to control the behaviour of the employees. Research has shown that these systems are interrelated and that they should not be investigated in isolation but as a package. However, empirical research within this field has been limited. Thus, the aim of this thesis is to investigate the design and use of PMSs and how the PMSs are linked to other parts of the MCS package, as defined by Malmi and Brown (2008). A quantitative study of strategic business units (SBUs) within large Swedish organisations is conducted and different types of PMSs are identified using k-means cluster analysis base on the SBUs' use of financial and non-financial measures in its employee evaluation. The result is five PMS types: Financial, Non-financial, Low Hybrid, Medium Hybrid and High Hybrid PMS. Links between these PMS groups and the other parts of the MCS package are studied and three distinct patters are found. Firstly, a consistency is observed between the methods used within the PMS and the methods used in other parts of the MCS package. Secondly, the characteristics of an SBU's PMS are linked to whether the system is focused more on financial or non-financial measures. Thirdly, the extent to which the SBUs use financial and non-financial measures in their employee PMS is connected to the links between the PMS and other parts of the MCS.