For example, they may use buffering (e.g., extra inventory)
to reduce the effects of uncertainty or they may try to increase
their information processing capabilities through structural
mechanisms (e.g., lateral relations) and other efforts to improve
information flow. In the model, these organizational capabilities
are represented by the following variables:
• Structure — structural arrangements to help enhance
the organization's capabilities to process information:
Puranam, Raveendran and Knudsen [40] argue that
organization design can directly influence how subgroups
(units, divisions, departments) process information and
develop new knowledge;
• Decision-making style — the degree to which management's
decision making style affects information
flow by making full use of two-way lateral and vertical
communications (Collaborative styles) or by relying
mostly on one-way vertical communications (Command
and Control styles).
Research on collaborative decision making has confirmed its
potential positive impact on organizational performance, provided
information and communication technologies can facilitate
the organization’s capability to process complex and dynamic
information flows [1]. It is also evident from recent IS research
[33] that a collaborative decision making style helps to promote
a climate where employees increase usage of IS and engage in
exploring its new features.
Systems Variables
The model proposes that the organizational information
processing requirements and capabilities discussed above will
affect a key system variable: the system design.
According to the management control literature, the uses
for which the SMPS are designed may have a significant influence
in their outcomes [11], and Mouritsen [35] has pointed
out that the ability of management control systems to support
change is influenced by system design. Ittner and Larcker
[22] argued that SPMS research should examine the decision
purposes for which a SPMS is designed, in order to allow appropriate
interpretation of the outcomes of the use of performance
measures, given that they might be appropriate for some
purposes but not for others. As noted by Bento and White [6, p.
7], “a distinctive characteristic of SPMS implemented in the last
two decades is an attempt to choose tailored performance measures
that translate a particular organizational strategy into
an integrated set of performance indicators. Thus, this set of
measurements contributes to change management by fulfilling
many purposes: not only to direct managerial action to the
achievement of new strategic objectives, but also to provide
feedback to managers, through a dynamic learning process, about
the potential need for new strategy formulation.” The survey
respondents were asked about 12 potential SPMS design purposes,
including uses such as evaluating individual and business unit
performance, making decisions regarding capital allocation
or technology acquisition, and communicating directives or
strategy. The SPMS design purposes that were studied here
cover all four decision contexts recommended by Ittner and
Larcker [22]: cost determination (e.g., measurement of business
results); information for planning and control (e.g., evaluation
of individual performance, determination of individual rewards
and recognition, and communication of management directives);
reduction of waste (e.g., management of operations, capital
and technology); and strategic emphasis on value drivers (e.g.,
management of strategy, suppliers and customer relationships;
delivery of information for decision-making and communication
of values and culture).
The information systems literature (e.g., [2, 12, and 41])
suggests that another relevant system variable that influences
IT variables is information quality (IQ). For the purpose of
this study “information quality” refers to the widely accepted
definition of “fitness for use” [3]. Notwithstanding the subjective
and perceptual nature of the information quality concept, it has
long been shown to be positively associated with the success
of information systems [46] and with system effectiveness [48]
including the increased use of the information, user satisfaction,
and impact on individuals and organizations [12]. The literature
in performance measurement points out that the information
quality of most performance measures (with the exception of
short-term financial measures) is perceived to be lower than their
importance, and warns that researchers should take information
quality into explicit consideration when studying performance
measurement systems [22, 27, 28, 32]. Luft [30] highlighted
that incorrect measurements (i.e., lower information quality)
represent one of the most common problems in strategic performance
measurement systems, leading to limited usage and
reduced effectiveness. Recent information system (IS) studies,
however, have not explicitly explored the impact of information
quality on the effectiveness or usefulness of IT systems; rather,
they have focused on how information quality impacts operations,
planning, customer service, asset utilization, costs, or
employee satisfaction [38].
Information Technology Variables
The model in Figure 1 shows two sets of IT variables that
potentially affect the business impact of SPMS: technical
characteristics and technical outcomes of the SPMS.
Information technology investments to improve technical
characteristics have been made for many decades, but research
on whether IT matters for improving firm performance have only
recently produced encouraging results at the firm or industry levels
[21]. Technical characteristics include the level of use of Internet
technologies to facilitate information flow, and the types of
technology used in the SPMS to generate and process information,
in particular the widespread use of Enterprise Resource Planning
(ERP). ERP usage has been the focus of a plethora of studies
in the IS literature [14], but the relationship between ERP usage
and organizational performance is still unclear [29]. Interestingly,
Liu and his colleagues found that the extent to which ERP use is
assimilated in organizations is related to the perceived usefulness
of the information and business processes.
The model in Figure 1 also highlights the role played by another
set of IT variables: the technical outcomes achieved by the SPMS.
Technical outcomes include the usefulness and effectiveness of
the SPMS. The literature in management information systems
defines usefulness as the degree to which a person believes
that using a particular system would enhance performance [43]
and relates it to voluntary IS use [12, 13]. The actual use of
an information system is seen in the literature as an important
indicator of IT success and has been found to be strongly related
to the perceived usefulness of the system [31]. Prior IS research