The data are collected using seven-point Likert scales and then four types of analysis are conducted. The first is alignment analysis in which the extent of match between the firm’s strategies, actions and measures is assessed. The second is congruence analysis, which provides more detail on the extent to which the strategies, actions and measures are mutually supportive. The third is consensus analysis, in which the data are analysed according to management position or function. And the fourth is confusion analysis in which the range of responses, and hence the level of disagreement, is examined.
Hayes and Abernathy (1980) focus on a different dimension of performance measurement – namely the fact that many traditional measures of financial performance encourage managers to adopt a short-term perspective. They hypothesize that the use of short-term financial controls may partly be to blame for the economic decline of the USA:
Although innovation, the lifeblood of any vital enterprise, is best encouraged by an environment that does not unduly penalise failure, the predictable result of relying too heavily on short-term financial measures – a sort of managerial remote control – is an environment in which no one feels he or she can afford a failure or even a momentary dip in the bottom line (Hayes and Abernathy, 1980).
One of the most comprehensive studies of short-termism is the one reported by Banks and Wheelwright (1979). They conducted a series of in-depth interviews with managers and planners in six major US firms and found that short-termism encouraged managers to delay capital outlays; postpone operating expenses; reduce operating expenses; and make other operating changes such as varying the product mix, the delivery schedules, or the pricing strategy. Furthermore, they suggest that one of the ways in which short-termism can be minimized is by establishing performance measures, which reflect both the short and long term. This recommendation is supported by Kaplan (1984).
Another issue that has to be considered when designing a performance measurement system is conflict, as illustrated by Fry and Cox (1989). They cite the case of a firm where the plant manager was primarily concerned with ROI, the product group managers were evaluated according to the number of orders that were shipped on time, and the supervisors and operatives were measured according to standard hours produced. This measurement system encouraged the supervisors and operatives to save set-up time by producing batches larger than those scheduled. Hence some orders were delayed and the product group managers had to sanction overtime to ensure good due-date performance. This, in turn, had a negative impact on the plant’s managers performance which was measured by ROI.
Finally, the perspective adopted by Computer Aided Manufacturing-International (CAM-I) provides an interesting insight. CAM-I is a consortium of industrialists and academics which sponsors, among other things, a research project on CMS: