performance measurement in small and medium enterprises an empirical study in scottish companies

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SummarysheetPERFORMANCEMEASUREMENTINSMALLANDMEDIUMENTERPRISES:ANEMPIRICALSTUDYINSCOTTISHCOMPANIESPatriziaGarengoDepartmentofIndustrialEngineeringandManagementUniversityofPaduaViaVenezia,135131Padua,Italypatrizia.garengo@unipd.itUmitS.BititciCentreforStrategicManufacturingDMEM,UniversityofStrathclydeJamesWeirBuilding,75MontroseStreetGlasgow,G11XJ,UKu.s.bititci@strath.ac.ukPatriziaGarengoisaPhDCandidateattheDepartmentofIndustrialInnovationandManagementoftheUniversityofPadua,Italy.SheholdsaBusinessManagementdegreefromtheUniversityofVenice(Italy).Forsomeyears,sShehwasbeenamarketingconsultantandapartecipatedparticipatedinmemberofresearch,consultancyandtrainingprojectsinInternetMarketingandDistanceLearningattheUniversityCentreforBusinessAdministration(CUOA).Hercurrentresearchinterestsincludemarketing,distancelearningandperformancemeasurement,withparticularattentiontoSMEs.UmitBititciisaProfessorattheUniversityofStrathclyde,alsotheDirectoroftheCentreforStrategicManufacturing(CSM).Asamanagementprofessional,consultantandanacademichehas18yearsofexperienceworkingwithawidespectrumofcompaniesonStrategyManagement,PerformanceMeasurement,ValueDevelopment,SupplyChainManagementandBusinessProcessImprovement.Thisbroadrangeofexperiencehasdevelopedthroughaseriesoflongtermprofessionalrelationshipswithorganisationsinaverityofsectors.AstheDirectorofCSM,hehasbeenresponsibleforanumberofEuropeanandUKfundedresearchanddevelopmentprogrammes.Keywords:Performancemeasurementsystem,smallandmediumenterprises,contingencyfactors,corporategovernance,managementinformationsystem,businessmodelsandorganizationalculture2 PERFORMANCEMEASUREMENTINSMALLANDMEDIUMENTERPRISES:ANEMPIRICALSTUDYINSCOTTISHCOMPANIESPatriziaGarengoDepartmentofIndustrialEngineeringandManagementUniversityofPadua,Padua,ItalyUmitS.BititciCentreforStrategicManufacturingDMEM,UniversityofStrathclyde,Glasgow,UK2AbstractSincethemid-1980smuchresearchhasbeencarriedoutonperformancemeasurementsystems(PMS).However,thereisinsufficientempiricalresearchandalackofstudiesonthefactorsthatenableandconstrainperformancemeasurementinsmallandmediumenterprises(SMEs).Inthisstudy,usingaliteraturereview,fourmaincontingencyfactorswereidentified.Then,bymeansofqualitativeresearchbasedoncasestudymethodology,therelationshipbetweenthesefactorsandPMSwasinvestigated.Finally,thefindingswereformalizedintheoreticalpropositions.22 IntroductionPerformancemeasurementsystemscouldplayanimportantroleintheorganizationalandmanagerialdevelopmentinSMEs.However,mostperformancemeasurementstudiesdonotconsidercompanysize.Furthermore,evidencefromliteratureandpracticesuggestapooruseofPMSinSMEs,butlittleresearchinvestigatesthereasonsforthis.Somestudiesmentionashortageofhumanandcapitalresources,alackinstrategicplanning,amisconceptionofthebenefitsofperformancemeasurementandatechnicalorientation(Barnesetal.,1998;HudsonandSmith,2000;HvolbyandThorstenson,2000;Tenhunenetal.,2001).However,thereisnotasufficientamountofin-depthempiricalresearchthatstudiesthecontingencyfactorsthatinfluenceperformancemeasurementinSMEs.Theaimoftheresearchpresentedherewastofillthisgap.Thepurposeofthisworkwastocontributetoabetterunderstandingofthefactorsthatinfluencethedesign,implementationanduseofperformancemeasurementsystemsinSMEs.BackgroundInthelast20years,businessperformancemeasurement(BPM)hasbeenstudiedusingmanydifferentperspectives(FrancoandBourne,2003).Thetwomainperspectivesaremanagementcontrolandperformancemeasurement.Managementcontrolsystemstudiesarecharacterizedbyacontingencyapproach:eachorganizationhastochoosethemostsuitablesystembytakingintoaccountsomecontingencyvariablessuchasstrategy,objectives,structures,culture,technology,etc.(Chenhall,2003;Langfield-Smith,1997;Otley,1999;Simons,1995;).Manyempiricalstudieshavebeencarriedout(AbernethyandBrownell,1997;Buckmaster,2000;IttnerandLarcker,1998;ShirleyandReitspergerg,1991)andtheneedforaninnovativeapproachisoftencalledfor??(Nannietal.,1992).Thoughsomenon-financialmeasuresareintroducedinMCSstudies,themajoritystillfocusonaccountingaspectsandinnovativemodelsarenotproposed.Themodelsfoundintheliteratureonperformancemeasurementsystems,inparticularbalancedmodels,aresometimesusedinacademicorempiricalstudies(Otley,1999).However,thecontingencyfactorsarenotwelldefinedandveryfewcontingency-basedMCSresearchstudiesexaminetherelationshipbetweenthesizeofacompanyandMCS(ReidandSmith,2000).Intheliteratureonperformancemeasurementsystems(PMS)manynormativemodelsandstudiesonPMScharacteristicsareproposed.Followingthecriticismoftraditionalapproaches,whichwerebasedonfinancialmeasures,inthe1980sbalancedanddynamicsarchitecturesweredeveloped(Bititcietal.,1997;Fitzgeraldetal.,1991;KaplanandNorton,1992;LynchandCross,1991;1996;Neelyetal.,2002).However,theliteraturerevealsthatlittleempiricalresearchontheimplementationanduseofthesearchitectureshasbeencarriedout.VeryfewstudieshavedevelopedPMSmodelsforSMEsandlittleresearchusesanempiricalapproachtoanalyseperformancemeasurementpracticesinSMEs.Furthermore,thecontingencyfactorshavenotbeeninvestigatedatall.InordertoeffectivelyimplementandusePMSsinSMEs,thefactorsthatenableorconstrainperformancemanagementinthesecompaniesmustbedefinedandanlaysed.Ourstudyadoptsamixedapproachthatoverlapsboththemanagementcontrolsystemandperformancemeasurementsystemapproaches.OurempiricalresearchwascarriedoutusingthecharacteristicsofthemodelsproposedbytheliteratureonPMS,theresultsofempiricalstudiesonMCSandtheliteratureonthecharacteristicsofSMEs.Theaimofthisstudywasto25 definesomeofthemainfactorsinfluencingperformancemeasurementinSMEsandtounderstandhowthesefactorsimpactperformancemeasurement.Tworesearchquestionswereinvestigated:GiventhethreestagesthattheliteraturedefinesasthecharacteristicsoftheimplementationofPMS(design,implementationanduse:Bourneetal.,2000),whatarethekeycontingencyfactorsthatinfluencethedesign,implementationanduseofPMSinSMEs?WhataretherelationshipsbetweenPMScontingencyfactors(ingeneral?)andtheperformancemeasurementpracticesinSMEs?ResearchdesignExploratoryresearch(Yin,1994:3)wascarriedoutusingasocialconstructionismparadigm(Easterby-Smithetal.,2002).Toanswerthefirstresearchquestion,aliteraturereviewandinterviewswerecarriedoutandprofessionalexperiencewasused.ContributionsfromtheliteratureonPMS,MCSandSMEwereusedatthebeginningoftheresearchaswellasduringtheempiricalphasesofthestudy.ExpertsinPMS,entrepreneursandmanagersofSMEswereconsultedbymeansofsemi-structuredinterviews.Furtherevidencewasgatheredusingprofessionalexperiencethatcamefromcomplementaryprojects(seeforinstanceGarengoetal,2004).Alltheinformationgatheredwasjoinedtogetherusingthecategoricalaggregationtechnique(Burckley,1976:18;Stake,1995:74)andfourmaincontingencyfactorswereidentified.Toanswerthesecondresearchquestion,wedevelopedaqualitativeresearchdesigninvolvingamultiplecasestudiesmethodology.Inparticular,Scottishcasesstudieswereanalysedtoverifythesignificanceofthecontingencyfactorsandtoinvestigatetherelationshipbetweenthesefactorsandperformancemeasurement.Thisdatacollectiontechniquewaschosenforthreemainreasons(Ellram,1996;Eisenhardt,1989;Meredith,1998;Stuart,2002).Firstly,theresearchisexplorative,since,asmentionedabove,thereisalackofresearchonthetopicstudied.Secondly,thecasestudieswereconsideredtobeveryusefulforuncoveringpossiblecontingencyeffectsandforfindingempiricallygroundedexplanationsforthem(GioiaandPitre,1990).Finally,casestudieshaveproventobeoneofthemostpowerfulresearchmethods,particularlyindevelopmenttheory(Vossetal.,2002).Moreover,companydocumentsandinterviewswithcompanyconsultantswereusedtocollectadditionalinformationandtobetterunderstandthedatagathered.Finally,whenpossible,theopinionsofotherresearcherswerecollectedtohelpconfirmourfindings(Eisenhardt,1989).Thiswaspossiblebecauseotherresearchershaveanalysedissuespartlyoverlappingthoseinvestigatedinthisstudy.TheunitofanalysiswasaPMSdefinedasabalancedanddynamicsystemthatsupportsthedecisionmakingprocessbygathering,elaboratingandanalysinginformation(Bititcietal.,2000;Neelyetal.,2002).Specificationsoftheunitofanalysiswereusedtodefineboththecharacteristicsofthepopulationfromwhichtheresearchsamplewasdrawnandtheboundariesofgeneralizationofthefindings(Eisenhardt,1989;Yin,1988).TheobjectofanalysiswasSMEs.Thepopulationinthisstudywasmadeupofmanufacturingcompanieswithoutdelocalizationofproductionthathavebetween50and250employees,whosecapitalisheldbyonepersonorasmallgroupofpeople,andthathasparticipatedinqualityawardsorotherimprovementprojects.Thedatawascollectedbyvisitingcompaniesandinterviewingpersonsatdifferentorganizationallevels.Theinterviewprotocolwasdynamicallyadjustedtomaximiseinsightsintothethemesthatemergedduringtheinterviews.Thecasestudieswereanalysedwithoutanypredefinedhypothesistotest(Eisenhardt,1989).Someimportantvariablesweredefined25 foreachcontingencyfactorusingtheexistingliterature,buttherelationshipsbetweenthesevariableswerenotidentifiedbeforetheanalysisofthecasestudies.Crosscaseanalysiswasusedtoanalysetheempiricaldata.Overlapbetweendataanalysisanddatacollectioncharacterizedtheentireresearchprocess.Nevertheless,thedatawasformallyanalysedintwomainphases.Duringthefirstphasesomemodelsweredefinedtoanalysetherelationshipsbetweeneachcontingencyfactorandperformancemeasurement(Meredith,1993).Then,inthesecondphase,theserelationshipswereinvestigatedandsummarizedintheformoftheoreticalpropositions.ContingencyFactorsUsingthemethodologydescribedabove,fourmaincontingencyfactorswereidentified.Inthefollowingsections,eachfactorisdefinedandtheliteratureunderliningitsimportanceinperformancemeasurementishighlighted.CorporategovernanceAcorporategovernancestructureisthewholesetofstructuresandprocessesusedtoguideandcontrolanenterprise(Cadbury,1992;OECD,1999)Insmallandmediumcompaniestheoverlapbetweenownership,companyandfamilygeneratescomplexcorporategovernancestructures.Thisoverlapinfluencesthelevelofdelegation,controlsystems,performancemeasurementsystems,andalloftheactionsofformalorgans,inparticulartheboardofdirectors(Compagno2003;GnanandMontemerlo,2001;GubittaandGianecchini,2001).Differentapproachesareappliedinthecorporategovernancestudies(seeZahraandPearce,1989).Twomaindimensionsareusedtoanalysetherelationshipbetweentheownershipstructureandtheroleoftheboard(Zahraetal.,2000).Usingtheagencyapproach,threemainrolesoftheboardofdirectorsweredefined:strategicrole(Bavly,1985;Compagno,2003;TaskakoryandBoulton,1983),controlrole(FamaandMeckling,1983)andservicerole(ForbesandMilliken,1999;Rosenstein,1987).Aboardwithaserviceroleismainlyusedwhereownershipandmanagementoverlap.Someofthemainservicerolesoftheboardofdirectorsinfamilycompaniesarethere-balancerole(DancoandJonovic,1981),thesharesupportrole(Ward,1992)andtherelationshipsupportrole(Barach,1984).ManagementinformationsystemAmanagementinformationsystem(MIS)isdefinedasthesystemforplanning,developingandusingtheInformationTechnologytoolsthatsupportcompanymembersinmanagingtheinformationprocess(Haagetal.,2002).ManyPMSstudiesemphasizetheimportanceofhavinganadequateinformationsystemtosupportdatacollection,analysis,interpretationandreportingprocesses(Aicipa,2001,HoandMcKay,2002;Bititcietal.,1997).SomeresearchessuggestthatPMScanbemadelesscumbersome,andmoredynamicandresponsiveusingITsupport(BititciandNudurupati,2003;BourneandNeely,2000;Hudsonetal.,1999;).Aninadequateinformationsystemisdescribedasoneofthemainobstaclestoperformancemeasurement(Aicipa,2001;BititciandCarrie,1998;Bourne,2001;Neely,1999;HoandMcKey,2002),especiallyinSMEs(Barnesetal.,1998;Bititcietal.,2000;Brouthersetal.,1998;Hudsonetal.,1999).ResearchclaimsthatinformationsystemsmustbeadaptedtothespecificcharacteristicsofSMEscharacteristicsthatfurtherresearchontherelationshipbetweenmanagementinformationsystemandperformancemeasurementisrequired(Bititcietal.,2000;Neelyetal.,2002).25 Theintroductionofpowerfultechnologicaltoolshasoftenledcompaniestofocusonlyonhardaspectsandtoneglectmanagerialpracticesandhumanbehaviour.Manyauthorsunderlinetheimportanceofanalysingsoftaspectssuchasperformancemeasurementpracticesandhumanbehaviour(Claveretal.,2001;Haagetal.;2002;Orlikowski,2000;Nudurupati,2003).Nonetheless,atleastuptonow,themodelsappliedtoassessMISaremainlybasedoncostbenefitanalysisorusersatisfaction.BusinessmodelAbusinessmodelestablishesthetypeofvalueacompanywantstocreateforthecustomer(Magretta,2002).Thisvalueissynthesizedinvaluepropositionsthatincludethebusinessstrategiespursuedbycompanies.PMSliteraturestatesthataPMShastoderivefromstrategy.LackofalignmentbetweenperformancemeasurementandbusinessstrategyprovedtobeoneofthemainobstaclestoachievingexpectedresultsfromaPMS(AtkinsonandWaterhouse;1997;KaplanandNorton,1992,1996).Consequently,themodelsproposedafterthemid-1980sstressthealignmentbetweenstrategyandPMS.Moreover,someauthorsexplicitlystatethataPMSshouldalsosupportthedefinitionandredefinitionofbusinessstrategytopromotecontinuousimprovement(Bititci,1997;Bourneetal.,2000;Neelyetal.,2002;Tonchia,2001).Chenhall’s(2003)literaturereviewunderlineslinksbetweenstrategyandMCSs.TheauthorwritesthatmanystudiesexploretherelationshipbetweenMCSsandstrategictypologies.However,thearchetypesofstrategyappliedindifferentstudiesheterogenousandnotclearlydefined.Asaresult,otherstudiesmustbecarriedoutinordertospecifythearchetypesusedintheseresearchstudies.Furthermore,thesearchetypesweredevelopedinthe1970sand1980s;therefore,theirrelevancetocontemporarysettingsshouldbechecked.GiventheimportanceofstudyingtherelationshipbetweenstrategyandPMSsandthelackofsuitablepredefinedtypologies,wechosetofocusourattentiononbusinessmodels.OrganizationalcultureOrganizationalcultureisdefinedasthedeepestlevelofbasicassumptionsandbeliefsthataresharedbymembersofanorganization(Schein,1985).Managementstyledefinesthedegreetowhichmanagersprovideclearcommunication,assistanceandsupporttotheirsubordinates,anditisoneofthekeyaspectstounderstandingorganizationalculture(CameronandQuinn,1999;Pheysey,1993;Shein,1985).PMSliteraturedescribescorporatecultureasoneofthecriticalfactorssupportingtheuseofstrategicperformancemeasurement(Bititcietal.,2004).FrancoandBourne(2003)illustratetwomainapproachesdevelopedintheliterature.Thefirstunderlinestheneedforacorporateculturethatsupportsteam-working,ownershipofproblemsandrisk-takingorentrepreneurship(LingleandSchiemann,1996;TheConferenceBoard,1999;AICPA,2001;Johnstonetal,2002);thesecondemphasisestheimportanceofacorporateculturethatfocusesoncontinuousimprovementandtheuseofstrategicperformancemeasurementsystem(HoandMcKay,2002;DeWaal,2002;KaplanandNorton,2001).Fromthemiddleofthe1980son,MCSliteratureemphasisestheinterplaybetweenorganizationalcultureandmanagementstyle(LebasandWeigenstein,1986)usingacontingency-basedapproach.Twomainpapersreviewthecross-culturalresearchinMCSdevelopedinthelast20years(Chenhall,2003;HarrisonandMcKinnon,1999).DifferentcombinationsofculturaldimensionsandMCScharacteristicswereexamined.ThewideuseofHofstede’sclassificationtoquantifyculturaldifferenceswascriticizedandalternativeapproachesandadditionalculturalattributesarerequired(Baskerville,2003).25 BriefprofileofthecompaniesinthecasestudyCompanyAwasformedin1979.ItisthebiggestBritishbrandofmineralwaterintheUK.Itmanufacturesandsellsmineralwater(stillandsparkling)inawiderangeofbottlesandpacks.Currently,thecompanyemploys200people.Afamilyownsthebusiness,buttheydonotactivelyparticipateinthecompany’sgovernance.CompanyBwasformedin1990.Itprovidesbottlingservicetodistillersandwarehousing,andhandlesalltypesofcargoandreworkserviceforitscustomerbase.Theproductsareseasonalandtheoperationalactivitiesarebasedonmanualwork.Consequently,thenumberofemployeesrangesfrom60(permanent)to110(withtheseasonalworkers).Thecompanyisownedbyagroupofbusinessmen,buttheyarenotinvolvedinthecorporategovernance;onlyoneshareholderworkspart-timeinthecompany.CompanyCisoneoftheUK'sleadingdesignersandmanufacturersofwindowsanddoors.Itwasfoundedin1900andcurrentlyemploysabout150people.Thecompanyhaddifferentownersinthepast,butisnowownedbytwopersons:oneisanentrepreneurwhoholdsmostofthecapitalandmanagesthecompany;theotherisoneofthepastowners,andheisnotinvolvedinthecompanygovernance.CompanyDdesignsandmanufacturespressuregauges,needlevalves,ballvalves,checkvalves,manifoldsandinstrumentation.ItisoneofthefewBritishengineeringcompaniessurvivinginthissector.Twobrothersestablisheditin1870.Someyearsagoanentrepreneurboughtthebusiness,andhecurrentlymanagesthecompany.ContingencyfactorsandperformancemeasurementAsmentionedabove,casestudieswereusedatthebeginningofthisresearchstudytodefineframeworkstoanalysetherelationshipbetweeneachcontingencyfactorandperformancemeasurement.TheframeworksusedtoinvestigatethecorporategovernancestructureandMISfactorsweredevelopedinthisstudywhilethoseusedtostudythebusinessmodelandorganizationalculturefactorswerechosenfromtheliterature.Thecasestudieswerethenplacedintheseframeworks,andtherelationshipbetweentheirpositionandperformancemeasurementwasinvestigatedandsummarizedintheoreticalpropositions.CorporategovernancestructureandperformancemeasurementOuranalysisofthecasestudiesconfirmstheinfluenceofcorporategovernanceinperformancemeasurement.ThegeneralmanagerofCompanyBstatedthatuntil4yearsagotheCompanywasownedbyonlyonepersonwhomanagedthebusinesswithoutanykindofmeasurement.Whenthecompanywasboughtbyagroupofbusinessmen,performancemeasureswereimmediatelyintroduced.InbothCompaniesCandDanentrepreneurownsandmanagesthebusiness.AsimilaruseofPMSsismadeinthesetwocasesbecauseofsimilaritiesintheirownershipstructuresandtheinfluenceoftheentrepreneurinthegovernance.Measureswereintroducedtomonitorthebusinessandnottosupportdecision-making;themeasuresreflectedtheentrepreneur’sknowledgeandinformationwasnotshared.InCompaniesAandBallthedecisionsweretakenbyfollowingaformalprocessandperformancemeasurementwasusedtomanagethebusinessandtosupportstrategicdecision-making.Ownershipstructure,influenceoftheownerinthecompanystructureandtheroleoftheboardofdirectors,allofwhichweredimensionsidentifiedduringtheliteraturereview,werefoundtoplayakeyroleintheinfluenceofthisfactoronPMS,.AframeworktosupporttheanalysisoftherelationshipbetweenPMSsandcorporategovernancewasdeveloped(seeFigure1).Thenthecompanieswerepositionedintheframeworkandtherelationshipbetween25 PMandcorporategovernancewasinvestigated.Theevidencewassummarizedinatheoreticalproposition(seeFigure1).Proposition1–Whentheownershipstructuremovesfromanentrepreneurwhoownsandmanagesthecompanytoagroupofshareholderswhoownthecompany,theroleoftheboardofdirectorsmovesfromaserviceroletoastrategicone.Theydonotmanagethecompanyandtheyhavenoinfluenceonthecompanygovernance.Theimportanceoftheperformancemeasurementasatoolforsupportingdecisionmakingincreases.Figure1–RelationshipbetweenperformancemeasurementandcorporategovernancestructureManagementinformationsystemsandperformancemeasurementTheempiricalinvestigationsupportsthechoiceofMISsascontingencyfactor.CompanyBconfirmedthatoneofthemainbarriersinimplementingPMSsisthelackofinformationsystems(IS).ThegeneralmanagerofCompanyBstated:“Wecouldnotuseperformancemeasuretosupportdecisionmakingifwecollecttheinformationusingspreadsheets.Whenwedecidedtointroduceanewmanagementstylebasedonperformancemeasurement,westartedtoinvestinhardwareandsoftwareandtoinvolveallthestaffinthechangingprogram”.CompanyDinvestedahugeamountofmoneyinIS.ThiscompanyintroducedanEnterpriseResourcePlanning(ERP)systemseveralyearsago,butthecompany’sneedswerenotanalysed.Consequently,thesystemdidnotprovetobesuitableforthecompanyandisstillnotusedtoday.Spreadsheetsarecurrentlyused.Thekeyroleofthehardandsoftdimensionsishighlightedbytheliteratureandconfirmedbythecasestudies.AmodelbasedonMIScosts(harddimension),managerialpracticesandhumanbehaviour(softdimensions)wasdeveloped(seeFigure2).TheMISofthecompanieswasassessedusingthisframework.Therelationshipbetweenperformancemeasurementandthemanagementinformationsystemwassummarizedinatheoreticalproposition(seeFigure2)Proposition2-Whenmanagerialpracticesandhumanbehaviourinaninformationsystemareadvanced,thereisacontextthatfavoursperformancemeasurement,regardlessofthelevelofinvestmentininformationsystems.25 Figure2–RelationshipbetweenperformancemeasurementandMISBusinessmodelandperformancemeasurementDuringtheanalysisofthecasestudies,businessmodelswerehighlightedasakeycontingencyfactor.CompanyCstartedtouseperformancetosupportthechangeinitsbusinessmodel.Untilafewyearsago,thecompany’stwomainstrengthsweretheabilitytoofferinnovativeproductsandtomaintainagoodrelationshipwithcustomers.However,inrecentyears,followingtheevolutionofthemarket,customersstartedtorequirecompetitiveprices.Themanufacturingmanagementhadtobeimprovedtoincreaseefficiency.Developingperformancemeasurementbecameessentialtosupportthisimprovement.CompanyBhadasimilarexperience.Afewyearsagothecompanywasboughtandanewbusinessmodelwaschosen.Withthenewbusinessmodelthecompanywantedtobuildastreamlinedprocesstomakelifesimpleanduncomplicatedforthecustomer,i.e.to“Takethehassleaway”.ThemanagementstatedthatwiththenewbusinessmodelPMSbecameessential.Proposition3-Whenthebusinessmodelchosenbyacompanyisbasedonhardvaluepropositionsoritissimplified,theimportanceofformalPMSstosupportdecision-makingincreases.Figure3–RelationshipbetweenperformancemeasurementandbusinessmodelTostudytherelationshipbetweenPMSsandbusinessmodels,differentclassificationsofbusinesswereanalysed.ThemodeldevelopedbyMartinezandBititci(2001)wasused.Thismodel,calledthevaluematrix,waschosenbecauseitsupportsamorepreciseclassificationofdifferentkindsofbusinessthanotherframeworks.Inparticular,itintroducesthesoftvaluedimensionstosupportthestudyofinnovativebusinessmodelsbasedonthechangesinthecurrentbusinessenvironment.Moreover,usingcasestudiesandaworkshop,themodelwasvalidated,inbothbigandsmallandmediumcompanies.TostudytherelationshipbetweenPMSsandbusinessmodels,differentclassificationsofbusinesswereanalysed.ThemodeldevelopedbyMartinezandBititci(2001)wasused.Thismodel,calledthevaluematrix,waschosenbecauseitsupportsamorepreciseclassificationofdifferentkindsofbusinessthanotherframeworks.Inparticular,itintroducesthesoftvaluedimensionstosupportthestudyofinnovativebusinessmodelsbasedonthechangesinthecurrentbusinessenvironment.Moreover,usingcasestudiesandaworkshop,themodelwasvalidated,inbothbigandsmallandmediumcompanies.ThecompanieswerepositionedintheMartinezandBititci(2001)model.Then,differencesinthePMSsusedbycompanieswithdifferentbusinessmodelswereidentifiedandsummarizedinatheoreticalproposition(Figure3)Organizationalculture,managementstyleandperformancemeasurementTheanalysisofcasestudiesconfirmstheroleoforganizationalcultureandmanagementstyleascontingencyfactorsintheimplementationanduseofperformancemeasurement.Duringtheimplementationphase,allthecompaniesusedanauthoritativemanagementstyleand25 powerculturewasastartingpoint.TheauthoritativemanagementstylesupportedtheintroductionofPMSsintheorganisations.Aftertheimplementationphase,companyAshiftedtoanachievementculture,andthesamethingishappeningincompaniesBandD.CompanyChasasupportcultureandademocraticmanagementstyle.TheseniormanageradoptsanauthoritativemanagementstyletomanagethedifficultyinimplementingthePMS.ThenatureoftheinterplaybetweenperformancemeasurementandorganisationalculturewasstudiedusingtheframeworkdevelopedbyBititcietal.(2004).TherelationshipsbetweenPMSsandorganizationalcultureweresummarizedinatheoreticalproposition(Figure4).ThispropositionisinagreementwiththeresultoftheresearchcarriedoutbyBititcietal.(2004).Proposition4-ThesuccessfulimplementationofPMSisdrivenbypowercultureandseniormanagerswhoadoptanauthoritativemanagementstyleduringtheimplementationprocess.Figure4–RelationshipbetweenperformancemeasurementandorganizationalcultureConclusionsThispaperpresentedfourmaincontingencyfactorsthatinfluenceperformancemeasurementinSMEsandfourtheoreticalpropositionstosummarizetherelationshipbetweeneachcontingencyfactorandPMSs.TocheckthevalidityoftheframeworkweinterviewedsomePMSresearchers.Thedatagatheredgaveadditionalproofoftheeffectivenessofthecontingencyfactorschosenandofthedevelopedframework.However,furtherresearchbasedoncasestudieswouldbeusefultotestthetheoreticalpropositionslistedabove.Moreover,furtherinvestigationwouldbeusefultoidentifyanyotherimportantadditionalcontingencyfactors.Duringthecasestudiesanalysisaninterdependencebetweenthefactorswasobserved,butfurtherresearchwouldbeusefultodefinetherelationshipbetweenthesefactors.ReferencesGiventhesignificantnumberofbibliographicalreferences,theyhavenotbeenpublishedwiththepaperbutcanbefoundatwww.dimeg.unipd.it/pmhttp://www.dimeg.unipd.it/pms/references.pdfsPERFORMANCEMEASUREMENTINSMALLANDMEDIUMENTERPRISES:ANEMPIRICALSTUDYINSCOTTISHCOMPANIESPatriziaGarengoDepartmentofIndustrialEngineeringandManagementUniversityofPadua,Padua,Italy25 UmitS.BititciCentreforStrategicManufacturingDMEM,UniversityofStrathclyde,Glasgow,UK25AbstractSincethemid-1980smuchresearchhasbeencarriedoutonperformancemeasurementsystems(PMS).However,thereisinsufficientempiricalresearchandlackofstudiesonfactorsenableandconstrainperformancemeasurementinsmallandmediumenterprises(SMEs).Inthisstudy,usingliteraturereview,fourmaincontingencyfactorsarechosen.Thenbymeansofqualitativeresearchbasedoncasestudymethodology,therelationshipbetweenthesefactorsandPMSisinvestigated.Thefindingsareformalizedintheoreticalpropositions.25IntroductionPerformancemeasurementsystemcouldplayanimportantroleintheorganizationalandmanagementdevelopmentinSMEs.Nevertheless,mostofperformancemeasurementstudiesdonotconsiderthecompany’ssize;evidencefromliteratureandpracticeevidencesuggesta-pooruseofPMSinSMEs,butlittleresearchinvestigatesthereasonsforthis.Somestudiesmentionshortageinhumanandcapitalresources,lackinginstrategicplanning,wrongperceptionofperformancemeasurementeffectsandtechnicalorientation(Barnesetal.,1998;HudsonandSmith,2000;HvolbyandThorstenson,2000;Tenhunenetal.,2001).However,thereisnotsufficientindepthempiricalresearchthatstudiesindepththecontingencyfactorsthatinfluencetheperformancemeasurementinSMEs.Thisresearchaimstofillthisgap.Thepurposeistocontributetoabetterunderstandingofthefactorsthatinfluencethedesign,implementationanduseofperformancemeasurementsystemsinSMEs.BackgroundInthelast20years,businessperformancemeasurement(BPM)hasbeenstudiedusingmanydifferentperspectives(FrancoandBourne,2003).Managementcontrolsystemstudiesarecharacterizedbyacontingencyapproach;eachorganizationhastochoosethemostsuitablesystemtakingintoaccountsomecontingencyvariableslikestrategy,objectives,structures,culture,technology,etc.(Chenhall,2003;Langfield-Smith,1997;Otley,1999;Simons,1995;).Manyempiricalstudieshavebeendeveloped(AbernethyandBrownell,1997;Buckmaster,2000;IttnerandLarcker,1998;ShirleyandReitspergerg,1991)andtheneedforinnovativeapproachisoftencalledfor(Nannietal.,1992).Somenon-financialmeasuresareintroducedinMCSstudies,butthemajorityarestillfocusedonaccountingaspectsandinnovativemodelsarenotproposed.Modelsdevelopedbyperformancemeasurementsystemliterature,inparticularbalancedmodels,aresometimesusedinacademicorempiricalstudies(Otley,1999).However,thecontingencyfactorsarenotwelldefinedandveryfewcontingency-basedMCSresearchstudiesexaminetherelationshipbetweenthesizedimensionandMCS(ReidandSmith,2000).PerformancemeasurementsystemliteratureproposesmanynormativemodelsandstudiesofPMScharacteristics.Followingthecriticismoftraditionalapproaches,basedonfinancialmeasures,inthe1980sbalancedanddynamicsarchitectureshavebeendeveloped(Bititcietal.,1997;Fitzgeraldetal.,1991;KaplanandNorton,1992;LynchandCross,1991;1996;Neelyetal.,2002).However,performancemeasurementsystemliteratureproduceslittleempiricalresearchontheimplementationanduseofthesearchitectures.Veryfew25 studiesdevelopPMSmodelsforSMEsandlittleresearchanalysesperformancemeasurementpracticesinSMEsusingempiricalapproach.Thecontingencyfactorsarenotinvestigated.However,implementationanduseofPMSinSMEsrequiresdefinitionandanalysisofthefactorsabletosupportorconstrainperformancemeasurementinthesecompanies.Ourstudyadoptsamixedapproachthatoverlapsboththemanagementcontrolsystemapproachandperformancemeasurementsystems.UsingthecharacteristicsofthemodelsproposedbyPMSliterature,theresultsofempiricalstudiesofMCSandtheliteratureonSMEs’characteristics,anempiricalresearchisdeveloped.TheaimofthisstudyistodefinesomeofmainfactorsinfluencingperformancemeasurementinSMEsandhowthesefactorsimpactonperformancemeasurement.Tworesearchquestionsareinvestigated:·Giventhethreestagesthatliteraturedefinesascharacteristicsofimplementationofperformancemeasurementsystem(design,implementationanduse:Bourneetal.,2000),whatarethekeycontingencyfactorsdeterminingdesign,implementationanduseofPMSinSMEs?·WhataretherelationshipsbetweenPMS’scontingencyfactorsandtheperformancemeasurementpracticesinsmallandmediumcompanies?ResearchdesignYouneedtopayattentiontothetenseyouareusing…ifyouaretalkingaboutwhatyouhavedonethenusepast-tense…was/were…ifyouaretalkingaboutwhatisinthepaperthenusepresenttense…is/areUsingasocialconstructionismparadigm(Easterby-Smithetal.,2002),exploratoryresearchiscarriedout(Yin,1994:3).Toanswerthefirstresearchquestion;literaturereview,interviewsandprofessionalexperienceareapplied.ContributionsoffromPMS,MCSandSMEliteratureareusedatthebeginningoftheresearchandaswellasduringthecarryingoutoftheempiricalphases.ExpertsinPMS,entrepreneursandmanagersofSMEsareinvolvedconsultedbymeansofsemi-structuredinterviews.Furtherevidenceisgatheredusingprofessionalexperiencesthatcomefromcomplementaryprojects(seeforinstanceGarengoetal,2004).Allthegatheredinformationisjoinedtogetherusingcategoricalaggregationtechnique(Burckley,1976:18;Stake,1995:74)andfourmaincontingencyfactorsarechosen.Toanswerthesecondresearchquestion,wedeployaqualitativeresearchdesigninvolvingamultiplecasestudiesmethodology.Inparticular,Scottishcasesstudiesareanalysedtoverifytherelevanceofthecontingencyfactorsandtoinvestigatetherelationshipbetweenthesefactorsandperformancemeasurement.Thisdatacollectiontechniqueischosenforthreemainreasons(Ellram,1996;Eisenhardt,1989;Meredith,1998;Stuart,2002).Firstly,theresearchisexplorative,since,asmentionedabovethereisapaucityofresearchintothetopicstudied.Secondly,thecasestudiesarerecognisedasveryusefulforuncoveringeventualcontingencyeffectsandforfindingempiricallygroundedexplanationsforthem(GioiaandPitre,1990);finally,casestudieshavebeenoneofthemostpowerfulresearchmethods,particularlyindevelopmenttheory(Vossetal.,2002).Moreover,companydocumentationandinterviewsofcompanyexternalconsultantsareusedtocollectadditionalinformationandforabetterunderstandingofthegathereddata.Besides,whenpossible,theopinionsofotherresearchersisarecollectedtoenhancetheconfidenceinthefindings(Eisenhardt,1989).ItThiswaspossiblebecauseotherresearchershaveanalysedissuespartlyoverlappingthoseinvestigatedinthisstudy.TheunitofanalysisisthePMSdefinedasbalancedanddynamicsystemthatsupportsthedecisionmakingprocessesbymeansofgathering,elaborationandanalysisofinformation(Bititcietal.,2000;Neelyetal.,2002).TheobjectofanalysisisSME.Specificationsofunit25 ofanalysisareusedtodefineboththecharacteristicsofthepopulationfromwhichtheresearchsampleisdrawnandtheboundariesofgeneralizationofthefindings(Eisenhardt,1989;Yin,1988).Thepopulationofthisstudyischaracterizedbymanufacturingcompanieswithoutdelocalizationofproduction,numberofemployeesbetween50and250,capitalheldbyonepersonorasmallgroupofpeople,andparteciapationparticipationinqualityawardsorotherimprovementprojects.Thedatacollectioniswascarriedoutthroughcompanyvisitsandinterviewstowithpersonsofatdifferentorganizationallevels.Theinterviewprotocolisdynamicallyadjustedtomaximiseinsightsintothethemesemergingduringtheinterviews.FollowingEisenhardt’s(1989)prescription,casestudiesareanalysedwithoutpredefinedhypothesistotest.Foreachcontingencyfactor,someimportantvariablesaredefinedusingexistingliterature,buttherelationshipsbetweenthesevariablesarenotexplicatedbeforecasestudiesanalysis.Inordertoanalyseempiricaldata,crosscaseanalysisareadopted.Overlapbetweendataanalysisanddatacollectioncharacterizesalltheresearchprocess.Nevertheless,thedataareformallyanalysedintwomainphases.Duringthefirstphasesomeframeworksfortheanalysisoftherelationshipsbetweeneachcontingencyfactorandtheperformancemeasurementaredefined(Meredith,1993).Then,inthesecondphasetheserelationshipsareinvestigatedandsynthesizedintheformoftheoreticalpropositions.ContingencyFactorsUsingthemethodologydescribedabove,fourmaincontingencyfactorsarewerechosen.Inthefollowingsections,eachfactorisdefinedandtheliteratureunderliningitsimportanceinperformancemeasurementishighlighted.CorporategovernanceCorporategovernancestructureisthewholeofstructuresandprocessesusedtoguideandcontroltheenterprise(Cadbury,1992;OECD,1999)vInsmallandmediumcompaniestheoverlapbetweenownership,companyandfamilygeneratescomplexcorporategovernancestructure.Levelofdelegation,controlsystems,performancemeasurementsystem,alltheactionsofformalorgans,inparticulartheboardofdirectors,areinfluencedbythisoverlapping(Compagno2003;GnanandMontemerlo,2001;GubittaandGianecchini,2001).vDifferentapproachesareappliedinthecorporategovernancestudies(seeZahraandPearce,1989).Twomaindimensionsareusedtoanalysethisrelationship:theownershipstructureandroleoftheboard(Zahraetal.,2000).Usingtheagencyapproach,threemainrolesoftheboardofdirectorsaredefined:strategicrole(Bavly,1985;Compagno,2003;TaskakoryandBoulton,1983),controlrole(FamaandMeckling,1983)andservicerole(ForbesandMilliken,1999;Rosenstein,1987).TheBoardwithserviceroleismainlyusedwhereownershipandmanagementoverlap.Someofthemainservicerolesoftheboardofdirectorsinfamilycompaniesarere-balanced(DancoandJonovic,1981),sharingknowledge(Ward,1992)andpowerandsupportoftherelationship(Barach,1984).ManagementinformationsystemManagementInformationSystemisdefinedasthesystemforplanning,developmentanduseofInformationTechnologytoolssupportingthecompany’smembersinmanaginginformationprocess(Haagetal.,2002).vManyPMSstudiesemphasizetherelevanceofhavinganadequateinformationsystemforsupportingdatacollection,analysis,interpretationandreportingprocesses(Aicipa,2001,25 HoandMcKay,2002;Bititcietal.,1997).SomeresearchessuggestthatPMScanbemadelesscumbersome,moredynamicandresponsiveusingITsupport(BititciandNudurupati,2003;BourneandNeely,2000;Hudsonetal.,1999;).Inadequateinformationsystemisdescribedasoneofthemainobstaclestoperformancemeasurement(Aicipa,2001;BititciandCarrie,1998;Bourne,2001;Neely,1999;HoandMcKey,2002),especiallyinSMEs(Barnesetal.,1998;Bititcietal.,2000;Brouthersetal.,1998;Hudsonetal.,1999).InformationsystemadequatetoSMEscharacteristicsisclaimedandfurtherresearchontherelationshipbetweenmanagementinformationsystemandperformancemeasurementisrequired(Bititcietal.,2000;Neelyetal.,2002).vTheintroductionofpowerfultechnologicaltoolsoftenledtofocusonlyonhardaspectsandtoneglectmanagerialpracticesandhumanbehaviour.Manyauthorsunderlinetheimportanceofanalysisofsoftaspectslikeperformancemeasurementpracticesandpeoplebehaviour(Claveretal.,2001;Haagetal.;2002;Orlikowski,2000;Nudurupati,2003).However,tillnowthemodelsappliedtoassessMISaremainlybasedoncostbenefitanalysisorusersatisfaction.BusinessmodelBusinessmodelisdefinedastheestablishmentofthetypeofvalueacompanywantstocreateforthecustomer(Magretta,2002).Thisvalueissynthesizedinvaluepropositionsincludingbusinessstrategiespursuedbycompanies.vPMSliteraturestatesthatPMShastoderivefromstrategy.LackofalignmentbetweenperformancemeasurementandbusinessstrategywasoneofthemainobstaclestotheachievementofexpectedresultsfromaPMS(AtkinsonandWaterhouse;1997;KaplanandNorton,1992,1996);consequently,themodelsproposedafterthemid-1980sstressthealignmentbetweenstrategyandPMS.Moreover,someauthorsexplicitlystatethatPMSshouldalsosupportdefinitionandredefinitionofbusinessstrategytopromotecontinuousimprovement(Bititci,1997;Bourneetal.,2000;Neelyetal.,2002;Tonchia,2001).vChenhall’s(2003)literaturereviewunderlineslinksbetweenstrategyandMCS.TheauthorwritesthatmanystudiesexploretheassociationbetweenMCSandstrategictypologies.However,thedifferentstudiesapplyheterogeneousandnotclearlydefinedarchetypesofstrategy;asaresult,studiesthatspecifythearchetypesemployedintheseresearchesareclaimed(????).Furthermore,thesearchetypesweredevelopedinthe1970sand1980s;consequently,itwouldbenecessarytochecktheirrelevancetocontemporarysettings.GiventheimportanceofstudyingtherelationshipbetweenstrategyandPMandthelackofsuitedpredefinedtypologies,wechosetofocusourattentiononthebusinessmodel.OrganizationalcultureOrganizationcultureisdefinedasthedeeperlevelofbasicassumptionsandbeliefsthataresharedbymembersofanorganization(Schein,1985).Managementstyledefinesthedegreetowhichmanagersprovideclearcommunication,assistanceandsupporttotheirsubordinatesanditisoneofthekeyaspecttounderstandingtheorganizationalculture(CameronandQuinn,1999;Pheysey,1993;Shein,1985).vPMSliteraturedescribescorporatecultureasoneofthecriticalfactorssupportingtheuseofstrategicperformancemeasurement(Bititcietal.,2004).FrancoandBourne(2003)illustratetwomainapproachesdevelopedintheliterature.Thefirstunderlinestheneedofcorporateculturesupportingteam-working,ownershipofproblemsandrisk-takingorentrepreneurship(LingleandSchiemann,1996,TheConferenceBoard,1999,AICPA,2001,Johnstonetal,2002);thesecondemphasisestheimportanceofcorporateculture25 focusedoncontinuousimprovementandtheuseofstrategicperformancemeasurementsystem(HoandMcKay,2002;DeWaal,2002;KaplanandNorton,2001).vFromthemiddleofthe1980s,MCSliteratureemphasisestheinterplaybetweenorganizationcultureandmanagementstyle(LebasandWeigenstein,1986)usingcontingency-basedapproach.Twomainpapersreviewthecross-culturalresearchinMCSdevelopedinthelast20years(Chenhall,2003;HarrisonandMcKinnon,1999;).DifferentcombinationsofculturaldimensionsandMCScharacteristicsareexamined.ThewideuseofHofstede’sclassificationtoquantifyculturaldifferencesiscriticizedandalternativeapproachesandadditionalculturalattributesarerequired(Baskerville,2003).SyntheticcasestudiesprofilesCompanyAwasformedin1979.ItisthebiggestBritishbrandofmineralwaterintheUK.Itmanufacturesandsellsmineralwater(stillandsparkling)inawiderangeofbottlesandpacks.Currently,thecompanyemploys200people.Afamilyownsthebusiness,butnomentionofthisfamilyisinvolvedtheydonotactivelyparticipateintheCcompany’sgovernance.CompanyBwasformedin1990.Itprovidesbottlingservicetodistillers,warehousingandhandlesingalltypesofcargoand,reworkserviceforatheircustomerbase.Theproductsareseasonableseasonalandtheoperationalactivitiesarebasedonmanualwork.Consequently,thenumberofemployeeschangesfrom60(permanent)to110(withtheseasonalworkers).Thecompanyisownedbyagroupofbusinessmen,buttheyarenotinvolvedinthecorporategovernance,onlyaminoroneshareholderworksparttimethecompany.CompanyCisoneoftheUK'sleadingdesignersandmanufacturersofwindowsanddoors.Itwasfoundedinthe1900andcurrentlyaround150peopleareemployed.Companyhaddifferentownersinthepast,nowitisownedbytwopersons,oneisanentrepreneurwhoholdsmostpartofthecapitalandmanagesthecompany,theotherisoneofthepastownersandheisnotinvolvedinthecompanygovernance.CompanyDdesignsandmanufacturespressuregauges,needlevalves,ballvalves,checkvalves,manifoldsandinstrumentation.ItisoneofthefewEnglishBritishengineeringcompaniessurvivinginthissector.Twobrothersestablisheditin1870.Someyearsagoanentrepreneurboughtthebusiness,andhecurrentlymanagesthecompany.ContingencyfactorsandperformancemeasurementAsmentionedabove,casestudiesareusedatthebeginningtodefineframeworkstoanalysetherelationshipbetweeneachcontingencyfactorandperformancemeasurement.TheframeworksforinvestigatinggovernancestructureandMISaredevelopedinthisstudy;thoseforexploringbusinessmodelsandorganizationalculturearechosenfromtheliterature.Afterwardscasestudiesareplacedintheseframeworks,andtherelationshipbetweentheirpositionandperformancemeasurementisinvestigatedandsynthesizedintheoreticalpropositions.CorporategovernanceandperformancemeasurementAnalysisofthecCasestudiesanalysisconfirmstheinfluenceofcorporategovernanceinperformancemeasurement.ThegeneralmanagerofCcompanyBdeclaredthatuntil4yearsagotheCcompanywasownedonlybyoneperson,whomanagedthebusinesswithoutanykindofmeasurement.WhentheCcompanywasboughtbyagroupofbusinessmen,performancemeasureswereimmediatelyintroduced.InbothCompaniesCandDcompaniesanentrepreneurownsandmanagesthebusiness.AsimilaruseofthePMismadeduetothe25 ownershipstructureandtheinfluenceofentrepreneurinthegovernancearehighlighted.Measuresareintroducedtomonitoringthebusinessandnottosupportdecision-making;themeasuresarealignedwithentrepreneur’sknowledgeandinformationisnotshared.InCcompaniesyAandBallthedecisionsaretakenfollowingaformalprocessandperformancemeasurementisusedtomanagethebusinessandtosupportstrategicdecision-making.Thedimensionsanalysedduringtheliteraturereviewplayakeyrole:ownershipstructure,influenceoftheownerinthecompanystructureandrolesoftheboardofdirectors.AframeworktosupporttheanalysisoftherelationshipbetweenPMandcorporategovernanceisdeveloped(seeFigure1).Next,thecompaniesarepositionedintheframeworkandtherelationshipbetweenPMandcorporategovernanceisinvestigated.Theevidenceissummarizedinatheoreticalproposition(seeFigure1).Proposition1–Whentheroleoftheboardofdirectorsmovesfromaserviceroletoastrategicone,theownershipstructuremovefromanentrepreneurwhoownsandmanagesthecompanytoagroupofshareholderswhoownthecompanytheroleoftheboardofdirectorsmovesfromaserviceroletoastrategicone,.Theydonotmanagethecompanyandtheyhavenoinfluenceonthecompanygovernance.Theimportanceoftheperformancemeasurementasatoolsupportingdecisionmakingincreases.Figure1–RelationshipbetweenperformancemeasurementandcorporategovernancestructureManagementinformationsystemandperformancemeasurementTheempiricalinvestigationsupportsthechoiceofMISascontingencyfactor.CompanyBaffirmedconfirmedthatoneofthemainbarriersinperformancemeasurementimplementationisthelackininformationsystem(IS).ThegeneralmanagerofCompanyBdeclared:“Wecouldnotuseperformancemeasuretosupportdecisionmakingifwecollecttheinformationusingspreadsheets.Whenwedecidedtointroduceanewmanagementstyle,basedonperformancemeasurementwestartedtoinvestinhardwareandsoftwareandtoinvolveallthestaffinthechangingprogram”.CompanyDinvestedahugeamountofmoneyinIS.MRPERPsystemwasintroducedsomeyearsago,butcompany’sneedswerenotanalysed.25 Consequently,thesystemisnotsuitableforthecompanyanditisstillnotused.Spreadsheetsarecurrentlyused.Thekeyroleofthehardandsoftdimensionsishighlightedbyliteratureanalysedaboveanditisconfirmedbythecasestudies.AmodelbasedonMIScost(harddimension),managerialpracticesandpeoplebehaviour(softdimension)isdeveloped(seeFigure2).TheMISofthecompaniesisassessedusingthisframework.Therelationshipbetweenperformancemeasurementandmanagementinformationsystemissummarizedinatheoreticalproposition(seeFigure2)Proposition2-Whenmanagerialpracticesandpeoplebehaviourinaninformationsystemareadvancedacontextsupportingperformancemeasurementcharacterizesthecompany,independentlyofthelevelofinvestmentininformationsystem.Figure2–RelationshipbetweenperformancemeasurementandMISBusinessmodelandperformancemeasurementDuringtheanalysisofcasestudiesthebusinessmodelwashighlightedasakeycontingencyfactor.CompanyCstartedtouseperformancetosupportthechangeofbusinessmodel.Untilafewyearsago,thecompany’stwomainstrengthsweretheabilitytoofferinnovativeproductsandtokeepagoodrelationshipwithcustomers.However,inrecentyearsfollowingtheevolutionofthemarketcustomersstartedtorequirecompetitiveprices.Improvementinthemanufacturingmanagementwasrequiredtoincreaseefficiency.Developedperformancemeasurementbecameessentialtosupportthisimprovement.CompanyBhadasimilarexperience.Someyearsagothecompanywasboughtandanewbusinessmodelwaschosen.Withthenewbusinessmodelthecompanywantstobuildastreamlinedprocesstomakelifesimpleanduncomplicatedforthecustomer,thatisto“Takethehassleaway”.ThemanagementdeclaresthatwiththenewbusinessmodelPMSbecameessential.25 Proposition3-WhenthebusinessmodelchosenbyacompanyisbasedonhardvaluepropositionsoritissimplifiedtheimportanceofformalPMStosupportdecision-makingincreases.Figure3–RelationshipbetweenperformancemeasurementandbusinessmodelTostudytherelationshipbetweenPMandthebusinessmodel,differentclassificationsofbusinessareanalysed.ThemodeldevelopedbyMartinezandBititci(2001)ischosen.Thismodel,calledvaluematrixischosenbecauseitsupportsamorepreciseclassificationofdifferentkindofbusinessthanotherframeworks,sinceitextendspreviousclassificationsdevelopedbyotherauthors.Inparticular,itintroducesthesoftvaluedimensions,tosupportthestudyofinnovativebusinessmodelbasedonthechangeincurrentenvironment.Moreover,usingcasestudiesandaworkshopthemodelwasvalidated,inbothbigandsmallandmediumcompanies.ThecompaniesarepositionedintheMartinezandBititci’s(2001)model;differencesinPMSusedbycompanieswithdifferentbusinessmodelareunderlinedandsummarizedinatheoreticalproposition(Figure3)Organizationalculture,managementstyleandperformancemeasurementTheanalysisofcasestudiesconfirmstheroleoforganizationalcultureandmanagementstyleascontingencyfactorsintheimplementationanduseofperformancemeasurement.Duringtheimplementationphase,allthecompanieshaveusedanauthoritativemanagementstyleandpowerculturehasbeenastartingpoint.TheauthoritativemanagementstylesupportstheintroductionofPMSintheorganisation.Aftertheimplementationphase,companyAshiftedtoanachievementculture,andthesamethingishappeningincompanyBandD.CompanyChasasupportcultureandademocraticmanagementstyle.TheseniormanageradoptsauthoritativemanagementstyletomanagethedifficultyinthePMSimplementation.ThenatureoftheinterplaybetweenperformancemeasurementandorganisationalcultureisstudiedusingtheframeworkdevelopedbyBititcietal.(2004).TherelationshipsbetweenPMandorganizationalculturearesummarizedinatheoreticalproposition(Figure4).ThispropositionisalignedwiththeresultofBititcietal.(2004)’sresearch.Proposition4-ThesuccessfulimplementationofPMSisdrivenbypowercultureandseniormanagerswhohadadoptedanauthoritativemanagementstyleduringtheimplementationprocess.Figure4–Relationshipbetweenperformancemeasurementandorganizationalculture25 DiscussionandConclusionsTheresearchfindsoutfourmaincontingencyfactorsinfluenceperformancemeasurementinSMEsandfourtheoreticalpropositionstosummarizetherelationshipbetweeneachcontingencyfactorandPMS.TocheckthevalidityoftheframeworkwehaveinterviewedsomePMresearchers.Thegathereddatahavegivenanadditionalproofoftheeffectivenessofthecontingencyfactorschosenandofthedevelopedframework.However,furtherresearchbasedoncasestudieswouldbeusefultotestthetheoreticalpropositionslistedabove.Moreover,inthisresearchwefocusedourattentiononsomecontingencyfactorsunderlinedbyliteratureandempiricalevidence.Furtherinvestigationwouldbeusefultoinvestigatetheimportanceofadditionalcontingencyfactors.Duringthecasestudiesanalysisaninterdependencebetweenthefactorswasobserved,butfurtherresearchwouldbeusefultodefinetherelationshipbetweenthesefactors.ReferencesPleasefindthereferencesin…www.dimeg.unipd.it/pms/……25 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