Quantitative methods for performance measurement systems
The business environment has changed dramatically since the 1980s. Many researchers have shown that the traditional financially-based performance measurement systems have failed to cope with the current dynamic business environment. Even although new performance measurement systems have been proposed, such as Activity-Based Costing, the Balanced Scorecard, the SMART system, the Performance Measurement Questionnaires and the Cambridge model, the problem of quantifying the interaction of the factors affecting business performance still remains. The objectives of this thesis are: 1. To develop a performance measurement system model that can be used to quantify the effects of factors on performance and consolidate them into a single performance indicator. 2. To develop a model for reducing the number of performance reports. 3. To carry out experiments for testing the validity, applicability and stability of the models developed. To achieve these objectives this thesis reviews research methodology literature, studies the traditional and new performance measurement systems, identifies the current problems of performance measurement systems, reviews existing methods for identifying, structuring and prioritising performance measures, reviews the multicriteria methods, studies the analytic hierarchy process (AHP) and its controversy, develops quantitative methods for performance measurement systems and carries out experiments to test the validity, stability and applicability of the methods developed. To quantify the effect of factors on performance and consolidate them into a single performance indicator a quantitative method for performance measurement system (QMPMS) was developed. The method uses cognitive maps for identifying factors affecting performance and their relationship, structured diagrams for structuring the factors hierarchically and analytic hierarchy process for quantifying the effects of factors on performance. The method was then extended to reduce the number of performance reports. The QMPMS and its extension were implemented in three case studies to test their theoretical and application validity. The first case study applied the models to 'J&B Scotland Ltd.' to identify whether the models can produce the intended outputs. The second case study applied the QMPMS to 'Seagate Distribution (UK) Ltd.' to test the validity (accuracy) and stability of the QMPMS. Finally, the third case implemented the QMPMS to quantify and consolidate Inland Revenue, Cumbernauld's performance measures. It was found from the experiments that the QMPMS is quite accurate (the mean percentage of deviation is less than 4 percent), stable for a reasonable period of time and it can be applied comfortably to real cases. The QMPMS is now being used by the Inland Revenue - Cumbernauld for producing a single performance indicator of their business processes and overall office.