IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/75409.html
   My bibliography  Save this paper

Performance Measurement and Management Promotion through Non-Financial Measures: A Management Accounting Perspective

Author

Listed:
  • Eisenberg, Paul

Abstract

The purpose of this paper is the discussion of non-financial performance measures that can be adopted in the management accounting function of business organisations. The study is important because it shows how organisational focus on non-financial measures can substantially enhance profitability, albeit being subject to cost constraints. To begin with, the evolution of management accounting research over the last three decades is resented. The development in the academia is then contrasted with the management accounting techniques used in practice. Among different techniques available, the Budgeting technique and the Activity Based Costing (ABC) technique are assessed from the view-point of decision making and non-financial measures. The focus of the argument is on the suitability of non-financial measures on the evaluation of profitability through customer relationships. Enterprise Resource Planning (ERP) and the Balanced Scorecard (BSc) are identified and evaluated as instruments to include non-financial measures. Furthermore, the application of non-financial measures taken into consideration in management performance evaluation and management promoting decisions is discussed. Managerial focus on promoting measures can be promotion driven and thus short-term oriented. This threat should be kept in mind when implementing non-financial measures in management accounting systems.

Suggested Citation

  • Eisenberg, Paul, 2016. "Performance Measurement and Management Promotion through Non-Financial Measures: A Management Accounting Perspective," MPRA Paper 75409, University Library of Munich, Germany, revised 02 Aug 2016.
    • Handle: RePEc:pra:mprapa:75409
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/75409/1/MPRA_paper_75409.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ittner, CD & Larcker, DF, 1998. "Are nonfinancial measures leading indicators of financial performance? An analysis of customer satisfaction," Journal of Accounting Research, Wiley Blackwell, vol. 36, pages 1-35.
    2. Scapens, Robert W., 2006. "Understanding management accounting practices: A personal journey," The British Accounting Review, Elsevier, vol. 38(1), pages 1-30.
    3. Sunil Gupta & Valarie Zeithaml, 2006. "Customer Metrics and Their Impact on Financial Performance," Marketing Science, INFORMS, vol. 25(6), pages 718-739, 11-12.
    4. Dennis Campbell, 2008. "Nonfinancial Performance Measures and Promotion‐Based Incentives," Journal of Accounting Research, Wiley Blackwell, vol. 46(2), pages 297-332, May.
    5. Michael C. Jensen, 2003. "Paying People to Lie: the Truth about the Budgeting Process," European Financial Management, European Financial Management Association, vol. 9(3), pages 379-406, September.
    6. Michael A. Lapré & Nikos Tsikriktsis, 2006. "Organizational Learning Curves for Customer Dissatisfaction: Heterogeneity Across Airlines," Management Science, INFORMS, vol. 52(3), pages 352-366, March.
    7. George P. Huber, 1991. "Organizational Learning: The Contributing Processes and the Literatures," Organization Science, INFORMS, vol. 2(1), pages 88-115, February.
    8. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
    9. Venky Nagar & Madhav V. Rajan, 2005. "Measuring Customer Relationships: The Case of the Retail Banking Industry," Management Science, INFORMS, vol. 51(6), pages 904-919, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eisenberg, Paul, 2016. "The Balanced Scorecard and Beyond – Applying Theories of Performance Measurement, Employment and Rewards in Management Accounting Education," MPRA Paper 74271, University Library of Munich, Germany, revised 05 Aug 2016.
    2. Terpstra, Maarten & Verbeeten, Frank H.M., 2014. "Customer satisfaction: Cost driver or value driver? Empirical evidence from the financial services industry," European Management Journal, Elsevier, vol. 32(3), pages 499-508.
    3. Jan Bouwens & Peter Kroos, 2017. "The Interplay Between Forward-Looking Measures and Target Setting," Management Science, INFORMS, vol. 63(9), pages 2868-2884, September.
    4. Jae-Woong Jeong & Heon-Hwi Lee & Hun Park, 2022. "A Study on the Effect of Knowledge Services on Organizational Performances Based on the Concept of Balanced Scorecards for the Sustainable Growth of Firms: Evidence from South Korea," Sustainability, MDPI, vol. 14(19), pages 1-19, October.
    5. Sun-Moon Jung & Jae Yong Shin, 2022. "Social Performance Incentives in Mission-Driven Firms," Management Science, INFORMS, vol. 68(10), pages 7631-7657, October.
    6. Jonathan R. Clark & Robert S. Huckman, 2012. "Broadening Focus: Spillovers, Complementarities, and Specialization in the Hospital Industry," Management Science, INFORMS, vol. 58(4), pages 708-722, April.
    7. Sven Baehre & Michele O’Dwyer & Lisa O’Malley & Nick Lee, 2022. "The use of Net Promoter Score (NPS) to predict sales growth: insights from an empirical investigation," Journal of the Academy of Marketing Science, Springer, vol. 50(1), pages 67-84, January.
    8. Haim Mendelson, 2000. "Organizational Architecture and Success in the Information Technology Industry," Management Science, INFORMS, vol. 46(4), pages 513-529, April.
    9. Marco Furlotti & Giuseppe Soda, 2018. "Fit for the Task: Complementarity, Asymmetry, and Partner Selection in Alliances," Organization Science, INFORMS, vol. 29(5), pages 837-854, October.
    10. Margaret A. Abernethy & Jan Bouwens & Laurence Van Lent, 2013. "The Role of Performance Measures in the Intertemporal Decisions of Business Unit Managers," Contemporary Accounting Research, John Wiley & Sons, vol. 30(3), pages 925-961, September.
    11. Omer N. Gokalp & Sami Keskek & Abdullah Kumas & Marshall A. Geiger, 2020. "Insider trading around auto recalls: Does investor attention matter?," Review of Quantitative Finance and Accounting, Springer, vol. 55(3), pages 1003-1033, October.
    12. Xueming Luo, 2009. "Quantifying the Long-Term Impact of Negative Word of Mouth on Cash Flows and Stock Prices," Marketing Science, INFORMS, vol. 28(1), pages 148-165, 01-02.
    13. Anselmsson, Johan & Bondesson, Niklas, 2015. "Brand value chain in practise; the relationship between mindset and market performance metrics: A study of the Swedish market for FMCG," Journal of Retailing and Consumer Services, Elsevier, vol. 25(C), pages 58-70.
    14. Anupam Agrawal & Suresh Muthulingam, 2015. "Does Organizational Forgetting Affect Vendor Quality Performance? An Empirical Investigation," Manufacturing & Service Operations Management, INFORMS, vol. 17(3), pages 350-367, July.
    15. Christoph Feichter & Isabella Grabner, 2020. "Empirische Forschung zu Management Control – Ein Überblick und neue Trends [Empirical Management Control Reserach—An Overview and Future Directions]," Schmalenbach Journal of Business Research, Springer, vol. 72(2), pages 149-181, June.
    16. Chenhall, Robert H., 2005. "Integrative strategic performance measurement systems, strategic alignment of manufacturing, learning and strategic outcomes: an exploratory study," Accounting, Organizations and Society, Elsevier, vol. 30(5), pages 395-422, July.
    17. Guenther, Miriam & Guenther, Peter, 2021. "The complex firm financial effects of customer satisfaction improvements," International Journal of Research in Marketing, Elsevier, vol. 38(3), pages 639-662.
    18. Baehre, Sven & O'Dwyer, Michele & O'Malley, Lisa & Story, Vicky M, 2022. "Customer mindset metrics: A systematic evaluation of the net promoter score (NPS) vs. alternative calculation methods," Journal of Business Research, Elsevier, vol. 149(C), pages 353-362.
    19. Seung Hyun Kim & Tridas Mukhopadhyay, 2011. "Determining Optimal CRM Implementation Strategies," Information Systems Research, INFORMS, vol. 22(3), pages 624-639, September.
    20. Dennis Campbell, 2008. "Nonfinancial Performance Measures and Promotion‐Based Incentives," Journal of Accounting Research, Wiley Blackwell, vol. 46(2), pages 297-332, May.

    More about this item

    Keywords

    Budgeting; Activity Based Costing (ABC); Enterprise Resource Planning (ERP); Balanced Scorecard (BSc); Performance Measurement; Customer Relationships; Management Promotion;
    All these keywords.

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:75409. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.