Making Best Use of Performance Measures and Information

Results indicate that the performance measurement system determines an individual′s decision‐making performance, and the broader, more effectiveness‐oriented measures also tend to make the individuals more confident and satisfied with their operating environment and decisions.

Abstract

Managing a complex, boundary‐spanning function to maximize its contribution to the firm can be a challenging task. This research is concerned with providing management with increased understanding of the effects of different ways of managing a function, especially a significant boundary‐spanning operation. Conducted in the context of a procurement function, through a laboratory experiment, explores the impact of performance measures, interaction with other internal organizations and access to information about external events on an individual′s decision making and “comfort level”. Results indicate that the performance measurement system determines an individual′s decision‐making performance. The broader, more effectiveness‐oriented measures also tend to make the individuals more confident and satisfied with their operating environment and decisions. The availability of interaction with other internal organizations and the access to information about external events impact on an individual′s decisions but have relatively little effect on his/her comfort level.