The Periodic Review of Performance Indicators: An Empirical Investigation of the Dynamism of Performance Measurement Systems

The aim of this study is to examine one attribute of performance measurement systems (PMS) that is not widely addressed in the management accounting literature, namely the dynamism of PMS. This attribute refers to the periodic review of performance indicators by organizations. Based on contingency theory and using survey data from a sample of manufacturing firms, this study examines whether the association between the dynamism of PMS and organizational performance is contingent on the level of external and internal changes. The results suggest three main conclusions. First, even though the current business environment is characterized by fast changes, manufacturing organizations do not appear to revise their PMS to a great extent. Second, while periodic revisions of performance indicators are beneficial, these revisions may not necessarily be appropriate at all times and in all circumstances as the need for dynamic PMS varies depending on the degree of external and internal change. Third, an absence of dynamic PMS may be more harmful in a context of higher levels of change than to have dynamic PMS even if they are not required.