A lot of particularly big companies are nowadays in the position to provide comprehensive information about critical business processes to decision-makers nearly in real-time with low additional efforts. Information about those processes can be traced through information technology, aggregated and analyzed and used for management decision-making. Still these possibilities are not fully recognized and realized. Aim of this work is therefore to examine the thesis that direct activity/process information must be taken into stronger account for management control and that the management accounting system must adopt the changing organizational and environmental realities by developing and implementing mechanisms to model the process perspective and integrating process information. The integration of process information enhances continuous improvement by providing up-to-date, and easy to understand and interpret measures on the local level that forces immanent response and leads to actions based on observable derivations from defined process objectives.
After essential definitions about Management Accounting, Performance Measurement, and Business Process Management criticism on traditional performance measures is presented (chapter 3.1). Further, arguments that underpin the need to change the Performance Measurement system according to the changes that are implied by a process-based view on the organization are given and aggregation issues are discussed (chapter 3.2). Afterwards, concepts for integrated Performance Measurement systems, e.g. based on the Balanced Scorecard and process measurement frameworks like SCOR or EFQM, that integrate process information are presented (chapter 3.3). In the last chapter (3.4) the opportunities and threats of information systems for a process-based Performance Measurement in general are discussed, and finally a number of recent approaches in academic research and practice to integrate process information in the Performance Measurement System, such as Process Mining and Business Activity Monitoring, are introduced.
Table of Contents
1. Introduction
2. Performance Measurement and Business Process Management
2.1 Management Accounting
2.2 Performance Measurement (PM)
2.2.1 Performance Measurement’ and ‘Performance Measurement Systems’
2.2.2 Integrated PMS
2.2.3 Balanced Scorecard (BSC)
2.3 Business Process Management (BPM)
2.3.1 Business Process Re-Engineering (BPR)
2.3.2 Business Process: working definition
2.3.3 Process Improvement
2.3.4 Business Process Standards and frameworks
2.3.5 Process Automation and Information Technology
2.3.6 BPM as integrated management approach
3. Process-based Performance Measurement
3.1 Criticism on traditional performance measures for management control
3.1.1 Biases because of wrong allocation bases
3.1.2 Timeliness issues because of lagging measures
3.1.3 Lacking capabilities for Continuous Improvement
3.1.4 Lack of connection to corporate strategy and customer perspective
3.2 Adoption of a process-based PM approach instead
3.2.1 Congruence between organizational structure and the PMS
3.2.2 Measuring the process performance
3.2.3 Aggregation issues
3.3 Approaches for the integration of process information in PMS
3.3.1 Academic approaches
3.3.2 Practical approaches
3.3.3 BSC and process measures
3.3.4 Summary
3.4 IT-driven approaches for process-based PM
3.4.1 Data Warehousing and Business Intelligence
3.4.2 Business Process Management systems (BPMS)
3.4.3 Comparison of ERP, BI and BPMS
3.4.4 IT-enabled Process Performance Measurement
3.4.5 Summary of the presented approaches
4. Conclusion
Objectives and Research Focus
This work aims to examine the thesis that direct activity/process information must be taken into greater account for management control, proposing that management accounting systems must adapt to modern organizational and environmental realities by integrating process-based measurement mechanisms.
- Integration of process-based information into performance measurement systems.
- Critique of traditional, financially-focused management accounting and performance measures.
- Examination of IT-driven solutions, such as Business Intelligence and BPM systems, for process performance monitoring.
- Alignment of organizational structure with process-based management and performance measurement.
Excerpt from the Book
3.1.3 Lacking capabilities for Continuous Improvement
Since the 1980’s there has been a wrong consciousness of the significance of continuously improving the performance capabilities of the company, resulting in the increased importance of nonmonetary indicators (Cross and Lynch 1989; Klingebiel 1996). It was recognized that short-term accounting information is insufficient to evaluate and control company activities effectively (Kilger et al. 2004, p. 10). Traditional performance measures quantify performance and other improvement efforts in financial terms. Yet, most improvement efforts are difficult to quantify in monetary terms (i.e. lead time reduction, adherence to delivery schedule, customer satisfaction and product quality). In addition, operators find typical financial reports difficult to understand which leads to frustration and dissatisfaction. As a result, traditional performance measures are often ignored in practice at the factory shop floor level. Financial measures have been criticized as they are aggregated to a single dimension and therefore they are abstract and provide no reference to the performance of the involved actors and for continuous improvement (Legner 1999, p. 113).
KAPLAN AND COOPER (1998) state that systems for operational learning and improvement must provide timely information about the actions employees have recently taken to improve processes under their control (Kaplan and Cooper 1998, p. 47). The feedback must incorporate both nonfinancial and financial information (e.g. cost, quality, yields, and cycle time) so that front-line employees, working in teams, can simultaneously take informed actions, based on their task-specific knowledge, to improve the quality, cycle time, and cost of processes. KAPLAN AND COOPER (1998, p. 48) criticize that even if improved financial accounting systems can overcome the timeliness issues still these systems will exceed historically determined standard costs and neglect the dimension time and quality. Kaplan (1990) states “traditional summary measures of local performance – purchase price variances, direct labour and machine efficiencies, ratios of indirect to direct labour, absorption, and volume variances – are harmful and should be eliminated, since they conflict with attempts to improve quality, reduce inventories and increase flexibility. Direct measurement is needed for quality; process times, delivery performance, and any other operating performance criterion that needs to be improved” (Ghalayini and Noble 1996, p. 66; Tatsiopoulos and Panayiotou 2000, p. 39; Legner 1999, p. 112; Pampel 1998, Zuelch et al. 1995).
Summary of Chapters
1. Introduction: This chapter highlights the shift in market conditions and the resulting need for organizations to transition from traditional management accounting towards a process-based view of performance measurement.
2. Performance Measurement and Business Process Management: Provides foundational definitions for management accounting, performance measurement, and business process management, establishing how these domains intersect.
3. Process-based Performance Measurement: Critiques traditional financial-only performance measures and argues for the adoption of process-based metrics, while discussing integration challenges and IT-driven approaches.
4. Conclusion: Synthesizes the findings, emphasizing the value of process information for decision-makers and the necessity of aligning performance measurement systems with organizational process structures.
Keywords
Performance Measurement, Business Process Management, Management Accounting, Continuous Improvement, Key Performance Indicators, Business Intelligence, Data Warehousing, Process-based View, Operational Control, Workflow Management, Strategic Management, Organizational Structure, Process Performance, IT-driven Performance Measurement, Efficiency and Effectiveness.
Frequently Asked Questions
What is the primary focus of this work?
The work explores how organizations can transition to a process-based performance measurement approach to better support management control in a dynamic environment.
What are the core thematic areas discussed?
The central themes include the limitations of traditional financial accounting, the role of process orientation, the integration of non-financial metrics, and the contribution of information technology (BI, BPMS) to performance measurement.
What is the central research aim?
The aim is to demonstrate that direct activity and process information must be better integrated into management accounting to reflect current organizational realities and support continuous improvement.
Which methodologies are used for performance measurement?
The work examines various frameworks, including the Balanced Scorecard, Activity-Based Costing, and IT-enabled approaches like Business Activity Monitoring and Data Warehousing.
What does the main body of the text cover?
It covers theoretical frameworks, critiques of traditional accounting systems, practical integration strategies, and the specific role of information systems in monitoring process performance.
How is this work characterized by its keywords?
It is defined by the intersection of performance measurement, management accounting, and business process management, supported by IT-driven analytical tools.
Why is standard costing criticized in the text?
Standard costing is criticized for being too complex, relying on outdated financial data, failing to capture time and quality dimensions, and potentially discouraging continuous improvement efforts.
What role does IT play in process performance measurement?
IT enables the collection, aggregation, and analysis of process data in near real-time, allowing managers to move beyond historical reporting to proactive decision-making and better alignment with strategic goals.
- Citation du texte
- Daniel Fürstenau (Auteur), 2008, Process Performance Measurement, Munich, GRIN Verlag, https://www.grin.com/document/89839
