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Int. J. Production Economics 110 (2007) 39–51

www.elsevier.com/locate/ijpe

Performance measurement impacts on management and

leadership: Perspectives of management and employees
J. Ukko, J. Tenhunen, H. Rantanen
Department of Industrial Engineering and Management, Lappeenranta University of Technology, Saimaankatu 11, FI-15140 Lahti, Finland
Available online 25 February 2007

Abstract

The study focuses on the impacts of performance measurement (PM) on management and leadership—a research area
that has not received much attention in the literature. The empirical part of the study is based on 24 interviews from eight
case organizations applying the Balanced Scorecard (BSC). Representatives of both management and employees were
interviewed in each case organization. The study concludes that performance measurement can only support, not replace
managers in leading people. The study shows that when operating with a performance measurement system (PMS), the
increased interactivity between the management and the employees leads to higher performance.
r 2007 Elsevier B.V. All rights reserved.

Keywords: Performance measurement; Management; Leadership; Balanced Scorecard; Impact

1. Introduction A system measuring human behavior will even-

tually change the behavior—often positively (Neely
One of the main purposes of performance et al., 1997). It is most important for the employees
measurement (PM) is to deliver reliable information to understand why something is or is not measured.
to support decision-making. In the field of perfor- Furthermore, the employees ought to know how
mance measurement, mainly the strategic purposes personal or team objectives are related to the
have been under focus. Usually, strategic perfor- objectives and goals of the whole company. When
mance measurement refers to the monitoring of measuring peoples’ activities, the role of leadership
companies’ long-range plans and success. However, is emphasized. For that reason, it is important and
quite often companies have applied PM on lower relevant to explore performance measurement from
levels of organization, such as departments, units, the different aspects of leadership, in addition to the
teams, and even individuals. The measures are often strategic perspective.
operative and close to the employees. In this case, When operative-level decisions are based on
PM has behaviorist impacts as well. information aggregated by the performance mea-
surement system (PMS), the system may have
effects on leadership and furthermore on the
Corresponding author. Tel.: +358 3 876 9140; management. Martinez (2005) suggests that PMSs
fax: +358 3 876 9133. focus the employees’ attention on issues that are
E-mail address: juhani.ukko@lut.fi (J. Ukko). important to the company, by linking key objectives

0925-5273/$ - see front matter r 2007 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2007.02.008
 ARTICLE IN PRESS
40 J. Ukko et al. / Int. J. Production Economics 110 (2007) 39–51

to the employees’ jobs and continuous reviews. In (1) What impacts does performance measurement
this case, the motivation and commitment of people have on the leadership?
as well as communication between the management (2) What impacts does performance measurement
and the employees should be highlighted. These are have on the management?
also essential elements of leadership. Hence, it is (3) How do the management’s and employees’
possible to find a clear connection between perfor- perceptions differ from each other?
mance measurement and leadership.
The aim of this article is to contribute to the The study brings out the impact of performance
research area of performance measurement by measurement by focusing on two aspects: Its impact
reporting a study of eight cases concerning the on management and leadership. The purpose is to
impacts of performance measurement on manage- highlight the fact that the management and the
ment and leadership. In the earlier literature of employees may see performance measurement from
performance measurement, the focus has been on different perspectives, which should be considered
the development of a measurement system and when designing, implementing and using a PMS.
the measures (Bititci et al., 1997; Kaplan and
Norton, 1996; Neely et al., 2000), the imple- 2. Literature review
mentation phase (Bourne et al., 2003; Gooderham,
2001; Letza, 1996), or promoting systems and 2.1. Leadership and management
platforms (Kaplan and Norton, 1992; Lynch and
Cross, 1995; Mettänen et al., 2004; Neely and Stodgill (1950) defines the term leadership as a
Adams, 2001; Tenhunen et al., 2003). However, the process or action that affects the actions of an
impacts of operative-level performance measure- organized group when it is heading for goal setting
ment have not received much attention, and the and goals. According to Ruth (1996), the main
research findings have been contradictory as regards qualities of leadership are abilities for long-term
the impact on business performance (Bourne et al., strategic thinking, communication skills, integrity
2005). In Finland, Lönnqvist (2002) has touched the and ambition. In popular language, leadership
issue when studying the use of performance usually refers to motivating and committing peo-
measurement from the perspectives of management ple—in short, leading people. Westley and Min-
and shop stewards. Rautajoki (1995) has studied the tzberg (1989) discuss the term visionary leadership
management–employee juxtaposition in the field of in their article and define it as a process, as
productivity measurement. These studies will be described in Fig. 1.
discussed below. As shown in Fig. 1, performance measurement
The study reported here is a qualitative and could be seen as a way to communicate the
explorative case study of eight Finnish organiza- company’s vision to the whole organization (e.g.
tions operating with the Balanced Scorecard (BSC). Kaplan and Norton, 1996). In this perspective,
The empirical data have been gathered by inter- PMSs are related to the leading process of Westley
viewing the management and the employees of the and Mintzberg, especially when: (1) we consider a
case organizations. The aim of the study is to find strategic PMS, (2) one of the measurement objec-
answers to the following questions: tives is to clarify the company’s vision and its

Fig. 1. Visionary leadership as a process. Revised from Westley and Mintzberg (1989).
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J. Ukko et al. / Int. J. Production Economics 110 (2007) 39–51 41

implications to the whole organization, and (3) the comfort level about the environment and his/her
measurement system and its results are open to the own performance.
whole personnel. Bourne et al. (2005) have examined the differ-
The term management can be defined function- ences of the use of a PMS in high-performing
ally as the action in measuring a quantity on a business units and average-performing business
regular basis and adjusting an initial plan and the units in the same company. The study reveals, e.g.,
actions taken to reach one’s intended goal (Wor- that in the high-performing business units (in
diQ). Management and leadership describe different comparison to the average-performing business
sides of the same coin, but it is neither necessary nor units)
possible to draw an exact line between them.
 the use of measures is more sophisticated,
2.2. Impacts of PM on leadership and management  the managers discuss their model of how the
business units operate and explain how aspects of
When applying a PMS to the operative level, it can operation, people and performance interact,
be assumed that the new system has some influence  the managers use the PM information interac-
on leadership. On the other hand, it can be stated tively and communicate about performance
that the leadership style will affect the implementa- intensively, both in formal meetings and ‘‘at
tion of the PMS. Bititci et al. (2004) conclude that every opportunity’’,
organizational culture, management styles and per-  the managers have multiple source of data from
formance measurement are related to each other; different factors in taking action, and
companies need an organizational culture that  PM is not the main source of control.
focuses on continuous improvement and strategic
performance measurement. They also state that a The study of Evans (2004) reveals that the
successfully implemented and used PMS will lead to maturity of the PMSs, better approaches to analyze
a more participative and consultative management performance results and sophisticated statistical
style and may lead to significant performance techniques correlate with a higher level of perfor-
improvements. Hence, the PMS is not only about mance. It is also important to turn the data
what is measured but also how it is measured. provided from PMS into understandable and useful
According to Bourne et al. (2002), in the information (see e.g. Ittner and Larcker, 2003). So,
implementation phase corporate culture has an it can be assumed that exact information, inter-
impact on performance measurement. They claim activity, and communication both in formal meet-
that a paternalistic culture, not punishing for errors ings and ‘‘at every opportunity’’ are key issues to
and encouraging conversation and analysis, could higher performance, in addition to a consultative
lead to successful implementation of a PMS. management style. In the present study, we examine
However, Lönnqvist (2002) states that corporate whether communication between management and
culture or attitudinal matters do not complicate the employees has become better with the more useful
measurement. In the present study, we examine information, whether performance measurement
whether PM has had impacts on leadership style has brought along some new leadership routines
and what are the key elements of successful for analyzing the measurement results, and whether
implementation. PM has improved information diffusion through
The study of Martinez (2005) reveals that PMSs the different organizational levels.
have a positive effect on, for instance, focusing The BSC was introduced to support managers in
people’s attention on what is important to the management accounting, decision-making and man-
company, aligning operational performance with agement as a whole. It rose to the challenge of the
strategic objectives, improving people’s satisfaction limitations of traditional accounting measures
and aligning people’s behaviour towards continuous (Kaplan and Norton, 1992, 1996). Its basic idea is
improvement. Dumond (1994) states that the PMS to translate strategy into measures, and into action.
is most important in guiding an individual’s The BSC included originally four perspectives:
performance and can have even a greater effect Financial, customer, internal, and learning and
when the right types of interaction and information growth perspectives. The architecture of BSC works
are provided to support that PMS. The PMS affects as follows: First, there is the financial perspective; it
not only an individual’s decisions, but also the measures the ultimate results of a business. This
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42 J. Ukko et al. / Int. J. Production Economics 110 (2007) 39–51

may consist of measures of, e.g. revenue growth, measurement literature (Kaplan and Norton, 1996;
profitability, return on investment (ROI), and Lynch and Cross, 1995; Olve et al., 1999; Simons,
economic value-added (EVA). 2000; Tenhunen et al., 2002; Toivanen, 2001).
In addition to financial objectives, a company needs Almost in every measurement system or process
customers who generate, for instance, revenue growth. model, the starting point is the vision and strategies
The customer perspective focuses on customer needs, of the company. Quite often the measurement
and its measures are typically customer satisfaction, system is used also on department or team level,
retention, and market share. Actually, financial and in which case we can talk about operative-level
customer objectives are desired outcomes, but they do performance measurement. The main gaps in many
not explicate how to achieve them. A company must of the presented process models are that they do not
define processes in which it must excel to satisfy the exploit the potential of the employees in the
customer. The internal perspective defines the activ- development phase, and they do not deeply consider
ities needed to create the desired customer and how the employees could be committed to the use of
financial outcomes. The internal perspective focuses, the system. These two issues are critical when
e.g. on quality, response time, costs, and new product companies search for maximal positive impacts of
introduction. The fourth perspective, learning and PMSs. To get more out of an operative-level PM,
growth, is directed to the future, on how to keep the companies have to consider the employee perspec-
internal key processes running. The learning and tive more in depth.
growth perspective focuses on the people and infra- Lönnqvist (2002) has studied performance mea-
structure of a company. Generic measures are, e.g. surement from the perspective of employees, utiliz-
employee satisfaction, information system availability, ing the wisdom of shop stewards. The primary
and skills development. disagreement between the management and the
Ittner et al. (2003) have studied the relation shop stewards was whether or not the management
between financial performance and performance should use performance measurement to control the
measurement alignment techniques, e.g. the BSC. employees. The management’s opinion was that
They found that the BSC processes are associated controlling is not an essential issue in performance
with higher measurement system satisfaction, but measurement; the shop stewards felt that control-
exhibit almost no association with economic per- ling the employees is one of the main targets in the
formance. Davis and Albright (2004) have studied measurement. Both parties agreed that non-finan-
whether the bank branches implementing BSC cial measurement has increased its share and the
outperform the branches within the same banking employees have a bigger role in this measurement
organization on key financial measures. They found than before.
evidence of superior financial performance for According to a study of Rautajoki (1995), the
branches implementing the BSC when compared employees felt that they could not contribute
to non-BSC implementing branches. There is some enough to the selection of productivity measures
contradiction in research findings concerning the or target levels. The management and the employees
positive impacts of BSC on financial performance. also had different opinions about the openness of
In the present study, we examine whether the PM the measurement system. Rautajoki states that 29%
has had impacts on different areas of management, of the shop stewards and 47% of the production
such as decision-making, quality of products and managers saw the measurement system completely
activities, customer needs and satisfaction, produc- open to the whole personnel. A major problem for
tivity and efficiency improvement, realization of the employees was the impossibility to take part in
targets, proactive management, finding improve- the development of the measurement system. Both
ment needs, and consequently on financial perfor- the managers and the employees shared the view
mance. All these factors can be seen as essential about the necessity of productivity training. The
elements of the BSC framework. study of Rautajoki (1995) brings out the fact that
different groups of personnel may have quite
2.3. Management, employees, and performance different opinions on the measurement.
measurement To conclude the literature review, it can be
suggested that the management should consider
Several development and implementation process the employee perspective more during the develop-
models have been presented in the performance ment, implementation, and use of performance
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J. Ukko et al. / Int. J. Production Economics 110 (2007) 39–51 43

measurement. It is well justified to study the and the representatives were both blue collar and
perception of managers and employees of the actual white collar workers. Nowadays, there are no
impacts of performance measurement and how traditional blue collar workers in many technology
these perceptions differ from each other. companies, as the employees are mainly highly
educated specialists. When the representatives are
3. Research methodology selected by the case organization, there is always a
concern about the criteria by which the representa-
Martinez et al. (2004) present some limitations of tives have been chosen. However, two employee
early research on the impact of PMSs, for example, representatives of the same case company allow
as follows: comparison between the representatives and im-
prove the reliability of the analysis and the results.
(i) Most studies come from surveys with no Because there was only one representative of the
control on important variables, such as whether management from each case organization, we asked
the companies have a PMS in place in reality. for the manager’s perception and opinion that the
(ii) Survey studies do not provide in-depth under- whole management of the organization might hold.
standing on the impact of the PMS. Some of In our study, the management representatives were
them conclude that the use of the PMS on a sufficiently high level in their organization that
increases business performance, but rarely it can be assumed that they had the overall
explain why and how. managerial view on the PM. In addition, all the
(iii) Very few findings focus on the operational representatives of the management were included in
impact of the PMS. the management group of their organization. The
(iv) Very little research has been reported from case analysis of the interviews was conducted by two
studies. researchers independently, after which a common
view was discussed. This procedure was followed to
In an environment described by Martinez et al. ascertain the reliability of the analysis.
(2004), there is a place for a case study focusing on The interviews were semi-structured, using the
the impacts of PM on operative-level actions. To be themes and factors listed below as the basis for the
able to conduct the case study, there was a need to data collection. The impacts of PM on the manage-
have access to organizations that operate with a BSC ment and leadership were discussed fairly informally
at the operational level. Before the case study, a during the interviews. To outline the relevant
preliminary survey was carried out by e-mail in themes, raised from the literature, for the interviews
Spring 2004. The survey reached 591 organizations, of the present study, the impacts of PM on
96 of which sent a response (response rate 16%). In management were examined through the following
the survey, it was asked, e.g. whether the company factors:
used a PMS and if not, the reasons why not. Twenty-
nine of the answering organizations had the BSC in  decision-making
use. After contacting the companies applying a BSC,  quality of products and activities
eight of them were interested in participating in the  customer needs and satisfaction
case study. In each of the eight organizations, one  productivity and efficiency improvement
representative of the business administration and two  realization of strategic and operative targets
representatives of the employees were interviewed  proactive management
face to face during the summer 2004.  finding improvement needs.
In total, 24 interviews were carried out in the
offices of the organizations, and all the interviews The impact of PM on financial performance was
were recorded. The total interview time was 21 h, asked only from the management representatives,
from 30 to 71 min per interviewee. Detailed because the employees may not possess long-term
information of the case organizations and the information about the financial performance.
interviewees is presented in Table 1. The impacts of PM on leadership were examined
The interviewed participants of the management through the following factors:
were chosen as near as possible to the top manage-
ment. The representatives of the employees were  leadership style
chosen by the contact persons of case organizations  presentation of contradictory issues
 44
Table 1
Information on the case organizations and the interviewees

J. Ukko et al. / Int. J. Production Economics 110 (2007) 39–51

A B C D E F G H

Case organization
Industry Electricity Manufacture of Engineering Manufacture of Manufacture of basic Telecommunications Retail trade Secondary education
supply food products activities and pharmaceuticals metals
related technical

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consultancy
No. of 140 50 490 80 670 450 65 300
employees
Turnover h14 million h4 million h34 million h7 million h120 million h65 million h9 million h20 million

Representative
Management CEO Financial Development CEO Development director Development manager Division director CEO
director director

Employee Production Purchasing Competence Information system Development engineer Group foreman Information secretary Department manager
foreman manager coordinator manager
Warehouse Salesperson Expertise centre Research and Furnace-man Mechanic Salesperson Education manager
foreman manager development
laboratorian

Performance measurement system

System BSC BSC BSC BSC BSC BSC BSC BSC
Years in use 4 1 6 3 5 2 4 1
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 leadership routines successful and, furthermore, to gain a positive

 information diffusion impact, it is assumed that the management and
the employees ought to have a common view on
We also examined the implementation process of PM.
the PMS through participating in designing, in-
forming, and education about the system. 4. Findings
With the selected approach, both management
and employee perceptions were gathered. The 4.1. Implementation process
qualitative research approach is appropriate when
the study focuses on the perceptions and experiences The planning and implementation of the PMS
of persons. Furthermore, the study is founded on seem to have a rather remarkable role in making the
hermeneutics to gain deeper understanding on the PMS effective. In the case companies, the planning
phenomenon under discussion. The ontological and had been done mainly by the management, starting
epistemological approach of the study is subjecti- with strategic measures at the company level. After
vist, which is quite natural when applying semi- defining the measures at the unit and team level, the
structured open-ended interviews. It is extremely role of the employees increases. This is a rather
difficult to find valid, objective and quantitative normal and understandable way to start the
measures to study, e.g. how the leadership style has planning. The management’s, as well as employees’,
changed in the company after the adoption of the opinion was that the employees should be somehow
PMS. In practice, the research of such abstract tied also to strategic planning.
concepts often has to rely on subjective perceptions One of the most important phases in the
of humans, especially in the business context. implementation process was informing the whole
Furthermore, with an objectivistic, quantitative personnel about the new measurement system. The
approach, it is not possible to gain such deep employees of the case companies were not satisfied
knowledge of the research subject as a subjectivist with the management information concerning the
approach enables. measurement system.
In the study, each company represents a case.
According to Eisenhardt (1989), cases may be Simply answered, poorly y in the implementa-
chosen to replicate previous cases or extend tion phase it was obviously a surprise to many
emergent theory, or they may be chosen to fill employees. It seems that the existence of the
theoretical categories and provide examples or polar system was not internalized y The marketing of
types (see e.g. Yin, 2003). The cases in this study the system was done in a lousy manner. —
were not selected to represent polar types. Primarily, Expertise centre manager, Case C, Employee
the two main criteria were that the companies representative
measured performance with the BSC, and they had In the case companies poor and delayed timing of
applied the measurement to the operational level. information distribution and lack of measurement
These conditions could be seen as the categories training caused some problems for employee com-
Eisenhardt (1989) mentions. The results are applic- mitment.
able to companies that are measuring their perfor- Due to the fear of something new, and lack of
mance or companies that are planning to launch a understanding in the area of measurement, inform-
performance measurement development project. ing about the system and the measurement educa-
The main underlying assumption of the study is tion should be started much earlier—before
described in Fig. 2, where the management and measuring becomes part of everyday routines. The
employees view performance measurement from employees of the case companies felt that training,
their own perspectives. Previous studies (Lönnqvist, which clarifies the link between personal and
2002; Rautajoki, 1995) suggest that the manage- company-level targets, is useful. The understanding
ment and the employees perceive performance on the entire measurement system was seen to
measurement and its purposes differently. One of enhance commitment and motivation.
the objectives of this study was to discover the issues
on which management and employees have con- I don’t know about the training, at least I haven’t
gruent opinions and on which the opinions differ been offered anyywe have passwords for the
from each other. For the measurement to be system, but it would be more meaningful if you
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46 J. Ukko et al. / Int. J. Production Economics 110 (2007) 39–51

Fig. 2. Performance measurement from the perspectives of employees and management.

knew better how it works and what the structure have been able to allocate resources like money and
[of the system] is. —Mechanic, Case F, Employee workforce to the right places.
representative
For example, we do many different tasks inside
The management of the companies seemed to the company before the product is finished for
have a slightly too positive view of their employees’ the customer. If we’ve measured that the defining
capabilities to adopt and understand new manage- phase of the product has taken too long time, it
ment systems. The role of training should be has been easier to add workforce to that phase.
emphasized in the companies where the level of So, the measurement has helped resource alloca-
employees’ education is at a lower level. The tion. —Development manager, Case F, Manage-
employees’ representatives and the management of ment representative
the case companies had a shared opinion that the
employees should have a bigger role in the area of This has been possible because the companies
PM, at least what comes to the employees’ have found the right targets for development, for
individual metrics and goals. example, in production and employees’ skills and
capabilities. Hence, the quality of activities and
4.2. Impacts on management processes has improved inside the companies. It can
be said that by gathering suitable information from
The information gathered from the PMS and the the right targets, the decision-making will become
analysis of the information has been utilized quite faster and more confident. This shows that the case
well in the case companies’ decision-making. Along companies have been mainly careful and focused in
with the performance measurement, the companies the PMS definition process.
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Most of the companies collected information case companies have succeeded well with their
from their customers’ needs and satisfaction on a measuring systems as a whole, because the idea of
regular basis. Both the management’s and the PM is that the operative targets should support the
employees’ opinion was that without analyzing the strategic targets.
customer information, it is difficult to succeed in According to the management of the companies,
increasing competition in the market. The collection the measurement has brought out future aspects of
of information on products and reclamations was the company and the business. The focus is no
considered very important as well, because of its longer on the quantitative data of history, as in the
straight link to customer satisfaction and needs. financial statement. This comes up, for example,
Thus, in the case companies PM had a clear impact when planning the education of employees concern-
on customer satisfaction and product quality both ing their skills, capabilities and know-how. The
from the management’s and the employees’ per- management tries to find out what kind of skills the
spective. employees will need in the future, not only today.
The companies utilized well the measuring The employees did not find so much proactive
information collected from the metrics of produc- elements in performance measurement. The reason
tivity and efficiency of production and other may be in the nature of the work. The management
activities. The problems in production and employ- operates mainly with strategic issues, whereas the
ees’ personal skills, as well as prioritization of employees work in everyday tasks with short-term
different activities were some examples that the targets.
companies had solved with the measuring informa- When looking at the management effects that the
tion. performance measurement has highlighted, it can be
said that the commitment of the whole organization
For example, we’ve repaired the product defects
has to be on a very high level. The main reason for
much faster, after we started to measure it. Only
that can be the bonus systems that were linked to
the fact that we’ve adopted the metric has
the measures except for one of the case companies.
improved the confirmation of finished jobs y
In this company, the effects of performance
so, the invoicing has become quicker, which
measurement on the management were seen as
affects the financial performance. —Develop-
much more slight from both management’s and
ment manager, Case F, Management representa-
employees’ perspective, compared to the other
tive
companies.
The management’s opinion was that the impact of
PM on the financial performance had been realized 4.3. Impacts on leadership
mainly by improving productivity and efficiency.
The improvements were done mainly by organizing The management’s and the employees’ views on
the resources in a new way, and the role of the impacts of performance measurement on leader-
measurement information was significant in this ship style differed from each other quite a lot. The
process. management of the case companies felt that
In most of the case companies, the management performance measurement had brought a new
and the employees saw that PM had helped the aspect to the leadership. Along with the measure-
companies to carry on their strategies and achieve ment, the conversation between the management
their strategic goals better than before. and employees had improved. Processing different
issues of work had become easier with explicit goals.
This decade has actually gone so well financially
and it seems that the measurement system has This has brought more edge and exactness to the
had a certain impact. The goals have been mainly conversation when we talk about facts. How
achieved in all these years the measurement comfortable the employees find it, is a different
system has been in use. So, it’s hardly a issue, because it’s always easier to talk about
coincidence. —CEO, Case A, Management issues based on imagination and visions. —CEO,
representative Case H, Management representative
The situation was very similar with the operative According to the employees, the contents of the
goals, indicating that the operative targets were in conversations had changed. However, they felt that
line with the strategic goals. This means that the the way of presenting different issues of work
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48 J. Ukko et al. / Int. J. Production Economics 110 (2007) 39–51

depends much more on the organizational culture some sort of practical training period with the
and individual characteristics of the manager than measurement system and that’s why the manage-
on performance measurement. The management ment has been too insecure and restrained
and the employees agreed that the measurement concerning measurement information distribu-
information had brought certain frames to the tion. —Expertise centre manager, Case C,
contents of personnel development discussions. Employee representative
Similarly, difficult issues were easier to handle with It could always be done better. Of course you can
the exact information. find the information from the system if you just
go to dig around, but you’ll have to be activeyIt
For some managers it’s easier to work with this
could also be clearer if the corporate level and the
kind of system and for some others it’s not. Some
unit level information was found in the same
are naturally talented leaders. Anyway it’s better
place, not scattered like now. —Warehouse
if you have facts in the background of the
foreman, Case A, Employee representative
discussion. For example, it’s good for the
insecure employees who easily think that they’re The persons whose understanding of PM is on a
going to be blamed for something. —Sales- low level are often persons with poor computer
person, Case G, Employee representative skills, making the use of the intranet difficult. In
some case companies, the employees did not know
The study shows that the performance measure-
what metrics and targets the other teams or units
ment has brought new routines to the case
had. This was felt embarrassing in the situations
companies. There are many different meetings on where the measurement was related to the bonus
different organizational levels, where the partici-
system. The employees saw that the information
pants analyze and present the measurement infor-
should be more understandable, the reporting
mation and try to solve detected problems. The
system should be easy to use and the discussions
companies have also developed instructions related
between management and employees should be
to the situations where some metrics give an
increased.
impulse. The companies have established, for
As a summary of the performance measurement
example, analysis groups and development groups.
impacts on leadership, it could be argued that the
The employees do not see the new routines as clearly impacts are felt much more strongly from the point
as the management. The reason may be that before
of view of the management than that of the
the measurement system has been extended to the
employees. The employees saw that the changes to
unit and team level, the new routines do not meet all
the leadership came mainly through the organiza-
the groups of employees.
tional culture and managers’ individual character-
The management’s and the employees’ opinions
istics. The perceptions of the employees and
differed quite a lot considering the diffusion of
managers on the impacts of PM on the management
measurement information. The common opinion
and leadership are presented in a frequency table
was that there is much more information available (Table 2).
than before PM adoption. The management saw
The scale used in Table 2 is based on the view and
that information is shared in many forms in
analysis of two researchers. On the basis of the
different channels, e.g. department, personnel and
factors used in the interviews, the analysed data
team meetings, newsletters, notice boards, and the
were categorized to provide a more precise view of
intranet. The common opinion of the management
the impacts of PM.
was that the diffusion of information through the
organization has been rather successful. The em-
ployees’ opinion was that the information is not 5. Discussion and conclusions
always understandable, it is separated to different
systems, and joint measurement meetings are The study reveals some evidence about the
organized too seldom. They also thought that the positive impacts of performance measurement on
responsibility of gaining information depends too leadership. The greater amount of more specific and
much on the employees’ own activity. exploitable information provides a more solid base
for management–employee communication.
I think that the information sharing has been too Although the management and the employees did
cliquish and poor so far. Maybe there has been not share the opinion about the success of the PM
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J. Ukko et al. / Int. J. Production Economics 110 (2007) 39–51 49

Table 2
Impacts of PM on management and leadership: a frequency table

Management representative (n ¼ 8) Employee representative (n ¼ 16)

No impact Some impact Substantial impact No impact Some impact Substantial impact

Management
Decision-making 0 3 5 3 3 10
Financial performance 0 1 7
Quality (products and activities) 0 2 6 3 3 10
Customer needs and satisfaction 1 1 6 2 5 9
Productivity and efficiency improvement 1 2 5 2 3 11
Realization of strategic and operative targets 0 0 8 0 3 13
Proactive management 2 0 6 6 5 5
Finding improvement needs 0 0 8 3 3 10
Leadership
Leadership style 1 2 5 9 4 3
Presenting contradictory issues 0 0 8 4 2 10
Leadership routine 1 0 7 3 5 8
Information diffusion 0 1 7 8 3 5

information diffusion, they were unanimous con- (2005). Their research revealed the importance of
cerning the fact that discussions, information interactive use of a PMS to improve the performing
diffusion and interactivity between the management of the company.
and the employees should be emphasized at every Our study suggests that PM has a range of
opportunity, when PM is launched to the operative impacts on the different areas of management.
level of the company, to achieve higher perfor- Under suitable circumstances, the impacts are
mance. positive. It can be stated that the maturity of the
In contrast, the perception of the employees and PMS, the measurement linkage to the reward
the management of the impacts of PM on leadership system, and the educational level of the employees
style differed considerably. The employees did not are some key factors behind the positive impacts.
see that PM could provide new elements to the The findings reveal that the maturity of the PMS
leadership style, as it was seen to depend much more enables the transformation of PM data to usable
on the organizational culture and the individual and exploitable information. By using this informa-
characteristics of the managers. Hence, it can be tion, it was possible to allocate the resources to the
concluded, as a limitation to using performance right activities, which led to higher financial
measurement, that PM can only support, not performance. Case company B had used the BSC
replace the managers in leading people. PM will for 1 year and they did not yet have a clear picture
not solve or fix problems of organizational culture of the range of measures or analyzing the results.
or in leading people. Case B was also the only case organization that
The findings of the present study are somewhat operated without a linkage between the measure-
contradictory to the study of Bititci et al. (2004), as ment and the reward system. So, these things may
they conclude that a successfully implemented and explain why in Case B both the management and
used PMS will lead to a more participative and the employees perceived the impacts of PM on the
consultative management style. In our study, the management and leadership much less in compar-
employees perceived that even if the PMS is used ison to the other case companies. Case H had also
successfully, it does not guarantee improvement in used the BSC for 1 year and the impacts of PM were
leadership style. Apparently, the use of a PMS does perceived much stronger in comparison to Case B.
not obliterate the need to consider the social and We suggest that the difference could be explained by
cultural aspects of leadership. The findings of this the clearly higher level of education of the employ-
study are in line with the study of Bourne et al. ees in Case H. The findings are quite well in line
 ARTICLE IN PRESS
50 J. Ukko et al. / Int. J. Production Economics 110 (2007) 39–51

with the study of Evans (2004). He found that there Bourne, M., Neely, A., Platts, K., Mills, J., 2002. The success and
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