Performance Measurement and Management Control

The Relevance of Performance Measurement and Management Control Research

Marc J. Epstein, Frank H. M. Verbeeten, Sally K. Widener, Marc J. Epstein, Frank H. M. Verbeeten, Sally K. Widener, Mark J. Epstein, Frank H. M. Verbeeten, Sally K. Widener

• Publisher: Emerald Publishing Limited
• Year: 2018
• Print ISBN: 9781787564701
• eBook ISBN: 9781787564718
• Topic: Business
• Subtopic: Accounting
• Index: Business

This volume contains exemplary papers that were presented at the 2017 Conference on Performance Measurement and Management Control in Nice, France, by researchers in the field from North America, South America, Africa, Europe, and Asia.  

This book represents a collection of innovative research in management control and performance measurement, and provides a significant contribution to the growing literature in the area. The collection also covers a representative set of topics, research settings, and research methods. 

The editors hope that this book will stimulate researchers to continue the search for additional understanding of performance measurement and management control, and provide guidance for both academic researchers and managers as they work toward improving organizations.

PART I

CRITICAL MANAGEMENT CHALLENGES OF PERFORMANCE MEASUREMENT AND MANAGEMENT CONTROL

CHAPTER 1

PERFORMANCE MEASUREMENT AND MANAGEMENT CONTROL: CHALLENGES FOR APPLICATIONS AND RESEARCH IN NEW SETTINGS

Marc J. Epstein

ABSTRACT

While balanced scorecards, strategy maps, and causal linkage models have been applied extensively by profit organizations over the last two decades, a similar approach to analysis, called logic models, has been increasingly applied by non-profit and other social-purpose organizations. This chapter provides a discussion of the basics of logic models and shows their application in three different settings, which include personal improvement, the social impact of business schools, and corporate governance. The chapter also provides an extensive discussion on field research and a case study of a leading international business school, wherein logic models were applied followed by social impact measurement. Finally, the chapter includes suggestions for future research that is needed to improve the applications of logic models and social impact measurement and the success of social-purpose organizations including business schools.

Keywords: Performance measurement; logic models; social impact measurement; corporate governance; non-profit organizations; business schools

The research literature in performance measurement and management control has developed significantly over the last few decades. Yet, there are many areas that still require important contributions in management research and guidance in order to improve both for-profit and not-for-profit organizations. Over this period, the development of the balanced scorecards, strategy maps, dashboards, and causal linkage models have been written about extensively and implemented in large numbers of for-profit organizations. These models have focused organizations on more clarity and specification on what they are trying to achieve, how they plan to achieve their objectives, and how they will measure success.

During the same time, logic models were more completely developed and popularized by the W. K. Kellogg Foundation as a way to articulate how a program or a non-profit organization does its work. A logic model links outputs, outcomes, and impacts with the inputs and processes that are believed to cause them and the theoretical underlying assumptions. Thus, it shows the hypothetical cause-and-effect relationships underlying a program or a not-for-profit organization. It is based on logic, empirical evidence, or both. It has become a critical foundation of both planning and evaluation in social-purpose organizations.

However, performance measurement and management control models generally, and logic models specifically, have not been used effectively in many critical areas where they would be quite helpful. This chapter describes three of these areas as a way to contribute to the effectiveness of individuals, social-purpose organizations, and corporations.

LOGIC MODELS

As defined previously and used in practice, logic models have made important contributions in the formulation and implementation of strategy in social-purpose organizations. A sample logic model for KaBOOM!, a prominent non-profit organization that builds playgrounds where safe facilities for play do not exist, provides a useful example (Epstein & Yuthas, 2014; Leonard, Epstein, & Winig, 2005).

Exhibit 1. Sample Logic Model for Kaboom!

In Exhibit 1, the basic logic model of inputs, activities (or processes), outputs, outcomes, and impacts is seen. It describes how the organization intends to achieve its goals. The arrows seen in the exhibit are critical as they represent the causal relationships, which are at the foundation of logic models and the ability of organizations to implement their strategies. The logic model shows specifically how the organization’s resources, actions, and outputs are expected to result in positive impacts on stakeholders and society. Epstein (2017), Epstein and Yuthas (2014), Epstein and Rejc-Buhovac (2014), and W. K. Kellogg Foundation (2004a, 2004b) provide more detailed information about logic models and the measurement of social impact.

APPLICATION OF LOGIC MODELS TO PERSONAL IMPROVEMENT

Logic models have been commonly used by social-purpose organizations to describe organizations or specific organizational programs. However, one of my colleagues found logic models to be so valuable that he began using them for his own life to get more clarity and rigor about his objectives in life and what actions he needed to take to achieve these objectives. He also began teaching logic models as a central element in his courses for both improving the implementation and measurement of success in social-purpose organizations as well as for improving the lives and personal success of his students.

Early in each semester, he asks his students to articulate what they are trying to achieve in life, what specific actions will be necessary to achieve these objectives, and how they will know whether they have succeeded. Forcing the rigor and clarity of the objectives, the implementation, and the measurement of success has proved extremely helpful to his students. Many of these students continue using their logic models well after the class has ended – and even after they have graduated. The professor uses his personal logic model, and encourages his students to do likewise, to guide his life decisions and keep focused on his objectives and the path to success. Similar to what is central to our field of performance measurement and management control for organizations, more carefully articulating mission, goals, and objectives along with the intended paths to achieve them increases the likelihood of success for organizations and individuals alike. Applying the frameworks and models we use in our work can be extremely beneficial to our own personal lives and the lives of our students.

LOGIC MODELS, BUSINESS SCHOOLS, AND OTHER SOCIAL-PURPOSE ORGANIZATIONS

Financial Times, Forbes, and others consistently rank the Mexico City-based Instituto Panamericano de Alta Direccion de Empresas (IPADE) as the top business school in Latin America. It has more than 35,000 alumni and provides programs in 24 cities in Mexico. Founded in 1967, it was established to train managers based “on a pragmatic approach that combines academic acumen and humanistic vision.” It was intended that these managers would then “positively transform organizations in all sectors and, eventually, society itself.”

In 2016, in anticipation of the 50th anniversary of the school, I was contacted to evaluate IPADE’s social impact, empirically test how well its graduates have succeeded in achieving its objectives, and make recommendations as to how IPADE can increase its impact over the next 50 years.

IPADE agreed that the report (Epstein, 2017) would be made public. It is available at http://50aniversario.ipade.mx/2017/10/31/ipade-with-a-high-impact-on-business-executives-and-their-organizations/?lang=en. I do not know of any other business school that completed a social-impact assessment. I conducted the project with an independent research team with support from IPADE faculty and staff but without any interference or monitoring of results so that confidentiality could be provided to participants.

IPADE’s mission is to “develop leaders with global vision, social responsibility, and Christian values who are able to transform organizations and society.” Therefore, before beginning the research project, the following two questions quickly surface:

1. (1) Does IPADE develop leaders with the needed critical skills, global vision, social responsibility, and Christian values?
2. (2) Do those graduates then transform organizations and society?

To answer these questions, IPADE asked me to develop an independent and empirically based research project. On most projects to measure social impact, the development of a logic model is a critical first step. The logic model is a causal model of hypothesized relationships that should rigorously and clearly articulate the organization’s mission and describe how it is to be achieved.

This is typically a significant challenge in most projects, which focus on the measurement of social impact for social-purpose organizations (or social-purpose segments of for-profit organizations). This is not surprising because the articulation of what an organization is trying to achieve and how it intends to achieve these objectives is also a significant challenge in similar projects in the for-profit sector as companies try to develop strategy maps, causal linkage models, or balanced scorecards.

Exhibit 2 shows the developed logic model for IPADE.

After the development of the logic model, a research design was developed to answer the two previous questions and independently and empirically test the logic model. The research design focused on the following three types of data:

1. (1) Archival data.
2. (2) Self-reported data from interviews with IPADE graduates.
3. (3) Observations by non-IPADE graduates of behavior, actions, and impact of IPADE graduates.

The archival data included internal data such as tabulations, analyses, and reports produced by IPADE for both internal and external distribution. The external archival data included reports from accrediting organizations such as Association to Advance Collegiate Schools of Business (AACSB), Association of MBAs (AMBA), and EFMD Quality Improvement System (EQUIS) and organizations, which collect data from business schools to rank them on various criteria and share that data broadly such as Forbes, CNN Expansion, and Financial Times. Though hundreds of pages of reports and archival data were reviewed and evaluated, the data were primarily focused on the inputs and processes described in the logic model and very little data were included on the outputs, outcomes, and impacts that were the focus of this study. This is not surprising as these outputs, outcomes, and impacts are more difficult to measure and remain typically unmeasured.

Exhibit 2. IPADE Logic Model.

There were 174 in-depth personal interviews conducted, all confidential with no sharing of the details outside the research team of myself and three interviewers that I trained and supervised. These were semi-structured interviews from graduates from all three of IPADE’s major campuses (Mexico City, Guadalajara, and Monterrey). The research project also included interviews from graduates from each of the five decades of IPADE’s programs since its inception and from each of their significant degree and non-degree programs.

An important part of the research design and implementation was the establishment of the counterfactual. A counterfactual is a marker for the social impact created by someone who chose to go to IPADE versus one who did not. In this way, we were able to create evidence about whether the IPADE program is actually responsible for the observed results.

To test the counterfactual in this research project, it was important to interview senior leaders along with human resource leaders and recruiting managers who had no connection with IPADE and were able to observe the behavior and actions of IPADE graduates and compare them with others who went to other business schools or no business school at all.

This project was an empirical test of the efficacy of IPADE’s logic model and its mission. The results of the research project can be seen in Exhibit 3. The interviews provide significant support for some elements of the IPADE logic model and less support for others. This provides an opportunity for IPADE to improve and work more on those elements of the IPADE logic model that are currently less effective to create more impact. It also provides an opportunity to carefully examine the mission, the hypothesized logic model, and the implementation through inputs and activities to determine whether changes are appropriate given the new empirical evidence.

Examination of the results on ...

Table of contents

• Cover
• Title
• Part I. Critical Management Challenges of Performance Measurement and Management Control
• Part II. Performance Measurement Instruments and Management Controls
• Part III. Performance Measurement and Management Control: Specific Settings