DEVELOPMENT OF PERFORMANCE MEASUREMENT SYSTEM ACCORDING TO BUSINESS ENVIRONMENT: AN SME PERSPECTIVE Lina Kloviene, Kaunas University of Technology, 2013

Introduction to the problem (1) Context of business environment; Fast decision making process; Growing importance of performance measurement system; Development of performance measurement system in SMEs according to business environment.

Introduction to the problem (2) Importance of SME’s for a economic growth; BUT Challenge to sustain performance for a long term; WHY? Scared resources for a new PMS methods; Need for new possibilities.

Introduction to the problem (3) What is performance measurement? The main feature of performance measurement is: ability to apply theoretical descriptive method into practices, ability to incorporate information to decision making process, ability to improve and change the systems according to changing external conditions and internal potential of organization.

The research problem What is a broader and more comprehensive view of all the performance measurement practice in SMEs?

The aim of an article is to investigate an internal recourses based development of performance measurement system according to business environment

Theoretical background(1-2) Performance measurement system Economic factors Economic constraints Competition Technological advancement Mimetic factors Copying best practices from others Coercive factors Accounting standards and financial legislation Socioeconomic-political institutions’ pressures Normative factors Professionals/competence Organizational strategic orientation Corporate culture Organizational characteristics Environmental level Organizational level

Theoretical background(2-2) Internal environment - reaction Static dimensionDynamic dimension Absorption dimension Simplicity dimension Performance measurement system External environment

Theoretical assumptions StaticDynamic Internal environment - reaction Absorption Simplicity increasing number of used measures increasing level of flexibility in an internal processes increasing level ofstrategycomplication variability o f underlying goals wide range of decision making External environment H1 H2 H3

Research method External environment of organization was analyzed according to the frequency of changes in factors of external environment. Internal environment was analyzed according to complexity of internal factors – as organization reaction to absorb or simplify external environment. Performance measurement system was analyzed as having five variables – measures, strategy, goals, processes and decision making level.

Research results (1-2)

Research results (2-2) The empirical data confirmed that internal operational focus and lack of external orientation still affects many SMEs and as result affecting performance measurement process; Continual analyzes of changes in external environment should be ensured.

Conclusions Dynamic external environment raises demand for variety of an information influencing importance of different measures (financial, market, customer, internal process, employees, innovation and growth). According to research results, financial and market measures should mostly be taken into account operating in a static external environment. External orientation should be implemented through effective internal/external communication.

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