Three modes of measurement: theory and practice

TLDR: In this article, it is argued that performance measures can be used in three distinct ways: as a means of control versus critical performance parameters; as a mean of checking health; and as a way of challenging the assumptions that underpin the strategy of the business.

Abstract: Today's conventional wisdom appears to assert that a balanced approach is the one best way of measuring business performance. The aim of this paper is to challenge this wisdom. It is argued that performance measures can be used in three distinct ways: as a means of control versus critical performance parameters; as a means of checking health; and as a means of challenging the assumptions that underpin the strategy of the business. It is also argued that each of these modes of measurement is appropriate for all organisations; that each requires different performance review processes to be established; and that all organisations should therefore consider operating three distinct performance review processes. One which allows the critical performance parameters to be controlled. A second which enables the health of the business to be checked. And a third which encourages the assumptions underpinning the organisation's strategy to be challenged. The paper draws on both academic literature and organisational practice to support these arguments. The three modes of measurement – control, check and challenge – are defined and their application demonstrated. In closing a framework is presented, which encapsulates the arguments put forth in the paper and summarises the implications for the theory and practice of business performance measurement.