The Choice Of Performance Measures And The Implementation Of Organizational Goal Congruence

In firms' management control system, performance measurement is a keyfactor. Performance measurement system can alleviate the conflicts ofinterests between the owner and managers of the company, and betweensuperiors and subordinates, ensure goal congruence, and reduce agency costs.The whole measurement system includes the choice of performance measures,the setting of performance standard (budget), performance appraisal andincentive schemes linking pay with performance. In this dissertation, I studythe choice of performance measures from the theoretical and practicalperspectives. In the dissertation, the research methods include analytical research method,experimental research method, and case study method. Using analyticalresearch method, I study goal congruity in single agent model, multiple-agentmodel and multi-period model respectively under the principal-agent theoryframework. Using experimental research method, I study the function ofincentive schemes in performance measurement system. The main conclusions are the following. The incongruity of performance measures is defined as the distancebetween the goal and the super-surface spanned by the measures. So, choosingmeasures to ensure the measures describe the goal, that is, the measures arethe drives of the goal is the best choice since the incongruity is the minimal(zero). The main ideas of the strategy map are consistent with the result. The theoretical guideline in choice of performance measures is informativeness,the practical guideline is controllability. In the dissertation, I find the informativenesscontains the controllability, and the controllability does not contain theinformativeness. In general, the informativeness is applicable, and the controllabilityis applicable in specific case, that is when the uncertainty does not exist.When using combination of non-financial measures and financial measures inperformance measurement, there is wage smoothing effect. When the agent is myopia,using non-financial measures does induce the long-term behavior of the agent, but thelevel of effort is far less than the case when the agent is far-sighted.Linking the pay with performance can enhance the performance of the linkedmeasures. Incentive pay can improve the duration of the employees' efforts,but can not improve the intensity of the efforts.