Measuring Organizational Performance: A Case for Subjective Measures

Date01 January 2016
Published date01 January 2016
DOIhttp://doi.org/10.1111/1467-8551.12126
British Journal of Management, Vol. 27, 214–224 (2016)
DOI: 10.1111/1467-8551.12126
Methodology Corner
Measuring Organizational Performance:
A Case for Subjective Measures
Satwinder Singh, Tamer K. Darwish1and Kristina Potoˇ
cnik2
Brunel University London Business School, 1University of Gloucestershire Businesss School, and 2University of
Edinburgh Business School
Corresponding author email: satwinder.singh@brunel.ac.uk
We reviewthe organizational performance (OP) measurement literature highlighting the
limitations of both objective and subjectivemeasures of performance. We argue that, with
careful planning, subjective measures can be successfully employedto assess OP. This is
because often consistent, reliable and comparable compatible objective data on OP mea-
sures – particularly across countries and sectors – is dicult to come by. Considering that
an inflated OP measure can be cross-checked with the use of secondary data, managers
have little incentive to reportsuch figures. As a result, when quizzed over the stand-alone
performance measures of their organizations or vis-`
a-vis their rivals, managers accurately
assess and respond to questions on the performance of their organizations. An in-depth
statistical exercise conducted on the subjectivemeasures of OP as reported by managers
of four sets of companies in four separate countries, show consistent results,thus lending
support to this premise.
Introduction
Organizational performance (OP) lies at the heart
of a firm’s survival. In business and management
research, OP is recognized as a central outcome
variable of interest, ranging from such disparate
areas as human resources (HRs) and marketing to
operations management, international business,
strategy and information systems (Hult et al.,
2008; March and Sutton, 1997; Richard et al.,
2009). The ultimate aim of research across all
of these areas is centred on explaining how OP
can be enhanced, shaped and sustained so as to
help businesses improve their profitability and
long-term survival (Bititci et al., 2012; March and
Sutton, 1997). In very generic terms, OP has been
defined as a set of both financial and non-financial
indicators capable of assessing the degree to
which organizational goals and objectives have
been accomplished (Kaplan and Norton, 1992).
Some authors have distinguished between OP and
organizational eectiveness (Richard et al., 2009).
It is claimed that, whilst OP refers to financial
performance, product market performance and
shareholder return, organizational eectiveness
represents a broader concept that, in addition
to financial performance, also includes wider
indicators, including operations eectiveness,
customer satisfaction, corporate social respon-
sibility and other outcomes that reach beyond
financial quantification (Richard et al., 2009). Op-
erationally, for applied research purposes,OP may
be defined in terms of financial ratios (e.g. return
on assets (ROA) and return on equity (ROE)),
market outcomes (Tobin’s q, market share, stock
price and growth), HR-related outcomes (job
satisfaction, commitment and others) or organi-
zational outcomes (productivity, service quality,
new product development and others). Financial
performance indicators can be measured with the
help of published company statements or data
from stock exchanges. Importantly, OP can also
be measured based on subjective information
gathered from managers or other key informants,
asking them to rate their company’s overall per-
formance such as their market share, profitability,
© 2015 British Academy of Management. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4
2DQ, UK and 350 Main Street, Malden, MA, 02148, USA.

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