The Evolution of Performance Measurement System (PMS) and Linkage to the Environmental Uncertainty and Strategy; a Review of Literature

Performance measurement systems in today’s business environment are different from the 1960s and 1970s. The nature of today’s business is very unique and dynamic; and with the effect of globalization, the organization’s performance measurement system requires a different dimensional approach. To provide managers with useful information and to sustain competitiveness, the organization must measure all aspects of organization functions. Traditional organization performance measurement systems measure the financial dimension alone, but as a result of stiff competition from the global market, the organization has to take a different approach in measuring performances. Integrated or multidimensional performance measurement system is a major innovation in organization performance measurement. However, this tool is not effective if it is not linked to the organization’s strategy and reflected based on the environmental uncertainty that has great influence in changing the organization strategy. Besides, the organization performance measurement system also varies according to the organization structure. This research paper is divided into two sections. The first section of this research reviews the literature with regards to development and evolution of performance measurement systems. The second section reviews literature with regards to the significance of incorporating factors such as environmental uncertainty, organizational strategy and structure in organizations’ performance measurement system. In summary, the innovation in performance measurement system and above mentioned factors are compulsory in order to sustain the organization’s competitiveness in today’s business environment.