Shortcomings of Current Performance Measurement and Management Systems: A Literature Review

Abstract

The performance measurement system as a tool for knowledge sharing and continuous improvement plays a key role in the knowledge management development. Previous research indicates that performance measurement and management systems are not always successfully implemented to improve decision-making or knowledge management. Many failures relate to the behavioural aspects of performance management, but a systematic review of this topic is lacking. Therefore, the main aim of the paper is to explore the shortcomings of current performance measurement and management systems. The study conducted a systematic review of the literature of peer-reviewed articles over the past 20 years. The main shortcomings are analysed within the individual categories of technical and social control, especially in terms of design, implementation, and behavioural aspects. The findings revealed that the most common causes of shortcomings of measurement and management performance systems include technical problems, insufficient or late knowledge sharing, or the inability to effectively implement the entire system. An ineffective performance measurement and management system encourages bad decisions and wastes resources by misallocating them. Subsequently, this results in dysfunctional employee behaviour and deterioration in overall performance, which often even increases fear, reduces employee trust, and engagement. Based on the synthesis of the results, the paper suggests how to prevent the identified shortcomings to cause a rapid change in the behaviour of employees. From a theoretical contribution point of view, the research provides a comprehensive and clear view of the currently available theory of performance measurement and management systems. In terms of managerial implications, point out the shortcomings of current performance measurement and management systems and outline how to overcome them.