The strengths of this framework are that it ties together the hierarchical view of business performance measurement with the business process view (Neely, A.; Mills, J.; Platts, K.; Huw, R.; Gregory, M.; Bourne, M.; Kennerly, M., (2000). It makes the difference between measures that are of interest to the internal parties ‘ productivity, cycle time and waste and measures that interest external parties ‘ quality, delivery and customer satisfaction.
Moreover, Hussain, M.; Gunasekaran, A., and Mazhar Islma, M., (2002) found that financial performance measurement is deemed to be very important and is highly used compared to non financial performance measurement which is hardly practiced. Performance measurement systems enable managers to know whether they are experiencing success or failure in their programs and also help decision makers to know whether their efforts are effective are not (Cook et al., 1995). The performance measurement systems must be updated and reviewed on an ongoing basis so that they may provide essential information for decision making and more importantly, help in assessment and in detecting problems so as to be considered as a useful management process.
The management control systems of many firms are predicted on financial performance indicators (Kaplan & Norton, 1996; Ittner & Larcker, 1997). The mostly used financial indicators are profitability, share price growth, return on equity, and return on investment, profit and earnings per share (Coates, Davis and Stacey, 1995). In addition, Clinton and Hunton (2001) also measured performance based on financial factors like percentage change in net income, percentage change in stock price and percentage change in return on investment. Kaplan and Norton (1992) argued that performance measurement based solely on financial factors is not enough. They claimed that a NYSE company has made great improvements in their quality, productivity and service which did not reflect in its financial performance.
Accounting systems used to measure performance are said to be consistent and reliable as they match with the objectives of owners to make profit. Nevertheless, they are inadequate for strategic decisions making (Atkinson et al., 1997). Financial Performance is very important for organisations but on the other hand, non financial performance factors are also very crucial (Richardson, Vandenberg, Blum, and Roman, 2002). Well designed performance measurement systems are very critical as it encourages motivation among workers which encourages them to work towards the organization’s aims and objectives and better functional of the organisation.
Banker et al. (2000) stated that non financial measures may be better predictor of performance than financial measures. Ample use of non financial performance measures is said to have a positive impact on performance (van der Stede et al., 2006) since, non financial measures is an important tool to measure the progress of the workforce and to motivate them (Santori and Anderson, 1987). The nature of non financial performance measurement differs with different micro and macroeconomic environments and also with different goals and objectives of organisations.
2.2 Factors influencing design and use of performance measurement systems
Figure 1 shows the different institutional forces, i.e., the internal and external factors that affect the design and use of non-financial performance measurement systems in the banks