orientations of learning are recognized in the literature with differing opinions regarding what constitutes learning – behaviorist, cognitivist, humanist, social and constructivist.
Learning may occur in a single-loop, which is a rather mechanistic and shallow process creating incremental learning outcomes within the existing mental frames, or in a deeper double-loop process generating new knowledge and challenging unquestioned assump-tions. When focusing the attention on the organizational context of learning, describing how individual learning can be translated into organizational via the process of intuit-ing, interpretintuit-ing, integrating and institutionalizing appeared to be the core mechanism, mediated by dialogue.
The two levels of learning, single-loop and double-loop, are processes that can occur on individual level or throughout organization. Similarly, three of the five learning orienta-tions, behaviorist, cognitivist and humanist perspectives, put the individual in focus, while the social and constructivist recognize the importance of social context – and thus view learning as a collective phenomenon. Moreover, organizational learning in particu-lar is concerned with the dynamics of translating learning from individual to organiza-tional level and implementing results of organizaorganiza-tional learning by creating structures and procedures guiding individual learning. Therefore, organizational learning and its outcomes can be divided in terms of the level of change that the learning creates – in-cremental single-loop learning or more radical double-loop learning – and according to
the main actor in focus, individual or collective. Building on these observations, a framework for mapping organizational learning (Figure 5) is created.
Figure 5. Framework for organizational learning.
This classification helps to clarify the complex nature of learning. In the next chapter, this complexity is well-represented by various researchers and their ongoing disagree-ment about whether PMS support or suppress learning – it may be that the lack of con-sensus derives from the ambiguous definitions of learning. The framework is also useful when trying to understand what kinds of learning outcomes organizations hope their PMS to trigger, as the purposes of use as well as the results they are aiming to achieve are likely to vary greatly. By mapping the current practice of PMS and identifying the focus areas as well as perspectives largely left uncovered, gaps and weaknesses in cur-rent research can be pointed out. The next chapter expands the theoretical background of this study into performance measurement systems. Having built an understanding about PMS and their various consequences, particularly in terms of learning, the frame-work drafted in this chapter can be completed into a more comprehensive tool for inves-tigating the linkages between PMS and organizational learning.
3 PERFORMANCE MEASUREMENT SYSTEMS
A classic organizational dilemma regards balancing between control and flexibility (Si-mons 1995b; Kasperskaya & Tayles 2013). Hardly any organizations can be seen to purely represent control or flexibility values, but they are rather positioned somewhere in between the control-flexibility continuum. Organizations dominated by control values are characterized by stability, predictability and bureaucracy (Henri 2006a). They em-phasize productivity and efficiency (Henri 2006a), and are associated with tight control of operations, structured communication channels and restricted information flows (Henri 2006a, after Burns & Stalker 1961). Flexibility value organizations, on the other hand, promote openness, change and adaptability. They highlight growth, innovation and teamwork in bringing up empowerment, commitment and employee development.
(Henri 2006a.) Organizations with a cultural flexibility orientation are characterized by loose hierarchy, informal communication, and free exchange of information (Henri 2006a, after Burns & Stalker 1961).
Elements of both cultural archetypes are needed to effectively manage an organization.
Too much control will suppress learning and adaptability to change, making it impossi-ble for an organization to survive in a dynamic environment, while too much flexibility will cause organization to lose its strategic direction and fail to implement innovations due to distraction. Management control systems (MCS) are designed to help manage the tension between these two dimensions – flexibility promoting entrepreneurship and in-novation, and control supporting rationality, hierarchy and predictable goal achievement (Simons 1995b; Henri 2006a). MCS is a package of controls, comprising control devic-es for budgeting, planning and goal setting, rewards, feedback loops and performance measurement (Neely et al. 2006; Oliver 2009). Depending on how the MCS is designed, it can be tuned to support not only achieving restrictive control in its narrow sense, but also planning, decision-making, motivating, coordinating, communicating, learning, providing feedback and adapting to environmental changes (Kloot 1997; Oliver 2009).
Indeed, as virtually all organizations are forced to operate in a continuously changing environment, achieving control refers to the actions an organization must take to adapt to the changes – gaining control over the change by adapting organizational processes accordingly (Kloot 1997).
Strategy development in a changing environment is a process of learning. It depends on continuous feedback, which can be provided by a performance measurement system.
(Feurer & Chaharbaghi 1995b.) Performance measurement systems (PMS), “a set of
metrics used to quantify both the efficiency and effectiveness of actions” (Neely et al.
1995), are an integral part of MCS, created to enable organizations identify their posi-tion, clarify goals, detect improvement areas and facilitate reliable predictions of the future (Neely et al. 1995). Performance is the organization’s capability to achieve its objectives (Lebas 1995; Neely et al. 1995). Essentially, PMS specify the established goals, identify where the organization is positioned relative to those goals, and deter-mine the courses of actions and processes required to navigate toward those goals under constantly changing conditions. In order to achieve desired progress, it must be planned and tracked with a measurement system to make sure the organization is making pro-gress towards the right direction (DeVilbiss 2006).
Of course, gathering data about the current performance through measurement is no end by itself – a comparison of outcomes to the past, to predefined targets and to external benchmarks is essential to set the results in context (Feurer & Chaharbaghi 1995b). Yet, the purpose of measurement is not just determining how the organization has per-formed, but also to stimulate actions to improve performance (Parsons 2007). Perfor-mance improvements can be achieved by absorbing information about the business op-erations and the external environment and applying it productively – by learning.
Hence, PMS is valuable if it is able to support not only strategy implementation but also formulation. For this purpose, strategic knowledge-generating measures as well as oper-ational measures providing instant feedback of the implementation are needed. (Feurer
& Chaharbaghi 1995b.) Moreover, as organizations consist of individuals, an important way to steer an organization to achieve predefined goals is to influence the behavior of individuals by providing feedback and acting as an employee performance evaluation tool (Kloot 1997, after Otley & Berry 1980). PMS comprises the measures, supporting infrastructure and tangible elements, but also the processes of information provision, measure design and data capture (Franco-Santos et al. 2007; Franco-Santos et al. 2012).
Therefore, PMS as a part of MCS is the key system and process in fulfilling the organi-zational strategy.