A hybrid performance measurement framework for optimal decisions

Abstract

Purpose

This paper seeks to propose a hybrid performance measurement framework integrating available frameworks and mathematical models. The hybrid framework potentially allows decision makers to move from intuitive decisions to analysis‐based decisions by using a complete hierarchy of objectives, mathematical equations and a simulation of increased capabilities. To illustrate the utility of the proposed framework, this paper aims to apply the framework to a hypothetical decision‐making scenario in a computer manufacturing company.

Design/methodology/approach

In the proposed framework, a developed hierarchy is verified with correlation and regression analyses. Mathematical equations relating performance indicators are defined with a multiple linear regression model. An expected final outcome and uncertainty are evaluated with a Monte Carlo simulation.

Findings

An organization can find consistent performance indicators based on correlation and regression analyses. In addition, based on a forecast final outcome, the organization can make proactive decisions about up‐front investments in its capabilities.

Research limitations/implications

A hierarchy of objectives developed in this paper is not comprehensive. A scenario used for simulating a future outcome is hypothetical.

Originality/value

Although some studies illustrate mathematical equations relating objectives, the studies are limited to parts of a hierarchy and there are few practical directions. This paper proposes mathematical equations that represent vertical relationships among objectives in a hierarchy, while evaluating the importance of a performance measurement system in a big picture. Moreover, this paper explains a decision‐making procedure based on a forecast outcome.

Citation

Fukushima, A. and Jeffrey Peirce, J. (2011), "A hybrid performance measurement framework for optimal decisions", Measuring Business Excellence, Vol. 15 No. 2, pp. 32-43. https://doi.org/10.1108/13683041111131600