The Relative Importance of Comprehensive Performance Measurement Systems and Financial Performance Measures on Employees’ Perceptions of Informational Fairness

Abstract

Research on how performance measurement systems affect employees’ perceptions of workplace fairness is important. As organizations often rely on their performance measurement systems to communicate information to their employees, it is useful to ascertain if and how the developments of performance measurement systems that are far more comprehensive than traditional financial systems affect employees’ perceptions of informational fairness through the information communicated to employees. Informational fairness refers to employees’ perceptions of workplace fairness that is based on the amount and the truthfulness of information that organizations provide to their employees. Based on a sample of managers from manufacturing organizations, the Partial Least Square results indicate that comprehensive performance measurement systems (comprehensive PMS) have a significant direct effect on job-relevant information. They also indicate that comprehensive PMS have an indirect effect on informational fairness via job-relevant information. In contrast, systems that are based on financial measures have no significant effects on job-relevant information and informational fairness. These results demonstrate how comprehensive PMS (through the communication of a greater amount of job-relevant information) can be used to engender employees’ perceptions of high workplace fairness.

Citation

Lau, C.M. and Amirthalingam, V. (2014), "The Relative Importance of Comprehensive Performance Measurement Systems and Financial Performance Measures on Employees’ Perceptions of Informational Fairness", Advances in Management Accounting (Advances in Management Accounting, Vol. 24), Emerald Group Publishing Limited, Leeds, pp. 77-115. https://doi.org/10.1108/S1474-787120140000024003