Limitations of Performance Measurement Systems based on Key Performance Indicators

Measuring performance is a key to optimize business processes. However, many of them cannot be easily measured due to their non-deterministic or qualitative nature. So, to fit in common performance measurement systems (PMS) that normally use numeric parameters (KPIs), artificial and simplifying measures have to be used that are complicated and costly to create and evaluate. Using a literature review, this paper documents the dominance of PMS that rely on KPIs and a lack of those that also incorporate non-numeric, generic indicators that better address qualitative problems. Combined with the discussion of different viewpoints to PMS properties as well as the demand for better transparency and comparability of business processes, the necessity of deployment for a refined PMS using additional indirect indicators is derived. It would be able to assess hidden performance problems and hence to reveal additional business process improvement possibilities.