Measuring organizational performance
Carton, Robert Bruce
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This dissertation focuses on the important issue of organizational performance measurement. As organizational performance can be judged by many different constituencies, resulting in many different interpretations of “successful performance”, this dissertation necessarily examines organizational performance from a single constituency perspective, that of the common stockholder in for-profit organizations. From this perspective, successful organizational performance can be equated with successful value creation for stockholders. It is argued in this dissertation that this perspective typically equates value creation with organizational financial performance; accordingly, this dissertation addresses the measurement of organizational financial performance. Since no prior research empirically established the domain of organizational financial performance, this research is by necessity exploratory in nature. A three part approach is adopted in this research to address this problem. First, a model is inferred from empirical data that includes the primary constructs of organizational financial performance and empirical measures of those constructs. Next, the validity and reliability of the constructs and measures are tested. Finally, the overall model is statistically evaluated. This research makes several unique contributions to the understanding of financial performance measurement for both research and management practice. Specifically, this research (1) demonstrated that the changes in financial performance metrics provide unique and significant information about shareholder returns; (2) identified financial performance measures that discriminate between high and low performing companies with respect to shareholder returns; (3) tested the relative information content of individual financial performance measures with respect to shareholder returns; (4) identified distinct dimensions of financial performance and measures of them; (5) developed and tested a multi-dimensional model of financial performance; and (6) developed annual and three-year composite measures of financial performance for use when market data is not available.