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 totheir non-deterministic or qualitative nature. So, to fit in common performance measurement systems (PMS) that normallyuse numeric parameters (KPIs), artificial and simplifying measures have to be used that are complicated and costly to createand evaluate. Using a literature review, this paper documents the dominance of PMS that rely on KPIs and a lack of thosethat also incorporate non-numeric, generic indicators that better address qualitative problems. Combined with the discussionof different viewpoints to PMS properties as well as the demand for better transparency and comparability of businessprocesses, the necessity of deployment for a refined PMS using additional indirect indicators is derived. It would be able toassess hidden performance problems and hence to reveal additional business process improvement possibilities