Performance measurement and target-setting: achieving balance in a Chinese state-owned enterprise

Abstract

Subjectivity is often eyed with suspicion in a commercial world. This project investigated how subjectivity was applied in the strategic performance measurement system (SPMS) of a large Chinese state-owned enterprise (SOE) where both market and government forces coexist long term. Its innovative five-dimension SPMS integrates financial and non-financial with subjective and objective measures. The same dimensions were applied across its strategic business units (SBUs) to communicate firmwide that meeting multiple demands was an inherent aim of SOEs, and to be embraced by all the SbUs.
However, the weightings for each dimension varied across the SBUs and over time, reflecting the dynamic strategic position of each unit. For firms with multiple, simultaneous and often competing demands, our case study shows how the use of subjectivity in measures and weightings can keep a multi-dimension SPMS stable yet flexible. The study also reveals innovative mechanisms used in participative target-setting. These show how using subjectivity in incentive formulas can transform difficult bargaining into greater cooperation between superiors and subordinates. These could be particularly important for multi-divisional firms with activities in many different areas.
Using objective and subjective measures together, maintaining stability while embracing flexibility, and accepting ‘push’ alongside ‘pull’, our case study celebrates paradox management. It suggests that a finely calibrated SPMS that simultaneously integrates opposing forces in a system can be particularly beneficial for organisations operating in complex and dynamic environments. Considering the nature of Yin and Yang within
a particular mechanism and integrating duality into systems, we bring Chinese wisdom into management control practice.

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Identifiers

ORCID for Pingli Li: orcid.org/0000-0001-5020-9126

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