Can Performance Studies Create Actionable Knowledge if We Can’t Measure the Performance of the Firm?

Abstract

The modern conception of the performance of the firm—future cash flows—makes performance difficult to measure and most performance measures inherently flawed. Moreover, the reliability of inferences about the performance of the firm declines as performance measures are used. The balanced scorecard does not improve the quality of performance measurement and can add further complications. Reducing the firm to its activities, their costs, and their revenue consequences may offer a partial solution to endemic problems of measuring performance. Long-term organizational adaptation, however, may require a conception of performance that makes all performance measures problematic and hence avoids lock-in to particular measures.