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Measuring Organizational Performance: Towards Methodological Best Practice

Australian School of Business, The University of New South Wales, Sydney, Australia, pierrer{at}agsm.edu.au

Timothy M. Devinney

Australian School of Business, The University of New South Wales, Sydney, Australia

George S. Yip

Rotterdam School of Management, Erasmus University, The Netherlands

Gerry Johnson

Lancaster University Management School, Bailrigg, Lancaster, United Kingdom

Organizational performance is one of the most important constructs in management research. Reviewing past studies reveals a multidimensional conceptualization of organizational performance related predominately to stakeholders, heterogeneous product market circumstances, and time. A review of the operationalization of performance highlights the limited effectiveness of commonly accepted measurement practices in tapping this multidimensionality. Addressing these findings requires researchers to (a) possess a strong theoretical rationale on the nature of performance (i.e., theory establishing which measures are appropriate to the research context) and (b) rely on strong theory as to the nature of measures (i.e., theory establishing which measures should be combined and the method for doing so). All management research on performance should explicitly address these two requirements. The authors conclude with a call for research that examines triangulation using multiple measures, longitudinal data and alternative methodological formulations as methods of appropriately aligning research contexts with the measurement of organizational performance.

Key Words: performance • profitability • empirical measurement • construct validity • organizational effectiveness

This version was published on June 1, 2009

Journal of Management, Vol. 35, No. 3, 718-804 (2009)
DOI: 10.1177/0149206308330560


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