Linking Environmental Uncertainty to Non-Financial Performance Measures and Performance: A Research Note

Abstract

Several previous research studies have reported mixed results concerning the direct association between non-financial performance measures and performance. The presence of environmental uncertainty on this relationship has not been established. This paper makes a contribution to this area by proposing that it is in conditions of environmental uncertainty that non-financial measures are most useful in improving organisational performance. It analyses empirical data from a random sample of 52 New Zealand manufacturing firms to test the hypothesis that non-financial measures of performance would lead to improved organisational performance under conditions of increased environmental uncertainty. The findings suggest that performance should be a declining function of the size of the "mismatch" between an organisation's environment and use of the different combinations of non-financial performance measures. Further, it is suggested that prior mixed results may be attributed to the omission of environmental uncertainty.Non-financial performance measures; environmental uncertainty; performance