Role of Performance Measurement Systems in Enhancing Organizational Resilience: Evidence from a Mediated Moderating Model

Abstract

In today's rapidly changing, digital world, it is becoming essential for organizations to be resilient. While it is widely acknowledged that Performance Measurement Systems (PMS) are vital management tools to closely monitor and spur improvement in organizational performance, limited research has looked into how PMS can contribute to building organizational resilience through strategic organizational capabilities and digital transformation. This study aims to examine the mediating role of strategic agility and the moderating effect of digital capability between the relationship of Performance Measurement Systems and Organizational Resilience in Malaysian firms. The study is based on Dynamic Capabilities Theory and Organizational Information Processing Theory with a quantitative research design using survey data from 210 managerial respondents from manufacturing and service organizations in Malaysia. This proposed research model is analysed through a hybrid approach of Partial Least Squares Structural Equation Modelling (PLS-SEM) and Artificial Neural Network (ANN) to explain and predict the results. The results prove that Performance Measurement Systems have a significant effect on Organizational Resilience both directly and indirectly via Strategic Agility. The results also show a positive moderating effect of Digital Capability on the link between Performance Measurement Systems and Organizational Resilience; that is, the more digitally capable companies are, the more resilient they are when they employ PMS. Based on sensitivity analysis analysis in ANN, the most dominant influence factor of Organizational Resilience is Strategic Agility followed by Performance Measurement Systems and Digital Capability. The research extends the literature in the field of performance management and organizational resilience by introducing the two concepts of strategic agility and digital capability in a single framework and by showing the added value of the combination of PLS-SEM and ANN methodology. The findings also have implications for managers who want to enhance organizational resilience by means of strategic performance management and digital transformation efforts.