Corporate internal performance benchmarking : performance measurements purification from macroeconomic noise

Abstract

Widely open economies along with highly integrated markets with unstable nature, have made all corporations and business units vulnerable to macroeconomic fluctuations. The flow of Macro-changes in performance falsifies the outcome of a firm’s action with misleading signals, which does not reflect sustainable competitiveness of the firm. This means that raw performance measurements are inappropriate for benchmarking purposes as well as industry averages. I argue that macroeconomic variables are not only firm-specific, but also divisionspecific. I have employed MUST-analysis approach to recognize the macroeconomic variables specific to each division and to eliminate their effects, in order to obtain “intrinsic” measure of divisions’ performance. Empirical results are presented from a case study of four divisions within Jotun Group, and showed that each unit is exposed to different sets of macroeconomic variables in addition to existence of deviations between traditional performance measurements and adjusted ones. Thus, leads to conclude that performance measurement purification is a necessary-supplementary condition in any benchmarking and strategic decision-making process.