This paper investigates what configurations of organization-level contingencies explain different performance management system (PMS) designs in project-based organizations (PBOs). By studying organization-level contingency factors – perceived environmental uncertainty, organizational size, innovation strategy, and opportunity strategy – this paper extends prior literature on PMSs in PBOs, which predominantly focused on project and portfolio level contingencies. In addition, while prior literature studied the contingency factors separately, this paper argues that it is the configuration of contingencies that matter for PMS design choices. Data on 15 PBOs in the management consulting industry reveal that PBOs combine various controls into performance management systems that are either predominantly mechanistic or organic in nature. Qualitative Comparative Analysis (QCA) points to four configurations of organization-level characteristics, two of which are associated with the PBO’s choice for mechanistic performance management system, and two that are related to organic performance management system.

Introduction

Project-based organizations (PBOs) are organizations that conduct their main external and internal activities by means of projects (Hobday, 2000; Lindkvist, 2004; Söderlund and Tell, 2011). To “ensure that projects support the strategy and business objectives of the firm” (Artto and Kujala, 2008: 474), PBOs employ performance management systems (PMSs); organizational instruments to achieve alignment of the projects with the strategic objectives of the PBO (Turner and Müller, 2003). The design of the PMS can vary substantially between PBOs. Prior research has identified and studied a range of factors affecting the design of performance management systems in non-PBO as well as PBO contexts (e.g., Chenhall, 2003). The purpose of this paper is to demonstrate that it is combinations of the various contextual factors – and not simply any of them individually – that hold explanatory power in explaining the design of a performance management system of PBOs. By doing so, this study aims to better approximate the design decisions made by managers in PBO contexts, where designing a PMS involves considering multiple contingencies simultaneously.