Performance-Based Funding and Internal Resource Allocation: The Case of Italian Universities

Management literature has emphasized the importance of performance measurement systems (PMS) that are consistent with the organization’s context and strategy. However, little attention has been paid to factors that explain the design of PMS not adequately reflecting an organization’s business model. We use the case of Italian universities to highlight how performance-based funding impacts resource allocation systems of faculty positions to academic departments. The findings show a variety of PMS in use. Differences across systems arise from different strategies and priorities. We have limited evidence that the systems’ features can explain the disparities in research performance and funding, which suggest that part of the explanation may reside in the size of the organization or in the power of academic disciplines.