Chapter 11 - Performance evaluation revisited. After studying this chapter you will be able to understand: Performance evaluation revisited and expanded, the balanced scorecard, benchmarking, measures of meeting delivery expectations. | CHAPTER © jsnyderdesign / iStockphoto 11 PERFORMANCE EVALUATION REVISITED WHAT’S UP AT C&C? Several changes to implement in the coming year with the hope of improving profitability Managers have a habit of waiting to see the final income statement before assessing operations Managers need to be more proactive, but they don’t know how PERFORMANCE EVALUATION REVISITED AND EXPANDED Unit 11 1 . Unit Unit © Tomwang112 / iStockphoto TWO TYPES OF MEASURES Lagging indicators Measurement occurs after action has occurred Leading Indicators Useful in predicting future performance through a cause-and-effect relationship Gives time to take corrective action Need to use a combination of lagging and leading indicators CAN LAGGING BECOME LEADING? TEST SCORE LEVEL OF STUDYING COURSE GRADE FINANCIAL AND NONFINANCIAL MEASURES Financial The traditional way of measuring success Based on accounting results Objective in nature Nonfinancial Not based on accounting results May be more . | CHAPTER © jsnyderdesign / iStockphoto 11 PERFORMANCE EVALUATION REVISITED WHAT’S UP AT C&C? Several changes to implement in the coming year with the hope of improving profitability Managers have a habit of waiting to see the final income statement before assessing operations Managers need to be more proactive, but they don’t know how PERFORMANCE EVALUATION REVISITED AND EXPANDED Unit 11 1 . Unit Unit © Tomwang112 / iStockphoto TWO TYPES OF MEASURES Lagging indicators Measurement occurs after action has occurred Leading Indicators Useful in predicting future performance through a cause-and-effect relationship Gives time to take corrective action Need to use a combination of lagging and leading indicators CAN LAGGING BECOME LEADING? TEST SCORE LEVEL OF STUDYING COURSE GRADE FINANCIAL AND NONFINANCIAL MEASURES Financial The traditional way of measuring success Based on accounting results Objective in nature Nonfinancial Not based on accounting results May be more subjective in measurement Growing in use Need both EXAMPLES OF NONFINANCIAL MEASURES Source: Chee W. Chow and Wim A. Van der Stede, “The Use and Usefulness of Nonfinancial Performance Measures,” Management Accounting Quarterly, 7, no. 3 (Spring 2006): 3. ARE NONFINANCIAL MEASURES IMPORTANT? Source: Deloitte LLP, In the Dark: What Boards and Executives Don’t Know about the Health of Their Businesses, 2007 BUT How would you rate your organization’s record of measuring and monitoring financial and nonfinancial aspects of performance? What are the main barriers to the effective use of nonfinancial performance measures by your organization? Source: Deloitte LLP, In the Dark: What Boards and Executives Don’t Know about the Health of Their Businesses, 2007 CHARACTERISTICS OF A GOOD MEASURE Specific – relates to the process and is clear Measurable – complete and accurate Actionable – can be influenced Relevant – relates to corporate objective Timely – must be received in time to matter THE TRICK IS TO
