Chapter 14 - Contemporary approaches to measuring and managing performance. In this chapter, we explain that many organisations use performance measurement systems that go beyond the measurement of financial performance. These contemporary approaches to performance measurement may entail placing a greater emphasis on non-financial measures, implementing balanced scorecards and using benchmarking techniques to better manage resources, and hence, improve performance. | Chapter 14 Contemporary approaches to measuring and managing performance 14- The purposes of performance measurement Communicate the strategy and plans of the business and align employee’s goals Track performance against targets Identify problem areas Evaluate subordinates’ performance, and as a basis of rewards Guide senior managers in developing future strategies and operations 14- Problems with conventional financial performance measures They are not actionable Financial measures emphasise only one perspective Financial performance measures provide limited guidance for future actions May encourage actions which decrease shareholder and customer value 14- Contemporary performance measurement systems Include non-financial and financial measures Have a strategic orientation—directly measure areas that provide competitive advantage Use external benchmarks Emphasise continuous improvement 14- Non-financial measures for operational control Non-financial measures reflect the drivers of future financial performance Improvements will flow through to financial performance More actionable Easier to investigate the source of low performance, compared to low cost variances More understandable and easier to relate to, particularly at the operational level 14- Non-financial measures for operational control Customer satisfaction Measured by survey administered to customers Defect measures Measurement of faults in a product that occur during the manufacturing process Support a high-quality strategy Quality Periodic inspections or testing of products continued 14- Non-financial measures for operational control Productivity The ratio of outputs produced per unit of input continued 14- Non-financial measures for operational control Stock status Accident report Safety statistics Multi-skilling Number of employees who have attained skills to allow them to undertake a range of operational tasks Machine downtime Number of hours, or percentage of total . | Chapter 14 Contemporary approaches to measuring and managing performance 14- The purposes of performance measurement Communicate the strategy and plans of the business and align employee’s goals Track performance against targets Identify problem areas Evaluate subordinates’ performance, and as a basis of rewards Guide senior managers in developing future strategies and operations 14- Problems with conventional financial performance measures They are not actionable Financial measures emphasise only one perspective Financial performance measures provide limited guidance for future actions May encourage actions which decrease shareholder and customer value 14- Contemporary performance measurement systems Include non-financial and financial measures Have a strategic orientation—directly measure areas that provide competitive advantage Use external benchmarks Emphasise continuous improvement 14- Non-financial measures for operational control Non-financial measures reflect
