| What are the purposes of performance measurements? | 1. Stewardship
To enable superiors to monitor managers and ensure their actions are aligned with organizational goals.
2. Control and motivation
Ensure goals are achieved. Controlling performance by measuring actual performance to targets. This can provide rewards and penalties to managers.
3. Planning and communication
Plans include realistic expectations of future performance and translating strategies into action.
4. Prediction
Current performance lays the foundation of future performance predictions. Current performance can signal later performance changes in other measures.
5. Learning and improvement
Feedback to help managers learn and think about improvements. |
| What are the issues with accounting information? And how can they be negated? | 1. Different accounting choices allow flexibility in calculations Might not show correct picture.
2. Financial performance as an “end-result”, not as drivers of performance.
3. Goal congruence not always achieved, e.g., shot termism is encouraged. Short termism is an excessive focus on short-term results at the expense of long-term interests.
The issues of financial measures can be negated by supplementing with non-financial performance measures as well. |
| What are some benefits to using non-financial performance measures? | 1. Can indicate future financial performance
2. More transparent measurement of managers.
3. Closer link to long term organisational goals.
4. Indirect quantitative information on intangible assets. |
| What are some issues with using non-financial performance measurements? | 1. Sometimes no clear link to financial performance.
2. Better non-financial performance might not be economically valuable.
3. No common measurement unit.
4. Drivers of success too numerous.
5. Time consuming and costly to measure. |
| How does the performance pyramid look? | Look at picture. |
