performance measurement Systems Performance measurement systems are an integral part of the management control systems. Management control is a process through which management ensures that resources are obtained and used effectively and efficiently in accomplishing the organization’s goals. To be most effective performance measures should be tied to the strategic objectives of the organization. Two key principles of performance measurements are; measurement of performance and compensation based on measured performance. The goal of performance measurement system is to implement strategies.
A performance measurement system is simply a mechanism that improves the likelihood the organization will implement its strategy successfully. Any performance measurement system blends the financial information and non-financial information with each other. In setting up such systems, the senior management selects measures that best represent the company’s strategy and these measures can be seen as current and future critical success factors. Uses of Performance Measurement According to Behn (2003) the uses of performance measurement are as follows: 1) To evaluate.
To evaluate performance, the senior managers need to determine what a business unit manager is supposed to accomplish. 2) To control. Performance measurement can ensure the senior managers that their subordinates are doing the right thing. 3) To budget. Sometimes budgets increase could be the answer to improving performance. 4) To motivate. Performance measurement systems give people significant goals to achieve and then use performance measures—including interim targets—to focus people’s thinking and work and to provide periodic sense of accomplishment. ) To celebrate. By achieving specific goals, people gain sense of personal accomplishment and selfworth. 6) To promote. To convince the stockholders that their organization is doing good, manages need easily understood measures of those aspects of performance about which many stockholders personally care 7) To learn. Learning is involved with some process, of analysis information provided from evaluating corporate performance (identifying what works and what does not).
The Essay on Effectiveness of Airasia’s Performance Measurement System
We could see that this system used by AirAsia is successful as they have been doing really well and improving since year 2001 from first airline in the world to introduce mobile booking, to be a public listed company on the Malaysia Stocks Exchange (Bursa Malaysia), after having on 22 November 2004. In line with its growth and expansion plans, AirAsia has secured a 175 aircraft commitment with ...
By analyzing that information, corporation able to learn reasons behind its poor or good performance. 8) To improve. In order for corporations to measure what it wants to improve it first need to identify what it will improve and develop processess to accomplish that. Performance measurement systems develop a feedback to assess with plans to achieve improvements and to determine if those processess create forecasted results (improvements).
Limitations of financial control Systems 1. It may encourage short-term actions that are not in the company’s long-term interests. . Business managers may not undertake useful long-term actions, in order to obtain short-term profits. 3. Using short-term profit as the objective can distort communication between a business unit manager and senior management. 4. Tight financial control may motivate managers to manipulate data. Comprehensive Performance Measures Comprehensive performance measures must address: 1. Financial performance 2. Customer satisfaction 3. Internal business process developments and 4. Allow an organization to learn and grow. Financial Performance can be measured by: 1.
The Essay on Financial Strategy For The Southwest Airlines
Southwest Airlines was instituted in 1967, initially as Air Southwest by Rollin King and Herb Kelleher and assumed the present name in 1971. It has grown from a small airline to one of the prevalent in the industry in the US as well as in the world. It is considered the leading low-fare carrier in America. Additionally, it is also a major carrier for domestic flights. Ever since its inception, the ...
Residual measures (accounting profit measures) such as net income, operating profit, earnings before interest, tax, depreciation, and amortization (EBITDA) 2. Ratio income (accounting return measures) such as Return on Investment (ROI), Return on Net Assets (RONA), or Risk Adjusted Return on Capital (RAROC).
Customer-related measures 1. Bookings 2. Back orders 3. Market share 4. Key account orders 5. Customer satisfaction 6. Customer retention 7. Customer loyalty Internal Business Process Measures 1. Capacity utilization 2. On-time delivery 3. Inventory turnover 4.
Quality 5. Cycle time Learning and Growth measures 1. Learning and growth identifies the infrastructure an organization must build to create long-term growth and improvement. 2. Growth comes from: people, systems and organizational procedures. Implementing a Performance Measurement Systems Implementation of a performance measurement system involves four general steps: 1. Define Strategy: * The BSC builds a link between strategy and operational action. * Therefore, it begins with the strategy first, to achieve the goals and objectives. 2. Define Measures of Strategy: The next step is to develop the measures to support the formulated strategy. * The organization must focus on a few critical measures and should not overload with the measures. * And importantly, the measures should be linked with each other in a cause and effect manner. 3. Integrate measures into the management system: * The scorecard must be integrated with the organization’s formal and informal structures, culture and human resource practices. 4. Review measures and results frequently: once the scorecard is implemented and running, the senior management should review is constantly.
The organization should look for the following: * How the organization is is doing according to the outcome measures? * How the organization is is doing according to the driver measures? * How has the organization’s strategy changed since the last review? * How has the scorecard measures changed? Difficulties in implementation Performance Measurement Systems 1. Poor correlation between non-financial measures and results 2. Fixation on financial results 3. Measures are not updated 4. Measures are overloaded 5. Difficulty in establishing trade-offs
The Essay on Invisible organizations and systems in LEGOLAND® Windsor Resort
Invisible organizations and systems that part of the firm that reflects the rules, regulations, and processes upon which the organization is based. (John E. G. Bateson, K. Douglas Hoffman, 2010, page 11) The main role of LEGOLAND® Windsor Resort is to offer services that afford thrills, fun and experience; however, all customers consume them at the same time. That means they are influenced by each ...
