Performance Measurement Systems

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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. 5) 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...
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