Traditional financial measurement is not applicable in today’s business environment anymore as it does not provide the company with real understanding of its processes and therefore organizations have to consider other non-financial factors of day-today performance, involving short and long-term approaches to be capable to appraise its performance correctly (Slack and Lewis, 2012).
Performance measurement allows organisation to identify how effective and efficient it is in comparison with previous periods as well as to continuously improve its services or products by setting new performance targets. As stated by Braz, Scavarda and Martins (2011) performance measures are metrics used for evaluation of part or complete process in comparison with set target, which have to be properly identified, implemented and continuously monitored.
According to Carengo et al (2007) cited by Braz,Scavarda and Martins (2011) implementing performance measurement allows companies to stimulate significant changes on managerial level as well as improve companywide learning and understanding of processes through collection, interpretation, analysis and distribution of performance related information.
The essential requirement is that performance targets and measures have to cover the sense and point of processes and performance. Poor designed targets as well as their measures can lead to difficulties in planning and control of operations and demotivate employees. As stated by Radnor and Barnes (2007) performance measurement system have to quantify what has direct influence on process effectiveness and efficiency and use gathered data as the basis for managing performance improvement.