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Performance measurement the process of establishing the limitation within which programs, savings, and achievement are reaching the pet results.
The process of measuring performance requires the use of numerical confirmation to establish progress toward definite organizational objectives.
The reason for measuring performance
Fundamental reason behind measures is to improvement.
reasons for measuring performance:
how well is organization performing. Performance is evaluate by, managers require to establish what agency made-up to finish. (Kravchuk & Schack 1996). To originate a clear, coherent mission, strategy, and objectives. After that choose how those activities measure.
Evaluation process can be done with the help of two variables:
organizational performance data.
benchmark creates framework to analyzing that data.
Performance measurement needs standards (benchmark) to evaluate performance.
How managers make sure that their subordinates are doing the right thing.
managers do not run their organization without the control of their workforce.
Budget is another reason for improving performance. Poor performance not change after apply budget. Increase in budgt is the answer to improving performance. For example purchasing good technology require the budget because the current is outdated. In assign budgets, managers, require macro budget allocations. Determine allocations at the micro level with the help of efficiency of various activities. We can determine our efficiency by observing performance. Efficiency is the result of our output. If our out put is low we are not much efficient.
Another reason to measure the performance is giving significant objective to achieve and use performance measures- including short-term targets- to focal point of people's thinking and work, and to provide cyclic sense of achievement.
Performance objective may also promote creativity in developing well again ways to attain the objective (Behn). Thus evaluate to motivate development may also motivate knowledge.
Almost-real-time productivity (faster, the better) evaluate with production objective. speedy reply required to give quick feed-back so workers could get better and adjust.
Also it is talented to present how workers now performing.
principal purpose behind the measures is productivity, managers can not encourage people to control something over which they have slight or no control.
An organization's leader have aggravated significant development using productivity objective, they create some conclusion end.
Organizations must honor their events- such ceremony secure their people together, give them cooperative importance. By attain specific objective, people get wisdom of personal achievement and self-esteem (Locke & Latham 1984).
Celebration assist to get better performance because it get awareness of the organization, and thus encourage its capability- it catch the attention of capital.
enthusiastic people who desire to work for winning organization.
Learning-sharing between people about their developments and how they attain it.
Significant performance objective give wisdom of individual and combined developments. objective can use to motivate the people. Those celebrations produce inspiration and thus development.
Public managers induce political better, legislators, stakeholders, journalists, and citizens that their organization is doing a fine work.
Learning is concerned with some procedure, information given from estimate business performance. By analyzing, business competent to discover reasons at the back its poor or good performance.
Managers will not be able to learn anything if there is so many performance measures.
More confusion due to rapid increase of measures.
Due to lack of time it is difficult to identify good measures..
Benchmarking help out by providing evaluation of organizational performance and provide achievable solution for development.
Benchmarking is a core process for measuring the performance.
Measurements are used for analysis of performance. Performance measurements should ask if we are deviate from our expected results.
Learning happens when organisation assembles problems in operations or failures. Then business improve by evaluate those faults and looking for solutions. If these faults are hidden by us then we can not manage them and we can non improve them.
for improvements we need feedback and after that work on our drawbacks. Improvements are very essential for our business success. Improvement process also connected to learning process to recognize places that are need improvements.
They need to study how measures they can take will force operations, environment, workforce and which finally has a collision on result.
(National Academy of Public Administration's center for improving government performance- NAPA 1999) performance measures can be used to: authenticate accomplishment; explanatory extra capital; get clientele, stakeholder, and staff faithfulness by showing outcome; and succeed acknowledgment inside and outside the organisation.
ultimately encourage capability and value of government in universal.
To persuade citizens their organization is doing well, managers require simply understood measures of those features of performance about which many citizens individually mind.
("National Academy of Public Administration-NAPA" in its study of early performance- measurement plans under the government performance and results Act) most strategy documented the require to talk performance assessment results to senior level officer.
Principles of performance measurement
Major work activities
Work which has no objective information can not be managed and measure. This work assumed valuable regardless of its conclusion.
The work which is not measure decrease or remove.
Pet performance result must be recognized for all measured work.
Result give the base for set up responsibility for results.
Desired result are essential for work assessment and significant performance evaluation.
Define performance for managers and supervisors make their work assignments operational.
Performance analysis should be taking frequently.
With the help of timely performance analysis we can take timely action.
Effective management control desired timely corrective action.
If we can not measure performanceâ€¦â€¦
We can not improve.
We can not manage our money and our people.
We can not compare with others.
We can not identify ourselves that we are improving or declining.
Common problems with measurement systems that limit their usefulness:
Dependence on data that highlight averages and discounts outliers.
Dependence on past model and unwillingness to recognize new structural alteration
Dependence on static, e.g., equilibrium, analysis and slight attention to time-based and growth ones, such as value-added measures.
We can not identify which plan, process, or workers are generate results that are cost effective and cost efficient
Performance Measurement topics
If we can not measure our performance we can not recognize our failure. So performance measurement helps us to improve ourselves.
Good Performance Measures:
give a successful strategy that is working successfully.
Focus on employees' attention
Help us for achievement,
offer a simple language for communication.
Provide ability to measure our output.
Help us that data is accurate.
performance measurement plays an vital part in:
â€¢ Make progress against organizational objectives
â€¢ Provides chance for improvement
â€¢ Comparison of performance both internal and external standards
performance measurement have the following framework
The focus of performance measurements framework is customer and measure the exact effects.
Performance measures should be:
â€¢ significant, definite and widely unspoken
â€¢ Owned and run by the panel of the organisation
â€¢ Based on a high level of data integrity
â€¢ that data collection is fixed within the standard procedures.
â€¢ Able to drive improvement
â€¢ Linked to critical goals and key drivers of the organisation
There are four key steps in a performance measurement framework - the strategic objectives of the
organisation are converted into desired standards of performance, metrics are creates to compare the
pet performance with the definite achieved standards, gaps are identified, and improvement actions
initiated. These steps are continuously implemented and reviewed:
Financial and non-financial measurements
e purpose of performance measurement and control systems is basically to communicate information which facilitates managerial decisions and actions. Performance is how well a company does, and a measure or measurement is a quantitative value, scaled and used for purpose of comparison (Simon 2000, 234). Performance measures can be divided into two types, financial and non-financial. Financial measurements are stated in monetary terms, such as revenue or profit for example. Non-financial are quantitative data not ex-pressed in monetary terms such as productivity, quality failures and customer satisfaction (Simons 2000, Collier 2006). The financial measurements can be collected into financial statements such as balance sheets, income statements, and cash flow statements. An exam-ple of a financial measurement for an organization can be sales value, while a non-financial measurement can be markets shares (Simons 2000). The financial perspective of measuring in companies can also be explained as lagging, or historical measurements, which means that financial measurements show what has happened. Examples are revenue, profitability and asset utilization (Niven 2005). The opposite of lagging measures are leading measures and these contain indications on performance before the actual process has started while it is still in progress. Examples of these are employee training, process quality controls and work in process costs (Simons 2000).
The financial measures can be (1) revenue, or revenue growth - this measure indicates cus-tomer willingness to purchase a firm's goods and services, (2) Gross Profit Margin - reflects the willingness of costumers to pay premium prices in return for perceived value in the firm's products or services, (3) Warranty expenses and/or product returns - these measures provide insight into product quality and the extent to which products meet customers ex-pectation concerning features and attributes(Simons 2000, 172).
The non financial measures can be (1) Market share or market share growth - Market share is a measure of customer acceptance relative to competitive offerings in the marketplace, (2) Customer satisfaction - these measures reflect customer perception of value and the extent to which products or services have met customer expectations. These data are usually col-lected through survey techniques administered by telephone or mail after sales of goods and services, (3) Referrals - This measure of customer loyalty is calculated by gathering data on the source of new business and maintaining a score of new business generated by referrals (Simons 2000, 172).