There exist a relationship between performance measures and business objectives. Business objectives entail statements of specific outcomes that ought to be achieved. For these outcomes to be achieved there are certain activities that need to be undertaken within the organization. The activities need to be conducted in a certain way if the specific outcomes are to be achieved. The best way to ensure that these activities are being conducted in the desired manner is by use of performance measures. There exist qualitative and quantitative ways of measuring performance. All the resources in the organization can be examined through this mechanism. If everything is operating as planned, it means that the organization’s objective of attaining its mission and vision is feasible. If the performance measures indicate otherwise, the organization might need to adjust its objectives or identify other ways of attaining these objectives.
A Performance Measurement System (PMS) entails a set of measures used to quantify the effectiveness and efficiency of actions. It provides information that helps in identification of best strategies to help meet the organization’s goals and objectives. A Performance Measurement System has some varied features. Among them is that it is results-oriented. This means that it focuses on outputs and outcomes. As a result, it is normally linked to the organization’s goals and objectives. PMS also tends to be selective. This is because it focuses more on those performance measures that are relevant to the organization. All performance measures are relevant to the organization, but there are those that carry more weight. This aspect helps to bring a balance between non-financial and financial performance measures. Another feature is that it is accessible. It tends to provide supporting information regarding results and includes a supporting infrastructure to collect, record and analyze data.
Key Performance Indicators are performance measures that an organization identifies as being critical to the achievement of its objectives and mission. There are various ways to set up the KPIs. Among them is the establishment of organizational goals and objectives. When the organization has its goals and objectives established, everything ought to work towards achieving them. The key Performance for the organization in this respect will be the ones directly related to the goals and objectives. Consultation with relevant stakeholders would also be helpful in setting up Key Performance Indicators. This is because the stakeholders are involved with the business in different ways hence possess different viewpoints about the organization. Usage of historical data to identify performance trends can also be effective. In some businesses, activities tend to be repetitive. As a result, whatever was deemed important some time back might still be important in the current period.
There exists a variety of tools, processes, and timetables that can be used for monitoring and reporting various business performances. When it comes to tools, there are KPIs, planning and budgeting, performance dashboards and benchmarking. Performance dashboards usually provide an overview of the performance areas by use of graphs, visuals, text and traffic light. It is the type of tool that answers specific performance questions that relate to the business. KPI’s on the other hand, are related to the business objectives and other critical success factors. Planning and budgeting on its part helps to monitor the spending within the organization against the goals. Areas experiencing high performances should be the ones being allocated more funds. When it comes to the processes, performance appraisals can be very useful. It tends to assess an individual’s performance at the workplace. This is one way that the organization identifies redundant employees or those that do not meet the required performance threshold. Timetables on the other hand, depend on the nature of activities being undertaken. There can exist daily, weekly or monthly reports. In some instances, there is a probability of getting combined timeframes.
Management Information Systems (MIS) and management accounts are useful in performance management. Management information systems entail computerized information processing systems that are designed to improve and support the efficiency and quality of human decision making and business operations. The uses of MIS include the provision of information to support performance evaluation, store and manage performance data and track progress. These aspects are useful since they ensure that performance management runs smoothly. Management accounts on the other hand include Cash Flow, Statement of Financial Position and accounting data among others. Uses of management accounts in performance management include helping to identify consequences and risks of actions, supporting decision making, provision of information to be used in performance dashboards and provision of historical data to inform target setting.
To some extent, outcomes and outputs seem to be one and the same thing. However, this is not the case. There is a very significant difference between the two. Outputs are the results that are derived from the implementation of an activity. Sometimes it can be as a result of the provision of products or services. On most occasions, outputs are linked to the objectives of the organization. It is more of what an organization expects to achieve if certain things are executed in a given specific manner. Outcomes on the other hand, can be regarded as mid-term results. They do not arise immediately after a certain activity has been executed, but after some time. It is more of what an organization gains from the output. They can be soft outcomes (less tangible and subjective) or hard outcomes (more observable and measurable).
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