Performance Measurement

Performance and Performance Measurement in Conventional Accounting and Finance System

INTRODUCTION

All organizations whether profit oriented or non-profit ones are destined towards achievement of some predefined goals and targets. These goals, which are set by the management as very specific purpose for the existence of the organization, act as standards against which actual performance of the organization is later measured.

The very first step of any organizational effort is taken with situating the expected targets and thresholds. Then plans to accomplish these goals are chalked out, human and other resources are organized, efforts of organizational members are directed towards achievement of required targets and incentives are offered to motivate the teams. Then comes the juncture where all these efforts, in other words performance, of the organization have to be measured. Baselines and benchmarks act as standards to distinguish actual performance from the desired one and thus determine organization’s effectiveness and operational efficiency.

Performance measure is a gauge to ascertain organizational efforts and discriminate success from failure. In fact performance measurement is the very core of the management functions. Any activity that cannot be measured cannot be managed. Performance measures are also used to compare the performance of different organizations, plants, departments, teams and individuals, and to assess employees. Shell Richard (2011) quotes famous saying of Lord Kelvin a famous physicist, scientist and philosopher:

“I often say that when you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely in your thoughts advanced to the stage of Science, whatever the matter may be” (Lord Kelvin...