- 8 Marks
Question
Performance Management aims to establish how well something or somebody is doing in relation to a plan. Explain TWO methods used in measuring performance and identify FOUR qualities of a good performance measurement criteria.
(8 marks)
Answer
Methods used in measuring performance:
- Financial Performance: This method analyzes profitability, liquidity, and risk. Financial indicators include profit, revenue, costs, share price, and cash flow.
- Non-Financial Performance: This can be applied to employees and product/service quality. Non-financial indicators may include quality of service, measures of customer satisfaction, and lateness.
Qualities of Good Performance Measurement Criteria:
- Quantitative: The measure can be expressed as an objective value.
- Easy to Understand: The measure conveys at a glance what it is measuring and how it is derived.
- Encourages Appropriate Behavior: The measure is balanced to reward productive behavior and discourage “game playing.”
- Visible: The effects of the measure are readily apparent to all involved in the process being measured.
- Topic: Other Aspects of Performance Measurement, Performance analysis
- Series: MAY 2016
- Uploader: Dotse