- 15 Marks
MA – L2 – Q56 – Performance analysis
Discuss methods and qualities of good performance measurement in management accounting.
Question
PERFORMANCE MANAGEMENT
Methods used in measuring performance
Financial Performance: analyse profitability, liquidity and risk. Financial Indicators include Profit, Revenue, Costs, Share Price and cash flow.
Non-Financial Performance: This can usefully be applied to employees and product/service quality. Non-Financial Indicators may include Quality of Service, Measures of customer satisfaction, Lateness.
Qualities of Good Performance Measurement
| A GOOD MEASURE: | DESCRIPTION: |
|---|---|
| Is quantitative | The measure can be expressed as an objective value |
| Is easy to understand | The measure conveys at a glance what it is measuring, and how it is derived |
| Encourages appropriate behaviour | The measure is balanced to reward productive behaviour and discourage “game playing” |
| Is visible | The effects of the measure are readily apparent to all involved in the process being measured |
| Is defined and mutually understood | The measure has been defined by and/or agreed to by all key process participants (internally and externally) |
| Encompasses both outputs and inputs | The measure integrates factors from all aspects of the process measured |
| Measures only what is important | The measure focuses on a key performance indicator that is of real value to managing the process |
| Is multidimensional | The measure is properly balanced between utilisation, productivity, and performance, and shows the trade-offs |
| Uses economies of effort | The benefits of the measure outweigh the costs of collection and analysis |
| Facilitates trust | The measure validates the participation among the various parties |
Find Related Questions by Tags, levels, etc.
Report an error
