Focus on: Performance Measures and Management Techniques—Module 45
PERFORMANCE MEASURES AND MANAGEMENT TECHNIQUES
attempt to translate an organization’s goals into specific measures with four perspectives:
1. Financial—Return on investment and related financial measures
2. Customer—Nonfinancial measures of customer satisfaction and retention
3. Internal business processes—Measures of operating effectiveness and efficiency including financial measures, such as cost variances, and nonfinancial measures, such as number of defects in production
4. Learning and growth—Measures of employee satisfaction, training, and advancement
Value-based management examines all aspects of a company with the intention of identifying the amount of economic value added (EVA) by different activities. In effect, it attempts to translate all activities into their financial value to the firm, and is comparable to a financial scorecard focus.
The components of a balanced scorecard include:
- Strategic objectives—A statement of the goals of the firm and necessary elements
- Performance measures—Identification of quantitative methods that can be used to track success in fulfilling the strategic objectives
- Baseline performance—The current level of performance for each measure
- Targets—The level or improvement in performance being sought
- Strategic initiatives—Programs that will help achieve the targets and objectives
Cause-and-effect linkages identify ...