SFAD

Class # 2
What is Performance Measurement?

Assessment of progress & results (Cruz et al., 2011; Payer & Hiebl, 2013)

Operationalize strategy to get result (Franco et al., 2012; Hall, 2010)

PM is a technical process as well as a social process (Bititci et al., 2012)

So, PM is…
• Assessment of results
• A system which translates strategy into action
• A tool to quantify efficiency & effectiveness
• Accomplishment of tasks against pre-determined standards
• Achieving objectives
Why Measure Performance?
• Know where you are & where you are going
• Motivation
• Improvement (identify problems & strengths)
• Plan
• Build reputation
• Attract talent
• Isomorphism (Mimic, Coercive, Normative)
• Become SUSTAINABLE
The 5 Ps of PMS
Prior Preparation Prevents Poor Performance
(Prof. Steve Hanke)

Plan, Act, Monitor, Adjust

Evolution of PM
Dominant Perspectives in PM
Accounting Figures
…………………
…………………………… …………………………..

Financial Ratios
…. …………….
Quality
………
Integrated

1900 1920 1940 1960 1980 2000

20th Century
History Of PM
• Evolved from simple to complex, static to dynamic, discrete to
continuous
• Double-Entry Book-Keeping System (13th century)
• Scottish Textile Factory Records (18th century)
• Formal process of measuring, recording, reporting (20th century)
Efficiency Era (1900-20)
• Frederick Taylor: Industrial efficiency can be quantified and hence
improved. Time & motion studies. Observe and document the
processes… time taken, movements etc…(i.e. input resources) … input
leads to output (production).. So there is a causal relationship which
can be optimized; this is called system analysis
• PM Focus: Increase Productivity, External factors are taken as a
constant
Result Era (1920-50)
• DuPont: Profit Margin * Asset Turnover * Equity Multiplier
• Profit Maximization is the ultimate aim
• Profitability, asset use efficiency, financial leverage
• Target based (production, sale, profit)
• PM Focus: Accounting information & ratio analysis. External factors
impacts PM but are un-controllable
Quality Era (1960-90)
• Deming & Ducker: PM is an active process
• Planning is the key
• Quality is an outcome NOT a method
• Motivate & train your employees
Deviations are caused by internal flaws
 Customers are the key
PM Focus: KPIs, Variance Analysis
Integration Era (1990----)
• Kaplan & Neely: BSC, Prism
BSC: Financial, Customer, Internal process, Learning

• Prism: Ultimate aim is stakeholders satisfaction

Stakeholders: Who are they? What do they need?
Strategies: What strategies we need to serve the needs
Processes: What processes we need to execute these strategies
Capabilities: What we need to operate these processes
Stakeholder contribution: What we need to develop these capabilities
Measurement Levels

IMPACT
LEVEL
Changes in Society
OUTCOME
LEVEL
Changes in Individual Life

Changes in Behaviour

Changes in Perceptions & Econ Status OUTPUT

LEVEL
Changes in Knowledge & Skills
PM in the Future
• Assessment tool Planning tool
• Clear boundaries Complex social-network
• Monitoring and Accountability Predictive
Projections using: Big Data, AI

Inclusive
Strategy Builder Flexible
Risk Incorporated
Articles Link
• https://www.researchgate.net/publication/329735963_International_Journal_of_Economics_Co
mmerce_and_Management_PERFORMANCE_MEASUREMENT_HOW_FAR_IT_HAS_TRAVELED_AN
D_WHERE_IS_IT_HEADED

• https://www.researchgate.net/publication/325180038_Performance_measurement_The_next_st
ation
Liquidity
Ability to pay in the short-term
Working Capital efficiency
Matching of receivables and payables generated from routine business
activities
Current Assets/Current Liabilities
Quick Assets/Current Liabilities
Cash + Marketable Sec / Current Liabilities