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PERFORMANCE MEASUREMENT & CONTROL, 150824_r26883, past-performance…
PERFORMANCE MEASUREMENT & CONTROL
Issue
surrounding the use of
financial performance indicators
to
monitor performance
:
Manipulation of results
Accelerating the revenue results :red_cross:
Delaying costs:red_cross:
Understating provision or accrual :red_cross:
Manipulation of accounting policies :red_cross:
Reveal past action
The detailed financial performance indicators have no predictive power for the future.
Short-termism
Make decisions intended at improving short-term financial performance but bring negatives impact on long term profitability.
Don't covey the whole picture
Not consistent with today’s business realities :star:
Financial measurement not relevant to many levels of organization :star:
Organizational value-creating activities are not fully captured in financial performance indicators.
The main behavioral aspects of performance management.
Human Resource Management
Important of HRM
Recruitment
Performance Managment
Retention & Motivation
Reward Scheme
Method
Benefit
Performance
Basic Pay
Benefit of RC
Incentives
Shares
Valuable
Problem
Prioritise achievement of reward
Unmotivated employee
Mental health
Appraisal
Reason
Development Purpose
Judgement Purpose
Important of Target Selection
Achievable
Relevant
Controllable
Prioritised
The
external considerations
in
performance management
Shakeholders
Internal
Employees
Motivation
Morale
Management
Salaries
Profit sharing
Connected
Shareholders
Price of Shares
Dividend yield
Earnings per share
Customers
Price
Quality
Service
Value for money
Financiers
Financial flexibility
Business framework
Fiancial security
Suppliers
Quality purchase
Payment
External
Community
Environmental impact
Employment
Social needs
Government
Taxation
Inflation
Exports
Employement
Pressure Group
Interest
Power
Market conditions
Economic growth
Inflation
Interest rates
Exchange rates
Government fiscal policy
Competitors
Competitors' prices
Cost structures
Financial Performance Indicators (FPIs)
Measuring Liquidity
Quick (Acid Test) Ratio
Creditors (payables) period
Current Ratio
Debtors (receivables) collection period
Inventory holding period
Work-in-progress period
Finished goods period
Measuring Risk
Financial Gearing
Dividend Cover
Interest Cover
Operating Gearing
Measuring Profitability
Net Profit Margin
Return on Capital Employed
Asset Turnover
Sales Growth
Gross Profit Margin
Methods for improving the performance indicated
Limit your focus to 10 indicators or less at each level of the organization
Spend time planning for performance indicator implementation
Cascade indicators down from corporate goals
