Essay Paper on Business Performance Measurement
Business performance measurement is divided into two main types: accounting and marketing. Implementation of this measurement is called an operational measurement. Accounting measures of performance have been the traditional mainstay of quantitative approach to business performance measurement. Íîwever, over the past two decades, a great deal of attention has been paid to the development and use of ïîï-financial measures of performance, which inn be used both lo motivate and report on the performance of business (and other) organizations. The impetus for such developments has come from both the bottom and the top of the organization. Much performance management at the operational level is carried out using specific indicators of performance, which are usually not measured in financial terms. At the most senior levels, although financial performance inevitably a major consideration, there has been increasing recognition that other important factors in the effective running of the organization cannot be well captured by such measures. Thus, non-financial performance measures have undergone significant development, to the relative neglect of the development of improved financial measures.
It is argued that there are three different major functions for financial performance measures, and that, although these functions overlap to some extent, major confusion can be caused by applying measures developed for one function to a different one. The three main functions involved are:
a) financial measures of performance (efficient provision and use of financial resources),
b) financial performance as a major objective of business organizations.
Assessing marketing performance is an increasingly important task for managers and other corporate stakeholders. First, many firms are looking to provide fresh growth in profit through increasing sales after years of downsizing. Second, multi-disciplinary perspectives on performance measurement) such as the balanced scorecard are increasing the attention given to non-financial measures of performance in general, raising the issue of which marketing measures, if any, should be included in such schemes. Third, investors and analysts are increasingly asking for information on the marketing performance of firms.
Unfortunately, assessing marketing performance is also very difficult to do. Unlike purely internal measures of performance, such as defects per million, marketing performance depends on external, largely uncontrollable actors, such as customers and competitors. Further, it acts as a mediator between these external actors and various internal corporate processes, such as accounting, manufacturing, research and development, and finance.
Specialists distinguish the following goals and functions of the business measurement: to monitor and control, to drive improvement, to maximize the effectiveness of the improvement effort, to achieve alignment with organizational goals and objectives, to reward and to discipline. Also, these functions may fall into the following groups: balancing profit, growth and control, balancing short term results against long-term capabilities and growth opportunities, balancing performance expectations of different constituencies, balancing opportunities and attention and balancing the motives of human behavior.
Business performance measurement is considered a part of the assurance service because it reduces the information risk and improves the quality of the decision-making within one firm. Business performance measurement analyzes many factors of the firm’s activity and management style to asses its performance and find the best solution to the current problems and challenges.
As the assurance service, business performance measurement analyzes the efficiency of the information use which became one of the most important factors in the modern business environment. It is about the ability to use operational data as quickly and efficiently as possible…
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