Measuring Business Performance Flashcards
What is performance?
It refers to output results and their outcomes obtained from processes, products and services that permit evaluation. It can be expressed in non-financial and financial terms.
What is measurement?
Numerical information quantifies input, output and performance dimensions.
What is performance management?
It is a process for setting goals and regularly checking progress towards achieving those goals. It includes activities that ensure organizational goals are consistently met in an effective and efficient manner
What are the variety of applications of performance management?
Staff performance
Business performance
Outcome performance measures
What are the differences in measurement and management in the context of performance?
Measurement:
- Deals with quantitative measures that track an organization’s performance
- It measures the performance of the business
Management:
- It is doing things to improve the performance of the business.
- Deals with the management of the strategy to achieve the intended performance
What are the examples of performance management techniques?
- Empowerment of employees
- Providing continuous coaching
- Equipping employees with the correct tools and resources
- Conditional appraisals
What are the common terms concerning performance management?
Efficiency
Effectiveness
Quantitative
Qualitative
Productivity
What is efficiency?
It compares what is actually achieved with what could be.
What is effectiveness?
It assesses how successfully objectives are being achieved.
What is productivity?
It describes the efficiency of production and is a measure of output per unit of input.
eg: land, labor, capital, enterprise
Explain the input-process-output-outcome model?
- What is to be achieved?
- What is produced or delivered?
- What action is taken?
- What is used?
- What is the impact?
What is the importance of having performance management systems?
- It can provide valuable insights that will inform broader human capital management decisions.
- Increased workforce productivity
- Higher employee engagement
- lower turnover
- maximized revenue per employee
What is the Balance Score Card?
It is a strategy performance management tool that can be used by managers to monitor the progress of strategic initiatives.
What are the balanced perspectives?
- Consumer perspective
- Financial perspective
- Internal perspective
- Innovation and learning
How can we use financial data in performance management?
By measuring the following key factors:
- Profitability
- Revenue
- Growth
- Costs: Cost of sales, inventory, support, production, raw materials, employees
What are the benefits to the
organization from
performance measurement?
Organization:
- Better control and accountability
- Improved performance
Stakeholders:
- Have a clearer understanding of the organization
Managers:
- Clear targets to focus upon
- Team responsibility
Employees:
- Personal accountability
- Linked to bonus
What is the importance of setting goals?
A goal is a broad, overarching statement of what an organization aims to achieve. It represents the desired outcome or result that the business wants to accomplish in the long term.
* Goals are usually qualitative, not easily measurable, and provide direction and purpose to the organization.
Example: A goal for a technology company might be to “become the market leader in innovative software solutions within the next five years.“
What is an objective?
An objective is a specific, measurable, and time-bound target that supports the attainment of a broader goal. It is more focused and concrete compared to a goal.
- Objectives are SMART (Specific, Measurable, Achievable, Relevant, Time-bound) and provide a clear roadmap for achieving the desired outcomes.
Example: Based on the aforementioned goal, an objective could be to “increase market share by 20% within the next three years through the development and launch of three new cutting-edge software products.”
What are targets?
Targets are precise, quantifiable benchmarks or metrics that indicate the level of performance required to achieve specific objectives.
- Targets provide clear criteria for evaluating progress and success, serving as checkpoints along the journey towards objective fulfillment.
Targets are often expressed in numerical terms and are closely aligned with specific objectives.
Example: Achieve a 10% increase in market share for each new software product within the first year of its launch.
What is the goal theory?
Goal setting theory constituents:
What is a goal?
The object or aim of an action.
Goals have two main attributes content and intensity.
Content: refers to the object or result being sought (e.g. increase profit by 20%)
Intensity: refers to effort needed to set a goal, the position of a goal in an individual’s goal hierarchy, and the extent to which a person is committed to goal attainment.
Setting Goals:
Clarity: Measurable goals, Timeline for completion
Challenge: A level of difficulty creates a motivating factor (without being unachievable)
Commitment: Effort and accountability increases performance
Feedback: Receive regular updates and prepare to change targets throughout
Complexity: Ensure the measure reflects the complexity of a task
What is the relationship between entrepreneurship and goals?
Successful entrepreneurs set goals as they explore markets for product and business model opportunities.
*human and financial resource gathering
*business start-up planning and organizing
*market entry
*technical development and proof of concept
*external financing
Example: Mark Zuckerberg founder of Facebook explained the specific growth and financing goals he set for his company
What are the Characteristics of Entrepreneurship Goals?
Self set goals:
*Highly motivated.
*High challenge, self-set growth goals yielded highest venture growth (Baum and Locke, 2004)
*If venture grows and require external financing, entrepreneurs may not be alone in setting goals.
Goal difficulty
* Financiers hold that entrepreneurs should accept their challenging financial and market penetration goals.
* Difficult goals increase performance (difficulty of goals = successful entrepreneurship)
What are the issues with goal setting?
Setting goals can result in
* Unethical behavior and cause harm
* Rise in unethical behavior
* Distorted risk preferences (Motivate risky behavior)
* Corrosion of organizational culture
* Reduce intrinsic behavior
what are the challenges faced when selecting and applying performance measures?
- Identifying what should be measured
- Obtaining the resources for a measurement system
- Communicating the metrics
- Designing a flexible system
