performance measurement

Question 1

a measure

Answer 1

quantification of dimension, size, or capacity of any object

Question 2

performance measures used to

Answer 2

keep track and monitor different aspects of performance to assess achievement of organisational goals and value creation

Question 3

what performance measures do

Answer 3

• communicate performance to material stakeholders
• communicate strategy and business plans, and align employee’s goals with organisational goals
• track performance against targets
• evaluate employees’ performance as basis of rewards
• guide and develop future strategies and performance

Question 4

integrated reporting

Answer 4

• value created, preserved, or eroded by organisations over time manifests itself in increases, decreases or transformations of capitals caused by the organisation’s business activities and outputs

Question 5

capitals

Answer 5

• financial
• manufactured
• intellectual
• human
• social/relational
• natural

Question 6

financial capital

Answer 6

funds available to produce goods/services

Question 7

manufactured capital

Answer 7

physical objects available to produce goods/services

Question 8

intellectual capital

Answer 8

• organisational capital (knowledge, systems)
• intellectual property (patents, copyrights)

Question 9

human capital

Answer 9

people’s competencies, capabilities, experience, motivations to innovate

Question 10

social/relational capital

Answer 10

• relationships between stakeholders
• ability to share information to enhance wellbeing

Question 11

natural capital

Answer 11

• renewable and nonrenewable environmental resources/processes
• support past, current, and future organisational prosperity

Question 12

critical success factor

Answer 12

key strategic/operational objectives that captures an aspect of performance vital to organisation’s success

Question 13

key performance indicators

Answer 13

developed to make CSF more concrete and quantifiable, and measure process against CSF

Question 14

management process

Answer 14

plan, do, check, adjust

Question 15

performance measures

Answer 15

developed after CSF and KPIs which are more comprehensive measure short or long-term objectives

Question 16

summary of steps to developing performance measures

Answer 16

1) define value, determined by what stakeholders value
2) determine CSF that captures firm’s success in creating value eg safe operation
3) develop measures that indicate progress or results against CSF eg percentage of incidents

Question 17

types of performance measures

Answer 17

• financial and non-financial
• quantitative and qualitative
• internal and external

Question 18

financial measures

Answer 18

• measures performance in dollars or ratio of dollars
• measures financial outcomes of firm/managers’ actions

Question 19

non-financial measures

Answer 19

• operational measures that considers various aspects of firm performance
• actionable, understandable, easily linked to firm goals

Question 20

quantitative measures

Answer 20

• measures stated in numbers
• can be manipulated mathematically
• more objective and precise

Question 21

qualitative measures

Answer 21

• measures stated in words
• cannot be manipulated mathematically
• less precise and provides directional information
• used when performance cannot be quantified

Question 22

internal measures

Answer 22

• measures performance from an internal/operational process point of view
• monitor processes required to deliver stakeholder value
• considers value chain activities
• early indicators of external measure of performance

Question 23

external measures

Answer 23

• measures performance from stakeholders’ point of view
• monitors organisations’ ability to create stakeholder value

Question 24

effective measures

Answer 24

capture a diversity of experiences and events, from different perspectives

Question 25

characteristics of effective measures

Answer 25

• objectivity
• reliability
• accuracy
• lack of ambiguity
• cost-effective
• consistency
• sensitivity
• functionality

Question 26

objectivity

Answer 26

• not biased or subjective
• provides same reading regardless of who/what is being measured/measuring

Question 27

reliability

Answer 27

provides the same information every time a specific event takes place

Question 28

accuracy

Answer 28

• clear, precise and consistent
• measures actual performance

Question 29

lack of ambiguity

Answer 29

• free of distortion
• what is being measured is explicitly and uniquely defined

Question 30

cost-effective

Answer 30

provides more value to user than cost of developing or collecting it

Question 31

consistency

Answer 31

conducive to most forms of linear transformation

Question 32

sensitivity

Answer 32

• signals changes in key conditions
• small amount of change can be detected by measure

Question 33

functionality

Answer 33

• linked to organisation’s CSF
• creates desired, not dysfunctional behaviour

Question 34

dysfunctional consequences

Answer 34

• undesirable side effects that destroy value
• occurs when measures create incentives for individuals to do things that organisation does not want them to do

Question 35

types of dysfunctional consequences

Answer 35

• behavioural displacement
• gamesmanship
• operational delays
• negative attitudes

Question 36

behavioural displacement

Answer 36

• measure encourages employees to do things not consistent with firm objectives
• result of incorrect/incomplete definition of firm’s goals or expected behaviour

Question 37

gamesmanship

Answer 37

• employees take actions intended to improve measured performance, but not in organisation’s best interest
• creation of slack resources
• data manipulation

Question 38

operational delays

Answer 38

• measure prevents completion of key task/activity
• makes it difficult for employees to get work done

Question 39

negative attitudes

Answer 39

• measure may be viewed as unfair
• can result in inefficiencies and potential sabotage