Performance Measurements

Question 1

What are the limitations of financial performance measures?

Answer 1

Reflects past strategic decisions (lag indicator).
Does not facilitate strategy development and management (leading indicators).
Poor predictor of future financial performance.
Ignores quality and other long-term goals.
Easily manipulated.

Question 2

Define “Performance Evaluation.”

Answer 2

A process involving a sequence of activities linked together to perform a particular task.

Question 3

What are examples of strategic performance frameworks?

Answer 3

The Performance Pyramid
The Performance Prism
The Balanced Scorecard (Kaplan and Norton, 1992)

Question 4

What are the four perspectives of the Balanced Scorecard (BSC)?

Answer 4

Financial Perspective: How do we look to shareholders?
Customer Perspective: How do customers see us?
Internal Business Perspective: What must we excel at?
Innovation/Learning Perspective: How can we improve and create value?

Question 5

What are the advantages of the Balanced Scorecard (BSC)?

Answer 5

Provides a comprehensive organizational view.
Brings together different performance perspectives in a single report.
Links strategic goals with performance measures.
Facilitates communication within the organization.

Question 6

What challenges do not-for-profit organizations face in performance measurement?

Answer 6

Cannot use traditional accounting ratios or measures.
Difficult to benchmark due to ambiguous missions and social goals.
Difficulty in measuring achievements and contributions.

Question 7

Define the “3 Es” used in performance measurement for public and non-profit sectors.

Answer 7

Effectiveness: Achieving objectives.
Economy: Optimizing resource use.
Efficiency: Output per unit of resource consumed.

Question 8

What are the components of Management Control Systems (MCS)?

Answer 8

Behavioral controls.
Personnel, cultural, and social controls.
Results/output controls (e.g., performance measures, budgets, rewards).

Question 9

How does performance measurement link inputs and outcomes in the public sector?

Answer 9

It selects and prioritizes indicators, linking inputs, activities, processes, and outcomes to achieve objectives and provide value for money.

Question 10

What are some limitations of performance measurement systems?

Answer 10

Aligning strategy and objectives with performance measures is challenging.
Lack of integration of risk management and sustainability measures.
Difficulty selecting appropriate measures for decision-making.