Performance Measures Flashcards
The management of Taylor Corporation is attempting to adopt new performance measures.
Henry Warren, the chief executive officer, has asked you to prepare a memorandum describing how management should choose between alternative measures.
-Requires an understanding how the measures will be used.
-Possible uses include for compensation, resource allocation, and business unit performance.
-Measures that are strategic communicate the goals of the organization and motivate management to pursue those goals.
-Performance measures must also represent economic reality. They should provide a clear and accurate measure of relative performance.
-If the measures are used to evaluate and compensate managers, they should be sensitive to factors that are in the manager’s control and not sensitive to factors beyond the manager’s control.
