Kinney 8e_SM Ch14

Kinney 8e_SM Ch14 - 1 Chapter 14 Performance measures...

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1 Chapter 14 Chapter 14 Performance Measurement, Balanced Scorecards, and Performance Rewards Questions 1. A mission statement expresses the organization’s purposes and identifies how the organization will meet its customers’ needs through its products or services. Alternatively, a vision statement expresses where the organization wants to be in the future. The former is more short run oriented than the latter and should change periodically as customer preferences change. A values statement helps provide information on the firm’s organizational culture. It indicates the areas of organizational importance so that employees can internalize these beliefs and values. Organizational strategies and missions are devised to achieve the goals and objectives of a firm. Control systems, including systems of performance measurement, are created to implement the missions and strategies of firms. 2. Performance measurement is necessary to gauge whether a firm is pursuing its goals and objectives successfully. Without performance measurement systems, managers, shareholders, and others would have no basis to assess the success of operations or whether operations were being conducted efficiently. Performance measures should be both qualitative and quantitative. The measures chosen must be reasonable proxies for the organization's critical success factors, many of which are not easily captured by financial or other quantitative measures. For example, managers need to employ qualitative measures to capture performance in the dimensions of customer service, product and service quality, product innovation, advancement in job skills, and effectiveness in communications. In the absence of benchmarks, the performance measurements will not be meaningful. The performance measurements can be interpreted only when they are compared to benchmark measurements such as industry performance or a firm’s historical performance measurements. 3. It is expected that people will act specifically in accordance with how they are measured. Thus, individuals must know of and understand the performance measures used, so that managers can make decisions in light of the effects of alternative choices on the performance measures. Managers who are allowed to participate in the development of the measures by which their performance is assessed are more likely to accept the performance measures as valid and fair and to understand how their actions influence the measures. 4. In selecting bases for performance measurement, managers should consider: whether the measures capture progress toward organizational goals, the input of those being evaluated,
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2 Chapter 14 whether proposed measures are appropriate for the skills and authority of those being evaluated, and methods to provide appropriate feedback on performance. The traditional performance evaluation
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This note was uploaded on 02/11/2012 for the course ACCT 318 taught by Professor Medvil during the Spring '11 term at USC.

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Kinney 8e_SM Ch14 - 1 Chapter 14 Performance measures...

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