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This is also a standard, but one that is expected to be achieved. In setting standards within a business
environment, management needs to consciously consider the level of standards to adopt: e Graduate Programme
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Download free ebooks at bookboon.com 21 Standard Costs Tools for Enterprise Performance Evaluation Achievable standards are realistically within reach. Such standards take into account normal
spoilage and inefficiency. Such standards are intended to allow workers to reach the
established benchmarks. This level of standard provides a clear set of metrics against which
job performance can be gleaned. The interpretation is generally unambiguous; when goals
are not met, improvement is needed. It is also thought to reduce the opportunity for
frustration and discouragement that can be associated with less attainable goals. Ideal standards may never be reached. They represent what will result in a state of
perfection -- no spoiled goods, no worker fatigue, no errors, etc. The idea behind such
standards is that employees will never rest on their laurels. Instead, they will achieve their
full potential by striving to hit the lofty goal. Many businesses avoid ideal standards
because they fear that employees will see ideal standards as meaningless since they cannot
hope to achieve them. In other words, the employees cease to strive for a goal they cannot
hope to reach. Further, such goals may not help in performance evaluations; what is the
feedback value of telling employees they failed to meet such standards (after all, isn’t that
what was expected)? 3.3 The Downside of the Standards
A manager also needs to consider the downside of standards and develop compensating balances.
For instance, if employees are encouraged to work fast, quality can suffer. Standards need to be in
place to make sure that quality of output is not adversely affected. On the other hand, some
seasoned employees may have become so skilled that they can easily meet their output goals and
find themselves able to coast through the work day. Usually skilled workers receive a higher pay
scale; it is not unfair to expect them to produce more output. Therefore, one standard may not fit all.
A good manager is particularly adept at helping to establish fair standards, and use them to plan and
control the operations within their area of responsibility. Download free ebooks at bookboon.com
22 Variance Analysis Tools for Enterprise Performance Evaluation 4. Variance Analysis
As already mentioned, standard costs provide information that is useful in performance evaluation.
Standard costs are compared to actual costs, and mathematical deviations between the two are
termed variances. Favo...
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