Participation has a significant role to play in ensuring that the goals and

Participation has a significant role to play in

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Participation has a significant role to play in ensuring that the goals and objectives and the resulting performance measures are accepted and will act as a motivating force (see Chapter 16 for a discussion of the role of participation in performance evaluation). Particular care must be taken in developing performance measures so that they will encourage goal congruence and minimize the dysfunctional consequences. Here the answer could draw off the discussion in Chapter 16 relating to the harmful side-effects of controls. Control in non-profit organizations is particularly difficult, because it is not always possible to state the objectives in quantitative terms or to measure the output of services. If it is not possible to produce a statement of a particular objective in measurable terms, the objective should be stated with sufficient clarity for there to be some way of judging whether or not it has been achieved. In a non-profit organization performance measures should attempt to measure both the quantity and the quality of outputs. It is usually much easier to measure quantity than quality. For example, in an educational establishment the quantity measure of the number of students who graduated in the previous year is much easier to measure than the quality measure of how well the students were educated. Nevertheless, the quality measure should not be overlooked. In some cases the quantity indicator may provide an approximate measure of quality. For example, the number of students who have graduated in the previous year, analysed according to degree classification, may provide an approximation of the quality of the education. Frequently in non-profit organizations input measures are used as proxy measures for output. If no satisfactory output measures can be formulated, input measures are a better measure of output than no measure at all. For example, it may not be feasible to construct output measures reflecting the quality of health care. In the absence of such measures, the amount spent on salaries and medicines may provide a useful clue to output. If, in the extreme, nothing was spent, we can conclude that nothing was accomplished. When inputs are used as proxy output measures, care must be exercised to avoid undue reliance on them. For example, the amount spent on wages and medicines may not represent an improved service to the users because the resources may not have been used effectively. Attempts should be made to develop useful measures of output so that efficiency and effectiveness can be measured. It is important that financial measures are not overemphasized and that a balanced scorecard approach (see Chapter 22) is adopted using realistic targets that relate the performance measures to the objectives of the organization.
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  • Spring '16
  • Depreciation, Tutorial, MANAGEMENT ACCOUNTING II, UKAM2043, UTAR, residual income, divisional manager, DIVISIONAL FINANCIAL PERFORMANCE

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