Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
http://www.accaglobal.com/en/student/acca-qual-student-journey/qual-resource/accaqualification/p5/technical-articles/the-pyramids.html by Shane Johnson 01 Sep 005 !t has become increasingly important for organisations to de"elop systems of performance measurement which not only reflect the growing comple#ity of the business en"ironment but also monitor their strategic response to this comple#ity. $he need for good performance management is an ongoing issue which should be addressed by the management of all organisations. $his article considers issues which are central to the understanding and assessment of performance measurement within any organisation. $he main issues requiring consideration by management are: lin%ing performance to strategy setting performance standards and targets lin%ing rewards to performance considering the potential benefits and problems of performance measures.
!n attempting to establish a clear lin% between performance and strategy it is "ital that management ensures that the performance measures target areas within the business where success is a critical factor. $he performance measures chosen should: measure the effecti"eness of all processes including products and/or ser"ices that ha"e reached the final customer measure efficiency in terms of resource utilisation within the organisation comprise an appropriate mi# of both quantitati"e and qualitati"e methods comprise an appropriate focus on both the long-term and short-term be fle#ible and adaptable to an e"er-changing business en"ironment. $he last point stresses how important it is that performance measurement systems are dynamic so that they remain rele"ant and continue to reflect the issues important to any business. $here are a number of models of performance measurement which can be used by management. $his article considers the &performance pyramid& of 'ynch and (ross )1**1+1. $he model represents an ac%nowledgement by the writers that traditional performance measurement systems were falling short of meeting the needs of managers in a much changed business en"ironment. 'ynch and (ross suggest a number of measures that go far beyond traditional financial measures such as profitability, cash flow and return on capital employed. $he measures that they propose relate to business operating systems, and they address the dri"ing forces that guide the strategic objecti"es of the organisation. 'ynch and (ross propose that customer satisfaction, fle#ibility and producti"ity are the dri"ing forces upon which company objecti"es are based. $hey suggest that the status of these dri"ing forces can be monitored by "arious indicators which can be deri"ed from lower le"el )departmental+ measures of waste, deli"ery, quality and cycle time. $he performance pyramid deri"es from the idea
Setting standards and targets $o set standards and targets, management could choose to ma%e use of benchmar%ing and/or target costing while being mindful of the critical need to lin% rewards to performance as appropriate. Benchmarking 1enchmar%ing is &a continuous, systematic process for e"aluating the products, ser"ices, and wor% processes of organisations that are recognised as representing best practices for the purposes of organisational impro"ement& )Spendolini 1**1+:. $he most common approach is process benchmar%ing, where the standard of comparison is a &best practice& firm which may be entirely unconnected with the benchmar%ing organisation. !t may not e"en operate within the same industry. $he objecti"e is to impro"e performance. $his is best achie"ed through the sharing of information which should be of mutual benefit to both parties ta%ing part in the benchmar%ing programme. 4s a result of recei"ing new information, each party will be able to re"iew their policies and procedures. $he process of comparing respecti"e past successes and failures can ser"e as a stimulus for greater inno"ation within each organisation. Target costing $arget costing should be "iewed as an integral part of a strategic profit management system. $he initial consideration in target costing is the determination of an estimate of the selling price for a new product which will enable a firm to capture its required share of the mar%et. !t is then necessary to reduce this figure to reflect the firm&s desired le"el of profit, ha"ing regard to the rate of return required on new capital in"estment and wor%ing capital requirements. $he deduction of required profit from the proposed selling price will produce a target price that must be met in order to ensure that the desired
Performance measures - benefits and problems 1erry, 1roadbent and 6tley )1**5+5 suggest that the following benefits can be deri"ed from the use of performance measures: (larification of the objecti"es of the organisation. $he de"elopment of agreed measures of acti"ity. 4 greater understanding of the processes within the organisation. $he facilitation of comparisons of performance between different organisations. $he facilitation of the setting of targets for the organisation and its managers. $he promotion of the accountability of the organisation to its sta%eholders.
-owe"er, they also draw attention to the potential problems that may de"elop from the use of performance measures by an organisation. $hese could include: tunnel "ision sub-optimisation myopia measure fi#ation misrepresentation