What is the importance of measurement in performance management?

Ask questions about a service that can help staff develop and carry out improvement strategies. Effective performance management is essential for businesses. Through formal and informal processes, it helps them align their employees, resources and systems to meet their strategic objectives. It also works as a control panel, providing early warning of potential problems and letting managers know when they must make adjustments to keep the company going.

Performance measurement is used to motivate managers to make decisions that benefit the company and themselves. Therefore, the key to good performance measurement techniques is to set goals that are realistic and incorporate decisions over which the manager has control. The company can then evaluate the manager based on controllable factors, which are the components of the organization for which the manager is responsible and that the manager can control, such as revenues, costs, and the acquisition of long-term assets, and other possible factors. Remember that in Accountability and Decentralization Accounting, you learned about responsibility centers, which are a means by which an organization can be divided based on factors that the manager can control.

This makes it easier to align the manager's objectives with those of the organization and to design effective performance measures. The four types of responsibility centers are revenue centers, cost centers, profit centers, and investment centers. The second way, which measures quantitative productivity, tracks repetitive tasks over time to test an employee's productivity.

This works best for employees who take calls, process parts, or have other types of repetitive tasks throughout the workweek.


Measuring the number of actions an employee performs per day or per week gives management a quantitative idea of what defines productivity. This method doesn't work well for employees working on long-term development projects, as there are very few things to count and compare. In places ranging from dining room celebrations to town hall announcements, employee of the month and team achievement awards are invaluable in encouraging behavior that improves performance and keeps it high. Different levels of management, in an attempt to improve their own position or avoid underperformance elsewhere, can add buffers to objectives.

For example, high school grade point average is a metric used by universities when considering the admission of future students, as it is considered a measure of previous academic success. Maintaining the will and ability to integrate these performance management processes into the rhythm of daily work is not attractive, but in the long run it is the most effective route to achieving real and sustainable performance improvements. To achieve this, a company establishes performance evaluation measures that align the decisions made by management with the objectives of the corporation and the professional objectives of the manager. The third way, which measures productivity by benefits, considers company performance as the best indicator of productivity.

Too often, companies measure and manage performance through lagging indicators, such as meeting monthly production or quality objectives. A good performance measurement system is one that uses appropriate performance measures, which are performance metrics used to evaluate a specific attribute of a manager's role, to evaluate management in a way that links the objectives of the corporation with those of the manager. In addition, a well-designed performance plan should lead to greater job satisfaction for the manager and to an increase in personal wealth if the rewards are based on money. A company is only as good as its employees, and for both managers and human resources (HR) managers, measuring the performance of teammates is a fundamental part of business activity.

Let's first look at the use of measures based on accounting, and then we'll consider a methodology that also incorporates measures not based on accounting. Frontline employees can see the “common thread” that connects their daily performance to the performance of their plant or business unit (figure. .

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