1.1 IntroductionManagement performance means achievements or outcomesachieved in relation to organizational goals set.
How successful the managementhas achieved the organizational objectives which are therefore involves a clearevaluation of performance.1.2 FinancialPerformance MeasuresFinancial performance is the achievements oroutcomes achieved in relation to monetary/economic terms. In evaluating thefinancial performance, users are normally intended to analyze the financialhealth of the organization for a specified period of time normally a year.Users of financial information may have different perspectives in evaluatingthe financial performance of the company, but the most common financialmeasures specific to profitability includes; · GrossProfit Margin- this measures how well the company is able togenerate profit and producing at low cost as it involves money earned afterdeducting the cost of sales (direct cost). · NetProfit Margin- this measures the organizational strength ongenerating profit after deducting all cost relating to production alsoassociated cost for bring the product to the market. · Returnon Capital Employed- it is the most common measure used to analyzethe profitable investments, as it influence on investors’ decision in analyzinga profitable investment among alternatives.· Returnon Asset- this measures how the company is able to utilize the asset togenerate profit as it includes net income with total assets of the company.
The measures above comprisesthe profit generated from operations, and the profit itself is realized afterdeducting all cost in all level, it is therefore worthy to classify it as costmeasures as well.1.3 Non-financialPerformance MeasuresStudies have been conducted on the contributionnon financial measures to organizational performance, with other researchersargues that this measures have a significant impact on firm performance whileother still believing on the traditional approach. But studies supporting thisapproach have recognizing the significant impacts made by product quality,customer satisfaction, product innovation and leadership in firmperformance. In the study conducted by Gijsel(2012) argued that, managers have been increasing reliance on non financialmeasures by revealing that these measures are better off during the economiccrises and are also vital in evaluating firm future performance.
1.4 ResultsBased ObjectivesResult Based on objectives is a managementstrategy that is aimed at achieving a significant change in the way the companyoperates as the central target is to improve performance through expectedresults (objective set). This approachprovides a framework to management for strategic plans, risk management and howto monitor and evaluate the performance. The primary purpose of this model is to improve efficiency andeffectiveness through accountability and performance reporting.
For a companyto succeed in this approach then they must ensure that every stakeholder isinvolved in the cycle and be defined according to the expected results. Thisapproach borrow from the system theory as it follow a consequentialrelationships as the terms involved are not used interchangeably nor out of theseries. Inputs ? Activities Outputs ?Shot-term outcome ? Medium term outcome ? Long-term outcomeThe success of this approach isthe ability of the organization to create a management culture that focus onresults as the model require more than the adoption of new administrative andoperational system. This involves designing a results oriented managementculture. 1.5 BalanceScore Card (BSC)The BSC created by Kaplan is one of the bestknown and widely used multidimensional models for measuring performanceworldwide. Its contributions to measure performance on a balanced andintegrated system using fourperspectives of an organization has made a significant stem from the oldfinancial performance measure. The importance of this model is that it recognizescustomers and employees as crucial to organizational achievements.
The modelalso has given opportunity to use non financial measures by succeeding theprevious metrics such as the Economic Value added (EVA). (Kumar, 2004)This model has been used bygovernments, non-profit organizations and wide business industry. Unlike thetraditional approach which analyzes the past performance, BSC has able tosupplement both past and future performance with objectives and measuresderived from the organizations’ vision and strategy.