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Financial Perf Measures

In: Business and Management

Submitted By gutta13
Words 6107
Pages 25
Responsibility centers and financial performance measures
Performance measurement is a tool for management control activity. Management control can be defined as the process by which managers and/or those placed in positions of responsibility influence other members of an organization to implement the organization’s strategies. The management control activities are aimed at ensuring that strategies are carried out so that the organization’s objectives are achieved. A specific aspect of management control activity is task control. Task control --a management control process by which specified tasks are carried out effectively and efficiently. Some writers draw a distinction between management control and task control, describing the former as a broad process for deciding and ensuring how strategies are implemented, and the latter as a device for assuring that specified tasks are carried out in a desired manner. In any event, performance evaluation can be applied to assess the success/failure with which a strategy is implemented or to measure the efficiency or effectiveness with which a specified task is performed. The steps followed to measure performance of a unit are often represented in a stylized model describing the chain of activities that produce a performance report. The figure below is one such stylized model of performance measurement that outlines a number of steps that produce a performance report used in decisions.

A simple process model of performance measurement
Define organization strategy

Describe organization characteristics

Clarify purpose of performance measurement

Define performance measures or indicators

Establish targets

Process: Analyze/Report • Data collection • Data analysis • Performance reporting

Feedback/Action

2
The strategies summarize the broad ways and means by which an organization attempts to maximize the

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