Importance of performance measurement, Operation Management

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Importance of performance measurement 

1. Research reveals that many institutional investors are basing their decisions, in part, on a review of company's non financial performance. According to a report called 'Measures that Matter' from Ernst and Young's centre for business innovation, investors give non financial measures, on average, one third of the weight when making a decision to buy or sell a given stock 

2. Total quality organisations measure more and different processes and outcomes than non-total quality organisations, and the primary requirements are to interrogate measures across different Levels and functions in a company. 

3. Measurement is the beginning of improvement, because if you cannot measure the activity, you cannot improve it. 

4. Measurement helps an organisation direct its scarce resources to the most attractive improvement activities ... Measurement also provides a direct stimulus to action. 

5. Measurement is required to reduce emotionalism and increase constructive problem solving, increase influence, monitor progress and give feedback and reinforce behaviour. 

6. Performance measurement system serves as a primary tool for communicating direction, for establishing accountability, for defining roles, for allocating resources as well as for monitoring performance.

7. Adam et al (1997) have shown that performance improves an individual's performance if there are targets and the performance will maximise if targets are seen as challenging but achievable. Euske et al (1999) state, the impact of performance measurement on organisational behaviour depends on the organisational context of the measurement, the use made of measurements, the degree of agreement between measurements and organisational objectives, and the individual's motivational response to measurement.


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