Wrong Performance Measurement Systems?\" in Order Answer

¶ … wrong performance measurement systems?" In order answer question, conduct independent research, drawing sources academic practitioner literature. Through research,: • Identify key criticisms performance measurement systems management accounting research theory; • Explain problems identified occur, consequences problems organisations individuals; • Use relevant academic research develop support explanations.

Performance Measurement Systems

Companies that develop their businesses in competitive environments are required to differentiate themselves through increased performance. The importance of performance has increased because of its implications on productivity, profits, and development of companies. In order to benefit from improved performance levels, companies must identify the levels at which their performance is situated. This is the reason for which performance measurement systems have been developed.

Performance measurement systems allow companies to make evaluations regarding their process efficiency, but also to identify which process improvements are required mostly. These systems also help identify the most efficiency practices within companies. Based on this information, companies can expand the usage of such practices to other purposes. The effects of performance measurement systems also help increase motivation.

However, there is important criticism to performance management systems. It seems that these systems are based on biased opinions. These systems are developed by individuals that have confronted themselves with numerous situations where performance was affected. They made opinions about those situations. They develop performance measurement systems based on these opinions (Neely & Bourne, 2003). But their opinions cannot be applied in all situations. Therefore, it is not useful to measure different situations with identical standards. Performance measurement systems must be adapted to the issues that are determined by each different situation.

Another criticism on performance measurement systems is represented by the fact that in many situations the individuals that develop them have too little knowledge on the situation that must be measured regarding its performance. This means they develop performance measurement systems that can be applied in several different situations, with little differentiation. In such cases, the users of these systems must be flexible in adapting them to their situations.

In addition to this, performance measurement systems usually determine multiple objectives (Julnes, 2006). This makes it difficult for the decision making process. This is because in cases of multiple objectives, companies can get into situations where reaching one these objectives is performed in the detriment of others. In such cases, companies must decide which objectives it is better to reach.

There are also other criticisms associated with performance measurement systems. These refer to their difficulty in balancing financial and non-financial measures. In order to develop efficient evaluation, companies must successfully balance these measures.