Answer to Question #155897 in Management for Prabhdeep

Question #155897

"A performance measurement system attempts to address the needs of different stakeholders of the organisation by creating a blend of strategic measures "?comment (please answer in 200 to 250 words)

Expert's answer

Stakeholders include the CustomersEmployees, and Owners. For most firms, these three are by far the most important, and the scope of the performance measurement is usually focused on them.

Majority of organizations use formal performance measurement systems that are extensions of their financial reporting systems. They justify this practice because the financial reporting system provides measures that:

  • Are generally regarded as reliable and consistent, thereby giving a solid foundation for developing reward and accountability structures.
  • Interlock with the primary objective of creating profits for owners, thereby giving a performance measurement focus consistent with organizational objectives.

One way to measure stakeholder value is by creating a blend of strategic measures by analyzing the social efficiency like

expenditures, average hours of training per year per employee broken down by employee category, cost of employee health and safety, payments to government, voluntary contributions to civil society, value of imports versus exports, total new investments, local purchasing, total workforce with breakdown by employment type, gender, and number of convictions for violations of corruption related laws or regulations.

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