Business performance measurement is one of the basic techniques in performance management. Still, many organizations have problems with the systems measuring performance, and traditional tools of financial measures are often criticized. In the modern dynamic business environment, new metrics for performance measurement are believed to be needed to meet the demands of an organization’s business strategy.
The main problem of performance measurement is that most of the reports provide data from the past, while managers need information based on the future capabilities of a company’s performance. Neely (1999) notes that “another problem with the performance measures used in many organizations is that they are rarely integrated with one another or aligned to the business processes” (p. 206).
Increasing competition, new performance strategies such as total reward system, various quality awards, changing of markets with the development of customer-oriented services, and the significant role of information technologies are the main causes of the necessity to change performance measurement systems in many organizations. A state-of-the-art performance measurement system should indicate the determinants important for the business success of a company. Some researchers note the importance of fitting performance measurement strategies with such elements as corporate culture of an organization, business strategy, and environment (Melnyk, Bititci, Platts, Tobias, & Andersen, 2014).
It is generally recognized that a performance measurement system is used for setting goals of the company, collecting and analyzing performance data. Its objective is to achieve the effectiveness of a company’s performance. Still, there are many contradictions and challenges in implementing it due to the constantly changing business environment.
References
Melnyk, S. A., Bititci, U., Platts, K., Tobias, J., & Andersen, B. (2014). Is performance measurement and management fit for the future? Management Accounting Research, 25(2), 173-186.
Neely, A. (1999). The performance measurement revolution: Why now and what next? International Journal of Operations & Production Management, 19(2), 205-228.