Quiz 18: Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Business

Performance Measurement: Performance Measurement is a process by which all managers get information about performance of tasks, achievement of results etc. and assess that performance against pre decided measures or goals or criteria. Management Control: Management Control simply means an evaluation of performance of middle level managers or senior level staff from their higher level management. Here a middle level manager gets evaluated from their supervisor or superior staff. Normally management control is related to whole organization or a unit or a division of organization. For example, setting or decision related with any policy or procedures of an organization is come under these criteria. Management control has broader concern than other two. Normally analysing profitability of an organization or unit, shutting down or continuing of a unit these types of decisions are taken under these. Management control is long term approach. It follows management by objectives approach. Motivating managers either through rewards or any other way to achieve goals at maximum level is main objective of this management control concern. Performance Evaluation: Performance Evaluation is a process where employers can review its employee's performance towards its job or company. Here, employer also considers what amount of contribution company has received from employee to achieve an organizational goal. It is also known as performance review or appraisal etc. Operational Control: Operational control simply means an evaluation of operating employee's performance by their middle level managers or their operation head. Operational control is a narrow term than Management control. Operational Control is related with set of policy designed for operation staff which is a part if management control. Operational control focuses on short term performances like detailed analysing performance of operation staff with expectation. So, middle level managers can easily come out with the problems and even solutions too. It follows management by exception approach.

Strategic Business Unit: Strategic Business Unit (i.e. SBU) means a unit where manager or authority is wholly responsible or accountable for its performance. In other words, SBU is a unit where all similar types of businesses can be combined into one or grouped together for strategy purpose. Here all types SBU's having its own strategies which may be different from its parent company. Strategic Performance Measurement: Strategic performance measurement is one of the systems which are used by management to evaluate performance of SBU manager. Here, Strategic performance measurement is possible only when proper delegation of responsibility is available. In this case management measures whether SBU manager is performed his responsibility towards achievement of organizational goals and to what extent it is etc. Importance: (i) Motivation to Managers: Strategic Performance Measurement helps management to evaluate performance of the managers with comparison of pre decided criteria. It will insist manager to perform extra effort towards achievement of goal. (ii) Goal Congruence: Here management providing rewards or incentives to take right decisions in a crucial situation. It helps managers and management to achieve their expected results. Hence to align mangers goal with management is treated as Goal Congruence. (iii) Fair the Rewards: Management provide rewards, promotions and many more on the basis strategic performance measurement. Here, management will assess performance of managers, skills and effectiveness in decision making.

Evaluation: Performance Evaluation is a process where employers can review its employee's performance towards its job or company. Here, employer also considers what amount of contribution company has received from employee to achieve an organizational goal. It is also known as performance review or appraisal etc. Effective Performance Evaluation Focus on Individual or Team Performance: Here, performance evaluation can be done of employee, creditors, etc. It might be at individual level or at team level. But if there is SBU then management's focus for performance evaluation is at team level. At individual level under performance evaluation, management commonly assess performance i.e. efficiency of the manager. While evaluating at individual level, management considers goals achieved as compared with the predefined targets. Management evaluates efficiency on the basis of decision making capacity at crucial point, achievement of goals etc. At group level, management can assess once manager's performance either with another manager or with his previous performance. Here, comparison with other managers is common method of evaluating but not actually correct. It is little bit unfair with all managers. Everyone has its own strength, hence not comparable with others. Management can evaluate his performance with comparison of his previous one. It is quite good idea to assess anyone's efficiency as comparing with himself only. Hence, It is effective that performance evaluation focus on team performance.