Page 137 - BA2 Integrated Workbook - Student 2017

Performance measurement

The purpose of performance

measurement

1.1 What is performance measurement?

Performance measurement is the monitoring of budgets or targets against actual
results to establish how well the business and its employees are functioning as a
whole and as individuals.

Performance measurement is a very important aspect of management accounting.
Management accountants get involved in:

 setting targets

 measuring the actual performance against those targets

 providing information to management regarding the outcome.

This information will be used by management to make decisions about the
organisation.

1.2 Impact of performance measurement on behaviour

Performance measurement is very important as it can affect behaviour, so it is crucial
when setting performance targets that we consider what behaviour we are looking to
encourage. Setting poor performance targets can lead to dysfunctional behaviour
which is behaviour that is not in the best interests of the organisation as a whole.

Performance can be measured at an individual, departmental or organisation level
and the types of measurements used will depend on the area being measured.

Responsibility centres were covered in the budgeting chapter. In responsibility
reporting, costs and revenues are grouped according to which individual manager or
management team is responsible for their control.

129