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Performance measurement techniques

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.

Different types of organisations require different types of performance measures and
different areas within an organisation require different measures.

Measures are especially relevant to managers if the manager has control over the
costs and revenues.

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