Question

Explain why measuring performance is important in business operations. Choose a business performance measurement tool that does not relate to your CLC and explain why.

Answer 1

Ans) The importance of performance measurement system lies in the fact that it not only improves the performance, but also the productivity of a business entity by reducing costs. It is a good way to align the activities with the plans being established.

- Performance measurement is the process of collecting, analyzing and reporting information regarding the performance of an individual, group, organization, system or component. One of the most important aspects to be considered in relation to performance measurement process is that the performance measures work qualitatively to provide the useful information about products, processes and services that are produced in a business. Hence, implementing performance measures is a great way to understand and manage and improve what a a business organization does.

- Business quotes such as “If you cannot measure it, you cannot manage it” or “What is measured improves” (P. Drucker) are sometimes criticized because not all important things seem measurable (Ryan 2014). Nonetheless, given the perceived need of managers to measure their business and the wide variety of performance indicators (i.e., ranging from quantitative to qualitative and from financial to non-financial), this structured literature review has presented the status of the research on business process performance measurement. This structured approach allowed us to detect weaknesses or inadequacies particularly regarding the definition and concretization of possible performance indicators. We continued by taking a holistic view of the categorization of the observed performance indicators (i.e., measures or metrics) into 11 performance perspectives based on relevant performance measurement models and established process performance dimensions.

The identified performance indicators within the 11 perspectives constitute an extended list from which practitioners and researchers can select appropriate indicators depending on their needs.

Future research can empirically validate the conceptual framework by involving subject-matter experts to assess the comprehensiveness of the extended list and refine the missing concretizations, and by undertaking case studies in which the extended list can be applied by specific organizations. Other research avenues exist to investigate the link between actual process performance and expected process performance (as measured in maturity models) or the impact of certain strategic or environmental aspects on the choice of specific performance indicators. Such findings are needed to supplement and enrich existing performance measurement systems.