Performance Measure Systems and its Limitations

The regular measurement of results and outcomes through which the reliable data about the efficiency and effectiveness of programs is generated is referred to as, performance measurement. To offer services and carry out relevant activities, the input resources that are used are funding, time for employees, and human resources. It eventually is a procedure of reporting, analyzing, and/or collecting information about the performance of a component, system, organization, group, or individual.

For the purposes of accomplishing goals and enhancing decision-making, the performance measurement system can also be considered as the reporting methods, evaluation goals and methods, and data collection procedures for monitoring the objective accomplishment, service-quality, efficiency and effectiveness of an agency.

In integrated enterprises, the KPIs – key performance indicators are managed and created by the performance measurement system. The most proper behavior is stimulated by it. A naturally balanced set of organizational measurements is comprised of successful performance measures. Further, it also helps organizations in developing their strategic objectives and goals, as meaning to the process is given and the performance is critically measured by these systems.

It can also be perceived as a quantifiable indicator that helps an organization in assessing how well it is accomplishing its planned goals. This part of the assessment will critically reflect upon the different kinds of performance measurement systems and their effectiveness in provided environments.

With respect to both professional (organizational) and academic areas, the limitations of conventional performance measurement techniques were felt. They had various drawbacks, such as lack of non-financial data, lack of hypothetically related external data, use of independent assumptions in financial data, and dependence on variance and accounting information. In addition, most of the measures were focused on short-term not long-term.

Information only related to operational and financial data was collected by various companies. However, such an organization had miserable failures in the long-run, as long-term measures were not included by them. Public responsibility measures, service/product quality, employee satisfaction, and customer satisfaction were these long-term measures. Moreover, all these conventional measures were often based on irrelevant and outdated principles and significance to the demands of the modern business environment was lacked by them.