B E S’s Institute of Management Studies & Research

Performance Measurement
& Control
Management Control Systems

Presented to: Prof T M C

 Management Control
• The process of assuring that resources are
obtained and used effectively and
efficiently in the accomplishment of the
organization’s objectives.
• Can be defined as a systematic effort by
business management to compare
performance to predetermined standards,
plans, or objectives in order to
– determine whether performance is in line
with these standards, and
– Presumably, to take any remedial action
required to utilize all the available
resources to the fullest.
• Carried on within the framework established by
strategic planning
Distinction between Strategy Formulation and Management Control
 Framework for Strategy
Implementation
Implementation Mechanisms

Management Controls

Strategy Organization Structure Performance

Human Resource Management

Culture
 What is Performance
Measurement?
• It is a tool to help managers control
the outcomes of their
organizations.
• It enables them to be the driver
rather than a passenger on their
organizational journey.
“You measure what you value.
You get what you measure.”
 What counts, gets measured

What gets What

gets
rewarded,
really STRATEGY measured,
counts gets
done

What gets done, gets rewarded

Value of Performance
Measurement
Why measure performance?
• Basic purpose: to provide feedback,
relative to the organization’s goals
• Measurement is not an essence, but
improvement.
– The purpose of measuring is not to
know how the business is
performing but to enable it to
perform better.
 continued
• Business performance measurement
has a variety of uses. Bititci, Carrie
and Turner (2002) list the following
reasons companies measure business
performance:
– To monitor and control
– To drive improvement
– To maximize the effectiveness of the
improvement effort
– To achieve alignment with organizational
goals and objectives
– To reward and to discipline

 continued
• Simmons (2000) looks at business
performance measurement as a tool
to balance five major tensions within
a firm:
1.Balancing profit, growth and control
2.Balancing short term results against
long-term capabilities and growth
opportunities
3.Balancing performance expectations of
different constituencies
4.Balancing opportunities and attention
5.Balancing the motives of human
behavior
To measure anything, we
require a tool/system
 Performance Measurement
Systems
• Performance Measurement Systems
(PMS) serve as a key contributor to
the perpetual and coordination/control
capabilities of the firm.
• Firms use PMS to:
– Help monitor and control specific
activities
– Predict future internal and external
states
– Monitor state and behavior relative to its
goals
 Performance Measurement
Systems
• It attempts to address the needs of
the different stakeholders of the
organization by creating a blend of
strategic measures:
– Outcome and drive measures
– Financial and non-financial measures
• Non-financial measures are referred as
“key success factors” or “key
performance indicators”.
– Internal and external measures
The Balanced Scorecard

Balanced Scorecard’s key theme is not about

Measurement as the term would outwardly convey
Its about

Value creation -Execution of Strategy

Balanced Scorecard : Synonym
for Managing Performance

lIntroduced in 1992, by Robert Kaplan and David Norton, the

Balanced Scorecard is the most commonly used framework for
ensuring that companies execute their strategies

lToday, about 70% of the Fortune 1,000 companies utilize the

Balanced Scorecard to help manage performance.
B a la n ce d S co re ca rd is
m e a su re d fro m th e fo u r
p e rsp e ctive s
Difficulties in implementing
Performance Measurement
Systems
Interactive Control
Case Study: CUP
Corporation