In the summary of the book “Business Performance Measurement and Management” it defines performance measurement as the set of metrics used to quantify both the effectiveness and efficiency of actions. Performance measurement is also defined as the language of progress for the organization. It is a plan, which indicates where the organization is and where is heading. In this regard, it functions as the guide to whether the organization is in the route of achieving its goals. In addition, it is a powerful behavioral tool, since it communicates to the employees, what is important and what matters for the achievements of the organizational goal. A central role was given to these systems and a later emphasis given to the PMS effectiveness in the performance process. Due to this, it is vital to understand the evolution of PMS as a performance management and measurement (PMM) tools that are key to the continuous improvement of performance, deployment, and diffusion of strategy, definitions, to the operations alignment with strategic objectives, to managerial development and to the learning of the organization.
Performance measurement is an important process of making sure that the organization meets its set goals. It helps to determine effective management strategies, budgeting, locating the areas that need to be improved, and determining areas with potential for collaboration. When performance is not measured, the company cannot place value of management activities and the employees’ activities. Performance measurement ensures that the annual reviews of employees and managers are given meaning. The performance must also be measured to understand how an organization compares with its competitors.
Tools of measurement
Some of the tools used for performance measurement include employee and organizational performance evaluations. Some of the enterprises have the tools included in the systems while others are stand-alone programs (Neely, 2007). Despite the tools used by the organization, it must adhere to the guidelines.
Evaluations of organizations
For the information of the organization, the main aim should always be on the performance of the agency, but should include the output, input, process and benchmark factors as well as having comparative guidelines for analysis. The outcomes must relate directly to the public purpose of the company. In this regard, there is effective, which tries to analyze the question: was the organization able to give the desired results? Secondly, Cost effective which states that when outcomes are divided by inputs, how effective and efficient was the organization’s performance? And then thirdly, the impact, which analyses the value provided by the organization. Lastly are the best practices: it evaluates the internal operations, what are the organizational performance and political expectations? How can the actual performance be compared with the benchmark of the past performance?
The evaluation of employees should be done on an annual basis. This is important because everyone in the organization understands when there would be the next evaluation and this process gives the company a comparable history to measure performance. A strategy must always be in to handle the performance evaluations that are not acceptable. In case it is a management evaluation, will there be a need for team reorganization? Should more resources be used to increase the company performance, or more the resources present in the department where they will be more effective? In regard to the performance of employees, for employee performance, there must be standards in place that give the corrective action and expected performance that will take place whenever one employee does not perform to the specifications. When management and employees understand what is expected from them, the chance of HR issues will be reduced because of corrective action. In the past years, it has been highlighted by literature that PMM could play a crucial role in managerial development in small and medium enterprises (SMEs). However, some of the researchers pointed out that, despite the general models being used correctly; they would not be enough for the specific characteristic of SMEs. In particular, the approach of SMEs to the performance measurement and management is mainly informal, not based or planned on a predefined model, performance measurement is introduced in solving specific problems and performance measures grow of this spontaneous process rather than as a result of planning.
Moreover, SME’s planning is usually absent or limited only to the operation levels where performance is measured. However, the performance measures usually focus on the past activities. The main aim is to get all the information needed in support of controlling the activities that forecast and plan processes. Consequently, SMEs does not take advantage of the PMM implemented as a holistic tool attained in planning the strategies and the establishment of strong linkages from strategy to operations. There is a problem because there is no based investigations survey of the current practices that relate to implementation and the use of PMM in SMEs. For this gap to be filled, an exploratory survey was carried out in 2009, which was aiming to investigate the characteristics of the PMM practices in the Italian SME context. The goal of the research that was presented in the book was to contribute the understanding of the adoption and the use of PMM in SME’s, section attention in organizations PMM systems, the presence of a PMM system in the companies, how the PMM systems are designed and the use of performance indicators.