Performance measurement system

Definition

A performance measurement system is a tool used by managers to track and assess the efficiency and effectiveness of their organization's operations. It provides key metrics that align with strategic goals to aid in decision-making.

5 Must Know Facts For Your Next Test

1. Performance measurement systems help align business activities with organizational strategy.
2. The Balanced Scorecard is a popular framework within these systems.
3. They encompass financial and non-financial metrics.
4. Key Performance Indicators (KPIs) are essential components.
5. Effective performance measurement systems can drive continuous improvement.

Review Questions

• What is the primary purpose of a performance measurement system?
• How does the Balanced Scorecard relate to performance measurement?
• Why are both financial and non-financial metrics important in a performance measurement system?

Related terms

Balanced Scorecard:

A framework for implementing performance measurements that considers financial, customer, internal processes, and learning & growth perspectives.

Key Performance Indicators (KPIs):

Metrics used to evaluate the success of an organization or activity in achieving key objectives.

Continuous Improvement:

An ongoing effort to enhance products, services, or processes through incremental improvements over time.