ACCT1046 Lecture Notes - Lecture 2: Customer Retention, Whole-Life Cost, Life-Cycle Assessment
Module 2 Topic 2
Different approaches to performance measurement
How an organisation elects to measure performance will be influenced by numerous factors,
including:
The products or services the organisation produces
- The types of products or services the organisation produces will influence the resources being
consumed, the impacts being generated, and so forth. For example, a taxi company would use
petrol; create wear and tear to cars, have higher insurance premiums, due to higher risks of
accidents. The consumption of these resources reflects the service provided.
The mission or goals of the organisation
- For example, if an organisation’s operation is to buy real estate, is the mission of the
organisation to provide safe housing for the poor or to maximise profits through real estate
development? In both cases there would be different performance measurements.
The culture of the organisation
- Is the organisation one that embraces corporate social responsibilities, that entails
responsibility to a broad range of stakeholders? Or does it predominantly focus on generating
profits for the benefit of its shareholders? These are important considerations as there would
be different performance measurements for different organisations.
Stakeholder expectations
- As stakeholders’ expectations change, so must the performance management process. As an
example, BHP’s disclosure about its workings to remedy the Samarco Dam disaster, found its
way in the opening sections of its annual report. BHP seems fully aware of the fact that an
issue such as this comes along with significant expectations from various stakeholder groups.
In line with such expectations, BHP has put in place a dedicated and senior team to remedy
the accident which no doubt is part of the performance management process.
The environmental or social sensitivity of the environment in which the organisation operates
- For example, if an organisation is operating in a village with little water for local residents,
then it might be particularly careful about water consumption. As another. example, an
organization operating close to the Barrier Reef might be particularly concerned with
monitoring and measuring the release of various wastes to water. These organisations will
have their performance in water usage and waste reduction measured against a higher
standard than similar organisations in different locations
The degree of competition
- The greater the degree of competition, the more an organisation might need to monitor
various costs. If an organization is competing on price, then it may need to reduce and
monitor costs so it can reduce price.
The supply chains in place
- An organisation that sources products from developing countries might be more concerned
about monitoring worker health and safety within the supply chain given the inherent risks
involved. For example, after the tragic fire of the Bangladesh clothing factory more
people/consumers did not want to buy clothes from retailers whose suppliers did not meet
appropriate working conditions for their employees. Suppliers were measured for their
performance of health and safety for employees.
Existing and projected regulation
- For example, your organisation sells confectionary, such as lollies and chocolate bars when
the government is planning to add a tax to sugar in the next year. The performance
measurements for next year would need to be revised. The point to be made is that there is not
one set of performance measures that will fit all organisations in all locations and times. That
is, ‘performance’ should not be considered as a single dimension of
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Document Summary
How an organisation elects to measure performance will be influenced by numerous factors, including: The types of products or services the organisation produces will influence the resources being consumed, the impacts being generated, and so forth. For example, a taxi company would use petrol; create wear and tear to cars, have higher insurance premiums, due to higher risks of accidents. The consumption of these resources reflects the service provided. In both cases there would be different performance measurements. These are important considerations as there would be different performance measurements for different organisations. As stakeholders" expectations change, so must the performance management process. As an example, bhp"s disclosure about its workings to remedy the samarco dam disaster, found its way in the opening sections of its annual report. Bhp seems fully aware of the fact that an issue such as this comes along with significant expectations from various stakeholder groups.
