3 results
1 - Accounting performance measurement: a review of its purposes and practices
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- By David Otley, Professor Lancaster University Management School, UK
- Edited by Andy Neely, Cranfield University, UK
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- Book:
- Business Performance Measurement
- Published online:
- 22 September 2009
- Print publication:
- 13 December 2007, pp 11-35
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- Chapter
- Export citation
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Summary
Introduction
Accounting measures of performance have been the traditional mainstay of quantitative approaches to organizational performance measurement. However, over the past two decades a great deal of attention has been paid to the development and use of non-financial measures of performance that can be used both to motivate and report on the performance of business (and other) organizations. The impetus for such developments has come from the bottom and the top of the organization alike. Much performance management at the operational level is carried out using specific indicators of performance that are usually not measured in financial terms. At the most senior levels, although financial performance is inevitably a major consideration, there has been an increasing recognition that other important factors in the effective running of the organization cannot be well captured by such measures. Thus, non-financial performance measures have undergone significant development, to the relative neglect of the development of improved financial measures. However, the recent publicity surrounding the marketing of economic value added (EVA®) as an overall measure of company performance by management consultants Stern Stewart can be seen as a sign of a new emphasis on the financial aspects of performance.
The purpose of this chapter is to review the roles and functions of financial measures of organizational performance, and to outline the major features of their development, particularly in the last thirty years.
Part I - Performance measurement – functional analyses and theoretical foundations
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- By David Otley, Professor Lancaster University Management School, UK
- Edited by Andy Neely, Cranfield University, UK
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- Book:
- Business Performance Measurement
- Published online:
- 22 September 2009
- Print publication:
- 13 December 2007, pp 7-10
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- Chapter
- Export citation
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Summary
By its nature performance measurement is a diverse subject. Researchers with functional backgrounds as varied as accounting, operations management, marketing, finance, economics, psychology and sociology are all actively working in the field. As discussed in the introduction, this incredible diversity brings with it both challenges and opportunities. It results in a fascinating richness, but also makes it extremely difficult for each generations of researchers to build upon one another's work. A significant barrier stems from the fact that, traditionally, the way academic careers develop is through functional specialization. Accountants talk to accountants. Operations managers meet with operations managers. Marketing specializts network with other marketing specialists. The result is deep and rich streams of functionally specialized research, often with limited cross-fertilization. The aim of this first section is to begin the process of redressing this shortcoming by drawing together several functionally based reviews of performance measurement.
The section contains six chapters. The first, by David Otley, reviews measurement from an accounting and finance perspective and explores the different roles of measurement. Otley argues that the accounting community implicitly recognizes that measurement systems have three fundamentally different roles in organizations. First, they provide a tool for financial management. Second, they provide an objective for overall business performance. Third, they provide a means of motivation and control. A key theme in Otley's contribution is that far too often academics and practitioners do not recognize these three different roles, and the result can be significant confusion, especially when a measurement system designed to fulfil one role is used for another.
1 - Measuring performance: The accounting perspective
- from Part I - Performance measurement – functional analyses
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- By David Otley
- Edited by Andy Neely, Cranfield University, UK
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- Book:
- Business Performance Measurement
- Published online:
- 06 July 2010
- Print publication:
- 07 March 2002, pp 3-21
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- Chapter
- Export citation
-
Summary
Introduction
Accounting measures of performance have been the traditional mainstay of quantitative approaches to organizational performance measurement. However, over the past two decades, a great deal of attention has been paid to the development and use of non-financial measures of performance, which can be used both to motivate and report on the performance of business (and other) organizations. The impetus for such developments has come from both the bottom and the top of the organization. Much performance management at the operational level is carried out using specific indicators of performance, which are usually not measured in financial terms. At the most senior levels, although financial performance is inevitably a major consideration, there has been increasing recognition that other important factors in the effective running of the organization cannot be well captured by such measures. Thus, non-financial performance measures have undergone significant development, to the relative neglect of the development of improved financial measures. However, the recent publicity surrounding the marketing of economic value added (EVA®) as an overall measure of company performance by management consultants Stern Stewart can be seen as a sign of a new emphasis on the financial aspects of performance.
The purpose of this contribution is to review the roles and functions of financial measures of organizational performance, and to outline the major features of their development, particularly in the latter half of the last century. It will be argued that there are three different major functions for financial performance measures, and that, although these functions overlap to some extent, major confusion can be caused by applying measures developed for one function to a different one.