Financial Perf Measures Essay

6115 Words Apr 1st, 2012 25 Pages
Responsibility centers and financial performance measures
Performance measurement is a tool for management control activity. Management control can be defined as the process by which managers and/or those placed in positions of responsibility influence other members of an organization to implement the organization’s strategies. The management control activities are aimed at ensuring that strategies are carried out so that the organization’s objectives are achieved. A specific aspect of management control activity is task control. Task control --a management control process by which specified tasks are carried out effectively and efficiently. Some writers draw a distinction between management control and task control, describing the former
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For the purpose of carrying out a performance measurement, it is pertinent to examine the organization strategy with a view to clarifying various functional units and divisions. Organization characteristics— This refers to the global characteristics of the entire organization, including the climate, span of control, existing lines of authority and relationships, and company policies, procedures, norms, etc. The organization chart will be useful in describing sub-categories of the functional areas in the organization and tasks performed in various parts of the organization. Task/position characteristics— Task characteristics refer to the characteristics of a task/position for which a performance measurement will be carried out. To develop an effective measure, there is need to clarify the task, including objective of task, resource need, lines of authority and communication, level of authority, internal and/or external constraints, legal considerations, etc.
One approach for task analysis recommended by proponents of Activity-Based Management is the process value analysis to determine tasks performed in a unit. This takes the form of a detailed description of activities performed to support the specified objective of the unit. Next, effort is made to determine who does what to facilitate accountability. In many instances, the analysis will reveal certain activities/tasks in the organization for which there are no accountable persons, or for

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