“Companies should focus on financial measures of quality because these are the only measures of quality that can be linked to bottom-line performance.” Do you agree? Explain. How are financial measures and quality related? What other factors should be considered?
Performance measurement is a crucial aspect of any company. For a very long time, companies have used financial measures such as profits and liquidation to assess their success. However, the tradition cost accounting measures provide limited information that can support company quality. Successful measurement of performance in an organization should therefore entail steady measurement of improvements by the customers as well as the results delivered to the shareholders and the stakeholders (Darwish & Potocnik, 2016). In addition to measuring, other measures of performance include defining and understanding the metrics, the collection and analyzing of data and eventually devising actions which are geared towards improvement.
Performance measurement is very important to the organization for various reasons. Measurements can be used to track progress against the set goals of an organization (Sohal & Teng, 2016). Moreover, measurement is a vital measure for comparison of performance against both the internal and external performance. Even the most important measurement of a performance assists most organizations to identify areas of improvement.
It is worth noting that companies should not entirely depend on the financial but also non-financial measures of quality as the indicators of performance (Sohal & Teng, 2016). Although the nonfinancial measures are not directly related to bottom-line performance, they reveal the specific areas in the organization that need improvement. Therefore monitoring non-financial parameters over time indicate whether or not the areas have improved.
Oftenly, the traditional financial measures of quality such as the returns on investment may provide inaccurate information about company performance (Darwish & Potocnik, 2016). In today's world, financial measures should be coupled to the nonfinancial measures of quality in order to accurately indicate the bottom line performance. Other measures of performance would include operational measures such as the defects rates as well as the cycle time.
Darwish & Potocnik. (2016). Measuring organizational perfomance : A case of subjective measures. British Journal of management, 27(1).
Sohal & Teng. (2016). Quality management approaches and their impact on firm's perfomance. International Journal of production Economics, 17(1).
by EssayRoyal, Nov. 9, 2019, 12:02 p.m.