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Performance Management System
Performance Management System
MANAGEMENT
SYSTEM
DR NOORAISAH KATMON
ACCOUNTING-BASED
PERFORMANCE MEASURES
Requires several steps:
1.
2.
3.
Return on investment
Residual income
Economic value added
Return on sales
EXECUTIVE COMPENSATION
PLANS
Based on both financial and nonfinancial performance
measures, and include a mix of:
Base salary
Annual incentives, such as cash bonuses
Long-run incentives, such as stock options
ISSUES IN PERFORMANCE
MANAGEMENT SYSTEM
(1) Additional difficulties faced by multinational
companies:
The economic, legal, political, social, and cultural environments
differ significantly across countries.
Governments in some countries may impose controls and limit
selling prices of a companys products.
Availability of materials and skilled labor, as well as costs of
materials, labor, and infrastructure may differ across countries.
Divisions operating in different countries account for their
performance in different currencies.
PREFERRED PERFORMANCE
MEASURE
Preferred performance measures are those that are sensitive
to or change significantly with the managers performance.
They do not change much with changes in factors that are
beyond the managers control.
They motivate the manager as well as limit the mangers
exposure to risk, reducing the cost of providing incentives.
May include benchmarking.
FAILURE OF PERFORMANCE
MANAGEMENT SYSTEM
(ACCORDING TO DR MARKO
SARAVANJA)
1. Lack of integration
2. Design challenges
3. Lack of leadership support
4. Implementation failure
5. Incompetence
6. Lack of rewards
7. Communication challenges
8. Inspiration challenges
9. Lack of monitoring
10. Lack of evaluation
INTEGRATED PERFORMANCE
MANAGEMENT SYSTEM (DR
MARKO SARAVANJA)