Page 265 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 14: Strategic Evaluation and Control

14.3.2 Measurement of Performance Notes

The second step in operational control is the measurement of actual performance. Here, the
actual performance is measured against the standards fixed. Standards of performance act as the
benchmark against which the actual performance is to be compared. It is important, however, to
understand how the measurement of performance actually takes place. Operationally measuring
is done through accounting, reporting and communication systems. A variety of evaluation
techniques are used for this purpose, which are explained in the next section. The other important
aspects of measurement relates to:

Difficulties in Measurement

There are several activities for which it is difficult to set standards and measure performance.

Example: Performance of a worker in terms of units produced in a day, week or month
can easily be measured. On the other hand, it is not easy to measure the contribution of a
manager or to assess departmental performance. The solution lays in developing verifiable
objectives, stated in quantitative and qualitative terms, against which performance can be
measured.
Timing of Measurement

Timing refers to the point of time at which measurement should take place. Delay in measurement
or measuring before time can defeat the very purpose of measurement. So measurement should
take place at critical points in a task schedule, which could be at the end of a definable activity or
the conclusion of a task.

Example: In a project implementation schedule, there could be several critical points at
which measurement would take place.

Periodicity in Measurement

Another important issue in measurement is “how often to measure”, Generally, financial
statements like budgets, balance-sheets, and profit and loss accounts are prepared every year.
But there are certain reports like production reports, sales reports etc. which are done on a daily,
weekly, monthly basis.
14.3.3 Identifying Deviations

The third step in the control process is identifying deviations.
The measurement of actual performance and its comparison with standards of performance
determines the degree of deviation or variation between actual performance and the standard.
Broadly, the following three situations may arise:
1. The actual performance matches the standards
2. The actual performance exceeds the standards

3. The actual performance falls short of the standards
The first situation is ideal, but sometimes may not be realistic. Generally, a range of tolerance
limits within which the results may be accepted satisfactorily, are fixed and deviations from it
are considered as variance.

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