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Periodically Review Each Measure...

Periodic review is essential for two reasons. First, the system of measures may no longer match the manufacturing process. Continual improvement strategies must be integrated with Performance Measurement Systems to gain full benefit from these tools. Second, motivation of the workforce should be fostered and encouraged by the Performance Measurement systems. Without periodic review, often the wrong people are being rewarded or the right people may be rewarded in such a way that the success of those processes are compromised.

People work the way they are measured. Inappropriate measures can cause people to focus on or do the wrong things. If one strays from the path, the tools should be designed to catch this early AND get everyone back on the correct path with the least disruption to productivity, etc...

Performance measurements have been valuable tools in setting and achieving goals and in implementing numerous enterprise strategies. Like all tools, they need periodic review to eliminate some, update others, and add new ones in order to meet changing needs in changing business conditions. Traditional financial performance measurements concentrate on the following: sales and market share, return on investment and return on assets, net income, and earning per share. These short-term measurements are the basis for manager rewards, according to their impact on performance improvement, which do not contribute to the long-term success of the enterprise. Many surveys have indicated that managers were dissatisfied with their performance measurement system, since the performance measurements are: too financial, irrelevant, difficult and complex to understand, unclear as to linkage between activity measures and the enterprise's strategic objectives, and often are not customer-driven.

Many companies, therefore, have developed more complex performance measurement systems, which include both financial and non-financial measures. The basic advantages of a systematic approach to performance measurement are the integration of all performance components into universal measures, openness of the measurement process, and focusing on basic goals of business activities and their realization. Simplicity is key.

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