Performance Measurement Systems

1. Explain the role of a company’s performance measurement system.

-Companies use performance measurement systems to perform multiple roles:

-Communicate the company’s strategic objectives.

-Motivate employees to help the company achieve its strategic objectives.

-Evaluate the performance of managers, employees, and operating units.

-Help managers allocate resources to the most productive and profitable 
opportunities.

- Provide feedback on whether the company is making progress in improving 
processes and meeting the expectations of customers and shareholders.

- Value creation through the use of financial and non financial measures

- Improve productivity through value analysis

- Create a goal attainment culture

- Facilitate employees learning

- Accountability

- Empowerment of middle level managers and employees

2. Explain why the growing importance of intangible assets complements growing interest in the Balanced Scorecard.

Information-age companies succeed by investing in and managing their intangible assets. As organizations invest in acquiring the new capabilities provided by these assets, their success cannot be motivated or measured by the traditional financial accounting model. This financial model, developed for trading companies and industrial-age corporations, does not measure whether the company is building capabilities that will provide future value. The Balanced Scorecard, a more comprehensive performance management system, incorporates