The document discusses several topics related to performance measurement and management including: 1) The evaluation and control process which involves determining metrics, measuring performance, comparing to standards, and taking corrective action if needed. 2) Responsibility centers which are used to assign accountability like cost, revenue, expense, profit, and investment centers. 3) Benchmarking which is continually measuring performance against competitors and leaders to identify gaps and drive improvement. 4) Problems that can arise with performance measurement like short-term thinking and goal displacement. 5) Critical success factors which are the most important 20% of factors that determine 80% of performance.

1. © 1998 Addison Wesley Longman, Inc. TM-141
Evaluation and Control Process
10.1 Evaluation and Control Process (Fig. 10.1) p. 231
Yes
Determine
what to
measure.
Measure
performance.
Take
corrective
action.
STOP
No
Does
perform-
ance match
stand-
ards?
Establish
predetermined
standards.
1 2 3 4 5

2. © 1998 Addison Wesley Longman, Inc. TM-142
Balanced Scorecard
1. Financial
2. Customer
3. Internal Business Perspective
4. Innovation and learning
10.2 Balanced Scorecard p. 238

3. © 1998 Addison Wesley Longman, Inc. TM-143
Responsibility Centers
• Standard cost centers
• Revenue centers
• Expense centers
• Profit centers
• Investment centers
10.3 Respomsibility Centers p. 239–240

4. © 1998 Addison Wesley Longman, Inc. TM-144
Definition of Benchmarking
• The continual process of measuring products,
services, and practices against toughest
competitors or those companies recognized as
industry leaders
10.4 Definition of Benchmarking p. 240

5. © 1998 Addison Wesley Longman, Inc. TM-145
Steps in the Benchmarking Process
1. Identify area / process to be examined
2. Find behavioral and output measures of the area or
process and obtain measurements
3. Select a set of competitors and best-in-class companies
against which to benchmark
4. Calcualte differences between company’s performance
measurements and those of the best-in-class and
determine why the differences exist
5. Develop tactical programs for closing performance gaps
6. Implement the programs, measure the results, and
compare results with those of the best-in-class companies
10.5 Steps in the Benchmarking Process p. 241

6. © 1998 Addison Wesley Longman, Inc. TM-146
Problems in Measuring
Performance
• Short-term orientation
• Goal displacement
• Behavior substitution
• Suboptimization
10.6 Problems in Measuring Performance p. 245–247

7. © 1998 Addison Wesley Longman, Inc. TM-147
Critical Success Factors
• Those things that must go well to ensure
success: 20% of the factors that determine 80%
of the performance
10.7 Critical Success Factors p. 153, 248

8. © 1998 Addison Wesley Longman, Inc. TM-148
Strategic Incentive Management
Approaches to Tie Rewards with Strategic Performance
• Weighted-factor method
• Long-term evaluation method
• Strategic-funds method
10.8 Strategic Incentive Management p. 249–250

9. © 1998 Addison Wesley Longman, Inc. TM-149
Weighted Factor Approach to Strategic Inventive Management
10.9 Weighted Factor Approach (Table 10.3) p. 250
Strategic Business
Unit Category Factor Weight
High Growth Return on assets 10%
Cash flow 0%
Strategic-funds programs (developmental expenses) 45%
Market-share increase 45%
100%
Medium Growth Return on assets 25%
Cash flow 25%
Strategic-funds programs (developmental expenses) 25%
Market-share increase 25%
100%
Low Growth Return on assets 50%
Cash flow 50%
Strategic-funds programs (developmental expenses) 0%
Market-share increase 0%
100%
Source: Reprinted by permission of the publisher from “The Performance Measurement and Reward System:
Critical to Strategic Management,” by Paul J. Stonich, from Organizational Dynamics (Winter 1984), p. 51.
Copyright © 1984 by American Management Association, New York. All rights reserved.

10. © 1998 Addison Wesley Longman, Inc. TM-150
Main Elements of Strategic Audit
I. Current Situation
A. Performance
B. Strategic Posture
II. Corporate Governance
A. Board of Directors
B. Top Management
III. External Environment
A. Societal
B. Task (Industry)
C. Opportunities and Threats
(EFAS)
IV. Internal Environment
A. Structure
B. Culture
C. Resources (Mkt, Fin, R&D,
Etc.)
D. Strengths and Weaknessess
(IFAS)
10.10 Main Elements of Strategic Audit p. 252–259
V. Analysis of Strategic Factors
A. SWOT Analysis (SFAS)
B. Review Mission and
Objectives
VI. Strategic Alternatives and
Recommendations
A. Alternatives
B. Recommended Strategy
VII. Implementation
A. Programs
B. Budgets
C. Procedures
VIII. Evaluation and Control
A. Adequate Information System
B. Adequate Control Measures