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Levers of Control, Balanced Scorecard 1, Non-Financial Performance Measures
Finance & Accounting
Pages 4 (1004 words)
Summary The article “Coming up short on non-financial performance measurement” by Christopher D. Ittner and David F. Larcker is about use of nonfinancial performance measures which reflect a realm of intangible value, are handy for managers, employees and investors for achieving their goals and ultimately affect financial results of the organization…
The writers say that there are still a lot of firms which do not realize the importance of nonfinancial performance measures and have no such procedures to measure them, on other hand there are many others which only use off the shelf procedures and frameworks for measuring it and do not dig deep to track the activities which actually affect the framework. Companies make many mistakes in using these off-the-shelf and even their own frameworks one of which is that they do not link the measures to the strategy and don’t know that which nonfinancial performance measure they should track. In their research they found that only 30% firms have developed their own causal models which develop cause-and-effect relationship between chosen drivers of strategic success and outcomes. Second mistakes the companies make is that even after developing causal models they do not validate the link between the selected measures and strategy, i.e. afterwards they do not examine the results to verify that if their selected measure is actually contributing towards the goal or not, or to what extent it is effective for achieving goal, so that it may be weighed accordingly and thus they remain fail to determine the relative importance of each measure and resultantly they fail in proper allocation of resources. ...
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