Performance Measurement of Commercial Business

This report discusses issues related to performance measurement in commercial businesses, including financial and non-financial measurement issues, unethical performance measurement, setting effective KPIs, and the role of accountants. It also explores the factors that influence an organization's work practice and expectations of accounting professionals.

PERFORMANCE MEASUREMENT OF COMMERCIAL BUSINESS 1
STUDENT NAME
UNIVERSITY NAME
COURSE
DATE

PERFORMANCE MEASUREMENT OF COMMERCIAL BUSINESS 2
EXECUTIVE SUMMARY.
The purpose of this report is to discuss issues that relate to the performance measurement
Of a commercial business by using relevant examples of companies. The report analyses
financial and non-financial measurement issues relating to the entity. Any entity should
report its performance in a way that reflect the actual performance of that entity. According to
this report, a strong framework must be developed to prevent misreporting of financial
information of the company.
This report also points out the roles that an accountant plays with regard to these issues.
accountants should have prepared and disclose issues related to entity but not to only focus
on the metrics as it will put pressure on the employee to achieve set targets.
According to this report, it is evident that non-financial metrics helps to develop the skills of
the employee. Use of financial and non-financial metrics is seen to impact greatly on the roles
of accountants as it put pressure on them to deliver quality reports.
Unethical performance measurement is also discussed in this report as it forms the basis of
performance measurement. Faithfulness and biasness are the key pillars of performance
measurement.it focuses on how the management reports on the performance of the entity, that
is they should report a true and unbiased information. This will adversely affect the entity,
stakeholders and the community at large.
Training accountants on the current ethical code developments should be enhanced and
positive attitude towards ethical code of conduct of professional accountants should be
enhanced.
The report also explains the setting of key performance indicators (KPIs)of an entity to
measure the performance on a business. Effective KPIs will impact positively to the
community as they will benefit from corporate social responsibility exercise of the company.
Organization culture greatly influence organization work practice. The report also points out
how an accountant engages with the society so as to add value to stakeholders.

PERFORMANCE MEASUREMENT OF COMMERCIAL BUSINESS 3
Table of Contents
1.0 INTRODUCTION...............................................................................................................4
2.0 UNETHICAL PERFORMANCE MEASUREMENT ISSUES..........................................4
3.0 KEY ISSUE RELATING TO KPI’S...................................................................................5
4.0 FINANCIAL VS NON-FINANCIAL PERFORMANCE MEASUREMENT ISSUES.....6
5.0 FACTORS THAT INFLUENCE AN ORGANISATION’S WORK PRACTICE AND
EXPECTATIONS OF AN ACCOUNTING PROFESSIONAL...............................................7
6.0 HOW AN ACCOUNTING PROFESSIONAL ENGAGE WITH THE COMMUNITY TO
ADD VALUE TO STAKEHOLDERS AND ONESELF..........................................................9
7.0 STRATEGIES AND DEVELOPMENT TOOLS THAT ARE APPROPRIATE FOR AN
ACCOUNTING PROFESSIONAL TO SUSTAIN A COMPETITIVE ADVANTAGE IN
TERMS OF EMPLOYMENT AND LEVEL OF COMPETENCE..........................................9
8.0 CONCLUSION..................................................................................................................10
9.0 REFERENCES:.................................................................................................................12

PERFORMANCE MEASUREMENT OF COMMERCIAL BUSINESS 4
1.0 INTRODUCTION.
Performance measurement refers to a process that aims at controlling and monitoring of
budgets/ target versus a real achievement for the company. The aim of this is to establish how
efficient various employees as well as the company effectively perform.
It can either be concerned with short or long term goals of the entity. For instance, cost of
operation or perception of various customers relating to the services offered and achievement
of the organization in terms of performance. This involves setting up of key performance
indicators and revisiting them to monitor if they are in line with achievements and relevant
adjustments should be made accordingly. Ethics should prevail in measuring various
performance of employees and general organization. Appropriate method of measuring
performance should be adopted by the organization as this will greatly impact on the morale
of an employee. For example, using financial metrics alone can make an employee to only
focus on achieving set targets. Non-financial on the other hand measure various elements that
an employee has and thus it motivates such employee.
When measuring performance therefore, an organization must ensure that it is not biased in
any way.
2.0 UNETHICAL PERFORMANCE MEASUREMENT ISSUES.
A business requires some very crucial aspects within its operations and values to ensure
success and going concern (Searcy, 2011, pg. 241). Such values and beliefs include executing
their corporate social responsibility in ensuring ethical behaviors throughout their processes.
Within the performance measurement context this becomes very vital, as the primary
objective of performance measurement within an organization is to be faithful and unbiased.
Although, in some situations accounting professionals within the management of an
organization engage in the unethical behavior of misreporting the performance of their
organization by means of creating ill-prepared financial reports which may have long
standing negative impacts on the organization, its stakeholders, and society as a whole
(Cugueró-Escofet and Rosanas, 2016, pg.
621). Such decision is taken due to many circumstances and situations with the most
prominent motives being the presence of pressure from superiors within the organization or
to boost their own self-interest. A prime example of such unethical behavior is of Toshiba
artificially measuring its earnings upwards by more than 1.2billion dollars, which was done

PERFORMANCE MEASUREMENT OF COMMERCIAL BUSINESS 5
by under reporting its expenses, reporting future revenues that didn’t eventuate and deferring
write-offs associated with annulled business contracts and other economical impediments.
Such unethical performance measurement practices have enormous negative impacts on all
stakeholder, as it implicates that’s the organization is in a better financial position then
actuality. Also, this also violates the codes of ethics of professional accounting and
fundamental characteristics of relevance and faithful representation of financial reports.
Furthermore, as the presence and role of accountants within the corporate environment
increase and become progressively varied in terms of characteristics and responsibilities
coupled with the emergence of performance measurement as a concept in financial and
management accounting, the issue of unethical behavior in the performance measurement
sector also becomes very current, and has the capacity to infect the corporate atmosphere,
their relevant stakeholders and society as whole if it isn’t addressed swiftly and adequately
immediately (Searcy, 2011). Additionally, inaction towards this threat will also inversely
impact the accounting profession, as such action and their prevalence will lift the trust
instilled with society of the accounting profession, and accountants .The issue of ethics can
be addressed by increasing education regarding ethically right behavior to students of
accountants, and by also ensuring the there are ample mandatory training programs within the
professional environment for current accountants, to be up to date on ethically right practices,
and the code of ethics of accounting profession is effectively implanted within the attitude
and approach of new and current accountants (Cugueró-Escofet and Rosanas, 2016, pg. 623).
3.0 KEY ISSUE RELATING TO KPI’S
A key issue relating to performance measurement in commercial businesses is the setting of
effective KPI’s which will provide relevant and accurate indications of business performance.
Furthermore, once effective KPI’s are set, issues arise when these KPI’s are not revisited and
adjusted to correspond with business performance and commercial changes.
The setting and adjustment of effective KPI’s is a key issue relating to performance
measurement in commercial businesses because if they are not set correctly, they will provide
a misleading indication of business performance. If KPI’s are not relevant or set too high/low,
they will provide an understated/overstated reflection of business performance. This will
impact how management develops the strategic direction of the business and it is therefore
essential that KPI’s are set effectively. Furthermore, once effective KPI’s are set, it is
important to revisit these indicators and make relevant adjustments in line with business

PERFORMANCE MEASUREMENT OF COMMERCIAL BUSINESS 6
growth or commercial changes. If these adjustments are not made, the existing KPI’s will no
longer provide an effective indication of business performance.
It is important that this issue is addressed now because KPI’s are epitomal to performance
measurement and so it is essential that effective KPI’s are put in place if they are not already,
and existing KPI’s are revisited and adjusted so they are accurately reflecting commercial
business performance. The sooner performance issues are found, the sooner strategic change
can be implemented and so it is important this issue is addressed promptly.
When it comes to setting effective KPI’s, accountants have the role of determining
appropriate values to measure performance against and analyzing the data relevant to specific
performance measures. In regard to revisiting KPI’s to ensure existing indicators are relevant
and effective, accountants need to be analyzing performance data and business changes to
determine if adjustments need to be made in the existing KPI’s.
This issue has implications for the accounting profession as well as society. For accountants,
there is an emphasis on strong analytical skills so that relevant information can be extracted
from company datasets. Accountants in the profession will also need to be skilled in utilizing
data analytics tools so they can harness technology to remove the manual aspect of the
analytics process. If businesses set effective financial and non-financial KPIs, this will have a
positive impact on society as investors and stakeholders will have access to accurate
information regarding the performance of the commercial business to assist with decision
making. Furthermore, it will mean there is a focus by a company on social benefit through
their non-financial KPIs which will lead to positive societal impact through increased
corporate social responsibility.
4.0 FINANCIAL VS NON-FINANCIAL PERFORMANCE MEASUREMENT ISSUES.
In any business, it is of utmost importance to have an effective performance measurement
framework in place that truly reflects the businesses performance in achieving its objectives.
Depending on the type of business, each business has their own techniques on measuring
financial and non-financial performance, however, some tend to rely solely on single
measures that has led to inefficiencies and negative consequences. This ultimately costed a
lot of time and money for the business by focusing on measures and programs that did not
truly reflect their performance or add any value to the organization. A strong and contingent
framework must be adopted to prevent businesses from suffering further loss and destroying
morale within the organization as some targets were not met. Hence, it is important for
managers to continuously evolve performance measurement frameworks with the changing
environment as putting too much reliance on numbers and specific measurements may limit

PERFORMANCE MEASUREMENT OF COMMERCIAL BUSINESS 7
potential growth for the organization.
The role of a professional accountant has various duties such as producing reports to
conducting financial investigations that ultimately supports and discloses the financial health
of a business. In most businesses, many focuses on financial metrics which they believe
strongly represents how the business is performing. However, those number-driven
companies fall into the trap of conflicts of interest as relying solely on metrics can lead to
manipulation of results (Likierman, 2009). An example of this is Aspen Technology where
the ex-chief was charged with conspiracy to inflate revenue targets and become the new chief
executive. Not only does this reinforce the abuse of unethical conduct but how focusing on
financial metrics can put pressure on employees to satisfy these targets. Furthermore, some
companies now are focusing more on non-financial measurements to assess employee
performance and instead reviewing numbers produced by an individual. A significant
example is an investment bank Morgan Stanley, which had shifted from using financial
metrics to assess the performance of employees to non-financial metrics which was aimed to
further develop their skills and understand employee talents. It was a successful
implementation by Morgan Stanley as it simultaneously improved the work culture meaning
employees were able to reduce their stress in meeting their financial targets and achieve high
morale and productivity. Overall, the framework used to measure financial and non-financial
metrics affect the roles of management accountants when understanding the objectives and
culture of the business. By implementing poor performance measurements in the business,
not only does it affect the business and its relevant stakeholders but enforce great pressure on
professional accountants to deliver a quality report.
5.0 FACTORS THAT INFLUENCE AN ORGANISATION’S WORK PRACTICE AND
EXPECTATIONS OF AN ACCOUNTING PROFESSIONAL.
Work practice is the standard operating procedure of what is performed in an organization’s
day to day activities. Depending on the type of business, work practice is influenced in
several ways which affect the productivity and work ethic of employees.
A significant factor that influences an organization’s work practice is the organization’s work
culture. In any organization, effective performance measurements are implemented not only
to monitor how the business is tracking but to also improve employee satisfaction and career
development. This highlights the effectiveness of leadership styles in managers in supporting
the growth and development of employees to boost morale and achieve higher levels of
productivity (Markos and Sridevi, 2010, pg. 89). An example of this is transactional

PERFORMANCE MEASUREMENT OF COMMERCIAL BUSINESS 8
leadership and transformational leadership. Transactional leadership is when an employee has
done good and is rewarded but when done wrong is criticized for their actions.
Transformational leadership on the other hand is aimed at encouraging growth and inspiring
employees to create change and ultimately shape the future success of the company. This
focuses on non-financial measures in learning and growth that continue to provide programs
and workshops for employees to refine their skills and bring greater productivity in the
organization. A key example of this is the consulting firm Gallup, which have highlighted
that there is a relationship with strong leadership and good organizational culture directly
influence the performance of employees. Furthermore, by setting a strong organizational
culture, this influences the attitudes and decisions made by professional accountants. If the
organization is focused entirely on producing the best results and enforcing pressure on
employees to meet targets, this also imposes pressure and stress for professional accountants
in producing quality financial reports. This may result in unethical practices by accounting
professionals by manipulating targets to satisfy organization leaders or receive incentives for
inflating results. Therefore, leadership and work culture are what determines the work
practice that is performed and the decision-making of accounting professionals.
There are strong expectations of accounting professionals to act ethically and professionally
at a high level at all times. This is especially when the organization has placed strong
emphasis on improving its financial performance due to underperforming activities. With
new accountants entering the profession, it may place uncertainty for the organization’s
leaders with the results produced due to inexperience. However, with the changing
environment, accounting professionals are required to continuously educate themselves in
understanding new digital technology and regulations that revolve around improving
performance measurements in an organization. Furthermore, professional accountants also
experience pressure not only from the organization but from stakeholders and the community
to produce strong financial reports for the interest of the public. This reinforces the high
stress levels and the expectations of professional accountants to support the organization
without acting unethically. Overall, with strong educational programs running continuously
for professional accountants, it will help to strengthen their image in the profession and will
have the confidence to perform their duties without the pressure of the public and
organization.

PERFORMANCE MEASUREMENT OF COMMERCIAL BUSINESS 9
6.0 HOW AN ACCOUNTING PROFESSIONAL ENGAGE WITH THE COMMUNITY TO
ADD VALUE TO STAKEHOLDERS AND ONESELF.
An accounting professional engages with the community by determining the needs and
desires of the community through research, surveys and interaction. This will lead to adding
value to stakeholders and oneself as performance measures will be set which not only
benefits the commercial business and the stakeholders and surrounding community.
By interacting with the community, an accountant can set performance measures which
reflect the desires of stakeholders in the community. Without engaging the community, an
accounting professional will not be able to help the business address key issues which are
impacting the community. This could include measures relating to sustainability, social
responsibility or diversification of service offerings.
An example of this community engagement can be seen through Chris Mamarelis and the
Whiddon Group. Accounting professionals engage with their clients to provide them with a
unique experience each year. Through their engagement and interaction with their
community, they were able to identify the desire of their clients to have certain experiences.
They could then set performance measures relating to the social benefit provided to their
clients. This is one demonstration of how community engagement leads to the identification
of performance measures which will add value to the stakeholders.
By engaging with the community, you also add value to yourself as an accounting
professional. Not only do you develop strong relationships and interpersonal skills, but you
work towards pushing the business to achieve more suitable and beneficial goals through
performance measures which are relevant to stakeholders.
7.0 STRATEGIES AND DEVELOPMENT TOOLS THAT ARE APPROPRIATE FOR AN
ACCOUNTING PROFESSIONAL TO SUSTAIN A COMPETITIVE ADVANTAGE IN
TERMS OF EMPLOYMENT AND LEVEL OF COMPETENCE.
Firstly, based on the above analysis, it very blatantly evident that the role or an accountant
within an organization has changed dramatically in recent times, and it has gone from a data
collector and information provider, to a more varied decision-making and leadership role and
has become a key driver in the success or failure and also a crucial portion of the operational
structure of the organization .Also, it is vitally necessary for both current and future
accountants to undergo on-going critical and in-depth ethical education prior and throughout
their professional lives, as with the increase in an accountants’ presence and impact in an
organization also escalates the responsibility to ensure they can be trusted and cope as

PERFORMANCE MEASUREMENT OF COMMERCIAL BUSINESS 10
professionals with sensitive and confidential information and tasks .Furthermore, due to the
ever changing landscape of business within society, it is essential for accountants to
constantly be updating their literacy and competency in new and advanced accounting
technologies and skills, this will allow them to be able to provide more succinct
interpretations regarding the operational performance within their organization, but also
enable more efficient planning, governing and risk management protocols in future corporate
decision making .Correspondingly, coupled with a strong ethical base, and up-to-date
knowledge of new accounting knowledge, it is required that accountants within the
profession are also trained with a holistic approach towards operational and financial
management, as the skills gained within accounting are multifaceted and new and current
accountants should gain the insight into their applicability of those skills in other areas within
an organization .As, this provides new accountants the ability to apply their skills in any
aspect of the organization and strive in new business practices that may emerge within their
professional life. For example, being able to examine their organization’s performance and
standing through their financial statements, and thus being able to assess that information and
propose to the executive management responsible for corporate strategy a potential change to
their measurement mechanisms to increase the amount of data and information that is
considered and deliberated upon, to ensure a more intensive analysis .Hence, we advocate
accounting professionals to persistently mature their people and professional skill and
knowledge, be engaging communicators, managers, leaders, and motivators. Also, they
should ensure they are able to contribute positively in all aspects of their business
independently and in partnership with others to pursue the predetermined goals and
objectives set by administration in an ethical manner.
8.0 CONCLUSION.
In conclusion, various changes should be designed in order to address this measurement
issues arising from performance measurement. For instance, the company should revise its
policies regarding the measurement of performance of employees. They should try as well to
use non-financial metrics to measure performance of employees. This will motivate
employees to work towards the set target. Strong regulatory framework should therefore be
designed to ensure that straight guidelines are followed to the later.
Accounting standard board must come up with laws and regulations that aims at punishing
entities that misreport or give untrue and biased information regarding their performance.
heavy penalties should be imposed on them to deter them from further doing the same.

PERFORMANCE MEASUREMENT OF COMMERCIAL BUSINESS 11
entities which violate the code of ethics and conducts of professional accounting of faithful
presentation of financial report should be heavily charged.
Further, awareness should be made on the ethical behavior of accountants and by adequately
training professional accountants on current ethical code of conducts of accountants and
positive attitude towards ethical code be developed by accountants.
Effective KPIs should me developed and implemented to avoid issues with KPI’s, they
should be revisited and adjustment made so that they can correspond to performance. If this is
not done, they might give misleading information.
Accountants should be given additional resources such as funds to enable them acquire extra
skill so that they can utilize technology to analyze the KPIs and remove errors in the process
of evaluation.
To overcome these issues in the accounting profession, revision in the existing laws and
policies should be done by the government and the profession. The government must put
stringent measures on those who break relevant laws. whistleblowers should be strengthened
and relevant shield and protection of them should be enhanced. There should be revision of
accounting standards and strengthening of bodies responsible for investigation of breach of
ethical codes.
Accountants must be taken through a rigorous training programs on ethics and be trained on
various complex case studies of organizations dealing with complex ethical issues and also be
imparted with technical skills such as critical thinking and reasoning, how to communicate
key issues well and on how to manage conflicts within the organization. These skills will help
an accountant to handle issues well and overcome them with a lot of ease.
Advice forums be developed by the organization where mentoring of upcoming accountants
is done so as to educate them on ethical codes early enough.

PERFORMANCE MEASUREMENT OF COMMERCIAL BUSINESS 12
9.0 REFERENCES:
Cugueró-Escofet, N. and Rosanas, J. (2016). The Ethics of Metrics: Overcoming the
Dysfunctional Effects of Performance Measurements Through Justice. Journal of Business
Ethics, 140(4), pp.615-631.
Likierman, A. (2009). The Five Traps of Performance Measurement. [online] Harvard
Business Review. Available at: https://hbr.org/2009/10/the-five-traps-of-performance-
measurement.
Markos, S. and Sridevi, M.S., 2010. Employee engagement: The key to improving
performance. International journal of business and management, 5(12), p.89.
Searcy, C. (2011). Corporate Sustainability Performance Measurement Systems: A Review
and Research Agenda. Journal of Business Ethics, 10CED7(3), pp.239-253.