Analysis of Performance Measurement Systems: A Detailed Review

This report provides a comprehensive review of performance measurement systems, contrasting traditional and modern approaches. It discusses models like the Balanced Scorecard, Benchmarking, Performance Prism, and Activity-Based Costing, with a detailed analysis of the DuPont model and its impact on integrating financial measures with operational indicators. The report also examines the Performance Measurement Matrix and other systems like the Performance Measurement Questionnaire, SMART, and Pyramid Organizational Development Model, highlighting their roles in strategic decision-making. It further reviews various performance measurement models, including the Medori and Steeple Framework, Strategic Measurement and Reporting Technique, and the European Foundation for Quality Management model, focusing on the Balanced Scorecard's widespread preference due to its alignment of organizational activities with strategic goals. The report concludes by emphasizing the need for further research to determine the most effective performance measurement model, addressing the strengths, weaknesses, and potential errors associated with their implementation, to enable organizations to accurately assess their performance levels.

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Performance measurement system
Question 1
There are two types of performance measurement system used. They include traditional
and modern performance measurement systems. Examples include balanced scorecard,
benchmarking, prism and activity-based costing. The most commonly used performance
management model includes DuPont model which was developed by ‘Du Pont’ which is an
American chemicals giant. This model links both financial ratios and accounting measures. They
include;
 Return on Investment.
 Return on Net Assets.
 Return on Equity.
This model has both positive and negative impact. Its major positive impact is that it helps in the
integration of financial measures with operational indicators. A major disadvantage of using this
model is that it emphasizes on financial measures.
Secondly, we have the Performance Measurement Matrix. This model was developed by
Keegan in 1989. The model is grouped into internal and external proportion, cost and non-cost. It
is used to measure business performances. Its principal interest is that it is simple and easy to
accommodate any performance measurement. Consequently, its main challenges are an inability
to establish a link between the different performance dimensions.
Other performance measurement system includes the performance measurement
questionnaire which is a tool used during managerial decisions. It is a strategy used to determine
ways of improving the performance of the company. There is the result determinant framework,

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Strategic Measurement Analysis and Reporting Technique (SMART), Pyramid Organizational
Development Model. All these performance model are used by an organization to formulate
strategies making them stay competitive. Without these measurements, it will be difficult to
determine their market position and performances in relation to other organizations and
achievement of success.
Question 2
Numerous performance measurements have developed in the business world. Some of
these performance model includes:
 Medori and Steeple Framework.
 Prism.
 Strategic Measurement and Reporting Technique.
 balanced scorecard.
 Dynamic Multidimensional Performance Framework (DMPF).
 European Foundation for Quality Management
 Result and Determinants Framework (RDF).
All these performance model aims to achieve satisfaction for their users as they determine the
performance level of their companies.
However, most organization prefer the balanced scorecard which was introduced in
1992.BSC focuses on the relation existing between the mission, vision, core values and strategic
focus areas with an objective of achieving strategic goals achieved set by the organization. The
main reasons why the BSC is preferred is because it can be used to align the daily organizations’

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activities with the strategies which have been set and help in prioritizing projects that the
company should launch or engage their employees.
The newest performance model is the performance prism which focuses more on the
stakeholders of a company. It functions in such a way that the needs and wants of the
stakeholders are addressed. As it improves the chances of an organization succeeding. The only
challenge is that it is a measurement which is still being worked on and certain aspects of its
functionality have not yet been established.
These performance measurements have both weaknesses and strengths. It is the role of
the organization to determine the best performing model relevant for determining the level of
performance in their respective organizations. As an illustration, it helps in the alignment of daily
activities of the organization with the set strategies and with it is easier to monitor projects and
the productivity of the organization. When comparing BSC to other performance measurement
system, it has a wide perspective such as financial, stakeholders, internal processes and capacity
of the organization.
Consequently, other performance measurement systems only focus on one area. Take, for
instance, Result and Determinant Framework (RDF) only focuses on the service sector only.
From the article, there is need to carry out more research on these performance measurement
systems to determine the most effective model which can be used to determine the level of
performance of any organization. All these measurement systems have strengths and
weaknesses, but they are still occurrences of errors when organizations are using them. When
there are clear guidelines based on intensive research, minimal errors can occur. As a result,
companies will be able to determine the best performance measurement tool that they can use.