It is usual for large companies to measure their current performances with targets or past results. Not all targets are financial based such as social responsibility and environmental stewardship. Such non financial targets are difficult to measure and appraise.

Financial targets such as budgets could be measured easily. In order to do this, the company needs to develop a system for measuring its performances. A good system should have all the following qualities in place:

1.   Must relate to the goals set by the company.

2.  Take care of the long term and short term concerns.

3.  Should reflect all the key actions and activities.

4.  Be affected by the actions of the managers and employees.

5.  Clearly understood by all employees.

6.  Form the basis of evaluating and rewarding employees.

7.  The objectives are clearly defined and achievable.

8.  Be used by the employees frequently and consistently.

There is a very close relationship between performance evaluation with budgets and business plan. Comparing current performances against budgets and business plans is a common and regular event in large companies. By comparing, the companies are able to identify shortcomings and operational weaknesses. Action plans are then developed to rectify these shortcomings and weaknesses.

It is very important for the companies to follow up with their action plans and monitor them regularly. Failure to do these, will defeat the purpose of developing the performance measurement systems which may cause the companies to be directionless in their business.

If you intend to develop a system of performance measurement for your company but do not know how to do it, you can seek professional advices. Today there are many organizations offering such services.