1.1 An Introduction to Block 1

An organized approach to thinking about performance includes the 4 ‘E’s: effectiveness, efficiency, economy and ethics.

Effectiveness (Do the right thing): How effectively does the company achieve their goals? For this you need to understand the purpose for which the company exists and their strategic goal, as performance is always in relation to this.

e.g.: In case of a school you need to understand the different goals each group of stakeholders have for the school.

Efficiency (Do the thing right): How efficiently does the company employ resources, transforms inputs into outputs?

Economy (Do it cheaply): How cheaply can the inputs be purchased?

Ethical (Do right): This looks at the performance of a company from the ethical perspective.

Measuring performance is important but very complex. Once you have found your strategy you should focus on those parts that are important in your strategy and include them in your performance measurement system. If customer support is crucial in your strategy then it needs to be a part of your performance analysis. “What gets measured gets attention!” (Robert Eccles).

In the past financials were crucial for measuring performance, especially earnings. Now analysts and companies are moving more to looking at the cash flow. On top of that financial information shows the past and not the future and nurtures short term thinking. But you need to find measures that, if improving, will predict a healthy long-term growth/success/profit/cash-flow/… .

Remember that this space is always evolving and so is your company. You should look at all your strategic goals, how they are interlinked and affect each other and use the tools at your disposal to an optimum.

All this interlinking shows the way for the rest of the modules in terms of looking at performance form the perspectives of Markets, Operations, Accounting and Finance, and People. The fifth perspective, Information, overlays the other four.