INTRODUCTION 

It is very important to assess the performance of an organization. But the question we ask ourselves is; “……how can we assess the performance of an organization?” The assessment of the organization can be done from two major angles or perspectives.

These are FINANCIAL PERFORMANCE AND NON-FINANCIAL PERFORMANCE.
In an attempt to answer the above question, we will use two models or frameworks to assess the performance of an entity.

These are:

a. THE BALANCED SCORECARD:

This is a strategic planning and management system that is extensively used by entities to align business activities to the vision and strategy of the organization, improve internal and external communication, monitor organization performance against strategic goals. It was originated by Dr. Robert Kaplan (Harvard Business School) and David Norton as a PERFORMANCE MEASUREMENT framework that added strategic metrics to give managers and executives a more “balanced” view of organizational performance.

There are four indicators of measuring the performance of management from the viewpoint of Kaplan & Norton.

These are:

1. THE FINANCIAL PERSPECTIVE: This measures the financial performance of the entity. It is the traditional evaluation of the entire business based on the financial statements. Examples include financial ratios such as return on assets, return on equity, liquidity ratios, and return on investment. This answers the question: “HOW DO WE LOOK TO SHAREHOLDERS”.

2. THE CUSTOMER PERSPECTIVE: Customer measures of performance related to customer attraction, satisfaction, and retention. These measures provide insight to the key question “How do customers see us” Examples might include the number of new customers and the percentage of repeat customers. Recent management philosophy has shown an increasing realization of the importance of customer focus & customer satisfaction in any business.

3. INTERNAL BUSINESS PROCESS: Internal business process measures of performance related to organizational efficiency. These measures help to answer the key question “What must we excel at”. Examples include the time it takes to manufacture the organization’s goods or deliver a service. The time it takes to create new products and bring them to the market is another example of this type of measure. This allows management to know how well their business is running, and whether its products and services conform to customers’ requirements (the mission) in terms of cost, quality, reliability, etc.

4. ORGANISATIONAL CAPACITY/ LEARNING & GROWTH: This relates to the future. Such measures provide insight to tell the organization, “Can we continue to improve and create value”. This includes:

• Employee training and corporate cultural attitude related to both individual and corporate self-improvement
• Ability to adapt and utilize advancements/changes in technological tools.

DIAGRAM: BALANCED SCORECARD- ADAPTED FROM HARVARD BUSINESS REVIEW.

 

b. MEASURING PERFORMANCE USING THE TRIPLE BOTTOM LINE:

Ralph Waldo Emerson once noted, “Doing well is the result of doing well. That’s what capitalism is all about.” While the balanced scorecard provides a popular framework to help executives understand an organization’s performance. Other frameworks highlight areas such as social responsibility.

One such framework, the triple bottom line, emphasizes the THREE Ps of PEOPLE (making sure that the actions of the organization are socially responsible), the PLANET (making sure organizations act in a way that promotes environmental sustainability), and traditional organization PROFIT.
This notion was introduced in the early 1980s but did not attract much attention until the late 1990s.

Read also: BEST STEP – BY – STEP GUIDE TO AUDIT PROCEDURES [UPDATED]   INTERNAL CONTROL AND AUDIT