Financial measures have traditionally been the cornerstone of the
perform- ance measurement system. In recent years, there has been a
shift from treating financial figures as the foundation for performance
measurement to treating them as one among a broader set of potential
financial measures. Changes in cost structures and the manufacturing and
competi- tive environment have been responsible for the change of
emphasis. In today's worldwide competitive environment companies are
compet- ing in terms of product quality, delivery, reliability,
after-sales service and customer satisfaction. None of these variables
are measured by traditional financial measures, despite the fact that
they represent the major goals of world-class manufacturing companies.
By focusing mainly on financial variables there is a danger that the
performance reporting system will motivate managers to focus exclusively
on cost reduction and short-term profitability and ignore many of the
critical factors that determine long-term business success. The key to
success, in today's global economy, is total customer satisfaction. To
achieve this, companies must develop performance measures that drive
employees to control processes that satisfy customer expectations. In
particular, performance measures should provide process-level
information that motivates employees to achieve the responsiveness and
flexibility that companies require to compete on a global basis.
Responsiveness is achieved by building relationships that lead to
satisfied customers, suppliers and employees. Flexibility is achieved by
reducing output variation in proceSfes; for example, the reduction of
lead times and delays are both necessary for sustained competitive
excellence and long-term profitability.
