Performance measurement is a tool to help managers control the outcomes of their organizations. It enables them to be the driver rather than a passenger on their organizational journey. The concept of performance measurement is not new but it was not recognized as a formal management process until the late 1960's when the Department of Defense, as part of an effort to reduce program cost overruns, issued a set of criteria defining standards for management control systems. This criteria approach was implemented throughout the Department of Defense by publishing the Cost/Schedule Control Systems Criteria Joint Implementation Guide. All DOD prime contractors were required to develop or modify their management control systems to comply with …show more content…
Estimating relationships used to relate physical activity and resources to income, expense, and investment dollars should be formalized so they can be monitored during performance measurement. Example- revenue per unit sold. The performance measurement baseline integrates operational and financial planning results and displays them on a common timeline. Operational and financial planning results and resource requirements may be summarized to the organizational level accountable for the results of that work. Summary reporting may be more convenient for upper management needs. Lower reporting levels must still be maintained for variance analysis. Operating plans and budgets must be consistent with the performance measurement baseline. Functional operating budgets lower than the baseline can be used to provide an incentive to managers and supervisors but operating budgets may not exceed the baseline values. When operating budgets are less than the baseline the resource requirements must be reduced commensurately to preserve the estimating relationships used to develop the budget. Changes to the performance measurement baseline must be controlled and justified. No retroactive changes to completed work are permissible since this negates any meaningful variance