Academic journal article The Journal of Bank Cost & Management Accounting

Basic Tenets of Performance Management in Financial Institutions

Academic journal article The Journal of Bank Cost & Management Accounting

Basic Tenets of Performance Management in Financial Institutions

Article excerpt

Preamble

The purpose of this effort is to provide guidelines for the development of management information that supports the decision making process, in order to accomplish the overall performance objectives of the organization. Objectives, which may vary from organization to organization, are met by the choices management makes in deploying its resources. Management's ability to make informed decisions is tied to the quality of management information available to them. These guidelines are intended to create a common conceptual and mechanical framework to generate the information that can be used to support this decisionmaking process.

Introduction

The Basic Tenets of Performance Management in financial services firms are organized into four primary categories, as shown below. These categories, with a listing of the basic tenets, are as follows:

* The Performance Management Process

1. Senior Management Commitment and Leadership

2. The Iterative Process of Implementation

3. Organizational Ownership and Involvement in Development of Measurements

* Measurements of Performance

4. Bases of Comparison - Relative Winners and Losers

5. Non-Financial Information and Performance Measurements * Measurement Structure

6. Organization, Product and Customer Dimensions

7. Integration with the Other Management Processes

* Measurement Rules and Methodologies

8. Reconciliation to Published Financial Statements

9. Consistency

10. Fairness and Support

The remainder of this document provides comments regarding each of the basic tenets.

The Performance Measurement Process

1. Senior Management Commitment and Leadership

Senior management must commit to provide the resources necessary to implement and maintain a performance management process. This includes the investment of the time and attention necessary to provide leadership for the process. To realize the value of the process designed in this manner, management must commit to use the information produced by the measurement process to make decisions and assess performance relative to the stated objectives of the organization.

2. The Iterative Process of Implementation

The need to have the organization take ownership of the process along with the need to gather data and define assignment methodologies makes it difficult to implement performance measurement all at once. Nonetheless, it is possible, and important, to begin the reporting of performance measurement information as it is developed in order to involve the organization in the development of the process. Over time, the continuous production and revision of the performance measurement processes will enable the evolution of useful management information.

3. Organizational Ownership and Involvement in Development of Measurements

In order for the measurement process to be accepted, it must produce information that is meaningful and actionable when viewed by those who are asked to use it to make decisions. As such, it is necessary to involve the organization in its development. In effect, anyone who is subject to performance measurement that requires an assignment of costs or revenues should have input into the development of the methodology to better ensure acceptance of the results. The performance measurement process belongs to the entire organization and should be implemented in a cooperative manner.

Measurements of Performance

4. Bases of Comparison - Relative Winners and Losers

In order to determine "good" performance versus "bad" performance, it is necessary to have a well-defined base against which to compare actual results. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.