All organizations should evaluate their performance regularly to ensure that they achieve the set objectives. Performance evaluation enables the management to implement corrective measures in the normal operations of the business. The two performance measures that an organization can use include the balanced score card and the economic value added methods. HYPERLINK “\\\\\\\\the” The measures have their advantages and disadvantages depending on the operations of the organization.
Economic value added evaluates the one aspect of the business, the financial aspect. Economic value added compares the operating profit and the cost of capital to calculate the economic profit. The economic profit shows the increase in value of the ordinarily shares. Using this method to measure performance in the business ensures that the management concentrates on profit maximization. This method does not consider other aspects of the business that are responsible for increase in profit Maher, Stickney & Weil, 2012).
Balanced scorecard ensures that the vision of the business is achieved through its objectives. The method combines financial and non-financial aspects of the organization to achieve its goals. The best method to use for the organization to measure the performance is the balanced scorecard. The balanced score card ensures that the financial part of the business is monitored. The non-financial aspects of a business like the workers are considered in performance evaluation (Jackson, Sawyers & Jenkins, 2009).
Training the workers would increase their output thus efficiency in the organization. The measure also evaluates internal business processes and ensures that they satisfy the standards set by management. The measure also considers the customer who is an important asset in the organization. The measure ensures that customer satisfaction is promoted. Customer satisfaction is promoted through customer service quality and the number of loyal customer. The method would be tasking in terms of implementation and cost compared to economic value added, but would yield better results in the future.
Jackson, S., Sawyers, R., & Jenkins, G. J. (2009). Managerial accounting: A focus on ethical decision making. Mason, OH: South-Western.
Maher, M., Stickney, C. P., & Weil, R. L. (2012). Managerial accounting: An introduction to concepts, methods and uses. Mason, OH: South-Western Cengage …
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