Question

What is involved in developing, monitoring and reviewing performance systems and processes to assess progress in achieving profit and productivity plans and targets. Be sure to include variance analysis, acceptable levels of variation, monitoring employee performance, performance appraisal, triple bottom line reporting and balance scorecard in your explanation. ( original answer please)

Answer 1

PERFORMANCE SYSTEM

It is a systematic method of employee evaluation, whereby an employee is assessed based on his job. The system is concerned with development of evaluation methods and by monitoring employees' performance. Follow-up activities are also done to check if their performance align with the standards/ benchmark set and to take corrective actions wherever deviations are found out.

METHODS OF REVIEWING, MONITORING AND DEVELOPING PERFORMANCE SYSYTEMS

• PERFORMANCE APPRAISAL : It is a way of measuring employee performance for a given period of time and also stating measures that are likely to improve their performances. Different methods of performance appraisal are ;
  1. Management by Objective
  2. 360 Degree Feedback
  3. Forced Choice Method
  4. Critical Incident Method
  5. Behaviourally Anchored Rating Scale
• MONITORING EMPLOYEE PERFORMANCE : It is an on-going process as far as a business firm is concerned. Monitoring employees reveals who is more productive and who is not. The following are the main ways of monitoring their performance ;

1. Making the employees use tools that help them to evaluate performance by themselves.
2. Ask people connect to the organisation such as customers/venders regarding the employees work.
3. Watch the working of employees
4. Requirement to provide a detailed explanation in writing regarding the work they have done for a specific period in the pasr, say 2 weeks.
5. Keep a regular review on the progressing work

PROGRESS IN ACHIEVING PROFITS & PRODUCTIVITY TARGETS

Profits should continue and gradually increase in order to stay in good financial health and compete in the industry. Hence the accountants plan in advance, the targets they want to attain for the next financial year or the time specified according to their requirement as well as the profits to be reaped in that specific period.

• VARIANCE ANALYSIS MEANING : It is actually a postmortem of accounts, that is it takes place after the actual happening of event. It is a method by which the standard cost/ budgeted costs are compared with the actual costs.
• ACCEPTABLE LEVELS OF VARIATION : Variation can be found out by comparing the standard and actual costs. A certain level of variation is always expected since 100% adherence to set standards is a rare possibility. But what is an acceptable level? The answer to this question depends on the industry and the level of benchmarks set and various other factors.
• TRIPLE BOTTOM LINE REPORTING : This mainly involves 3 aspects - social, environmental and financial. A firm reports and conducts activities on all the 3 basis. Being a socially commited firm is desirable to the the society and it increases the firm's publicity among its competitors.
• BALANCESHEET SCORECARD : It is a method by which internal functions as well as the implications they provide to the organisation is controlled. Feedback is collected and quantified, providing managers and other important decision makers, the information that they need.