Activity performance measurement
Assessing how well activities (and processes) are performed is fundamental to man agement's efforts to improve profitability. Activity performance measures exist in both financial and nonfinancial forms.These measures are designed to assess how well an activity was performed and the results achieved. They are also designed to reveal if constant improvement is being realized. Measures of activity performance center on three major dimensions: (1) efficiency, (2) quality, and (3) time.
Efficiency focuses on the relationship of activity inputs to activity outputs. For example, one way to improve activity efficiency is to produce the same activity out- put with lower cost for the inputs used. Quality is concerned with doing the activity right the first time it is performed. If the activity output is defective, then the activity may need to be repeated, causing unnecessary cost and reduction in efficiency. The time required to perform an activity is also critical. Longer times usually mean more resource consumption and less ability to respond to customer demands. Time meas- ures of performance tend to be nonfinancial, whereas efficiency and quality meas- ures are both financial and nonfinancial.