Clearly state what constitutes performance indicators? Why do people :: Economics

Clearly state what constitutes performance indicators? Why do people want organisations to produce these? Suggest your own type of performance indicators that Could be used with a doctor's surgery (general practise). ACCOUNTING AND CONTROL IN ORGANISATIONS 2003 Q. a) Clearly state what constitutes performance indicators? b) Why do people want organisations to produce these? c) Suggest your own type of performance indicators that Could be used with a doctor's surgery (general practise). d) What problems might arise when you try to use the Performance indicators that you produced in part c). a) The purpose of performance indicators is to evaluate and monitor how well a system responsible for providing a service is performing; to report this information in quantitative terms; and to direct the system's efforts and resources towards desirable goals. The fundamental problem, however, with defining what such a set of performance indicators should be made of due to there sometimes being a lack of consensus on what are desirable goals and, therefore, a lack of definition of what constitutes good performance. Performance indicators can consequently be measuring very different aspects of performance, yet they are all generally concerned with measuring the success of a venture and the success of the people who are managing it. As performance indicators are concerned with the measurement of the success of an organisation, and its management, you need to look at what success is to see what constitutes one. The obvious answer is that success is earning a profit and that the greater the profit the larger the success. Profit as measured in accordance with generally accepted accounting principles is, however, a somewhat unsure gauge of success. This is because profits can be kept up for years while a business is being milked dry by cutting down on research, maintenance and certain kinds of advertising, or by realising assets which have been steadily appreciating in value. Alternatively profits can be kept down by stepping up these expenditures and by declining to realise assets which have appreciated in value. Furthermore, what does "the larger profit" actually mean. If it simply means the greatest number of absolute pounds, then there is the criticism that a manager who has access to unlimited capital, with either a free rate of interest or a very low rate, can probably increase the absolute profit he shows by pumping in more capital, so long as he can show any return at all on it. If, however, it is measured by the rate of return on capital employed then is a high rate of return on a small capital better or worse than a lower but still satisfactory return on a larger capital.