Performance Indicators In A Firm

Performance management forms the core foundation and context for the creation and measurement of key performance indicators in a firm. Here, the measure of a firm’s performance refers to the key success factors and quantifiable performance indicators used to measure or keep track of the changes made Vis-a-vis their impact towards the attainment of a company’s long-term goals and objectives. Kaplan and Norton (1996) mentioned several criteria for measuring the performance of a firm’s performance measures; however, scholars recognise validity as a key criterion towards a firm’s performance measure because it bears the greatest impact to company's managerial operations. This essay analyses such criterion in relation to a real-life example.
Validity

Their significance arises from the fact that they offer significant insight that is essential for informed decision-making processes (McDavid et al. 2013). Valid performance measures facilitate how managers acquire the right information, at the right time and place. Hence, they grant managers the real chance to optimise decisions, accelerate the firm’s productivity as well as boost its efficiency. This aspect of informed decision-making processes bears a high significance in diverse ways. For instance, managers can quickly make informed decisions in response to barriers of growth and development, hence leading to a near perfect organisation (McDavid et al. 2013). Managers can also use the same information to make structural changes aimed at changing how the firm operates, introducing a high level of efficiency, and improving

For example, the case of CSX Transportation – a Class I railroad that services the U. S., Ontario, and Quebec. New CEO Hunter Harrison has revised the operational performance system by expanding the coverage of three key metrics: (1) train velocity; (2) cars online; and (3) terminal dwell, as part of his overall Precision Scheduled Railroading program (Globe Newswire 2017). The CEO believed that these revised metrics could benefit their stakeholders as it would give the company a more accurate understanding of their performance and allow more opportunities for improvement. The CEO’s metrics revision might be heading towards the achievement of validity since the previous metrics had excluded the end-to-end travel time, speed, and terminal dwell time of trains. He believed that by setting valid metrics that measure necessary activities mentioned above, he would be able to establish a plan that reduces terminal dwell time, customers’ travel time, and train delays. Those revisions are reasonable since he would not be able to make strategies that would reduce dwell time without a valid indicator that would measure it. It is consistent with our definition of validity at the outset as it presents key indicators that are logically sound and aligned with the company's approach to quality. However, it also proves our argument that adopting a valid performance measurement would lead to the