Performance measurement remains a vexing problem for business firms
and other kinds of organisations. This book explains why: the
performance we want to measure (long-term cash flows, long-term
viability) and the performance we can measure (current cash flows,
customer satisfaction, etc.) are not the same. The 'balanced
scorecard', which has been widely adopted by US firms, does not
solve these underlying problems of performance measurement and may
exacerbate them because it provides no guidance on how to combine
dissimilar measures into an overall appraisal of performance. A
measurement technique called activity-based profitability analysis
(ABPA) is suggested as a partial solution, especially to the
problem of combining dissimilar measures. ABPA estimates the
revenue consequences of each activity performed for the customer,
allowing firms to compare revenues with costs for these activities
and hence to discriminate between activities that are ultimately
profitable and those that are not.
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