Chapter 1. TRENDS IN PERFORMANCE MEASUREMENTS

To survive and grow, a business enterprise must meet its stated objectives. How do we know if a business is meeting its goals? Just as we go to a doctor for a checkup to confirm our physical well-being, a business also needs monitor its health. It needs to measure its performance frequently to evaluate its past performance and identify areas where it must improve in the future.

Historically, as supply geared up to meet the rising demand for consumer products, the productivity of an enterprise became the most important performance measure. As the gap between supply and demand decreased and competition increased, customers had better choices, and they began demanding more features and better service. Customer demand propelled companies to innovate and diversify in order to grow, and businesses became more complex. Productivity alone thus became an insufficient measure of business performance.