Difference between performance measurement and performance management

Performance measurement and performance management look similar but there is a big difference. In short, performance measurement is just part of performance management and they are both an ongoing process. Performance management covers everything, managing the performance from day 1 to the end of the organisation.

In managing the performance, we are aiming to improve the performance of the organisation, process and the employees. Cost information provides us one of the main information to understand the efficiency of process (for example). Cost and management accounting techniques are used as the information provided will be useful for measuring the performance of process. Furthermore, employees' performance can also be measured through this information, for example whether purchasing manager is able to purchase at a good price.

Decision making is directly linked to performance. A good decision will result in good outcome, leading to good performance. Therefore, decision making is part of the syllabus of performance management.

There will also be plans to achieve the company's objectives so budgets will be set. If the actual performance is meeting the budget requirement, it can be said that the performance is good. To manage performance, there should be a plan to achieve (budget) and actively ensure that company is achieving the plan.

After the planning and decision making work, the performance information (such as cost variances) are collected so that control can be taken place. Performance measurement is a control procedure and this aims to measure the actual performance and determine whether it is good or bad so that new actions or changes in existing actions can be planned (which means that the procedure will start again from budgeting).

Performance management covers all the above. In short, we can say that performance management involves planning, control and decision making so that the performance will improve continuously.