What does a performance measurement system evaluate?

A performance measurement system is designed to assess how well an organization is achieving its strategic goals and objectives. It focuses specifically on evaluating the effectiveness and efficiency of organizational actions, which includes how resources are utilized to produce desired outcomes and results. This type of system often involves a variety of metrics and indicators that help organizations understand their performance relative to established benchmarks.

By measuring effectiveness, the system determines whether the organizational goals are being met, while the evaluation of efficiency looks at how well resources, such as time, money, and materials, are being used in the process. This comprehensive evaluation helps organizations make informed decisions, identify areas for improvement, and implement changes that drive better overall performance.

In contrast, analyzing overall market trends, ensuring compliance with tax regulations, or assessing a company's cash flow status does not directly relate to the core purpose of a performance measurement system. These factors, while important in their own right, are not the primary focus of evaluating organizational performance through a systematic approach.