performance measurement

Program / Bachelor in Management
Instructor / Associate Professor Y. Fedotov,
Department / Operations Management
Course status / Elective
Concentration / International management, Financial management, Marketing, Public Administration
Year / 4th year
Term / Fall – 2011
Workload / 3 ECTS, 45 hours of classes
Prerequisites / Microeconomics-2, Mathematics for Managers, Statistics-1, Game Theory, Basics of Econometrics
Course abstract / The performance measurement is an essential part of the performance management, which includes activities to ensure that goals are consistently being met in an effective and efficient manner. Performance management can focus on performance of different in nature operating units: the organization, a department, processes to build a product or service, employees, etc. Respectively, the performance measurement is needed for the unit in question. Microeconomic analysis involves problem-solving, which assumes specification of an issue under consideration, setting-up its model and solving of respective problem. To ensure that all students can effectively deal with standard microeconomic problems and correctly analyze them a substantial number of problem-solving homework assignments are given over the course.
Course aim and objectives: / The aim of the course is to provide the students with knowledge of modern concepts of organizational performance, advanced models and sophisticated analytical tools applied for measuring the organizational performance (aggregate index methodology, stochastic frontier analysis, data envelopment analysis). The course aims at developing deeper understanding how appropriately to select particular performance measures (metrics) for use both in empirical studies and performance management practice. Practical part of the course includes appraisal of performance of a particular operational unit through application of software packages to empirical data.
The course has:
  1. To display various concepts of unit’s performance and efficiency
  2. To provide microeconomic background for measuring the economic and operational efficiency of the unit in question.
  3. To provide knowledge of computational tools used for assessment of the unit’s performance.
  4. To demonstrate how the models and tools of efficiency measurement can be used for performance evaluation in marketing, financial management, operations management, public sector, etc.
  5. To develop problem-solving skills, so reinforcing understanding of theoretical concepts and respective computational models.

Knowledge and skills / Learning Outcomes:
By the end of the course module the students should gain knowledge of various performance concepts and corresponding operational models. They will obtain an understanding of computational techniques appropriate for assessment of performance and enhance their ability to analyze the real life operation of the units in question. Thus, they should be able:
  1. to construct the model for measuring the unit’s performance adequate to specific perspective of the analysis;
  2. to use correctly empirical data on the unit’s performance for evaluation of specific types of efficiency;
  3. make adequate judgment on the unit’s performance according to results obtained from respective quantitative model.

Coursecontent: / Topic 1. Performance Management and Performance Measurement: An introductory overview
Topic 2. Economic underpinnings for Performance Measurement
Topic 3. Stochastic Production Frontier Analysis (SPFA)
Topic 4. Data Envelopment Analysis (DEA)
Topic 5. Aggregate index numbers (IN)
Topic 6. Application of SPFA, DEA and IN models for performance evaluation in marketing, financial management, operations management, public sector, etc.
TeachingMethods: / lectures, exercises, independent learning, class and home assignments, tutorials.
GradingPolicy: / Midterm exam: / Written test
Final exam / Open book written test
In class presentation and homeworks / The students will have to make a presentation of application of SFA, DEA or IN methodology for evaluation of the performance of operating unit relevant to the concentration area of their studies. The presentation can be produced by teams up to 3 persons. Homeworks are due before the deadlines. Late homework gets no credit.

The final grade in the course will be estimated as the aggregate of all (mentioned above) evaluations with the following weights:

MidtermExam / 0,10
FinalExam / 0,7
In class presentation and homeworks / 0,20
The result of each type of evaluation is measured by the rate of accomplishment of the tasks included in respective evaluation.
Required reading: / Coelli Tim, D. S. PrasadaRao, George E. Battese. An introduction to efficiency and productivity analysis, 2nd edition – New York: Springer, 2005. – 356 p.
Handbook on data envelopment analysis. /Ed. by William W Cooper, Lawrence M Seiford and Joe Zhu. – Boston-Dordrecht-Lancaster: Kluwer-Nijhoff Publishing, 2004. – 593 p.
Performance Management: Multidisciplinary Perspectives. //Ed. By Richard Thorpe and Jacky Holloway . – New York: Palgrave Macmillan, 2008. – 331 p.
Optional reading / Carton R.B., Hofer C.W. Measuring organizational performance: Metrics for entrepreneurship and strategic management research. – Cheltenham, UK- Northampton, MA, USA: Edward Elgar Publishing Ltd., 2006. – 276 p.
Cooper William W., Seiford Lawrence M., Tone K. Introduction to Data Envelopment Analysis and Its Uses. With DEA-Solver Software and References. – New York: Springer, 2006. – 354 p.
de Waal, Andre. Strategic performance management: A managerial and behavioural approach. – New York: Palgrave Macmillan, 2007. – 414 p.
de Waal, Andre. Power of performance management: how leading companies create sustained value. – New York-Chichester-Weinheim-Brisbane-Singapore-Toronto: John Wiley & Sons, Inc., 2001. – 335 p.
Farrell M. J. The Measurement of Productive Efficiency. //Journal of the Royal Statistical Society. Series A (General), Vol. 120, No. 3 (1957), pp. 253-290/