Performance measurement practices in selected Eritrean manufacturing enterprises
Weldeghiorgis, Kidusan Yohannes
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Performance measures in the past primarily focused on production and were aimed at attaining increased short-term operational efficiency in terms of financial indicators. This type of measurement is too narrowly focused as it ignores critical measurement indicators that makes or breaks the company such as human capital, processes, customer interface, etc. In this regard most African countries are finding it extremely difficult to compete in the dynamic and changing global business environment. This study aims to assess to what extent Eritrean manufacturing enterprises use integrated performance measures, extent of its utilization and perceived relevance related to their actual financial results. In this regard an integrated model such as the balanced scorecard approach (financial, customer satisfaction, internal process/operational and employee satisfaction measures) was selected as reference for the study. A survey was done to gather data. Qualitative and quantitative techniques were employed for analyzing the data. The specific methods of data analysis include descriptive statistics such as tabulation, cross tabulation, computations of frequencies, and computations of percentages as well as correlation and regression analysis. The relative importance of financial as well as non-financial measures in relation to the performance evaluation process in the context of manufacturing enterprises was investigated. The result of the analysis indicated that the majority of respondent enterprises primarily focus on financial measures, using historical data, accounting profits and financial ratios which are compared with industrial trends. The financial measures are considered as having great importance in the respondent enterprises. Despite the fact that the non-financial measures are as important as the financial measures - little or no attention is being paid to non-financial dimensions. The result of the analysis revealed that there is a clear and strong relation between the financial performance and the non-financial performance measures (customer satisfaction, internal process/operational and employee satisfaction). In addition, empirical findings suggested that the non-financial measures are significant explanatory factors of financial performance. More importantly, findings show that manufacturing plants that consistently employed both financial and non-financial measures performed better than those that do not. Based on the results of the study important policy recommendations are outlined. Manufacturing enterprises have to invest in re-training employees to get motivated and competent people to produce customer perceived product quality as well as continuous improvement of operational processes, which may help the enterprises to compete in today’s dynamic business environment. Generally the study has collected essential numerical evidence for the future development of manufacturing enterprises. Knowledge and understanding of the critical factors underpinning enterprises’ performance can lead to further improvements. In turn this will help the overall development of the national economy.