Performance measurement in service industries helps organisations to improve their competitive advantage through the provision and use of appropriate measures of business performance. It is argued that there are three different types of service – professional services, service shops, and mass services – and that approaches to performance measurement vary between these three.

It is also argued that service managers require or need to adopt a range of measures to evaluate the performance of their business, monitoring the more intangible aspects which contribute to competitive success, as well as the more quantifiable financial results. Six dimensions of service business performance are identified: financial and competitive performance, service quality and innovation, flexibility and resource utilisation.

a) Critically evaluate the advantages and disadvantages of top management setting budgets within a company without the participation of lower-level managers.

b) Prepare a report for the financial controller, highlighting what you consider to be the problems of the current systems of performance measurement, management reporting and setting budgets. State how you consider the systems might be improved in light of the company’s current financial difficulties.