Performance indicator financial definition of performance indicator
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performance indicator a proxy measure of organizational performance often used where profit or ‘bottom-line’ indicators are either inadequate or irrelevant guides to performance. Non-profit-making organizations or those with a multiplicity of objectives can find such indicators especially beneficial. Their use has been encouraged in the UK public sector in recent years, though private sector companies can also find them useful to measure and develop their quality of services. In the public sector their primary use has generally been to measure the relationship of inputs to outputs, thereby providing an indication of both efficiency and of the quality of output (effectiveness). Use of these indicators is thought to improve managerial decision-making and resource allocation. However, selection of appropriate indicators can be problematic whilst measurement and recording of output can be difficult. See MANAGEMENT BY OBJECTIVES, BALANCED SCORECARD.