Performance report definition
/What is a Performance Report?
A performance report addresses the outcome of an activity or the work of an individual. The report may compare actual outcomes to a budget or standard, as well as the variance between the two figures. The recipient of a performance report is expected to take action when there is an unfavorable variance. A key part of a performance report is the baseline from which variances are calculated. If the baseline is not reasonable, then any outcomes derived from it will be invalid.
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Advantages of a Performance Report
There are several reasons why most organizations issue performance reports. First, they focus attention on issues that are below expectations, bringing these items to the attention of both managers and employees. Second, they quantify issues, so that report recipients can tell if the spotlighted items represent significant concerns that warrant immediate attention. Third, they foster communication, since they are forcing the report recipient and responsible manager to discuss the highlighted issues. Finally, the preceding points make it much more likely that the items contained within performance reports will be dealt with - if not reported, they tend to persist for long periods of time.
Types of Performance Reports
The main types of performance reports that a business might use are as follows:
Budget vs. actual report. This report compares actual financial results to budgeted amounts for a given period. It highlights variances in revenue, expenses, and profits, allowing managers to identify areas over or under budget. The report supports decision-making by pinpointing where corrective actions or reallocations may be needed.
Departmental performance report. This report evaluates the performance of individual departments, such as sales, marketing, or production. It typically includes metrics like costs incurred, output achieved, and departmental goals met. Managers use this report to assess operational efficiency and hold department heads accountable for results.
Profitability report. This report analyzes profit levels by product, service line, customer segment, or geographic area. It helps identify which areas contribute most to the company's bottom line and which may need improvement or discontinuation. This insight supports strategic decisions about pricing, investment, and resource allocation.
Variance analysis report. This report focuses on the differences between expected (standard or budgeted) and actual performance, especially for cost and revenue items. It breaks variances into components such as price, quantity, or efficiency variances. Managers use it to investigate root causes and improve operational controls.
Key performance indicator (KPI) dashboard. A KPI dashboard summarizes critical performance metrics in a visual format for quick review. It includes indicators such as sales growth, customer retention, inventory turnover, and return on investment. This report enables real-time monitoring and helps leadership stay focused on strategic objectives.
Examples of Performance Reports
Examples of performance reports are as follows:
An employee receives an annual performance report, detailing her activities versus her original action plan.
A project manager receives a periodic performance report, noting cost and time overruns as of the latest project milestone.
A city government issues an annual performance report, showing the services provided by each of the various city departments.
A sample performance report that shows the profits generated by a group of retail stores appears in the following exhibit. This report is useful both for store managers and regional managers; they are both interested in enhancing store performance, and will probably use the results shown on this report to determine why the results of the Freeport store are so good (or, alternatively, why the results of the Muncie store are so bad).
