How to measure departmental performance in an organization? Be it a cost center/support function, or a business unit (sales/marketing dept)?

The best way to measure departmental performance is through a Company Performance Report which should be reviewed by management on a monthly basis.

This report should consist of sales, discounts, gross margins, expenses and profitability and all these elements should be tabled and in comparison to targets (for the month), and comparison to last year (same period). Moreover the report should also show what the department contributes to the overall profitability of the company.