6. Performance Indicators

Question 1

Organisational performance?

Answer 1

• Business performance often centres on bottom-line objectives
• However, the proper evaluation of organisational performance requires the use of several additional management concepts.

Question 2

EVALUATION OF PERFORMANCE:?

Answer 2

Business performance is more than increasing profits/sales. To evaluate an organisation properly we need to think of a number of other management concepts.

• Efficiency:
o The way the organisation uses its available resources to achieve its goals/objectives.

• Effectiveness:
o The degree to which an organisation achieves its stated goals and objectives.

o Productivity: A quantitative measure of the relationship between resource inputs and outputs.

Question 3

EVALUATION OF PERFORMANCE

Measuring performance?

Answer 3

• Any performance measure must be relevant, valid, and reliable and deliver valuable information.
• All KPIs should be comparative and may be compared to changes in KPIs over time.

Question 4

Effectiveness and efficiency?

Answer 4

Organisational performance can be seen as consisting of two important dimensions: effectiveness and efficiency.

■ Effectiveness refers to an organization ability to formulate and achieve objectives—that is, to achieve the right sort of outcomes.

• An organization is effective to the extent that it is achieving its stated objectives.
• Refers to an organization’s ability to set and achieve its objectives appropriate to the business environment. This depends on an organization strategic management.

■ Efficiency refers to the use of resources (money, time, etc.) in achieving objectives.

• An organization is efficient to the extent that it achieves its objectives at the lowest possible cost, using the minimum quantities of resources.
• Refers to an organisation’s ability to use resources such as labour, equipment in order to achieve its objectives at the lowest possible cost. Productivity is an important aspect of this.

Question 5

Effectiveness and efficiency

Key Performance Indicators (KPI) ?

Answer 5

More precise and measurable data to evaluate the performance and improvement of a business. These can be financial (profit) or non-financial (job satisfaction). Benchmarking can also be used, where performance is compared to that of a competitor for example revenue figures.

Question 6

Key Performance Indicators?

Answer 6

• Measures the progress towards the achievement of goals and outcomes.
• Can use qualitative (e.g. sales, market share, productivity) or quantitative measures (e.g. staff turnover, satisfaction surveys).
• Modern management theory recommends that employees should be
• involved in choosing and establishing performance indicators,
• that indicators should be realistic and achievable
• and that employee rewards should be based on improved performance

• Performance indicators provide more precise and measurable data to evaluate performance and improvement.

• Performance indicators are also used for benchmarking.
-Benchmarking is a process in which an organisation compares its own work outcomes with similar work in other organisations

Question 7

Why do organisations use KPIs?

Answer 7

• To determine whether resources are used properly and to see whether budgets and forecasts are being met or exceeded.
• To make amends if needed.
• Compare employee behaviour to standard.

Question 8

Financial KPIs?

Answer 8

• Net Profit
A successful business makes an increasing profit

• Value of Sales
Value of sales should be equal or better than figure planned.

• Value of Assets
A successful business increases its assets

• Share Price
Determined by the public. If share prices increase, then more shareholders want to invest

• Productivity Rate
Measure amount of output per worker per time frame.

• Market Share
Successful business increases its market share.

Question 9

Non-Financial KPIs?

Answer 9

• Employee Satisfaction

i) Staff turnover rate; the rate at which staff leave. Successful business keeps this low.
ii) Results of staff satisfaction survey;
iii) Staff absenteeism;

• Customer Satisfaction

i) Measure of complaints
ii) Results of customer satisfaction survey

• Number of Sales
Successful businesses maximum the number of sales within the limits of production capacity.

• Quality
Successful businesses have a reputation for producing good goods and services.

• Level of Waste
Raw materials in manufacturing and waste of any resources.
Also includes labour, time and money.

• Number of Workplace accidents
An efficient business minimises the risk of harm to staff.