Financial measures
Budget comparisons and analysis
- It involves making structured projections of the expected business activities before a financial year
- It aims at maximizing profits by cutting down operational costs
- It helps in the formulation of strategies and action plan aimed at achieving the set targets
- It creates a picture of the performance of the company and its ability to meet targets
Action
- Policymakers can revise the existing strategies
- They can avoid the recurrence of past mistakes in the future
Return on Investment (ROI)
- It is a mathematical technique for appraising the profitability and viability of an investment
- It is important to persons involved in decision making
- It is important when a decision has to be made regarding an investment to be financed through borrowed money
- It is best for decisions on mutually exclusive investments
Action
- The management only invests in projects with a positive ROI
- Projects are ranked in descending order according to their ROI values
Human resource measures
Employee satisfaction survey
- It establishes workforce job satisfaction
- It considers employees’ attitude towards the organization, compensation, and carrier development opportunities
- It provides the base for future planning
- It provides data necessary for the improvement of employees’ motivation
- Workers can express their dissatisfactions
- The management can evaluate the workers’ opinions and engage employees in the evaluation process
- All employees’ grievances should be considered
Performance evaluation
- It refers to the appraisal of an individual worker’s performance
- Important records include attendance and punctuality records, overtime records, leave records, sales records
- It seeks to determine workers’ suitability and compliance with the organization’s policies
- It provides information to support salary increments, promotions, transfers, demotions, and terminations.
- The management can decide to effect demotions, transfers, or lay off workers based on this evaluation
Market position measures
Market share
- It is the portion of the whole market that a given company controls
- It is important in conducting a market survey
- It determines the kind of customers a company wants
- It helps to decide whether the existing share is enough
- The management makes decisions based on the market share: whether shrinking or expanding
- Managers decide whether to retain or improve the current market share
Size of the company in comparison to competitors
- Companies operate under high competition
- The size of a company determines its competitive advantage
- Knowing the size of competitors will help in understanding their weaknesses
- Thus, it is easy to compete by improving the quality of the products and maintaining good relations with customers
- Competitors information aids in decision-making and strategizing
- It helps in identifying competitors’ weaknesses
Action
By knowing a company’s size, the management seeks to improve the firm’s competitive advantage by:
- Improving the quality of the product
- Revising the credit policy for more sales
- Acquiring new machines to increase efficiency and
- Investing in advertisement among others
Action
- The company may realize that poor working conditions are the barrier to customer satisfaction
- Hence, it can improve the working conditions
- Management may implement strategies to improve product quality
- For a new product, management may decide to spend more on an advertisement, increase its production, or drop it
Product/service measures
Product rate of failure
- It entails a product’s reliability based on its performance and appeals to the users
- It involves gathering information from customers on their perception of the future of a product
- This information is used to predict its survival
- Such information determines the popularity and acceptance of a product, which dictates its future.
- The management can thus take the right steps to avoid rejection of a product.
Action
- The management may decide to change a product’s qualities
- The management may avail spare parts to enhance the durability of a product, hence improving public confidence in the same
- The management may drop the product to avoid losses in the end, which applies if it is proved that the product is likely to fail.
Customer satisfaction survey
- It is an assessment of how well the products offered in the market meet the consumers’ requirements
- It is designed to determine the percentage of satisfied customers dealing with a firm at a given time
- Information on customer satisfaction highlights what needs to be done to improve the company’s profits
- Customer feedbacks help in making decisions on whether to test or drop the product early enough to avoid losses
- A company gathers information to assist in designing strategies aimed at improving products’ quality
Bridging the gap between short term and long term strategies
- A wide gap exists in the performance measures designed to achieve short term and long term goals
- Mostly, organizations overlook necessary strategies to achieve their missions and visions
- SWOT is useful in analyzing these differences
- It involves Strengths, Weakness, Opportunities, and Threats
References
Datta, P. (2012). An applied organizational rewards distribution system. Management Decision, 50 (3), 479-501.
Davies, J., & Kochhar, K. (2002). Manufacturing best practice and performance studies: a critique. International Journal of Operations & Production Management, 22(3), 289-305.