A Guide To Organisational Performance Measures (With Types)
By Indeed Editorial Team
Published 16 October 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
As a business leader, you can improve the operations of a company by tracking its organisational performance measures. Organisational performance metrics document how efficiently and effectively a firm is achieving its goals and using this framework can help you understand the capabilities of employees and teams. Understanding organisational performance can help you ensure that a business is using its resources properly and progressing towards its objectives.
In this article, we list organisational performance measures and explain how they can benefit a company.
4 Types Of Organisational Performance Measures
Here are four types of organisational performance measures you can use to gauge a company's success:
Financial metrics help a company evaluate its profitability and overall effectiveness at making profits. One of the key financial metrics you can find for a company is the return on assets. The return on assets is a ratio that shows how profitable a business is in comparison to its total assets. Another financial metric you may calculate for a company is the return on equity, which is the result of dividing a company's net income by its shareholders' equity. This figure reveals a company's return on net assets since its shareholders' equity equals a business' assets minus its debts.
Still, you can find the return on investment for a specific project. You can calculate this figure by dividing the monetary benefit of the investment by the investment's cost. The resulting figure is a ratio that shows the investment's value. Financial performance measures are useful to a company's leaders who can use the information to make operational changes and improve profitability. Shareholders can use public financial measures to determine whether to invest in specific companies. When you present current financial measures to interested parties, you can also provide past metrics so that they have reference materials to review.
Internal business process measures
Internal business process measures are metrics that quantify a company's operations. For example, a company that sells a product may calculate how long it takes employees to manufacture one unit. If the product is complex, the company may decide to time each production stage. If the product is relatively simple and does not contain multiple components, the company may time its completion as a whole. A company may choose to compare its production times to those of a competing business. A service-based company may also time how long it takes employees to deliver the service to its customers.
Another internal business process measure is how long it takes for a company to release new offerings to its customer base. A business can measure how long its team takes to research and test a new product. The standard amount of time it takes for a company to bring an offering to the market may vary between industries. For example, a company that makes small and affordable children's toys may only need a couple of weeks to introduce a new product. Alternatively, a company that makes intricate gaming computers may need several months to launch a new product.
Customer measures are organisational performance metrics that relate to customer retention, satisfaction and attraction. Gathering data on customer measures can inform business leaders of the perceptions that customers have about a company. A few common customer measures include the number of new customers, the number of repeat customers and the percentage of repeat customers. If a business notices that it has a high percentage of repeat customers but low numbers of new customers, its leaders may determine that it needs to renew its marketing efforts to a broader audience.
Customer measures can also help a business refine the experience for the customers it has. For example, imagine a new clothing retail store that has been open for one month. It has brought in lots of new customers in comparison to its other locations thanks to effective advertising techniques. The management team reviews its records of customer phone numbers for each transaction and finds that there have been very few repeat customers. The management team decides to make the store more welcoming by adding ambient music and making the lighting brighter to make the store a more inviting location.
Learning and growth measures
Learning and growth measures can help a company determine how successful it may be in the future. A business can use the learning and growth measures it obtains to determine what improvements it can make and where it can create additional value for its customers. One example of this kind of metric is the number of skills that new employees learn each year. Another example of this kind of metric is the number of new employees that assume the same role within a company.
For instance, imagine a grocery store only has 10 employees at the beginning of a year. If the company has enough resources to employ 20 new cashiers by the middle of the year, this can indicate significant business growth. You can also imagine that this same company introduces a tuition reimbursement programme to encourage its employees to attend university. This system can help the grocery store develop the skill set of its employees. It may also encourage them to transition into higher-level management roles or give them the knowledge they need to devise new innovations that can benefit the company.
Benefits Of Using Metrics To Track Organisational Performance
Here are some key benefits that companies experience when they use metrics to track organisational performance:
Assess their survival and growth
Organisational performance metrics can help a company determine how well it may grow in the future. It can also predict if it may encounter issues with staying in business if it is currently suffering in specific areas. While current metrics cannot foretell future circumstances with certainty, they can provide some guidance that business leaders can use to make informed decisions.
Determine their environmental impact
A company can use organisational performance metrics to determine the impact that its operations are having on the environment. For example, a hardware company may find that it has an assembly line that produces each drill in under one minute. If it also measures waste as part of its internal business process measures, it may find that it produces an excessive amount of metal waste. Even though it is producing products efficiently, it may determine that it has to make adjustments to its manufacturing process to reduce waste and lessen its negative environmental impact.
Gauge their relevance
A company can also use organisational performance metrics to gauge its relevance within its particular industry. It may compare its instances of repeat customers to other companies. It may also assess its number of new customers within a specific period to determine how attractive the company and its offerings are to its customer base. If business leaders find shortcomings, they can organise their teams to devise ways to increase the company's appeal to new and repeat customers alike.
Analysing Organisational Performance At Different Levels
Professionals can improve upon past performance for a company by looking at narrower levels throughout the organisation. For example, managers can assess how well individuals are performing at the individual level. They may measure the successful completion of certain tasks and whether employees complete assigned tasks with creativity, resourcefulness and enthusiasm. Individual metrics tend to be more subjective, but they can still offer valuable insights.
Managers may also measure organisational performance at the team level. Supervisors can gauge the leadership and adaptability amongst teams. They may use their findings to restructure teams so that each group can better contribute to the organisation's smaller tasks and broader objectives.
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