Organisational and Managerial Performance

ENVS1130 E.J. de Renzy-Martin

Foundations of Management December 2002

Coursework 1

Organisational and Managerial Performance

1. How, when, where and by whom should organisational, managerial, product and service performance be measured?

It has never been more important to accurately measure business and managerial performance. Since the post-War renaissance, companies’ prospects of obtaining a competitive advantage have solely depended on a combination of the expertise, knowledge and skills of its staff. There is, however, no single measure of performance in any situation. A large proportion of performance measures are qualitative not quantitative, and therefore value judgements can only be calculated with supportable and justifiable standards. Consequently, it is imperative that the main attributes of those who measure this performance can analyse and interpret the results, with a fundamental understanding of the environment, people, customers, the market- and the organizations’ position within it. This is not possible without the full and latest information, constantly gathered and assessed.

It is important that a central element of this approach is that targets need to be measurable, and reflected on consistently and frequently; but these are not always measurable quantitatively. However, a quantitative output may not always add value:

“Value is derived from innovation, sharing knowledge and reacting quickly and effectively to a new scenario…”

Rigid performance objectives might also become outdated in the dynamic business world of today. Although it would make sense to maintain firm quantitative objectives for certain personnel, notably sales teams, business and managerial operation measurements should be principally qualitative. Japanese companies seem to have progressed with a more suitable model for performance measures, which relies on organisations identifying key indicators, and seeking continuous, regular improvements in these specific areas instead.

“…obstacles do not exist to be surrendered to, but only to be broken.”

The extent to which targets are met is often a matter of external factors beyond any individual’s control. There are many factors that can affect the company or firm’s performance that are beyond any manager’s influence, and the company or firm could make severe losses, or vast profits, through no fault of the person in charge. A large proportion of the time it is due to the state of the economy, and the circumstances in which the given market is operating. It is important to differentiate between what is within the manager’s control, and what might only depend on an economic recession or other uncontrollable factors. Profit margins are therefore a bad judgement, as although this is overtly easy and straightforward to measure; further elements would have to be addressed. A better and more reliable assessment, for example, would be the companies’ position or market standing within its market.

Generally, it is simple to measure the quantitative side of performance, as statistical and financial information are simple to obtain; from databases, surveys, reports and other company materials. The efficiency of the workforce could be measured by the output per person, and by establishing the percentage of market share the manager has obtained. However, it is more important that the manager has achieved the company’s set objectives, cut down costs, and has given adequate returns to stakeholders.

“…success is more than impressive numbers in an annual report.”

Qualitative measures require thorough investigation into the meaning and significance of these figures. Areas of scrutiny might be staff performance, resource utilization and innovation. Monitoring of a manager’s performance must be sustained, with assessment on a regular basis, yet giving enough time for progress to be made. A monthly check on a manager’s managerial performance might be adequate, leaving a longer period for an organizational performance test, as it might take additional time for any significant change to take place in returns on investment.

Another important measure that should also be applied to organization and management activities is motivation, although practically this is very difficult to measure. This means