BUSN11080 Managing Organisational Health Assignment Sample 2024
Introduction
Performance measurement in an organisation can be referred to as the processes of collecting, analysing and reporting information of a group or individual through which performance can be analysed for undertaking appropriate means of driving efficiencies. Performance measurement system of organisations enables the companies to understand limitations and strong points, which can be nurtured according to the benefit of the company.
Thus, this essay would significantly shed light upon the performance indicators that are used in various organisations for measuring performance. Additionally, various advantages of utilising performance indicators to monitor and measure organisational performances would be discussed in detail along with its disadvantages.
The thesis statement of this essay is to determine whether performance indicators provide a positive impact on an organisational performance or not.
Discussion
Key performance indicator (KPI) can be referred to as the measurable value of a company. KPIs can be utilised by the companies to understand the effectiveness or efficiency of the company in achieving its goals and objectives and also through lean approaches (Cruz Villazón et al. 2020).
Several organisations use KPI for evaluating their success through the performance rate of organisations. Additionally, it needs to be stated that employees are one of the most crucial elements of the organisation that needs proper supervision in enhancing their performances for achieving efficiency and success. With accumulated efforts of employees, the organisations are able to reach their objective within a predetermined time-frame.
Thus, evaluation of their performances is essential for understanding the capabilities of production companies and others (Verhaelen et al. 2021). On the other hand, high-level KPIs in most of the cases, focus on analysing the overall performance of a company; whereas, low-level KPIs focus on departmental processes such as sales, HR, marketing and others.
On the flip side, with the advancement of technologies, analysing performances of organisations have become easier through incorporation of KPI software in organisations, companies can analyse their performances at ease (Céspedes-Lorente et al. 2019). For instance, a software company that wants to analyse its performance, can use KPI to understand its year-over-year revenue growth.
On the contrary, a retail store can place more value on same-store sales in terms of its best KPI metric for gauging its growth. Thus, different companies tend to have different KPI techniques for analysing their growth in the market. Moreover, different types of KPIs are present to measure different sections of a business, such as financial metric, which is significantly known to focus on profit margins and revenues.
Other than financial metrics, other KPIs are customer metrics and process performance metrics and others that deal with customer satisfaction, customer retention and other customer related concerns along with monitoring operational performances respectively (Haber and Schryver, 2019). Utilising KPIs have various positive implications on organisations.
One of the most crucial advantages of utilising KPI in organisations is that it can assist in quickly understanding complex issues of the companies and apply systemic management practices (Ibatova et al. 2018). KPIs have the capability to assess several intertwining processes which alternatively helps in saving money and increasing organisational efficiency.
Additionally, KPIs assist in formulation of sustainable goals and analysing their implementation for achieving best for the companies (Hristov and Chirico, 2019). Communication also becomes efficient with the use of KPIs and along with that, it also provides a scope for sound decision making. Nevertheless, it can be said that KPIs are extensively easy to formulate and its advantages are immense, which intrigues organisations to adopt and facilitate.
Even, big companies like Amazon and others use KPI for analysing their performances. Amazon has been using KPI for analysing their performances and increasing their efficiencies in case of any errors or issues that can be witnessed in the company.
The most used KPI in Amazon are in regard to analysing rate of order defects, cancellation rate, rate of delayed delivery, returns from dissatisfied customers, reimbursement rate and several others. Through these ratings, Amazon analyses its operations and initiates action towards rectifying any defects and increasing their performances. With utilisation of these KPIs, Amazon is significantly growing and expanding in the market. From 2004 to 2021, the net revenues of Amazon’s e-commerce sector and sales have tremendously increased. As per the last reported year, the multinational e-commerce giant has earned net revenue of about $470 billion, which was $386 billion in 2020 (Statista, 2022) (Refer to appendix 1).
Through constant improvement in performance, the company has been able to come up to this position in the market, gaining a huge competitive advantage over its competitors.
Additionally, Google also uses KPIs to monitor, analyse and optimise the behaviour of users on the websites. Furthermore, these metrics also help website managers of Google in operationalising their goals of marketing. Through KPI, Google also analyses the number of new users reaching the websites along with returning users (Refer to appendix 2).
Several companies use KPI to achieve growth in their distinctive operations, and Google as well has utilised KPI for analysing performance and increasing efficiencies, which has resulted in significant growth of the company. As per the report of Fiscal year 2021, Google’s revenue has amounted to $256.7 billion (Statista, 2022). Even over the years since 2009, Google has been able to increase its revenues through the effective use of KPIs (Refer to appendix 3).
Thus, it can be analysed that the advantages of KPIs are immense for various companies and the results of their growth can be significantly witnessed. Furthermore, as per the performance measurement of the companies are concerned, goal-setting theory can be analysed for understanding the areas of performance in-depth.
Goal-setting theory is mainly based on the idea that setting a specific goal and appropriately measuring that goal is far more efficient that setting unclear goals and measuring it. Five principles are present in the goal-setting theory established by Locke that needs to be followed for enhancing efficiencies of the companies (Miller, 2020).
The principles can be defined as clarity, challenges, commitment, feedback and task complexity, which needs to be followed by the companies to achieve their goals in a significant time. Furthermore, goal-setting theory is such a theory, which needs indulgence of employees, supervisors, aligning rewards, feedback, coaching and others (Refer to appendix 4).
Thus, with the help of goal-setting theory, the goals of the companies can be systematically incorporated and with the help of KPIs, the measurement of the success rate of achieving the goals can be analysed and measured. However, KPIs have certain disadvantages which need to be considered by the companies for achieving best efficiencies.
One of the biggest disadvantages of incorporating KPIs in the organisation is that it is time consuming. The formulation of KPI is simple; nevertheless, it takes a significant amount of time to analyse the progress areas. Incorporating KPI would not be able to showcase success in a day or two. It would take a significant time for understanding its positive or negative impacts on the companies (Kaur and Kaur, 2018).
Furthermore, KPIs have a high learning curve, which signifies that application of KPI in organisation needs experience and skill. Thus, organisations that are new to using KPIs need to start at a slow pace. KPIs can be extensively useful, but overburdened with several KPIs at once can create an issue with proper collaboration and effectiveness.
On the other hand, KPIs are also used on analysing the performance of HR, which to a certain extent impacts positively. However, judging an employee solely based on the individual’s performance can create issues with demotivation and lack of interest towards work, which can even result in employee turnover.
Employees are the essential assets of the company; thus, combination of all the measures in a systematic manner is essential for visualising its best benefits. Consequently, emphasis on performance measurement extensively can result in lack of commitment from the employee’s side and also decreased level of output along with motivation (Kaur and Kaur, 2018).
Furthermore, regular follow up of the KPIs is essential for analysing whether the employees and other individuals are aligning their task. This would take up a lot of time for implementation again from the starting phase. Additionally, with the time and trends of the market, goals of the organisations tend to shift.
Thus, a shift in goal would demand a shift in the KPIs, which would make the management of companies to set KPIs from the beginning, consuming a huge amount of time. The added time and effort can divert the focus of the companies towards other essential factors as well such as procurement of resources, employees, customers and others.
Conclusion
From the above essay, it can be concluded that KPI has various implications towards the development and growth of different companies. Several companies use KPIs in different areas of departments. Through KPIs, continuous monitoring of the performances can be done alongside achieving higher efficiencies of organisations.
On the other hand, certain negative implications are present, which needs to be managed efficiently for bringing forth the positive implications of the KPIs. Thus, it can be stated that performance indicators are essential for adoption in companies, as it can provide several positive implications.
References
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Cruz Villazón, C., Sastoque Pinilla, L., Otegi Olaso, J.R., Toledo Gandarias, N. and López de Lacalle, N., 2020. Identification of key performance indicators in project-based organisations through the lean approach. Sustainability, 12(15), p.5977.
Datapine, 2022. GOOGLE ANALYTICS KEY PERFORMANCE INDICATORS AND METRICS. [Online]. Available at: <https://www.datapine.com/kpi-examples-and-templates/google-analytics#:~:text=A%20Google%20Analytics%20KPI%20is,operationalization%20of%20their%20marketing%20goals.> [Accessed on 6 March 2022]
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Haber, J. and Schryver, C., 2019. How to create key performance indicators. The CPA Journal, 89(4), pp.24-30.
Hristov, I. and Chirico, A., 2019. The role of sustainability key performance indicators (KPIs) in implementing sustainable strategies. Sustainability, 11(20), p.5742.
Ibatova, A., Kuzmenko, V. and Klychova, G., 2018. Key performance indicators of management consulting. Management Science Letters, 8(5), pp.475-482.
Indeed, 2021. What Is Goal-Setting Theory? Principles, Pros and Cons. [Online]. Available at: <https://www.indeed.com/career-advice/career-development/goal-setting-theory#:~:text=Goal%2Dsetting%20theory%20is%20a,effective%20than%20setting%20unclear%20goals.> [Accessed on 6 March 2022]
Kaur, G. and Kaur, H., 2018, September. Factual dimension identification and usage for real estate framework. In 2018 2nd International Conference on Micro-Electronics and Telecommunication Engineering (ICMETE) (pp. 23-27). IEEE.
Miller, A.M., 2020. Investigating the Connection Between Achievement Goal Theory and Goal-setting Theory. Hispania, 103(3), pp.387-402.
Statista, 2022. Annual net sales of Amazon 2004-2021. [Online]. Available at: <https://www.statista.com/statistics/266282/annual-net-revenue-of-amazoncom/> [Accessed on 6 March 2022]
Statista, 2022. Google: global annual revenue 2002-2021. [Online]. Available at: <https://www.statista.com/statistics/266206/googles-annual-global-revenue/> [Accessed on 6 March 2022]
Verhaelen, B., Mayer, F., Peukert, S. and Lanza, G., 2021. A comprehensive KPI network for the performance measurement and management in global production networks. Production Engineering, 15(5), pp.635-650.
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