3.1.7 Performance indicators Flashcards
What are Performance Indicators?
These are used to measure how well an organisation is achieving its objectives in certain areas by measuring and reporting information. PIs are used to measure the extent to which an organisation is effective and efficient. You must compare them, and use several, as when they alone they can be misleading
Effiectiveness
to a degree to which an orgainsation achieves its stated objectives
Efficiency
how well an orgainsation uses resources to achieve objectives
Market share (%)
This measures the amount of a particular industry than an orgainsation “owns” in terms of customers – calculated by dividing an organisations sales (in that market) by the total sales of all organisation’s operating in that market (expressed as %). Organisations are always looking to grow their share of the markets in which they operate. E.g. Sportsgirl will find a drop in accessories sales in Febuary from January and will notice that Diva has taken some of their market share.
NET profit figures ($)
This is a financial indicator that measures what profit (money) the organisation has made in sales after all expenses and taxes have been paid. This measure is of vital importance to all organisations, as it demonstrates success in a financial sense of “making money”. E.g. NAB’s net profit for first half of the year in 2011-2012 was 9,000,000,000; the second half they made a net profit of 10,000,000,000 which is a good result.
The rate of productivity growth
Productivity is a measure of efficiency and campres the amount of output produced to the amount of inputs used in production. Productivity = outputs/inputs. The rate of productivity growth measures the change in productivity in one year compared to the previous year (or years). All organisations look to use their resources (inputs) better and therefore to increase productivity over time. Organisations are always striving to be as productive as they can. E.g. Coles adopted new technology (self check outs at their supermarkets) thus cutting staff in order to be more productive.
Number of sales
This measures the total number of sales in a given time frame. It is compared with previous periods. Business would be keen to maximise the number of sales within the limits of the production capacity. Note that this is fragile and that you need to consider macro factors. E.g. 7-Eleven found an increase in the number of sales in December-January compared to June-July, due to the warmer weather in December-January.
RESULTS of a staff survey
These are used to ascertain levels of staff satisfaction or motivation at the workplace. Any increase in staff satisfaction should lead to increases in productivity, better corporate culture, decreases in staff turnover (resulting in reduced costs of recruitment nd training). These results are useful providing tht what you want to know is staff welfare. E.g. The results of a staff survey at McDonalds showed that staff didn’t find the workplace safe, therefore there was an increase in staff turnover.
RESULTS of a customer statisfaction survey
These are used to ascertain levels of customer satisfaction with the product or service produided by the organisation to their customers. High satisfaction or increased satisfaction should lead to: increase in sales, loyal customers or increased maket share. It can determine service and quality but needs carefully targetted questions. E.g. The results of a customer satisfaction survey at David Jones showed that customers were unhappy with the level of customer service, therefore David Jones found a decrease in their market share.
Level of staff turnover
This measures the amount of staff that are leaving the organisation. It is represented as a % by calculating how many people leave an organisation in a given time period (usually a year) over the total number of staff. Staff turnover= no. of staff leaving / total staff. This is a very important indicator for large businesses as high staff turnover is very costly in terms of lost productivity, poor productivity, recruitment and training costs of new employees.
Level of wastage
This refers to the wasted input resources that aren’t used effectively in the prouction of a product or the provision of a service. Wastage can refer to hard waste (costs), carbon emissions, wasted time, wasted effort (such as when a fault occurs) E.g. Coles wasted 5,000,300 apples in their supermarkets in 2011, and in 2012 they wasted 4,900,000 apples therefore their level of wastage is lower.
Number of workplace addicents
This refers to the actual number of accidents occuring at the workplace. These should be categoraised on their level of seriousness – so not just taking number into account but seriousness also. All organisations will look to reduce workplace accidents, if they don’t the result may be high staff turnover (employees feeell unsafe), increased insurance (workcover) costs, low levels of staff morale and therefore low levels of productivity, legal costs, training someone else to fill position, and reputation. This is a limiting indicator, however. E.g. Blint builders had 250 employees throughout 2012, in the first half they had 17 workplace accidents, and in in the second half they had 8 workplace accidents; the seriousness of accidents varied.
Number of customer complaints
Refers to the actual number of complaints about an orgainsation’s products or services. It reflects a lack of customer satisfaction and possibly a lack of “quality control”. Increased numbers of complaints will lead to decreassed market share, declining customer loyalty and increased costs to business having to replace faulty prodcuts or re-provide services. This can be misleading however as how many were sold in the period of time is a contributing facotr. E.g. Nike shoes sold 8 billion shoes in 2011, with 1 billion customer complaints; and in 2012 Nike sold 10 billion shoes with 3 billion customer complaints which could result in declining customer loyalty due to a huge rise in complaints.
