Performance and Operations Management - Literature review Example

Question 1

Introduction

Undoubtedly, performance constitutes a persistent concern for all actors in the economic sector. Regardless of being a primary concern in the commercial sector, its perception significantly differs across companies depending on particular interests. Typically, the interest of enterprises revolves around selected references, performance measurement, and measurement instruments. At its root, performance measurement acts as a prerequisite that ensures institutional progress. Performance management enables companies to maintain not only sustainable success but also facilitates development. Performance management does not form part of business objectives. However, it remains crucial to the generation of actions that promote the successful realisation of company goals and development. Irrespective of its implication on business performance, performance measurement is a complicated process with a broad range of challenges. Most of these challenges revolve around the designing and implementation of effective performance measures. In spite of these problems, performance measurement remains essential to dynamic organisational performance because it represents the link between corporate goals and decisions.

Performance Measurement

According to Lakri, Dallery, and Jemai (2015, p.20), performance measurement involves the application of numerical facts to authenticate company development. Performance measurement enables companies to establish their progress towards precisely defined organisational objectives. Statistical evidence comprises elements related to facts and the determination of customer perception. For instance, companies realise the measurement of customer knowledge through surveys related to customer satisfaction. As discussed earlier, the type of performance measures that firms undertake depends on their goals, objective, and line of operations. For example, companies in the service industry kick off their performance measurement process by providing a precise definition of organisational services. These definitions may incorporate the level, quality, reliability, and timeliness of the provided services.

Institutions usually aim at assessing the proficiency of their success through performance measurements. Performance management enables companies to examine resource not only acquisition but also their practical deployment in achieving goals and objectives. The analysis of business performance involves a variety of financial and non-financial measures. Harbour (2011, p.7), defines performance measurement as the process of creating measurable indicators. These indicators allow for systematic tracking to examine feasible progress during the achievement of predetermined goals. According to Kuhi, Kaare, and Koppel (2015p. 638), institutions must ensure efficient performance measurement to facilitate successful implementation of organisational strategies. Typically, performance measures revolve around the monitoring of organisational activeness in the fulfilment of goals and the requirements of stakeholder. Performance measurement facilitates dynamic company performance in terms of flexibility costs, value, and quality (Kuhi, Kaare, & Koppel 2015p. 638).

Organisations require an active performance management system, which facilitates the successful implementation of objectives and stakeholder demands. Based on Nowak (2015, p.373), an active performance measurement system promotes the making of informed and efficient decisions. These decisions facilitate not only operational but also strategic management. Notably, performance measurement has evolved over the years. Previously, companies based performance analysis purely on related financial measures. Back then, cash flows, profits, and ROCE were the primary measures involved in performance measurement (Ringrose 2015, p.206). Nevertheless, the evolution has enabled companies to incorporate multi-dimensional in addition to financial measures during performance measurement (Ringrose 2015, p.206). The incorporation of the two categories of performance measures as noted above facilitates both management and the understanding organisation performance to realise predetermined goals.

The development of new performance measurements techniques and frameworks characterise the recent years. As noted earlier, companies depended on on in financial measures in the assessment of performance. Nevertheless, the examination of business success based on profits and cash flows failed to deliver practical results leading to the development of new frameworks Matthews & Marzec 2012, p.7082. Scholars refer to these techniques as multi-dimensional because they involve the incorporation of both financial and non-financial measures. Apparently, the balanced scorecard forms part of the commonly applied technique for measuring the performance of an entity. According to Homburg, Artz and Wieseke (2012, p.59), the balanced scorecard revolves around four distinct perspectives related to internal processes and financial measures (Homburg, Artz & Wieseke 2012, p.59). In addition to financial measures and internal processes, the balanced scorecard also involves the assessment of learning and growth and customer satisfaction (Ringrose 2015, p.210).

Indisputably, the perspectives of the balanced scorecard encompass not only internal but also external organisational activities (Frösén et al. 2016, p.63). Additionally, the balanced scorecard’s elements cover both current and future factors likely to affect the performance of an organisation (Frösén et al. 2016, p.63). Performance management benefits organisations through various ways. However, the most notable advantage associated with performance management revolves around strategic analysis. The evaluation of performance enables companies to ascertain their current financial well-being. In addition to communicating the current well-being of an organisation, the information obtained during performance measurement allows companies to predict its future well-being (Frösén et al. 2016, p.63). Companies such as BP optimize performance measurements to identify factors likely to comprise future prosperity through performance measurement. The companies will then implement measures that will prevent future challenges with the likelihood to compromise success.

According to Frösén et al. (2016, p.65), performance measurement applies to all industry sectors. The process is also applicable to all sizes and types of organisations regardless of their type of operations. Private, public, and non-profit companies should implement as active performance measurement system to facilitate the active realisation of organisational goals. Ringrose (2015, p.208), asserts that the analysis of corporate performance involves a broad range of employees. The involvement of a variety of employees facilitates the actual measurement of company performance. Apparently, the process requires the participation of all departmental heads to represent the opinions of all employees. Irrespective of the involvement of a variety of employees, the management accountant remains essential to efficient performance measurement (Choong 2014, p.88). Apparently, the management controller provides information related to decision-making during the evaluation of performance (Choong 2014, p.4175).

Performance Measures

Gao (2015, p.88) asserts that performance measures explain the potentiality of an organisation towards the achievement of predetermined objectives. Besides the realisation of predetermined goals, performance measures denote organisational progress towards the attainment of institutional policies. Characteristically, performance measures involve numerals that describe the activities of firm and indicators of success. Technically, performance measures are quantifiable, and they usually indicate the cost, amount, and the results of actions that portray organisational success (Gao 2015, p.88). The types of performance measures applied depend on output, outcome, and corporate efficiency. Similarly, performance measures differ across organisations depending on factors related to work environment, employee occupation, and type of business.

The commonly applied performance measures in institutions include graphic rating scales, MBOs, overviews and forced rankings. According to Guni (2016, p.311), overview involves the determination of employee status, advancement opportunities, and compensation. Therefore, performance measures must incorporate methods that will promote accurate and fair assessment of the performance of employees. Measures related to MBOs remain essential to the measuring executive employees in managerial and supervisory positions (Guni 2016, p.313). MBOs begin with the identification of employment goals from the perspectives of employees and their managers. Measures related to forced ranking are not standard in performance measurement due to their dictatorial factors. The method emphasised the grouping of employees into categories based on their performance. Finally, graphic rating scale measures are appropriate for production-oriented work environments such as food and beverage industries (Guni 2016, p.313).

Challenges

At its root, performance management aims at creating and improving the effectiveness of performance among employees. Typically, the process involves team members working in association with their managers in the planning, monitoring, reviewing, and appraising the performance of employees (Ammons, 2015, p.9). According to Brown, Squire and Lewis (2010, p.4180), efficient performance management promotes the active realisation of organisational goals. Performance management incorporates a broad range of measures related to behaviour and traits to facilitate effective measurement of employee and organisational performance. Nonetheless, the process may face several challenges that may compromise the effectiveness of employee performance. Some of the problems that compromise the designing and implementation of efficient performance measures include inadequate integration, wrong design, incompetence, and weak leadership commitment (Ammons, 2015, p.9).

Incompetence

Competence remains crucial to the formulation and implementation of effective performance measures. Apparently, competence facilitates smooth implementation of the performance measurement system in an organisation. Efficient performance measurement requires the application of skills related to the definition of strategic objectives. In addition to strategic goals, effective performance measurement requires adequate possession of competencies related to performance contracts and core competencies. Skills related to the establishment of KPIs that correspond with performance measures are also essential (Brown, Squire & Lewis 2010, p.4182). Similarly, competence involves the provision and receiving of feedback through skills involving active listening and the conducting of appraisal interviews. Most importantly, the designing and implementation of effective measures require adequate possession of competencies similar to performance coaching. Consequently, incompetence and inadequate possession of the skills as noted above will compromise the creation of the behavioural dimensions of performance.

Inadequate Leadership Commitment and absence of Integration

Unquestionably, support related to leadership and commitment remains crucial to the establishment of a smooth performance measurement system. Characteristically, leaders play the role of driving the process and ensuring that performance remains integral to the management of an organisation. In addition to ensuring that performance remains central to organisational management, leaders also set the strategic direction and formulate performance measures. Additionally, leadership promotes effective monitoring and evaluation of corporate performance (Woerrlein & Scheck 2016, p.221). Most importantly, leaders reinforce the performance cycle through reward and reprimand measures. Therefore, insufficient leadership compromises effective implementation of performance measures. On the other hand, poor integration of performance measures into the human resource function, organisational structure, and culture (Woerrlein & Scheck 2016, p.222).

Inappropriate Design

Faulty design is the primary challenge that compromises the implementation of effective performance measures in organisations. Apparently, institutions incorporate systems and tools that do not align with specific needs. Notably, most companies duplicate and adopt performance measurement systems that have worked for other organisations (Poocharoen & Wong 2016, p. 610). They fail to recognise the fact that firms are different and require not only unique but also strategic measures that align with organisational culture and objectives. Companies cannot duplicate performance measures designed for other organisation even if they operate in the same field. Organisations need to embrace intense consultation with a broad range of stakeholders for the incorporation of various opinions. Companies also fail to conduct a pilot test of the performance measures. Pilot tests are crucial because they ascertain the feasibility of the formulated measures (Poocharoen & Wong 2016, p. 610). Companies that incorporate performance measures into their systems without conducting pilot tests risk failure.

Conclusion

In summary, performance measurement is an essential function of any organisation. Performance measurement promotes quality improvement by informing companies about their flaws and areas that require adjustment. In addition to quality improvement, performance measurement supports organisational transparency. Transparency assures stakeholders and other clients of the quality care and performance. Performance measurement also promotes accreditation for the identification of organisational activities that meet the expected standards. Nevertheless, companies need to manage challenges such as wrong designs, inadequate leadership, and incompetence that compromise the designing and implementation of effective performance measures.