Evolution of Organizational Performance Metrics

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Historical Performance Measures

Profit

The metric of profit has likely not changed much throughout the 20th century. It remains one of the most important measures of success to businesses because it often determines whether it can continue operating in the long term. How it is measured, such as gross, operating, and net profit, has also remained the same.

Rate of return

The rate of return is also calculated in the same manner as before, but it may have become less significant recently. Ferreras and Crumpton-Young (2017) highlight scholarly views suggesting that the metric is misleading because it does not identify specific areas for improvement. Regardless, it is used to evaluate the overall success or failure of an initiative.

Inventory turnover

Inventory turnover used to be less prevalent than it currently becais use of the dominance of financial measures. Ferreras and Crumpton-Young (2017) indicate that the change happened in the 1990s with the introduction of Just In Time and Total Quality Management. These methods favor nonfinancial measures to identify areas that can be improved, leading to their increases in prominence.

Accident frequency

Accident frequency can serve as part of an effective set of safety measures. The BMW Group, in particular, uses it as part of its broad organizational performance measure package (Warren et al., 2017). While the measure has existed for a long time, it has become more prominent as accidents were identified as a significant performance factor.

Employee satisfaction

This metric is among the more recent ones, as management has shifted from a purely operational perspective to a more human-oriented one throughout the 20th century. Compared to the 19th century, when worker well-being was a minor factor, it is much more prominent nowadays. Their satisfaction is one of the critical components of this concept in addition to other aspects such as their health.

The performance measures for a contemporary organization

The authors organization uses three of the measures listed, omitting inventory turnover and accident frequency, as well as a variety of others. Inventory turnover is not relevant to the business because it does not operate with a physical inventory or sell material goods. The reason for the second omission is that the companys operations do not involve accident-prone physical labor, which is outsourced to contractor companies where necessary. These businesses manage their performance independently, presumably considering accident frequency as a significant metric. About the three other metrics, they are general items that should be considered by every company, and the authors organization fulfills this directive. These items form part of the basis of the organizations overall performance evaluation, enabling it to provide a broad picture before considering industry-specific and more narrow indicators.

Three of the measures in the authors list either did not exist at the beginning of the 20th century or were not considered as important as they are today. These are inventory turnover, accident frequency, and employee satisfaction. The first was likely still relevant to businesses that made and sold fast-spoiling goods, but the concept has since expanded to most physical good sellers. On the other hand, accident frequency and employee satisfaction were generally considered irrelevant because of a climate of general disregard toward workers. However, management has evolved since then due to legislative and competitive pressures. Leaders recognized the value of the workforce to the organization and its ability to affect business performance substantially. As a result, businesses have moved toward a more human-oriented perspective, benefiting both themselves and their workers.

References

Ferreras, A. M., & Crumpton-Young, L. L. (2017). Company success in manufacturing organizations: A holistic systems approach. CRC Press.

Warren, C., Reeve, J. M., & Duchac, J. (2017). Accounting (27^th ed.). Cengage Learning.

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