An analysis of an organisation’s performance as compared to goals and objectives. Within corporate organisations, there are three primary outcomes analysed: financial performance, market performance and shareholder value performance (in some cases, production capacity performance may be analysed). See here for more details.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA): A non-GAAP (Generally Accepted Accounting Principles) measure of profitability, which can be used to compare companies and industries from the external/investor perspective. This measure is best used in combination with other financial performance measures (see here for more details).
EBITDA = Revenue - Expenses (excluding tax, interest, depreciation and amortization)
Earnings Before Interest and Tax (EBIT): a non-GAAP (Generally Accepted Accounting Principles) measure of operating profit. This measure does not include tax burden or capital structure.
Revenue – operating expenses
Net income + interest + taxes
Organisation efficiency: this measures how well the organisation is using its resources to meet its strategic objectives. This includes both its financial and human resources (see here for more details).
Organisation efficiency may include:
Cycle time: the time it takes for a process to be completed
Cycle time = Total time for processes / total number of processes undertaken
Average response/customer service time: the average time it takes to complete the desired service for the customer/client.
Total time serving customer / total number of customers
Organisation effectiveness: this measures the extent to which the service provided meets the objectives and/or expectations of the organization and/or a customer (see here for more details).
Organisation effectiveness may include:
Coverage: number of customers/clients served, often by geography, business unit etc
For instance, number customer in a specified region.
Quality: the proportion of service provided without error.
- The proportion of services provided without a complaint or the ratio of complaints to total services provided.
- The proportion of service produced at a specified standard.
- The proportion of services provided with compliments from customers.
Customer/user service: Customer/user satisfaction can be measured using a predefined survey.
Market capitalisation: this measures the market value of a company’s outstanding shares, and an indicator of company size.
Stock price x total number of shares outstanding
Share performance: measures of the value of company shares, and therefore the value of the organisation.
Share performance can include measures such as:
Earnings per share: a measure of company profit. This shows the amount of money being made per share, but does not include information about expenses.
Earnings per share = (Profit – dividends) / number of outstanding shares
Price to earnings ratio: a measure which compares the current price of the company to its per-share earnings.
Price per share / Earnings per share
Return on equity: a measure of a corporations profitability. This measures reveals how efficient an organisation is at making profit.
Profit / Amount of equity (investment)
Compound annual growth rate: a measure of the annual growth of investments.
Research suggests that small changes in management can have an enormous impact on productivity and performance, equivalent to 25% increase in labour, or 65% increase in invested capital.
Find out more about the McKinsey research below:
For practical information on understanding and measuring performance in your organisation, download the CMI checklists below:
Introducing performance measurement
Implementing a balanced scorecard
For more information on how engagement, leadership styles and risk and ethical awareness can impact performance, read the following research.
Coca-Cola Enterprises has a huge global operation with multiple business units. The organisation sought to develop a centralised HR analytics function to serve eight countries. Read the full case study to find out how the HR analytics team were able to increase data maturity and improve business performance.