Importance of Assessing the Organization's Performance

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Importance of Assessing the Organization's Performance

By CFO Tech Outlook | Thursday, February 18, 2021

When evaluating the organization’s performance as a whole, some measures need to be implemented so that all components can be monitored and evaluated promptly.

FREMONT, CA: Organizational performance is a unique term that is nevertheless loosely defined. Though the construct relies on several factors connected with each organization, yet the lack of a universal definition makes it complex for professionals to concur about what they mean by organizational performance. Here is a summary of the existing evidence about the financial, social, psychological, and operational perspectives of organizational performance to arrive at a comprehensive definition and roll out interventions to enhance it.

Organizational performance is quantified for various levels of hierarchy and can be evaluated for individuals, groups, and the entire enterprise.  A systematic review of studies published in reputed journals revealed 207 different measures used for assessing performance.  The researchers eventually settled on a multi-dimensional construct of enterprise performance, with financial performance, product market performance, and shareholder return forming three vital aspects.

To answer this question is to define enterprise-level performance. Reports have pointed out that the measures for enterprise performance relied on asking the questions and why they require to measure performance. Some of the reasons why professionals want to measure and report organizational performance are to justify the valid usage of investors’ money, navigate managerial decision making by pointing out the complex areas, compare performances of various functions, projects, and people, and exercise control. Therefore, the definition of enterprise-level performance can change as per the use it is put to.

This development has created one of the most comprehensive definitions of enterprise performance, which couples construct efficiency, effectiveness, and relevancy. Successful organizational performance is thus, where goals are met with optimum resources to fulfill relevant stakeholder needs. To measure organizational performance so firms can improve it. Regardless of measuring organizational performance or the definition of the adopted terms, professionals are looking at means to develop upon past performance. Considering the various levels of performance evaluation, several interventions are recognized to be useful.

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