Modern Business Performance Indicators: Flexibility for Success - Essay Sample

Introduction

In today's dynamic world, the success of a company depends on how flexible it can be to different circumstances. As such, it is vital to evaluate current business performance and consider opportunities for improvement. The indicators used for such evaluations, and the criteria, have undergone significant development over the past years (Velimirovic, Velimirovic & Stankovic, 2011). The traditional business performance indicators are now highly criticized.

In contrast to this, modern indicators of business performance were developed to focus on managing the value of a company. When business performance is being evaluated, the company's character should be taken into consideration. The indicators chosen should be aligned with the company's mission.

Measuring business performance is an issue which many experts focus on. A conflict occurs regarding which performance indicators to use. On the one hand, the traditional approaches focus more on the performance of a company concerning the company's primary goal. The modern approaches, on the other hand, focus more on the connection of the company's activities with the employees (Carlucci, 2010). For the traditional approaches, focusing on company goals is considered to be a form of profit maximization. Therefore, many indicators may be used, even though they may not always be compatible with one another. These indicators tend to show the overall results rather than specific sectors. The modern approaches, on the contrary, focus on the specific indicators needed to show the strategic performance of a company. The value management approach tries to connect the efforts meant to maximize the value so that all stakeholders can enjoy better profit margins.

Therefore, to measure business performance through traditional indicators, the factors must feature those who focus on earnings, cash flow, and profitability. The earnings indicators are the most commonly used option. They are explained in terms of net income, earnings before taxes, the earnings before any interests and taxes, and earnings before interests, taxes, and depreciation (Carlucci, 2010). The cash flow indicators give people information about the company's cash income and expenses. For example, total cash flow, operating cash flow, and free cash flow may be identified. The last indicator group focuses on profitability. It shows profits and includes the return on sales, assets, earnings per share, and others. Since these indicators are focused on accounting data, more specifically on the earnings, they tend to feature a series of disadvantages. It does not take into account the inflation and risk of money and alternative cost. Also, before the value of profitability indicators can be determined, it needs to be compared with opportunity costs.

Modern indicators were developed as a result of the criticism of traditional indicators with their disadvantages. This criticism is as a result of the different valuation of the company concerning the market and performance by considering accounting data (Velimirovic, Velimirovic & Stankovic, 2011). Modern indicators are related to acceptance of the value for capital owners as the topmost goal of an organization. Therefore, the most common indicators feature, discounted cash flow, market added value, total shareholder return, and many others.

How HR Supports the Business to Maintain Performance Through Business Planning and Change Management

Business planning and change management are some of the ways through which HR supports businesses to maintain performance. About change management, HR has a lot of roles to play in the process. The department has a role in re-thinking organizational design to trigger change. It needs to monitor the process and ensure that the change implementation process is happening swiftly (Pateman, 2014). HR must ensure that the company's integrity is not impacted. Also, the changes being made should be in line with the company's goals and strategies. That will ensure that the performance of the organization is not impacted negatively. HR needs to be able to communicate its strategic vision with the finance and marketing departments of an organization. Since it can easily influence change adoption by employing strategic policies in various fields, it is apparent that proper communication is a must. Therefore, even the middle managers must be considered to ensure that communication is effective. Often, these managers get information when it is already too late. The HR needs to ensure that a change process is handled gradually so that all parties can get sensitized on the details of the change process.

To maintain the performance of a company, the HR needs to contribute by recommending a calendar and defining specific milestones that should be reached by both the company and employees over time. That is because the transformation of a business does not happen overnight, and if rushed, the outcomes can be quite costly. Therefore, a step by step approach will ensure that adoption to the changes is swift and without resistance (Goodge, 2006). Change tends to trigger fear and uncertainty in employees and the managers as well. Since it is not easy, the HR needs to anticipate negative reactions if the right planning is not considered in advance. Therefore, to overcome such outcomes, HR should train the managers to become positive change agents so that they can help with the transformation.

HR also plays an important role in business planning, which is also important for ensuring outstanding performance. A business plan explains the steps which a company intends to take to develop over a specified time frame. The focus is usually on how to make business profits and identify risks to be avoided. A reason why some business fails is because of how they focus much on a set of goals that are too narrow. The planning process is often ignored. That is why HR needs to work with the organization staff to ensure that a plan is in place (Goodge, 2006). The plan will ensure that the full potential of the employees is realized in the process. Therefore, the planning process should ensure that the executive focus is also on the vision and values of a company. Therefore, any actions or decisions made will need to be in line with these aspects.

Business Data

Business data sources are important for determining the current position of a company and identifying various opportunities that can be grasped to lead to better outcomes. Mostly, the focus is on internal business data. However, business systems data and structured data are equally important in enabling the planning for the future of a business.

Internal data refers to pieces of information that are generated from within the business. It features areas like operations, personnel, and finances. External data, on the other hand, focuses on the market area. For instance, it considers information relating to customers and business competitors (Lowry, 2015). Therefore, statistics and questionnaires will be very important in this case. The internal data is considered to be much more valuable than external data since it features the actual company situation. The external data is not always as accurate, and it is sometimes based on assumptions (Carter, 2012). However, both of these options are quite helpful in business planning. Internal data will enable one to run the business and optimize operations. External data, on the contrary, will aid in providing a better understanding of the customer base and competition status.

Internal data is assessed by considering the HR metrics such as employee performance, productivity, and other important sectors. The percentage of profits experienced over the past month or fiscal year may be a good source. Once assessed and used to inform the planning process, this data source will help a company to improve its efficiency and productivity (Pateman, 2014). That is because the areas of failure will be identified, and research will be conducted on how to bring about changes to this section. The steps for change are what will be included in the business plan. That is what will be used to guide employee behavior as these will be aligned to the strategic goals of a company.

Sales data is an important consideration for the planning process. It may include information such as distribution channels, profitability, price points, customer information, and the gaps between the needs of consumers and the products being offered. Upon being assessed, his information may help a company to identify changes in sales trends, thereby prompting a change in the marketing campaigns (Carter, 2012). For example, when a company notes that the sales to a particular population of people aged 30 and over have increased, it may help to trigger the need for an updated marketing campaign focusing on this new demography that had previously been ignored. The internal source of data will have helped in identifying a new target population that the company did not think would be productive.

As for the external business information, the focus will be on print information, including books and periodicals. The current product offering and the industry in which the company exists will be the key to identifying the right external resources. The industry information will be collected, as well as the performance of other companies that have been featured as trying to operate in it. The challenges and opportunities which the companies faced will be highlighted. This information is important because the current company will know what to expect in the industry, thereby enabling proper planning for the events. For instance, in a company that exists in a country where political turmoil is frequently experienced, the print information will be able to highlight the specific challenges that need to be prepared for. The performance of other similar companies in this environment will be highlighted, such as the financial outcomes, any losses experienced as a result of civil war, and so on. If the company was able to recover or not is also an important piece of information to consider. Finally, lessons that can be learned from these companies will inform the business planning process by ensuring that the current company does not make similar mistakes. Hence, the print information will be used to aid the planning process by analyzing the various companies that exist under similar circumstances as the current company (Pateman, 2014). It will highlight the important steps that must be taken to prevent an impact on the performance of a company.

Lastly, the final source is government resources. The government offers numerous pieces of information across various subjects that can be very useful for business planning. Most of the government-related information is available online. Businesses need to be in line with various standards, laws, and regulations that ensure the operations and practices do not go outside of what is expected by the law. Therefore, it is important to keep up with the legal and regulatory government trends to avoid losing licenses and work permits. It will also help in avoiding possible lawsuits against the company that may have turned out costly. These government-based resources are available on specific websites such as OSHA.gov or EEOC.gov (Carter, 2012). Every government agency tends to feature a special website. Therefore, depending on what is required, HR can simply get to these websites and use keyword searches to get the information they need. For example, if the organization is a medical institution, it will need to ensure that practices are in line with the medical professional standards as stipulated under th...