Tuesday, July 14, 2009


Performance appraisal in service industries.

Service businesses do not produce any tangible output and, as it is difficult to measures performance, the tendency has been to concentrate on the easily quantifiable aspects of cost and productivity.

However, the non-tangibility of output makes even productivity difficult to measure. Fitzgerald et al advocate the use of a range of performance measures covering six “dimensions

(a). Competitive performance, focusing on factors such as sales growth and market share.
(b). Financial performance, concentrating on profitability, liquidity and market ratios.
(c). Quality of service, looks at matters like reliability, courtesy, competence and availability.
(d). Flexibility, is an apt heading for organization’s to deliver at the right speed, to respond to process customer specifications, and to cope with fluctuations in demand.
(e). Resource utilization, considers how efficiently resources are being utilized. This can be problematic because of the complexity of the inputs to a service and the outputs from it.
(f). Innovation, is assessed in terms of both the innovation process and the success of individual innovations. In a modern environment in which product quality, product differentiation and continues improvement are the order of the day, a company that can find innovative ways of satisfying customers wants has an important competitive advantage.

Performance measurement for Non-Profit Making Organization (NPMO).

Commercial organizations generally have market competition and the profit motive to guide the process of managing resources economically, efficiently and effectively. However, non-profit making organization (NPMOs) cannot by definition be judged by profitability nor do they generally have to be successful against competition, so other methods of assessing performance have to be used.

Performance is usually judge in terms of inputs and outputs and this tie in with the “value for money” criteria that an often used to assess NPMOs.
  • Economy (spending money frugally)
  • Efficiency (getting out as much as possible for what goes in)
  • Effectiveness (getting done, by means, by means of (a)and (b) what was supposed to be done)

More formally, effectiveness is the relationship between an organization outputs and its objectives, efficiency is the relationship between inputs and outputs, and economy equates to cost control in the commercial sector.

The problems with measuring the performance of NPMOs are therefore as follows.
  • For many NPMOs, particularly government bodies, it is extremely difficult to define their objectives at all, let alone fine one which can serve a yardstick function in the way that profit does for commercial bodies.
  • NPMOs tend to have multiply objectives, so that even if they can all be clearly identified it is impossible to say which the overriding objective is.
  • Outputs can seldom be measured in a way that is generally agreed to be meaningful. (For example, are good exam results alone an adequate measure of the quality of teaching?)