Frequently, in the day-to-day activities of companies, in conversations, meetings and other encounters, we reflect on the performance of the business operations carried out. Subjects such as: meeting the budget, meeting deadlines for delivering orders, the yield of a particular asset or the launch of a new product tend to be very present. In these conversations, we have the habit of using pre-established parameters, such as goals, standards and references, generating the famous performance indicators (Key Performance Indicators), fundamental tools for diagnosing, controlling and directing the improvement of companies to achieve and maintain a competitive advantage (PORTER, 1985).
The fact is that, for companies, a clear definition of objectives is not enough to achieve success. While this is a necessary condition, it is far from sufficient. A well-designed plan is of no use if there is no coherent conduct in day-to-day operations, and the monitoring of indicators plays a fundamental role in this regard.
But not everything is as simple as it seems, since the activities that companies perform are quite diverse. Thus, benchmarks for performance evaluation also have different essences. Realize: “Are the goods produced within specifications? ”, “Are deliveries to customers being made on time”, “Is the machine's productive performance adequate? ”, “Are the commercial teams hitting the target?”.
It is possible to note that the answers to these questions (indicators) are based on parameters of very different natures. While product specification and delivery time are related to customers' expectations and determinations, machine performance is related to the supplier's nominal parameters and the challenge for sales teams is related to the company's desire for revenue (given an expected profitability of shareholders).
It was with the aim of systematizing these different natures that COSTA and JARDIM (2010) proposed a five-dimensional model to group the challenges of operational diagnosis: effectiveness, efficiency, quality, productivity and effectiveness.
Figure 1 – The five dimensions of operational diagnosis
Source: ILOS
EFFICIENCY
The concept of effectiveness refers to the achievement of results in relation to the GOALS of the business, which are nothing more than a quantified interpretation of the available opportunities. Therefore, they are defined by resource users. Effectiveness indicators express the relationship between what has been achieved and the target, for example, sales volume/sales target.
EFFICIENCY
The concept of efficiency refers to the operational efforts in relation to the pre-established STANDARD, parameters inherent to the process, evaluating the rationality and the parsimonious use of the existing resources and, therefore, provided by the resource manufacturer. Efficiency indicators express the relationship between the effort made and the expected standard effort, for example, volume produced/nominal capacity.
QUALITY
The concept of quality refers to the SATISFACTION of stakeholders, that is, meeting their needs and desires, measuring, therefore, compliance with specifications and expectations. Quality indicators express the relationship between what met the specifications compared to the whole, for example, conforming products/produced products.
PRODUCTIVITY
The concept of productivity refers to the COST-BENEFIT ratio between the results achieved and the related efforts to achieve them. It measures how much of the virtually unlimited opportunities in the market have been captured given the limitations of available resources. Productivity indicators express the relationship between results and efforts, for example, total cost/delivered products.
EFFECTIVENESS
The concept of effectiveness refers to the MISSION of a system, evaluating whether or not it has fulfilled the reason for which it was created, whether sustainable value is being provided to the stakeholders to ensure the longevity of the project. Effectiveness indicators, for for-profit companies, express the company's ability to maintain adequate return on investment such as, for example, calculated profitability/desired profitability.
CONCLUSION
It is important to note that performance indicators are not neutral, as they work as incentives, they are capable of inducing behavior. And this can happen for both good and bad. Distorted indicators can generate a bad incentive system, while good indicators can improve the performance of a given system, even without the need for any investment (COSTA & JARDIM, 2010).
Finally, performance indicators are decisive as incentives for behavior and can be responsible for the success or failure of companies. After all, the adaptation of the famous popular saying could not be truer: “Tell me how you measure me and I will tell you how I behave”.
References
COSTA RS and JARDIM EGM: The five dimensions of operational diagnosis, NET, Rio de Janeiro, 2010.
HAYES, R.; PISANO, G.; UPTON, D.; WHEELWRIGHT, S.: Operations, strategy, and technology – pursuing the competitive edge. Hoboken: Wiley & Sons, 2004.
PORTER, ME: Competitive Strategy. The Free Press, New York, 1980.
PORTER, ME: Competitive Advantage. The Free Press, New York, 1985.
SLACK, N. and LEWIS, M.: Operations strategy, Harlow: Pearson Education, 2004.
SLACK, N.; CHAMBERS, S.; JOHNSTON, R.: Production Management. 2nd ed. 3. Edition São Paulo: Atlas, 2002.
WOMACK, J., & JONES, DT: Lean Solutions, Free Press, New York, 2005.
