Efficiency of management, criteria for the effectiveness of enterprise management

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The main task of any manager is effective management. Performance criteria allow you to assess in detail the quality of the manager's work in order to make appropriate adjustments. Evaluation work should be carried out regularly to identify strengths and weaknesses, followed by timely adjustments.

The essence of the concept

Management efficiency is an economic category that demonstrates the contribution of the manager and his environment to the overall performance of the organization. Many researchers invest just such a meaning in this concept. In this case, the management efficiency criteria are presented as the results of activities and the degree of implementation of the goals and objectives that were set for the current period. Profit is the main indicator.

It is worth noting that management efficiency is a relative indicator that characterizes management as a whole or its separate subsystem. For this purpose, they are usedvarious integral indicators that give a more accurate numerical definition of the results.

It is worth noting that a significant part of the economically active population with an appropriate level of education and qualifications is involved in the management process. Since a large amount of time and money is spent on the training of such personnel, a lot of attention is paid to assessing such a parameter as management efficiency. Efficiency criteria allow a deeper consideration of this issue. In theoretical studies, the following varieties are distinguished:

• economic efficiency is the ratio of production and management costs, as well as the results obtained;
• social efficiency is the satisfaction of different categories of consumers with the range and quality of goods and services.

You should also distinguish between the following concepts:

• internal efficiency is the achievement of the organization's own goals at a constant level of costs;
• external efficiency - compliance of the enterprise with the needs and requirements of the external environment.

The evaluation algorithm is as follows:

• determining the purpose of performance evaluation;
• selection of criteria and their detailed justification;
• collection of initial data to be used in the analysis process;
• development of requirements for the resulting indicators;
• development or selection of a methodology in accordance with which calculations will be made;
• calculations and evaluation of receivedindicators.

Each organization sets itself certain goals. In the process of evaluating the final results, certain inconsistencies may be identified. Based on the results of the audit, a decision can be made to adjust the management process or to make changes to the plans.

Economic criteria for management efficiency

The main goal of management is to continuously improve the performance of the organization. Of particular importance is the economic efficiency of management. Efficiency criteria can be general and particular. In the first case, the global aspect of performance results is considered. It is important to achieve the maximum result with the minimum expenditure of resources. Partial indicators of management effectiveness are as follows:

• the level of labor costs of workers involved in the production process;
• rationality of spending material resources;
• minimum cost of financial resources;
• indicators characterizing the use and depreciation of fixed production assets;
• production cost (should be kept to a minimum);
• indicator of production profitability;
• technical equipment of production shops (compliance with modern achievements of technical progress);
• work intensity of workers, which is determined by working conditions and organizational structure;
• compliance with the cost rate while fully complying with allcontractual obligations;
• stability of the number and composition of staff;
• compliance with environmental regulations at the same level of costs.

In order to evaluate the efficiency of the enterprise, first of all, economic indicators are used. The main one is the ratio of profit to total costs incurred in the reporting period. If deviations or unsatisfactory results are identified, factor analysis is carried out to determine specific causes.

Components of efficiency

In the course of assessing the effectiveness of the organization's management, the following indicators can be used:

• efficiency, which is manifested in the degree of achievement of the goals that were set by the management;
• the ability to economically spend material and financial resources, fully satisfying the needs of all structures and departments of the organization;
• achieving the optimal ratio of the obtained economic results to the costs that were incurred in the production process;
• degree of influence of direct or indirect factors on the final result.

Criterion groups

Criteria for evaluating the effectiveness of management are specific indicators that allow you to evaluate the feasibility and effectiveness of the implementation of certain activities. Modern economic science divides them into two groups:

• private (local) criteria:
• labor costs of workers involved in the direct production of goods or services;
• expenditure of material resources for managerial and other purposes;
• cost of financial resources;
• indicators that characterize the use of fixed assets (purpose, depreciation, efficiency, etc.);
• turnover rate;
• payback period (reduction or increase).
• qualitative criteria:
• increasing the output of products that belong to the highest category of quality indicators;
• environmental responsibility of the organization, as well as the introduction of modern energy-saving technologies;
• conformity of products to the urgent needs of society;
• continuous improvement of working conditions of workers, as well as their social level;
• saving resources.

It is worth noting that all criteria for evaluating the effectiveness of management must be accompanied by the maximization of output (or the number of services provided). There should also be an increase in profit levels.

Criteria and indicators of management effectiveness

In order to evaluate the economic results from management activities or decision-making, appropriate methods are used. Thus, the criteria and indicators of management effectiveness are as follows:

• general indicator of management efficiency (the ratio of profit for the reporting period to the costs attributed to management);
• management staff ratio (the ratio of the number of senior managers and the total numberworkers employed by the enterprise);
• management cost ratio (the ratio of the organization's total costs to management costs);
• ratio of management expenses to the volume of output (in physical or quantitative terms);
• effectiveness of management improvement (the economic effect for the year is divided by the amount of money spent on management activities);
• annual economic effect (the difference between the total savings due to implemented management measures and the costs multiplied by the industry factor).

Efficiency of organization management

Economists identify the following criteria for the effectiveness of organization management:

• organization of management entities, as well as the full validity of their activities;
• the amount of time resources that are spent on solving certain issues that are the responsibility of top management;
• management style;
• the structure of the governing bodies, as well as the smoothness of the relationship between their various links;
• total costs that fall on the maintenance of the administrative apparatus.

Any organization strives to obtain the maximum benefit. It should be noted that the increase in profits is one of the main parameters, according to which the effectiveness of management is determined. The criteria for the effectiveness of the organization in this context imply the end result of the work of the entire enterprise. This is due to the factthat the fulfillment of plans largely depends on the quality work of managers.

Basic approaches to performance evaluation

The most important indicator of the functioning of any organization is the effectiveness of management. Performance criteria can be defined and applied according to several basic approaches:

• The target approach, as the name implies, is associated with an assessment of the degree of achievement of the planned result. At the same time, the action becomes much more complicated if the enterprise does not produce any tangible products, but is engaged, for example, in the provision of various kinds of services. It can also be about overlapping goals. Also, the criteria for evaluating the effectiveness of organization management quite often represent a set of formal goals that do not reflect the real state of affairs.
• The system approach implies the consideration of the management process as a combination of input, direct operation, and output. At the same time, management can be considered both at the highest level and at the middle level. Most often, the system is considered in the context of its adaptation to internal and external conditions, which are constantly changing. No organization can limit itself to just producing products and providing services, because it must act in accordance with market conditions.
• The multidimensional approach aims to capture the interests of all groups formed in the organization.
• The competing estimator approach allows such performance criteria to be usedenterprise management as a control system, as well as internal and external influences. At the same time, the leader quite often faces a mutually exclusive choice.

Assessing the effectiveness of personnel management

Criteria for the effectiveness of personnel management include the quality, timeliness, and completeness of the performance of certain work and the achievement of goals. The overall numerical indicator, according to which the performance of employees can be assessed, is the ratio of the achieved indicators to the labor costs for a certain period.

Evaluation of the effectiveness of personnel management is usually carried out in order to assess the feasibility and validity of the introduction of motivational mechanisms or personnel changes. At the same time, it should be borne in mind that personnel costs can be primary (wages) and secondary (social services and other costs provided for at the legislative level).

The work of employees should ensure the achievement of the goal. The criteria for the effectiveness of personnel management are, for the most part, specific indicators that are calculated per unit of production capacity or output.

Assessing the effectiveness of the management system

The following criteria for evaluating the effectiveness of the management system are distinguished:

• complexity of the organizational structure and substantiation of the expediency of the functioning of each of its links;
• speed of response to new situations andmaking appropriate management decisions;
• strategy, in accordance with which the organization as a whole and each of its individual subsystems is managed;
• expenses that fall on the maintenance of the administrative apparatus, as well as their relationship with the results obtained;
• results of continuous monitoring of senior management activities;
• assessment of the impact of the management apparatus on the final result of the enterprise;
• numerical and qualitative composition of the management, as well as the ratio with the total number of employees.

It is worth noting that the results of the organization's activities depend not only on the efficiency of the production staff, but also on how well the organizational structure is built. To do this, a periodic check is carried out in order to identify discrepancies, as well as to bring the parameters to modern requirements and standards (the criteria for the effectiveness of management systems are used).

Classification of management effectiveness assessment methods

Criteria and indicators for assessing management effectiveness can be applied in accordance with the following approaches:

• orientation towards the definition of the initially set tasks in order to determine the degree of their implementation;
• assessment of the effectiveness of the administrative apparatus, as well as the degree of provision of managers with information and other resources;
• evaluation of products produced or services provided in order to determine the satisfaction of the finalconsumer;
• engaging professional experts to identify weaknesses and strengths in the functioning of the organization;
• comparative analysis of different points of view of managers or management systems;
• involving all parties and participants in the management and production process to determine the degree of efficiency.

Evaluation activity can correspond to one of the following types:

• formative:

  • determining the discrepancy between the desired and the real state of affairs;
  • assessment of the production process to identify strengths and weaknesses;
  • assessment of the degree of achievement of goals.

• summarizing:

  • determining the types of products and services that bring real economic benefits in order to eliminate irrational directions;
  • studying changes in the well-being of employees and customers as a result of the activities of the organization;
  • assessment of the ratio of costs to actually achieved economic results.

Conclusions

Management efficiency is an economic category that demonstrates the manager's contribution to the resulting indicator of the organization's performance. The determining indicator here is profit (namely, a comparison of the indicator that was achieved and the one that was noted in the plan for the corresponding period).

Management efficiency is critical for several reasons. The first one is that it takes a lot of time to preparethis kind of staff, and their number is quite large. In addition, top management is characterized by the highest degree of remuneration in the enterprise, which should be economically justified.

Efficiency of management can be both economic (recoupment of costs invested in production) and social (the degree of satisfaction of the population with quality, quantity, as well as the range of products and services). It is also worth highlighting the internal and external performance separately.

One or more approaches can be used to evaluate the effectiveness of an organization's management. Thus, the target implies an assessment of the result obtained and its comparison with the planned one for the period. If we talk about a systematic approach, then we are talking about the perception of the work of the organization as a holistic process. Multivariate assessment affects all groups that are somehow connected with the activities of the enterprise or are interested in its results. It is also worth paying attention to the approach of competing estimates, which takes into account factors of the opposite direction.

Management performance evaluation uses a number of criteria that can be used alone or in combination. So, the main indicator is the ratio of costs and profits. Also an important role is played by the optimal ratio of production workers and the number of regular management personnel, as well as the costs that are regularly assigned to management. It is important to correlate the latter indicator not only with the level of profit, but also with the real volume of production.products (in physical or quantitative terms). Also, when calculating economic efficiency, it is important to adjust the indicators of the values of the industry coefficient.

It is important to understand that not only the composition of the production staff plays the main role in achieving the success of an enterprise, but the criteria for the effectiveness of management quality are no less important. The correct organizational structure must be selected, which will ensure optimal interaction between all departments of the enterprise, as well as reducing the time and material costs of communication.