Operations, Business Performance and Internal Measures of Success

By John Dudovskiy
December 1, 2014

Internal Measures of SuccessCompany operations have direct impact on business performance and internal measures of success can be applied in order to assess the nature of this impact. Great impact of operations on business performance can be explained by using the term of balanced scorecard, that consist of a set of measures used to assess four critical aspects of a business practice: financial performance, customer service, internal processes and innovation and learning.

Most important operations-related internal measures of success within balanced scorecard include the amounts of waste and scrap, duration of time to produce a single unit, numbers of defected units, numbers of returned units, and the level of effectiveness of labour utilisation.

Balanced scorecard has been widely praised by business scholars and practitioners for its advantages that include possibility to identify ‘best practices’ more effectively, opportunities to identify additional sources of competitive advantage, achieving alignment between key performance measures and organisational strategy, possibility view operations from holistic approach etc.

Accordingly, acknowledgement of operations as one of the critical measures of success within the framework of balanced scorecard can be interpreted as indication of great impact of operations on business performance.

Unless the quality aspect of operations is addressed in an effective manner, proposed management initiative of producing upgraded product range for online sales may have negative effects in internal measures of success at least in short-term perspective. In other words, on-site factory is already operating to near capacity with limited space for increasing inventory, and therefore attempts to increase the volume of output with disregard to quality, capacity and inventory is going to cause internal measures of success to decline which can lead to the overall decline of business performance.

Category: Management