Within this paper, there will be a discussion about the most important metrics that are used by operations managers. It will determine how each metric can support overall financial performance of an organization, the data that will be used to support those metrics, and how they are supported by data analytics. “Operations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs” (Heizer & Render, 2014). It consists of planning, organizing, staffing, leading and controlling. This process is typically used when management is looking to address specific operations issues. There is an evaluation that management assesses the performance criteria and measures them against specific targets.
There are metrics that fall under specific categories and determines if the organization will meet their long-term goals. Important metrics of business performance management are: financial, customer, internal, productivity, strategic, and compliance (Markgraf, n.d.). These metrics are classified as key factors for operations management and helps them pay close attention to ensure the performance of the organization is a success. The triple bottom line focuses on the important metric factors within an organization, as it helps operational managers promote sustainability through the three Ps: people, planet, and profit (Heizer & Render, 2014).
Through the triple bottom line metric, it helps operational managers improve on their financial performance through economic value. This is developed within the organization to the cost of sustainability in their environmental practices. The triple bottom line metric has the capability of improving financial performance of an organization, by ensuring that any and all stakeholders involved in the company are able to grow and develop together to improve the productivity of the organization.
Organizations can limit the impact they have on the environment, by finding ways in which they can be more sustainable in the materials they use, reducing energy costs/usage, and utilizing methods when delivering products to customers. The organization can also consider the kind of impact that their actions will have on the people involved. Key metrics, in evaluating management can be found through financial performance, including sales, profits, and costs. For operations managers, evaluating their year-over-year sales shows them their sales performance of the current year compared to their performance of the previous year. If during that evaluation, they noticed the sales were decreasing, there would need to be an investigation to determine why that individual’s sales had dropped.
If sales are down, profits can still rise as long as costs stay down as well. Cost metrics would include operating expenses such as rent, power, internet, labor, taxes and fees, and supplies. Additionally, organizations get their income from their customer base and it is important to maintain the level of business that is provided to them, in order to retain good business practices. For organizations, a positive business metric is to have an increasing customer base and a fairly large number of returning customers. “Other metrics include customer retention and results from customer surveys” (Markgraf, n.d.).
To ensure long-term success, an organization must examine the working atmosphere. When this is examined, management would typically see success in their organization when an employee’s salaries and benefits are within an industry norm. Effective management can be measured a number of ways including having a high levels of employee retention, low disciplinary cases, and an increase in employee productivity.
Within organizations, these metrics are able to provide a level of quality within management. Compared to large organizations, smaller businesses will typically score higher on the internal metrics, because they are closer with their employees, which can increase all levels of the working atmosphere. Having a boost in employee morale will lead to increased productivity and higher sales, which will create customer retention and customer satisfaction for the long-term. “Strategic management is the continuous planning, monitoring, analysis and assessment of all that is necessary for an organization to meet its goals and objectives” (Rouse, n.d.
). Companies will typically use specific strategies to reach both their long and short-term goals. An assessment can be made of the strategic performance and how the business is able to measure how they have done in executing the strategies that operations management has implemented. Once implemented, management will do an evaluation to determine how well they did at enforcing those specific strategies and whether the company executed them effectively to get the results they desired. Metrics and evaluation are a key function in ensuring that management is successful in the planned actions.
Another factor in evaluating business performance is measuring compliance and how effective it is within management. “Management must be able to demonstrate legal compliance with financial reporting, employment regulations and environmental rules” (Markgraf, n.d.
). In a perfect world, businesses have always been compliant, and the authorities had not had to use restrictions. A compliance metric shows the number of times that an organization has had to comply with official restrictions and additionally a second metric shows how quick an organization was able to comply and fulfill the requirements from those restrictions. “Data analytics (DA) is the process of examining data sets in order to draw conclusions about the information they contain, increasingly with the aid of specialized systems and software” (Rouse, n.d.).
Data analytics is widely known for helping organizations be able to make more informed decisions for the company by using theories and testing. Through proper examination, operation managers can better determine how to collect data relating to the metrics and examine each one individually and thoroughly. In addition, it will allow management within organizations to be able to make better decisions about leadership development, performance tracking, success within the organization, career progression, and other metrics. Management will gain insight on the specific metrics and by doing this it will prove outstanding for the organization’s future and current success. Data analytics plays a key role in improving and analyzing the metrics and being able to draw conclusions from the findings and implement what was determined rather than basing information from opinion.
By implementing these metrics in organizations, management will be able to make more informed decisions and will ultimately lead to greater success within that organization.