The main task of any manager is effective management. Efficiency criteria make it possible to evaluate in detail the quality of a 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 effectiveness is an economic category that demonstrates the contribution of the manager and his environment to the overall result of the organization. Many researchers put just such a meaning into this concept. In this case, management performance criteria are presented as the results of activities and the degree to which goals and objectives that were set for the current period are achieved. The main indicator is the profit.
It is worth noting that management effectiveness is a relative indicator that characterizes the management as a whole or its individual subsystem. For this purpose, various integral indicators are used, which give a more accurate digital determination 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, quite a lot of attention is paid to evaluating such a parameter as management efficiency. Performance criteria allow a deeper look at this issue.
In theoretical studies, the following varieties are distinguished:
- economic efficiency is the ratio of the costs of production and management, as well as the results obtained;
- social efficiency is the satisfaction of different categories of consumers with the assortment and quality of goods and services.
The following concepts should also be distinguished:
- internal efficiency is the achievement of the organization’s own goals at a constant cost level;
- external efficiency - compliance of the enterprise with the requirements and requirements of the external environment.
The evaluation algorithm is as follows:
- determination of the purpose of performance evaluation;
- selection of criteria and their detailed justification;
- collection of initial data that will be used in the analysis process;
- development of requirements for the resulting indicators;
- development or selection of methods in accordance with which calculations will be made;
- carrying out calculations and evaluating the obtained indicators.
Each organization has specific goals. In the process of evaluating the outcome, certain inconsistencies may be identified. Based on the results of the audit, a decision may be made to adjust the management process or to amend the plans.
Economic criteria for management effectiveness
The main goal of management is to continuously improve the performance of the organization. Of particular importance is the cost-effectiveness of management. Performance criteria can be general or private. In the first case, the global aspect of performance is considered. It is important to achieve maximum results with minimal resources.
Private indicators of management effectiveness are as follows:
- the level of labor costs of workers employed in the production process;
- rationality of expenditure of material resources;
- minimum cost of financial resources;
- indicators characterizing the use and depreciation of fixed assets;
- size of the cost of production (should be minimized);
- profitability indicator of production;
- technical equipment of production shops (compliance with modern achievements of technological progress);
- labor intensity of workers, which is determined by working conditions and organizational structure;
- compliance with the cost standards with full compliance with all contractual obligations;
- stability of the number and composition of staff;
- compliance with environmental standards at the same level of costs.
In order to evaluate the performance of the enterprise, economic indicators are primarily used. The main one is the ratio of profit to total costs that were incurred in the reporting period. If deviations or unsatisfactory results have been identified, a factor analysis is performed to determine specific causes.
Performance components
In assessing the effectiveness of the management of the organization, the following indicators can be used:
- performance, which is manifested in the degree of achievement of the goals that were set by management;
- the ability to economically spend material and financial resources, fully satisfying the needs of all structures and units of the organization;
- achieving the optimal ratio of the obtained economic results to the costs that were carried out in the production process;
- degree of influence of direct or indirect factors on the final result.
Criteria groups
The criteria for evaluating management effectiveness are specific indicators that allow us to evaluate the feasibility and effectiveness of the implementation of certain measures. Modern economic science distributes them into two groups:
- particular (local) criteria:
- labor costs of workers involved in the direct production of goods or services;
- expenditure of material resources for management and other purposes;
- costs of financial resources;
- indicators that characterize the use of fixed assets (purpose, depreciation, efficiency, etc.);
- the turnover rate of funds;
- payback period of investments (its reduction or increase).
- quality criteria:
- increase in output, which belongs to the highest category of quality indicators ;
- environmental responsibility of the organization, as well as the introduction of modern energy-saving technologies;
- compliance of products to the urgent needs of society;
- continuous improvement of working conditions of workers, as well as their social level;
- saving resources.
It should be noted that all criteria for evaluating management effectiveness should be accompanied by maximization of output (or the number of services provided). There should also be an increase in profits.
Management Criteria and Performance Indicators
In order to evaluate the economic results from management events or decision-making, appropriate methods are used. So, the criteria and indicators of management effectiveness are as follows:
- general indicator of management efficiency (ratio of profit for the reporting period to the costs allocated to management);
- managerial staff ratio (ratio of the number of top managers and the total number of employees employed in the enterprise);
- coefficient of management costs (the ratio of the total costs of the organization to the costs of management activities);
- the ratio of management expenses to the volume of products (in physical or quantitative terms);
- the effectiveness of improving management (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 the implemented management measures and the costs multiplied by the industry coefficient).
Organization Management Efficiency
Economists identify the following criteria for the effectiveness of organization management:
- organization of managerial subjects, as well as the full validity of their activities;
- the amount of time resources spent on the solution of certain issues that are the responsibility of senior management;
- management style;
- the structure of governing bodies, as well as the smooth functioning of the relationship between their various links;
- total costs that are incurred by the maintenance of the administrative apparatus.
Any organization seeks to maximize benefits. It is worth noting that the increase in profit is one of the main parameters in accordance with which the effectiveness of management is determined. Organization performance criteria in this context imply the end result of the entire enterprise. This is due to the fact that the implementation of plans largely depends on the quality work of managers.
Key Performance Assessment Approaches
The most important indicator of the functioning of any organization is the effectiveness of management. Performance criteria can be defined and applied in accordance with several basic approaches:
- The target approach, as the name implies, is associated with assessing the degree of achievement of the planned result. Moreover, the action is much more complicated if the company does not produce any tangible products, but is engaged, for example, in the provision of various kinds of services. We can also talk about overlapping goals. Also, criteria for evaluating the effectiveness of managing an organization quite often represent a set of formal goals that do not reflect the real situation.
- A systematic approach involves the consideration of the management process as a combination of input, direct operation, as well as output. At the same time, management of both the highest level and the middle one can be considered. Most often, a system is considered in the context of its adaptation to internal and external conditions, which are constantly undergoing changes. No organization can be limited only to the release of products and the provision of services, because it must act in accordance with market conditions.
- A multi-parameter approach is aimed at covering the interests of all groups that have formed in the organization.
- The approach of competing assessments allows the use of criteria for the effectiveness of enterprise management, such as a control system, as well as internal and external influences. Moreover, the head often enough faces a mutually exclusive choice.
HR management performance assessment
Criteria for the effectiveness of personnel management include quality, timeliness, as well as the completeness of the performance of certain works and the achievement of goals. The overall numerical indicator, according to which it is possible to evaluate the performance of employees, is the ratio of the achieved indicators to 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 the work of personnel changes. 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).
Workers must ensure the achievement of the goal. Criteria for the effectiveness of personnel management are, for the most part, specific indicators that are calculated per unit of production capacity or manufactured products.
Assessment of the effectiveness of the management system
The following criteria for evaluating the effectiveness of the management system are distinguished:
- the complexity of the organizational structure and the justification of the feasibility of the functioning of each of its links;
- speed of response to new situations and the adoption of appropriate management decisions;
- a strategy in accordance with which the organization as a whole and each of its individual subsystems are managed;
- the costs that are incurred by 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 administrative apparatus on the final result of the enterprise;
- the 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 inconsistencies, as well as bringing the parameters to modern requirements and standards (criteria for the effectiveness of control systems are used).
Classification of methods for assessing management effectiveness
The criteria and indicators for assessing management effectiveness can be applied in accordance with the following approaches:
- orientation to the definition of initially assigned tasks in order to determine the degree of their implementation;
- assessment of the effectiveness of the administrative apparatus, as well as the degree to which managers are provided with information and other resources;
- Evaluation of manufactured products or provided services in order to determine end-user satisfaction;
- involvement of professional experts to identify weaknesses and strengths of the organization;
- comparative analysis of various points of view of managers or management systems;
- involvement of all parties and participants in the management and production process to determine the degree of effectiveness.
Valuation activities may correspond to one of the following types:
- formative:
- determination of the discrepancy between the desired and actual state of affairs;
- assessment of the production process in order to identify strengths and weaknesses;
- assessment of the degree of achievement of goals.
- summarizing:
- identification of varieties of products and services that bring real economic effect in order to eliminate irrational trends;
- the study of changes in the welfare of employees and customers as a result of the organization;
- assessment of the ratio of costs to actually achieved economic results.
conclusions
Management efficiency is an economic category that demonstrates the contribution of a manager to the resulting indicator of an organization’s activities. The defining indicator here is profit (namely, a comparison of the indicator that was achieved and that which was noted in the plan for the corresponding period).
Management effectiveness is critical for several reasons. The first of them consists in the fact that a lot of time is spent on preparing this kind of personnel, and their number is quite large. In addition, senior management is characterized by the highest degree of remuneration at the enterprise, which should be economically justified.
Management efficiency can be both economic (return on costs invested in production), and social (degree of satisfaction of the population with quality, quantity, and assortment of products and services). It is also worth separately highlighting the internal and external work efficiency.
To assess the effectiveness of the management of the organization, one or several approaches can be used. So, the target involves evaluating the result and comparing it with the intended 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. Multiparameter assessment affects all groups that are somehow related to the activities of the enterprise or are interested in its results. It is also worth paying attention to the approach of competing assessments, which takes into account factors of the opposite direction.
In assessing the effectiveness of management, a number of criteria are used that can be applied independently or in combination. So, the main indicator is the ratio of costs and profit. An important role is also played by the optimal ratio of production workers to the number of managers, as well as the costs that are regularly allocated to management.The last indicator is important to correlate not only with the level of profit, but also with the real volume of production (in physical or quantitative terms). Also, when calculating economic efficiency, it is important to adjust the indicators 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 the enterprise, criteria for the effectiveness of management quality are equally important. The correct organizational structure should be selected, which will ensure optimal interaction between all departments of the enterprise, as well as reducing time and material costs for communications.