In a market economy, organizational performance indicators are becoming increasingly important. In general, the concept of “effect” refers to the result of actions taken. If it acts as the final result of the enterprise, it can be characterized by both cost and in-kind indicators.
From an economic point of view, the effect is the difference that is obtained between income and expenses. In the event that there are more incomes, then we can talk about the presence of a positive effect, or profit. It can occur when production volumes increase or the level of expenses decreases. This condition is met, all other things being equal. A negative effect indicates a loss-making activity. Nevertheless, the management of the organization should have an idea of the price of what resources (investments) the actual result was achieved. It is a comparison of the existing effect and the materials used for this, time costs, raw materials and other elements that serves as the “foundation” of financial stability and the functioning efficiency of the entire enterprise.
Next, a few words about effectiveness. It characterizes the degree of achievement of the goals of the enterprise with the application of a minimum amount of costs. To do this, use key performance indicators. They are based on the following basic relationships:
- R / C;
- S / R;
- (PZ) / P, where P is the result, and Z is the cost.
A special place is taken by such an efficiency indicator as profitability. It can be calculated for products, production assets, labor costs. There is also an indicator of the effectiveness of the use of enterprise resources, fixed assets, working capital, as well as investment.
The economy also has comparative economic efficiency. It allows you to find the most profitable solution to the problem among the available alternatives. It is important to distinguish between a performance indicator and a criterion. The first indicates the price at which resources a particular result was achieved. But one performance indicator is not able to give a complete picture. Then the criterion stands out. He is able to characterize the economic efficiency of activities not only from the quantitative side, but also from the qualitative one. At the enterprise level, the maximum profit per unit of resources can be taken as a criterion. It reflects the goals of production and their relationship with expenses and income.
In general, the implementation of organizational transformations, technical and economic measures give results not only in quantitative, but also in qualitative terms, which is why it is important to separate the performance indicator and the criterion. Using each of them allows you to see only part of the "mosaic". It is necessary to consider the totality of all elements, taking into account the existing relationships and dependencies. It is customary to single out natural, conditional, as well as cost indicators. The use of each of them has not only positive aspects, but also negative ones, which must be taken into account.
