Managment Decisions and Control
Nowadays, effective management decisions and control systems are vital to the success and growth a business enterprise. It helps companies to improve their overall efficiency and accomplish long term objectives (Tukker 2015). The present essay emphasizes how managers can design and develop good performance measures in organizations.
In the present scenario, the competition among businesses in almost every industry has become so intense that it is no longer easy for companies to attract new customers and retail the old ones. At present, management focuses on making a company cost effective so that the overall performance can be enhanced in the long run. It can be stated that cost efficient businesses can enhance their overall margin of profits. Nowadays, managers try to reduce the overall cost of operations so that they can have better margins of profits by selling products and services at the same price. Cost efficiency is also linked with performance measurement as it indicates that the organization is making the best and most efficient utilization of all available resources. In the modern era, becoming cost efficient is important because it supports businesses to carry out adequate planning and has effective control over the resources (Magelssen, Sanchez & Damanpour 2015). Cost efficiency is also relevant to performance measurement as low operational cost represents the overall effectiveness of management. It can be expressed that businesses with high cost are not able to generate adequate profits and at the same time they lack strong management and control over the crucial resources.
To accomplish the criterion of cost efficiency it is necessary to identify the key areas where the organization can save the major cost. For instance, if any organization has set targets to reduce the overall cost of operations then in such case the best way to accomplish their criteria is by adopting latest tools. A business enterprise can easily rely on advanced technology where the use of machines can assist in reducing the cost and in turn performance of the enterprise can be boosted easily. For accomplishing this criterion better management of the resource is required along with the proper planning so that overall operations can be conducted properly (Chen, Delmas & Lieberman 2015). Identifying key areas for reducing cost can be surely beneficial such as production cost, marketing cost, etc. Apart from this, some other areas are present which business may be allocating high cost such as marketing and for the same best alternative can be chosen such as social media marketing with the help of which overall productivity can be enhanced. It is the duty of managers to enhance production level of the business in lesser cost as this can directly lead to higher profit margin which is beneficial for the enterprise in every possible manner.
Businesses have identified different ways of cutting costs, and this has allowed them to enhance their performance in the market. A company like Ryanair has removed two or three of its lavatories, and they are replaced with up to six extra seats (Hough 2011). This is one of the most effective ways which managers working in Ryanair have identified to lower down the cost level and it has allowed in enhancing profitability level. On the other hand, in the case of Ford motor the best criteria adopted by the company for reducing cost by cutting down the salaried workforce (Muller 2017). So, this supported in becoming cost efficient and has allowed accomplishing desired objectives.
A company such as Indigo airlines can be considered as the most relevant example of how cost efficiency can be linked with performance measurement. In the year 2016, the company adopted several practices and strategies with an objective to reduce its overall cost of operations (Majumder 2017). The result of this was that Indigo airlines became the most profitable airline company and was also awarded the title of the company of the year 2016. At the same time, cost efficiency practices supported in developing the higher degree of customer’s satisfaction which can be considered as one of the most vital tools of performance measurement.
The entire study being carried out has supported in knowing about the significance of effective criteria in performance measurement. In case if any organization is cost efficient then it allows in measuring performance and highlights that company is efficient enough in conducting the major operations. Apart from this the examples of companies quoted like Ford, Ryanair has adopted practices of reducing down cost, and this allowed them to maintain their profit level up to the extent. Moreover, cost efficiency has the direct link with performance measurement as in case if managers of the business can identify the areas where costs can be reduced then it leads to performance enhancement and vice versa.
Chen, CM, Delmas, MA & Lieberman, MB 2015, 'Production frontier methodologies and efficiency as a performance measure in strategic management research', Strategic Management Journal, vol 36, no. 1, pp. 19-36.
Hough, A 2011, Ryanair's new controversial cost cutting plan: one toilet per aircraft, viewed 14 August 2017, <https://www.telegraph.co.uk/travel/travelnews/8823614/Ryanairs-new-controversial-cost-cutting-plan-one-toilet-per-aircraft.html>.
Magelssen, C, Sanchez, F & Damanpour, F 2015, ' Learning from Outsourcing: The Effects of Outsourcing Strategy on Organizational Efficiency', In Academy of Management Proceedings , vol 2015, no. 1, p. 17468.
Majumder, A 2017, Obsessive focus on cost, efficiency made IndiGo BS Company of the Year 2016, viewed 14 August 2017, <https://www.business-standard.com/article/companies/obsessive-focus-on-cost-efficiency-made-indigo-bs-company-of-the-year-2016-117031700895_1.html>.
Muller, J 2017, Ford To Cut 10 Percent Of Salaried Workforce As Fields Aims To Keep His Strategy On Track - Report, viewed 14 August 2017, <https://www.forbes.com/sites/joannmuller/2017/05/15/ford-belt-tightening-said-to-include-10-percent-cut-in-global-workforce/#8b8fe0a3e9f7>.
Tukker, A 2015, 'Product services for a resource-efficient and circular economy–a review', Journal of cleaner production, vol 97, pp. 76-91