Oksana O. Herasymenko PhD in Economics, Associate Professor, Associate Professor Department of Innovation
and Investment Management Taras Shevchenko National University of Kyiv Kyiv, Ukraine Efficiency, as one of the key management categories, in general terms reflects the achievement of the company's development ultimate goal. According to the theory, the universal interpretive formula for efficiency is based on the connection between the result obtained and the resources used in the process of production (provision of services or performance of work). Without diminishing the importance of this quantitative characteristic of efficiency, let us emphasize the need to take into account stakeholders' interests. Such a position is typical of studies by Western experts. In particular, S. Ayuso [1] and R. Freeman [2] note that efficiency is a consequence of the quality of the processes taking place in the company and the consideration of economic and social actors' interests that are part of the internal and external environment. In the works of J. Gibson, D. Ivantsevich, and D. Donnelly, efficiency is seen as the optimal balance of production, quality, efficiency, flexibility, satisfaction, competitiveness, and development [3]. American economists introduce several terms that characterize efficiency into scientific circulation. D. Sink identifies the ratio of necessary and actual resource expenditures as economical efficiency [4]. According to Pareto efficiency is defined as the marginal result in the form of a production system's returns without causing damage to others.
Ukrainian contemporary scholar V. Andriychuk advocates the view that efficiency is a certain process' outcome, which is measured by the ratio between results and costs (resources). In an extended efficiency concept's interpretation V. Andriychuk draws attention to the fact that efficiency can be interpreted more broadly as achieving maximum effect with fixed predetermined volumes of resources, or achieving a specified result (effect) with minimal resource expenditure [5].
As the analysis of the existing scientific work has shown, the issue of efficiency is considered mainly in three aspects: 1) efficiency as a degree of organization's goals achievement; 2) efficiency as a degree of interests coherence; 3) efficiency as a degree of flexibility and adaptation to the external environment [3].
P. Drucker believes that efficiency is a consequence of the correctness of actions [6], V. Petty and F. Kene understand efficiency as the managerial output regarding the actions of the management entity [7]. G. Emerson considers efficiency as the main goal of management, which determines the relationship with the enterprise's functionality [8].
In the regulatory format, according to the provisions of the international management standard ISO: 9000:2000, efficiency is defined as the ratio between the
result achieved and the resources used, which confirms the dissemination of the resource approach to the definition of the "efficiency" category in practice [9].
Results of the scientific literature analysis suggest that management efficiency is reflected by indicators characterizing, on the one hand, the efficiency of employees' labor activity, and, on the other hand, the efficiency of performing certain management functions and relevant processes.
Three types of indicators are used in modern scientific and applied practices for performance evaluation:
1) Key Result Indicators, which reflect the success of the company's activities, which is characterized by the use of a certain balanced scorecard;
2) Performance Indicators, which show directions in which the company should move in order to achieve its goals;
3) Key Performance Indicators, which indicate the degree of goals achievement and outline milestones for efficiency improvement.
The balanced scorecard developed by R. Kaplan and D. Norton is an effective tool for managing company's efficiency. It includes financial, customer, internal process, training and growth components. Financial indicators are not enough to determine how efficiently a company or its division are functioning, as they reflect the company's efficiency in the past, without allowing for diagnosing and fixing problems that arise in real time. The balanced scorecard is considered a unique system that allows for the integration of financial and non-financial indicators.
Key performance indicators (KPIs) should be considered innovative metrics for measuring management efficiency. They allow to reflect goals realization in terms of structural units and individual positions.
− The following principles should be the methodological basis for building a KPI system:
− The KPI system should not be designed as a tool for punishment or revenge. It should be a set of indicators that reflects company's goals and development dynamics, as well as each employee's contribution into set objectives' achievement. When involving non-managerial employees in the KPI system development process, it is necessary to prevent the risks of possible staff dissatisfaction and results falsification, which, based on subjectivity, may acquire maximum value according to the KPI scale.
− KPIs should not include indicators that are not subject to quantitative measurement.
− KPIs should allow employees to have a direct impact on their achievement and completion of assigned tasks.
− KPIs should not be an end in itself in employees' activities, so that by achieving several indicators, employees would not ignore the realization of other goals and objectives, which could lead to losses and negative consequences for company's development.
Practice shows that KPIs allow controlling the degree of set tasks' achievement in company's goals coordinates. KPI system can be successfully used for evaluating the performance of individual employees, departments, and company as a whole.
The practice of developing and applying a KPI system is aimed at solving a number of tasks, including:
− clarifying company’s goals, setting tasks for structural units and individual employee positions by level of organizational hierarchy;
− strengthening employees' understanding of company's purpose, forming a clear idea of individual tasks and tasks for structural units;
− forming an objective and transparent basis for analyzing and controlling performance of both individual employees and structural units of the enterprise;
− strengthening objectivity in determining individual and collective performance, assessing employees' contribution to the overall end result;
− promoting company's efficiency by improving the quality of management and motivating employees whose remuneration is directly related to the achieved KPI level.
Practices of diagnosing existing management system, which are becoming increasingly widespread, include determining the happiness index and the loyalty index.
Happiness is a multifaceted and ambiguous concept that has different characteristics for each person. At the same time, it is very important for a manager to know whether employees are happy or not and what causes the "happiness index" in the company to change. This directly affects the business' success. According to Gallup, the American Public Opinion Institute, positively minded employees outperform pessimists by 37%, and the profitability of companies with high employee engagement is 27% higher than that of companies that do not pay due attention to employees [10]. The "happiness index" diagnostics allows identifying the emotional connection between an employee and the employer and identifying areas for improvement. This is the first step in developing a happiness strategy.
The formalized business model of Zappos, which has an annual turnover of $100 billion, is as follows: "Happy employees = happy customers = successful business".
"The desire to make people happy does not contradict, but rather helps to make a profit.
Today, Zappos is the most desirable place to work for a million Americans and everyone who works in the online retail business," says the director of development at Delivering Happiness, the service division of Zappos [11].
Practice proves that large companies are created by motivated and "charged" teams.
In order to make sure that the company is operating and developing in the right direction, it is necessary to measure the net employee support index, often called the loyalty index, twice a year, which helps understanding the extent to which employees are satisfied with their work in the company and are inclined towards joint development. This indicator largely determines the company's readiness for development and growth. The methodology is derived from the concept of external customer NPS, developed for assessing service quality [12]. In global management practice, NPS is known as a mirror of customer loyalty and an indicator of company's future growth. Numerous studies and practical situations confirm that engaged employees who identify themselves with company's culture and product show significantly better results, are willing to take on more responsibility, and stay with the company longer. Only a happy and productive team can create the best product and
provide perfect customer service – this is the quintessence of an effective management model according to NPS.
Thus, each company, based on its activities' peculiarities determined by the trajectories of achieving the set goals, based on the use of traditional approaches and innovative metrics, forms a system for diagnosing management efficiency.
Determination of problem areas in company's functioning allows identifying new opportunities for further development.
References
1. Ayuso, S. (2007). Responsible Corporate Governance: Towards a Stakeholder Board of Directors? / S. Ayuso, A. Argandona. Navarra: University of Navarra, 2007.
2. Freeman, R.E. (1984). Strategic Management: A Stakeholder Approach.
Pitman, Boston.
3. Gibson, James L. et al. (1991). Organizations: behavior, structure, processes.
Homewood, IL : Irwin.
4. Scott, Sink et al. (1985). Productivity Management: Planning, Evaluation, Control, and Improvement.
5. Andriychuk, V. G. (2005). Efficiency of agricultural enterprises: theory, methodology, analysis. Kyiv, KNEU [In Ukrainian].
6. Drucker, Peter F. (1993). Managing for the Future. Routledge.
7. Ursul, A.D. et al (1985). The problem of efficiency in modern science.
Chisinau.
8. Emerson, Harrington (2018). The Twelve Principles of Efficiency. Franklin Classics.
9. Does ISO 9000 certification pay? ISO Managements System (July –August, 2002). P. 31-40.
10. How to enjoy work and easily advance in your career. URL:
https://publish.com.ua/suspilstvo/yak-otrimuvati-zadovolennya-vid-roboti-i-legko- prosuvatisya-po-sluzhbi.html
11. Employee happiness as a KPI. URL: https://hrliga.com/index.php?module=
news&op=view&id=16681
12. Determination of NPS index. URL:
https://activegroup.com.ua/viznachennya-indeksu-nps/