Organizational Performance Can Be Measured in Terms Essay

Excerpt from Essay :

Organizational performance can be measured in terms of financial, output metrics, or market share performance. An organization is considered to achieve high performance if it is able to demonstrate growth in its all aspects of organizational performance metrics. The three key criteria to measure organizational performances in all industries are as follows:

Financial performance (profits, return on assets)

Product and market performances (sales, market share)

Shareholder returns (total shareholder return, economic value added)

An organization is generally able to claim a healthy financial performance if its annual net profits continuously increase or if the company reaches its own internal financial targets. Product and market performances are measured when organizations can claim a significant share of the total volume of sales in the market. It is generally thought that with the production of high quality goods or services, organizations will be able to achieve their desired market performances (Richard 2009). For example, Apple Inc. has become an industry leader by producing high quality products for its target market. As a result of their products quality, Apple has been able to increase its net profits and market performances. Between the fiscal years of 2009 and 2010, Apple increased its net sales by 52% and increases its net income from $8,235 million to $14,013 million which has in turn resulted in cumulative increases to shareholders earnings (See Fig 1) (Thomas, 2008).

Fig 1: Apple Cumulative Total Returns from 2006 to 2010

Source: Apple Annual Report, 2010

3.1: Identification of Problems and Opportunities for Quality Improvement

There are three criteria that can be used to identify problems as well as opportunities for quality improvement. First of all, organizations can consider the internal failure costs associated with quality standards which can help them discover quality issues before the goods actual reach the market. In many cases defective products can be identified and corrected internally. An organization can also utilize this method to ensure quality improvement processes are effective.

Another criterion, which is somewhat similar to internal failure cost, is the appraisal costs which organizations can incur in order to uncover defects. This method includes quality inspections, product testing, and performing auditing. These tasks are used to identify problems and enhance quality improvement standards. Finally, another option is that an organization could use external failure costs to identify quality problems. This method involves considering the recalled or defective products from the customer sales. For example, auto-manufacturers could recall the cars from the customers due to malfunction in the braking system. A manufacturer of launch meat or hotdogs could also recall its products due to the presence of bacterial contamination.

External failure costs should be the last resort organizations should use to identify and enhance quality improvement standards. By relying on external failure costs to identify problems and enhance quality improvement, organizations' can damage the long-term reputation damage of their firm; which could put an organization out of business virtually overnight (Reid & Sanders 2010). To prevent quality problems and enhance quality improvement, an organization should implement a continuous performance improvement program.

3.2: Apple Inc. Performances Improvement Program

To enhance quality of the products, Apple Inc. has set up performance improvement plan. Apple is dedicated to investing in research and development to improve the quality of the products. Apple believes that by investing in R&D, company will be able to produce high quality and innovative products that will be desirable to customers. To further performance improvements in its products, Apple increased expenses on R&D investments between 2009 and 2010. For example, Apple spent $449 million on R & D. In 2009 and in 2010 and the company spent $1.8 billion on R&D which represents an increase of 34% in R & D. investment (Apple Annual Report, 2010).

Another method Apple uses to implement its performance improvement program and enhance quality of its products is by opening Apple training centers to continually develop the skill sets of the employees. Apple believes that their company can develop high quality products by empowering their employees through training. "The Apple Authorized Training Center…

Cite This Essay:

"Organizational Performance Can Be Measured In Terms" (2012, April 08) Retrieved May 25, 2020, from

"Organizational Performance Can Be Measured In Terms" 08 April 2012. Web.25 May. 2020. <>

"Organizational Performance Can Be Measured In Terms", 08 April 2012, Accessed.25 May. 2020,