Concept Performance Metrics
Performance metrics determines the activities and operations of the business. Performance metrics in a particular organisation helps to gather information about that organisation. Hence, the stakeholders become aware about the status of the organisation. Food and beverage industry is a vast sector and subjected to tough competition. In order to receive a sustainable growth and success in the business it is important to monitor the performance of the organisation. Performance metrics allows the organisation to perform that task. Through the implication of performance metrics, a business could receive certain advantages. This study is intending to figure out the role of the managers in implementing performance metrics. It also intends to describe the impact of performance management in the success of the food and beverage company. Application of performance metrics has certain advantages along with challenges, which will be discussed in this study.
Concept of Performance Metrics
Performance metrics includes certain factors that help the organisation to comprehend status about the organisation. It includes the behaviour, performance and activities. As stated by Berges et al.(2013), performance metrics include the interest of all the stakeholders and shareholders of the organisation. Implication of performance matrix helps the organisation to determine the status of the business along with its strength and weakness. It helps to determine the strong and weak points of the company, hence, based upon that the management can determine the organisational strategies. Thus, the growth and sustainability of the organisation depends on the successful application of performance metrics.
Role of performance metrics to measure success in food and beverage stores
The key to evaluating the business is by measuring the performance of the employees. This evaluates whether the employees are doing their work properly or not. A performance metrics provide the hard data and yields results that help in measuring the clear quantities to allow development to the food and beverage industry. Performance measurement is required to collect, analyze and report the performance of an individual, group, and organisation. The performance measurement works qualitatively to provide various information about the products, processes, and services that are provided by the company or organisation. Badland et al. (2014) proposed that the performance of measurement must be practiced on a regular basis to check the performance against the standards and quality of the products and services provided by the company. A manager is responsible for the performance metrics. The manager observes controls, supervises the activities of the subordinates, and prepares the reports based on their performance. This helps in managing the various activities to accomplish them effectively. The manager constantly checks the performance of the activities to ensure that activities are performed in a specified manner or if any correction activity is required. On the contrary, if any deviations occur in the work the manager ensures that such deviations are not continued further. Thus, the performance measurement is a process of which is required for continuous improvement.
Concept Of Performance Metrics
For example, Woolworths Limited need to increase its current sale profit by fifteen percent thus, they need to first calculate the break-even point. This value tells the organisation about how much sales they need to make to increase the profit by fifteen percent. Wu et al. (2014) mentioned that the prime cost is the sum total of all the expenditure made by the store. Including the cost of the labour and the cost of the goods, they sold. Whatever money is left back excluding the prime cost is the profit of the store. The prime cost of a store is generally sixty percent of the total sales. To increase the profit margin of the store they need to decrease the extra expenditure and manage the activities properly.
The role of the evaluation mechanism influences the manager. The manager uses the broad-based measurement information for the control and feedback. The resultant decision made by the manager makes an impact upon the identification and exploration of the major and strategic capabilities to improve the organisational performance. Georgiev et al. (2014) commented that the managers to take strategic decisions to increase the performance of the organisation subsequently and to implement the decision-facilitating measures. The performance of an organisation arises from the decision-making on the exploring the existing capabilities and the identification and implementation of the new opportunities.
The performance metrics not only measures the performance rate of the employees but also the productivity of the entire organisation at a lowered cost. Necessary feedbacks can be generated through this process, which is helpful for the managers to guide the activities accordingly. Thus, it can be said that the performance metrics process is helpful in understanding, managing and improving the business of an organisation.
Different performance metrics
Food and beverage industry is vastly diversified. In order to measure the success of the business in this industry manager applies various key performance metrics. Owners could get information about the present status by monitoring those metrics in regular basis. It depicts both the negative and positive trends of the venture. Some of the key performance metrics have been discussed which play vital role in order to measure the success of the venture.
Break Even Point
Breakeven point is the most important metrics that should be monitored in regular basis in order to comprehend the status of the business. Figures in breakeven point calculation depict the requirement of investment in order to get it back as profit. As opined by Roloff et al.(2012), simultaneously it provides the forecast about the period to earn the money back. In case of both function of starting or investing and business operation, this metrics plays the vital role. It also justifies the additional investment. Through the calculation of breakeven point, one can comprehend the necessity of investment and time to earn it back.
Breakeven point= Total fixed Costs/((Total sales- Total cost of variables)/Total sales)
Hence, it is important to know fixed cost along with total cost and variable cost and also total sales to calculate the breakeven point.
Cost of Goods Sold (COGS)
COGS is another important metrics in order to determine the organisational operation. It depicts the cost behind every item that has been offered to the customers. Hence the organisational authority could decide the cost of the product while sell the product. Thus an organisation could easily figure out the profit or loss while sell the product through COGS calculation. As mentioned by Loderer & Waelchli (2010), it helps to adjust the organisational policies in different market situations and demand. It also assists the organisation to figure out the major sector of expenditure and based upon that the organisation could adopt certain policies to reduce the expenditure.
COGS= Purchased inventory+ starting inventory-final inventory.
A store starts with $ 5,000 inventory. The company invest $ 2,000 to purchase and the organisation left with $ 4,000. Hence the COGS of the company will be $ (2,000+5,000-4000), i.e. $3,000.
Another important metrics to measure the success of the organisation is overhead rate. It provides information about the operational expenditure. Authorities of the organisation could get information through the calculation of overhead rate about the regular expenditure carried by the store or the organisation in order to continue the venture. Hence, the organisation could get information about service expenditure and could determine the organisational policies to attract additional profit.