22. Performance Index

Performance Index is a tool which purpose is to assist in the monitoring of processes. It assumes that the process is comprised of several factors, which have different effects on it. Factors ought to be evaluated in order to manage the process effectively, moreover, one should give an appropriate hierarchy and monitor their progress. This method is also used to make a decision which is dependent on many conditions.

Its advantages are as follows:

  • simplification of data by giving them the measurable value,
  • exclusion of the subjective factor,
  • simultaneous monitoring of many factors,
  • easy to use,
  • taking into account all the parameters.

Application of this method consists of the following steps:

  1. Define what is to be monitored (process, task).
  2. Mention the factors which must be taken into account.
  3. Develop a table where the measurement results are going to be stored.
  4. Entering the evaluation criteria in the appropriate fields.
  5. Identify the extent to which they are at present.
  6. Determination of the target for each of the factors.
  7. Determine the value of the individual factors.
  8. Reasonable weight ought to be allowed for each of the factors, so that the sum of the weights was equal to 100.
  9. Determine the frequency of measurement.
  10. Measure the performance of each of the factors.
  11. The number of gained points ought to be assessed for each of the factors.
  12. Multiply each result by the weight of the factor to get “value”.
  13. Add all the values ​​to obtain the index of the process efficiency.

Development process of a new product varies depending on the scope of a business and the sector in which it operates. The accurate assessment of the criterion of evaluating the new products is pivotal. This assessment may utilize criterions connected with the market, the product or the finances. The financial criterions of the new product requires considering: the introduction to the market costs, market growth, profit levels, effects of cash inflows, the time of costs reimbursement, the size of return.

Performance Index due to its simplicity, objectivity and effectiveness. This method can  quickly help to solve problems, make decisions and monitor the most important processes occurring in the organization.