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MEASURING THE PERFORMANCE OF CHOSEN COMPANIES IN THE CZECH REPUBLIC

M. KOZENA, J. SKOLUDOVA

Abstract

Businesses at the present time find themselves in a difficult situation; besides the ongoing effects of the economic crisis, they are facing a continuously escalating competitive struggle. Standing up against the competition is becoming more complex and requires constant monitoring of, and adaptation to, market requirements. Thus, pressure is constantly growing on the efficient use of resources, reduction of production costs, improvement of business processes and last but not least, the creation of innovation and change. Company management are looking for new means and approaches to improve business performance as well as its evaluation and management. In addition to traditional methods such as financial analysis indicators with the requirement to maximise profits, more modern methods are becoming increasingly popular in use, which are characterised by a comprehensive approach to business management. These new approaches take into account the risk incurred now and create value not only for the owners but also for other interested parties. The “traditional” methods of measuring business performance are based mostly on economic fundamentals, such as profit, cash flow and profitability. Perhaps the most commonly used indicator to assess the financial performance of a company is the profit. The most used methods that measure a company's financial performance include ratios (liquidity, activity, debt, profitability, productivity and capital market), pyramidal decomposition and summary indicators. Current trends in financial management are increasingly moving towards linking a company's financial performance of with the creation of shareholder value. At present, many businesses, in evaluating their performance, are increasingly using new approaches that take non-financial criteria into account. The flaw in financial data is that it reflects the results of management decisions of the previous period, and their development is influenced by a number of factors that cannot be specified. Developments in this area are increasingly moving along the path of supplementing financial indicators with a number of other non-financial indicators. Use of non-financial indicators also allows the prediction of the future development of financial indicators and thus the value of the company. A relatively new method used in the Czech business environment is the pointer system evaluating business performance called the Balanced Scorecard. In contrast to all other methods, it not only evaluates the performance of a company at the present moment, but links individual indicators with the strategic management of the business. Another widely used method for measuring the performance is the method of benchmarking. Benchmarking is a tool for strategic management. The concept of benchmarking is a method of measuring the performance of competitors.

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DOI resolver: doi.org/10.5593/SGEMSOCIAL2014/B22/S6.058

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