2018Journal of Entrepreneurship and Sustainability IssuesOpen access

Comparative analysis of company performance evaluation methods

Judita Narkunienė, Aurelija Ulbinaitė

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Abstract

The evaluation of a company's performance is an integral part of the management of every company, which allows determining the impact of business management decisions on the performance results, as well as the direction of the results and the decisions that need to be made to improve them.Traditionally, a company's performance is evaluated on the basis of an analysis of financial performance indicators, but it is noted that in today's dynamic business environment the timely control of the performance is crucial, thus, there is an increasing attention on non-financial performance indicators.The aim of the article is to investigate and compare the modern methods for company performance evaluation that are based on the analysis of financial and non-financial performance indicators.The research is carried out using systematic analysis of scientific literature, comparison, and aggregation methods.First of all, the article unfolds the essence of the concept of the company performance evaluation and highlights the differences between traditional and modern performance evaluation systems.Moreover, the advantages of non-financial performance indicators are compared with financial indicators.Furthermore, a classification scheme for performance evaluation methods is provided; by identifying their main advantages and disadvantages the most popular and widely used modern performance evaluation methods are overviewed: economic value added method, balanced scorecard, performance prism, performance pyramid, six-sigma model and multi-criteria company performance evaluation method.Finally, according to certain criteria, a comparative analysis of the latter methods is performed.The comparative analysis confirms that non-financial performance indicators complement financial indicators; therefore, in the process of a company's performance evaluation, modern performance evaluation methods, combining financial and non-financial performance indicators and allowing the performance to be evaluated both quantitatively and qualitatively, should be used.However, there is no single method that would be appropriate for all companies, so further work can be targeted at establishing a multi-criteria performance evaluation method that would satisfy the needs of a particular business' activity and targets for evaluation.

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The evaluation of a company's performance is an integral part of the management of every company, which allows determining the impact of business management decisions on the performance results, as well as the direction of the results and the decisions that need to be made to improve them.Traditionally, a company's performance is evaluated on the basis of an analysis of financial performance indicators, but it is noted that in today's dynamic business environment the timely control of the performance is crucial, thus, there is an increasing attention on non-financial performance indicators.The aim of the article is to investigate and compare the modern methods for company performance evaluation that are based on the analysis of financial and non-financial performance indicators.The research is carried out using systematic analysis of scientific literature, comparison, and aggregation methods.First of all, the article unfolds the essence of the concept of the company performance evaluation and highlights the differences between traditional and modern performance evaluation systems.Moreover, the advantages of non-financial performance indicators are compared with financial indicators.Furthermore, a classification scheme for performance evaluation methods is provided; by identifying their main advantages and disadvantages the most popular and widely used modern performance evaluation methods are overviewed: economic value added method, balanced scorecard, performance prism, performance pyramid, six-sigma model and multi-criteria company performance evaluation method.Finally, according to certain criteria, a comparative analysis of the latter methods is performed.The comparative analysis confirms that non-financial performance indicators complement financial indicators; therefore, in the process of a company's performance evaluation, modern performance evaluation methods, combining financial and non-financial performance indicators and allowing the performance to be evaluated both quantitatively and qualitatively, should be used.However, there is no single method that would be appropriate for all companies, so further work can be targeted at establishing a multi-criteria performance evaluation method that would satisfy the needs of a particular business' activity and targets for evaluation.

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Available abstract

The evaluation of a company's performance is an integral part of the management of every company, which allows determining the impact of business management decisions on the performance results, as well as the direction of the results and the decisions that need to be made to improve them.Traditionally, a company's performance is evaluated on the basis of an analysis of financial performance indicators, but it is noted that in today's dynamic business environment the timely control of the performance is crucial, thus, there is an increasing attention on non-financial performance indicators.The aim of the article is to investigate and compare the modern methods for company performance evaluation that are based on the analysis of financial and non-financial performance indicators.The research is carried out using systematic analysis of scientific literature, comparison, and aggregation methods.First of all, the article unfolds the essence of the concept of the company performance evaluation and highlights the differences between traditional and modern performance evaluation systems.Moreover, the advantages of non-financial performance indicators are compared with financial indicators.Furthermore, a classification scheme for performance evaluation methods is provided; by identifying their main advantages and disadvantages the most popular and widely used modern performance evaluation methods are overviewed: economic value added method, balanced scorecard, performance prism, performance pyramid, six-sigma model and multi-criteria company performance evaluation method.Finally, according to certain criteria, a comparative analysis of the latter methods is performed.The comparative analysis confirms that non-financial performance indicators complement financial indicators; therefore, in the process of a company's performance evaluation, modern performance evaluation methods, combining financial and non-financial performance indicators and allowing the performance to be evaluated both quantitatively and qualitatively, should be used.However, there is no single method that would be appropriate for all companies, so further work can be targeted at establishing a multi-criteria performance evaluation method that would satisfy the needs of a particular business' activity and targets for evaluation.

Key concepts: Balanced scorecard, Performance indicator, Financial analysis, Computer science, Performance management, Performance measurement, Economic Value Added, Risk analysis (engineering)

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