Any significant management action can be assessed both in terms of success of immediate goals and as effect of the organization ability to embrace change. Market competition intensifies with the development of Romanian society and its needs. Companies that offer different products and services need to impose certain advantages and to increase their performances. The paper will present modern tools for measuring and evaluating organizational performance, namely: Balanced Scorecard, Deming model and Baldrige model. We also present an example for Balance Scorecard, of an organizations belonging to the cosmetics industry.management, performance, balance scorecard, performance measurement

BADEA FLORICA

GRIGORE ANA-MARIA

RADU CATALINA

English

Research Papers in Economics

  951 
MODERN INSTRUMENTS FOR MEASURING ORGANIZATIONAL 
PERFORMANCE  
Grigore Ana-Maria 
Academia de Studii Economice Bucure￿ti, Facultatea de Management 
Badea Florica 
Academia de Studii Economice Bucure￿ti, Facultatea de Management 
Radu C￿t￿lina 
Academia de Studii Economice Bucure￿ti, Facultatea de Management 
 
 
Any significant management action can be assessed both in terms of success of immediate goals 
and as effect of the organization ability to embrace change. 
Market  competition  intensifies  with  the  development  of  Romanian  society  and  its  needs. 
Companies that offer different products and services need to impose certain advantages and to 
increase their performances. 
The paper will present modern tools for measuring and evaluating organizational performance, 
namely: Balanced Scorecard, Deming model and Baldrige model. We also present an example 
for Balance Scorecard, of an organizations belonging to the cosmetics industry. 
 
Key words: management, performance, balance scorecard, performance measurement  
 
JEL Code: M10, L25, L66 
 
1. The concept of performance  
Performance can be defined as “a state of competitiveness of the organization, reached through a 
level of efficiency and productivity which ensures a sustainable market presence”
658.  In our 
opinion performance needs both effectiveness and productivity simultaneous. Hence we conclude 
that a performing organization is efficient, competitive and productive. 
P. Druker considered that to be effective means “to do planned things well”; by efficiency he 
meant “the extent to which objectives were achieved ˝. 
T.  Katarbinski  defined  effectiveness  as  precision  in  achieving  targets.  He  suggested  that 
efficiency is the action by which an organization achieves its goals in terms of minimal cost.  
Both  management  specialists  come  to  reinforce  the  above  statements  on  the  concept  of 
performance. 
The purpose of the paper is to find indicators and instruments that reflect as closely as possible 
the subtleties of how an organization is functioning. We started with the following questions. 
What  indicators  reflect  best  organizational  performance?  Profit  level?  Different  rates  of 
efficiency? Achieve planned results? The answer must take into account the multiplicity and 
diversity of factors that influence both individual and organizational behaviors. 
Performance measurement represents results quantification of activities undertaken within an 
organization over a period of time. For performance measurement we started from a series of 
questions:  Is  there  a  link  between  objectives,  performance  measurements  and  organization 
results? Are performance metrics relevant? To answer these questions we identified a series of 
modern management methods for measuring and assessing organizational performance. 
 
   
                                                       
658   M. Boulescu, M. Ghi￿￿, V. Mare￿,  ˝Auditul performan￿ei˝, ed. Tribuna Economic￿, Bucure￿ti, 
pg. 13, 2002.   952
2. The Balance Scorecard   
In the early '90s two experts from the Harvard Business School introduced a new performance 
measurement tool they called The Balanced Scorecard659. The two experts Robert Kaplan and 
David Norton have started identifying the weaknesses of previous management approaches and 
through their approach of the balance scorecard provide a clear prescription of what companies 
should measure in order to balance the financial perspective.  
The balance scorecard is a measuring instrument that offers to the organization the opportunity to 
clarify its vision and strategies and translate them into action. This provides feedback on both 
internal  business  processes  and  on  external  achievements  in  order  to  continuously  improve 
strategic performance and business results. 
The  balance  scorecard  is  a  concept  that  allows  performance  evaluation  and  assessment  by 
focusing  on  presentation  of  the  results.  This  instrument  is  characterized  by  flexibility.   
Results areas should be specified depending on the interests involved:  
1. Shareholders or financiers (financial results) 
2. Clients (external results)  
3. Staff (internal results)  
4. Managers (results of improved processes) 
5. Results of learning and innovation  
Results in each area must be observed as a multitude of objectives, performance indicators and 
standards  involving  the  relevant  key-factors  and  authorities.  Balance  scorecard  suggests  that 
managers  look  at  the  organization  from  four  perspectives:  learning  and  growth  perspective, 
business process perspective, customer perspective and financial perspective.  
It is recommended to use this management method in all managerial situations. The balance 
scorecard can be used: 
- When the managers want to track the degree of objectives achievement and the level of results 
to ensure improvement in the degree of substantiation of managerial decisions. 
- When one area or another are checked, monitored by top management due to continuing poor 
results recorded in a previous period of time. 
- When the time budget for managers, especially those from top management is busy, when they 
are assaulted by numerous information, some with a low relevance to the objectives. 
 
3. The Deming model 
In the traditional industrial activity “quality control” and “zero defects” were keywords. In order 
to defend the client from receiving poor quality products numerous efforts were undertaken to try 
to control the products at the end of the production line.  
The problem with this approach - as Deming said, is that the true causes of defects will never be 
identified and there will always be inefficiencies due to the rejection of defects.  
What Deming says refers to changes occurring at each step in the production process and causes 
of variation must be identified and fixed. If this is possible, then there is a way to reduce defects 
and improve product quality indefinitely. In order to establish this process, Deming also stresses 
that all business processes should be part of a feedback system with chains. The feedback should 
be examined to determine the causes of change, which is what presents significant problems (See 
figure below): 
 
                                                       
659   D. T. Corodeanu, ˝Management comportamentul ￿i performan￿a întreprinz￿torului român˝, ed. 
Tehnopress, Ia￿i, p. 248-250, 2008 
  
Figure 1: The DEMING cycle
 
4. The BALDRIGE model 
The Baldrige method (1997) reiterates the concept built on facts
businesses depend on performance measurement and an
is to obtain information that allows managers to kn
term decisions.  
Measurement  standards  must  derive  from  business  str
information about key processes, productivity and r
information  necessary  for  performance  measurement  a
performance, performance products and services, ope
suppliers, employees’ performance related and finan
Of  major  importance  in  performance  improvement  is  t
measurement  standards  or  indicators.  Performance  me
measurable characteristics of products, services, p
to  track  and  improve  performance.  These  measurement
selected to represent the best performance factors.
Among the most important benchmarks for measuring p
identified: income from sale of products and servic
and  market  results,  the  evaluation  results  of  human 
results, social responsibility and organizational r
 
5.  Example of Balance Scorecard at L’Oreal
5.1 The cosmetic market 
Cosmetics are important consumer products, with a k
cosmetics  that  include  makeup  and  fragrance  product
products such as dental care products, shampoos and
                                                       
660   Source: http://www.valuebasedmanagement.net/methods
953 
 
Figure 1: The DEMING cycle
660 
terates the concept built on facts-based management: modern 
businesses depend on performance measurement and analysis. The purpose of measurements 
is to obtain information that allows managers to know the company and to take responsible long
Measurement  standards  must  derive  from  business  strategy  and  provide  critical  data  and 
information about key processes, productivity and results. There are many types of data and 
information  necessary  for  performance  measurement  and  improvement,  including:  consumer 
performance, performance products and services, operations, marketing, competitive comparison, 
suppliers, employees’ performance related and financial cost. 
Of  major  importance  in  performance  improvement  is  the  creation  and  use  of  performance 
measurement  standards  or  indicators.  Performance  measurement  standards  or  indicators  are 
measurable characteristics of products, services, processes and operations that the company uses 
to  track  and  improve  performance.  These  measurement  standards  and  indicators  should  be 
selected to represent the best performance factors. 
Among the most important benchmarks for measuring performance, the Baldrige model (2005) 
identified: income from sale of products and service delivery, customer-based results, financial 
nd  market  results,  the  evaluation  results  of  human  resources,  organizational  effectiveness 
results, social responsibility and organizational results. 
5.  Example of Balance Scorecard at L’Oreal 
Cosmetics are important consumer products, with a key role in everyone's life: beside traditional 
cosmetics  that  include  makeup  and  fragrance  products,  these  include  also  personal  hygiene 
products such as dental care products, shampoos and soaps.  
Source: http://www.valuebasedmanagement.net/methods_demingcycle.html 
modern 
. The purpose of measurements 
ow the company and to take responsible long-
ategy  and  provide  critical  data  and 
esults. There are many types of data and 
ng:  consumer 
rations, marketing, competitive comparison, 
he  creation  and  use  of  performance 
asurement  standards  or  indicators  are 
rocesses and operations that the company uses 
cators  should  be 
erformance, the Baldrige model (2005) 
based results, financial 
resources,  organizational  effectiveness 
ey role in everyone's life: beside traditional 
s,  these  include  also  personal  hygiene   954
Current  cosmetic  market  is  oriented  towards  innovation,  by  including  new  color  palettes, 
treatments directed to certain types of skin and unique formulas that focuses on different needs. 
Most cosmetics have a life expectancy of less than five years and 25% of producers reformulate 
its products each year. They must constantly improve their products to maintain its position on 
the highly competitive market. The consumer expects a more diverse range of options and greater 
effectiveness.  
The  current  cosmetics  market  is  dominated  by  several  multinational  corporations:  L'Oreal, 
Colgate Palmolive, Beiersdof, Kao Corporation and Avon Products. 
 
5.2 Proposal for improving the activity at L’Oreal Company 
Many  companies  need  a  model  for  measuring  and  evaluating  performances  that  truly  pulls 
together all parts of the organization. The balance scorecard model offers an optimum image on 
the key activities in the business. Keeping the points above in mind we developed an example of 
balance scorecard which can be used in the cosmetics companies. The model identifies the key 
success factors for financial, customers, internal processes and knowledge and learning activities. 
Also  for  each  strategic  objective  we  identified  the  performance  indicators,  targets  and 
improvement actions.  
 
Table 1: Balance Scorecard at L’Oreal
661 
BALANCE SCORECARD 
FINANCIAL 
Key success 
factors 
 Strategic 
Objectives 
 Performance 
Indicators 
 Targets   Improvement actions 
Good 
financial 
results and 
increasing 
profitability 
 Maximizing 
shareholder value  
 
Increase sales    5% in 3 
years  
 
 – Penetrating young 
markets.  
 - Increasing prices for the 
best quality products.  
 Higher profits   Profit on equity 
consistently 
Increase by 
15% in 3 
years  
 - Wider range of products.  
 - Intensification of 
promotional campaigns. 
CUSTOMERS 
High global 
market share 
Greater market 
share  
 
 
Market 
share  
 
 
3% in 3 years  
 
 
 
 - Developing marketing 
programs focused on 
objectives  
  - Communicate with 
customers using electronic 
instruments.  
Global market 
presence  
 
 
Number of 
potential 
customers 
approached  
5% increase in 5 
years  
 -Developing a plan for 
penetrating untapped 
markets.  
egotiating a strategic 
partnership with other local 
firms. 
                                                       
661  Adapted after the Balance Scorecard from Easy Jet: H. K. RAMPERSAD, “Total Performance 
Scorecard”, ed. Didactic￿ ￿i Pedagocic￿, Bucure￿ti, p. 111-113, 145, 315-322, 2005 
   955 
 Deeper 
knowledge of the 
global market for 
personal care 
products.  
Revenue 
potential  
10% increase in 
5 years  
  Creating a database that 
includes characteristics of 
potential customers. 
High quality 
products 
Increased degree 
of loyalty on 
products 
purchased  
 The 
number of 
complaints 
from 
customers 
Decrease by 
10% per year  
 
 
 - Providing additional 
bonuses to employees who 
are customer oriented.  
  Degree of 
customer 
loyalty 
towards 
brand  
 1.2.1 Increase 
by 5% per year  
 Design of procedures to 
resolve customer 
complaints  
 Measuring the degree of 
customer loyalty.  
 Image 
Improved 
awareness of 
audience target 
Awareness 
of brand 
At least 50% in 
4 years  
 - Benchmarking in terms 
of customer loyalty.  
  
INTERNAL PROCESSES 
Team spirit 
and 
motivating 
work 
environment 
 Managers act as 
mentors  
P
e
r
c
e
n
t
a
 At least 70% in 
3 years  
 
 
 
 -Formulating a 
development plan for 
managers. 
 - Provide  guidance for 
training teams.  
Degree of 
satisfaction 
with the 
feedback  
At least 70% in 
3 years  
 - Study the employee 
satisfaction.  
Successful 
introduction 
of new 
products 
(innovative) 
 New products 
developed  
urvey score 
of 
employee 
satisfaction  
Increase by 5% 
per year  
 
 - Offering products that 
meet customer needs.  
Percentage 
of sales 
from new 
products 
and 
services.  
Increase 5% per 
year 
 
 
 - Develop a formula for 
extending the range of 
products for men.  
Time 
required to 
launch a 
new 
product on 
the market 
Reduction by 
10% in 3 years 
 -  Better  organization  of 
research  and  development 
department.  
 -  Determining  the  criteria 
for  developing  new 
products 
KNOWLEDGE AND LEARNING 
Competitive 
advantage 
based on 
 Improved 
managerial skills  
Sales per month    Increase 
by 10% 
in 3 years  
 - Matching skills with 
the performance 
evaluation system.    956
knowledge, 
abilities and 
skills of 
employees 
Percentage of 
managers trained in 
management skills 
essential.  
 80% in 3 
years  
 
 - Learn effective 
leadership.  
 
 
 
6. Conclusions 
 
Successful  organizations depend critically  on the ability  to differentiate  themselves  from  the 
competition  through  continuous  and  consistent  concern  in  increasing  prosperity  of  the 
organization. In this context change adaptation and progress have a vital role in creating a high 
degree of competitiveness of organizations. 
This paper tried to offer a few examples of modern performance measurement and evaluating 
methods  like  the  balance  scorecard,  the  Deming  and  Baldrige  models.  Also  we  presented  a 
simplified balance scorecard example used at L’Oreal. 
 
Bibliography 
1. M. Boulescu, M. Ghi￿￿, V. Mare￿, „Auditul performan￿ei”, ed. Tribuna Economic￿, Bucure￿ti, 
pg. 13, 2002. 
2. D. T. Corodeanu, „Management comportamentul ￿i performan￿a întreprinz￿torului român”, ed. 
Tehnopress, Ia￿i, p. 248-250, 2008. 
3. H. K. Rampersad, “Total Performance Scorecard”, ed. Didactic￿ ￿i Pedagocic￿, Bucure￿ti, p. 
111-113, 145, 315-322, 2005. 
4. Ana-Maria Grigore, Constantin Bâgu, C￿t￿lina Radu, „Developing performance indicators for 
business  improvement”,  Analele  Universit￿￿ii  din  Oradea-￿tiin￿e  Economice,  anul  XVIII, 
volumul IV, p.270-275, 2009. 
5. S. Avasilc￿i, “Definirea cerin￿elor de performan￿￿ în managementul schimb￿rilor tehnologice”, 
în Brudaru, O., (Ed.) „Cercet￿ri în managementul schimb￿rilor tehnologice”, Editura Sedcom 
Libris, Ia￿i, vol. 5,  2001. 
6. S. Kumar et. al, “The cosmetics cosmos- a review of four major players”, Revista Strategic 
Direction, vol. 23, nr. 3,  p. 26-28,  2005. 
7. S. Kumar, “Exploratory analysis of global cosmetic industry: major players, technology and 
market trends”, Revista Technovation, vol. 25, p. 1263-1272, 2005.  
8. http://www.valuebasedmanagement.net/methods_demingcycle.html 
 
 
 
 
   

MODERN INSTRUMENTS FOR MEASURING ORGANIZATIONAL PERFORMANCE

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MODERN INSTRUMENTS FOR MEASURING ORGANIZATIONAL PERFORMANCE

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