The purpose of this article is to present a literature review on the definition of business performance.
The concept of business performance is commonly used both in the literature and in organizational circles to designate a certain level of excellence. It remains, however, relatively ambiguous to the extent that it is very overused in everyday language.
Furthermore, although it is widely used, there is no consensus around a precise definition and measurement. These depend, in fact, on the objective sought, the analysis perspective chosen as well as the field of interest of its user.
Read Also: Weber and bureaucratic organization
In relation to these two criteria of effectiveness and efficiency, Bourguignon (1997) began by grouping the meaning of the word performance, in the field of management, around three primary meanings, namely:
The first meaning is performance-success: when the performance of the company is synonymous with success. This meaning contains a value judgment, with regard to a frame of reference, which represents success from the point of view of the observer.
The second meaning is performance-result, here performance refers to the result of an action: the ex post evaluation of the results obtained without value judgment.
Read Also: The Human Relations Movement
Finally, the last meaning is performance-action: performance can mean an action or a process (the implementation of a skill which is only a potentiality).
According to P. Lorino (1997), “Performance in the company is everything which, and only what, contributes to achieving strategic objectives”. J.-B. Carriere (1999) then concludes that performance is nothing other than the evolution of the company or its expansion.
This notion of company performance can be summed up as the idea of success or success of the company which cannot be obtained without positive market sanction.
Read Also: Technical Leadership: Explained
Bourguignon (1998) describes this notion of success as a subjective reality and dependent on internal representations of success in the company. As for W. Azan (2007), he reduces the notion of performance to the idea of development.
Once we accept the hypothesis of divergences of objectives and participants in the organization, the concept of performance has as many meanings as there are individuals or groups who use it. Bessir (1999)64 notes that despite a certain confusion or vagueness surrounding the definition of company performance, there are four points of convergence between the different definitions. These four points are:
First, the term company performance is often used in an evaluation context, so we find terms like: performance evaluation, performance management, performance management. Performance is therefore closely linked to value. The latter is the one that prevails in the definition of performance as a result.
Read Also: The Sociotechnical School of Thought: Explained
Second, performance has several dimensions, the number of which varies depending on the authors.
Third, performance is often related to consistency and relevance. The term coherence, which does not raise any difficulty in the definition, refers to decisions which are logical among themselves and in relation to a scale of preference. The term relevance, unlike the term coherence, does not have a precise definition.
While relevance is usually defined in relation to a user and an intent, in some cases it is confused with consistency and in other cases it is equated with precision or accuracy.
Read Also: How to Improve Strategic Decision Making?
The articulation of these different terms makes the performance of the company appear as the result of a simple summation of relevance and coherence or as the product of an iterative loop between these same two terms. Performance, consistency and relevance are respectively the objective dimension, the rational dimension and the subjective dimension of any valid evaluation.
Fourth, performance is not a concept that is defined absolutely or objectively, it is considered by the authors to be a subjective concept.
Thus, Tchankam (2000) defines a successful company as one that does better than its competitors in the short, medium and long term. Furthermore, performance has long been a one-dimensional concept, measured by profit alone, due in particular to the weight of owners in the decision-making process (Saulquin et al. 2007).
Several studies, which are part of a positivist trend, most of the time study performance from a financial angle and reduce this concept to a simple dimension centered on the financial dimension alone (A. Bourguignon, 1998).
Indeed, the financial approach to company performance consists of asking the following question: “How does the organization position itself vis-à-vis its shareholders?” » by responding to it with an objective of maximizing the profit generated and return on investment.
Thus, this performance consisted of achieving the profitability desired by the shareholders with the turnover and market share which preserved the sustainability of the company.
This purely financial logic has been the subject of strong criticism in the existing literature (Dohou-Renaud, 2007; Bouquin, 2004; Lebas, 1995), notably:
The sustainability of companies no longer depends only on the financial aspect of their activities, but also on the way in which they conduct themselves.
The performance of the company defined in financial terms is no longer enough given its short-term dimension of maximizing a profit materialized by the dividends paid.
It does not integrate the different actors who participate in the development of the company (managers, employees, customers, etc.).
However, the end of the 1980s brought to light the complex and multifaceted nature of the concept. P. Barillot (2001)65 explains that the birth of a more complex economic environment during the 1980s and 1990s resulted in the realization that the management of the company is not reduced to the financial aspect alone.
From then on, corporate responsibility is broadening, it is no longer limited to shareholders alone, but includes other stakeholders (associations, unions, customers, suppliers, etc.).
These new players demand to be heard and this listening becomes a vital target for the performance and sustainability of companies. This new reality has led to the abandonment of the one-dimensional approach to the notion of performance, in favor of a broader vision.
Indeed, a large literature has focused on the conceptualization of company performance as a globalizing model. It is therefore a question of precisely defining the notion in a strategic configuration for piloting the activity as a whole, in order to highlight the challenges presented by the different approaches in force, and in particular their robustness in the face of contingency factors of the ‘environment.
For Baret (2006) company performance is a multidimensional concept “overall performance” that is difficult to measure technically. Overall performance is “the aggregation of economic, social and environmental performance”
Marcel Lepetit defines it “as a multidimensional aim (or goal), economic, social and societal, financial and environmental, which concerns businesses as well as human societies, as well as employees and citizens”.
In short, company performance is a complex and multidimensional concept that integrates different dimensions to define it and different measurement indicators because it remains a matter of perception and not all stakeholders have the same perception of performance.
It is, moreover, relative to the vision of the company, its strategy and its objectives. It is in this sense that the performance of a company can be measured from different angles and is not limited only to its financial dimension. So to evaluate it, it is necessary to carry out measurements at the level of all its dimensions and rely on its determining factors to improve it.
