The capability and performance of SMEs are measured based on seven parameters that vary across sectors.Generally the 7 parameters cover the following areas:
1. Business performance
Business performance can be expressed in non-financial and financial terms.
Financial and marketplace performance is performance relative to measures of cost, revenue, and market position, including asset utilization, asset growth, and market share.
Customer-focused performance is performance relative to measures and indicators of customers’ perceptions, reactions, and behaviours.
2. Financial capabilities
Aggregate measures for financial return may include those of return on investment (ROI), operating margins, profitability, or profitability by market segment or customer group. Measures on financial viability may include those for liquidity, debt-to-equity ratio; days cash on hand, asset utilization, and cash flow.
Capital Intensity - indicates the amount of fixed assets allocated to each worker. If this trend is positive it indicates that the company had invested in fixed assets in order to improve performance, particularly in infrastructure, new machines, and technology.
Capital Productivity - Capital productivity reflects how efficient the fixed assets of a company were utilised to generate more value added to the products or services.
Labour Cost Competitiveness - This is defined as labour cost per employee. If the trend is positive, i.e., increasing, the company must ensure that growth in labour per employee is commensurate with higher value-added growth.
3. Technical capabilities
Deals with workforce capability and capacity; how the company assesses workforce capability and capacity needs, including the skills, competencies, certifications, and staffing levels needed to build a workforce environment conducive to high performance.
4. Production capability
Volume of products that can be generated by a production plant or enterprise in a given period by using current resources.
Innovation is defined as making meaningful change to improve the company’s products, services, programs, processes, operations, and business model, with the purpose of creating new value for stakeholders. Innovation should lead the company to new dimensions of performance. Innovation requires a supportive environment, a process for identifying strategic opportunities, and the pursuit of intelligent risks.
6. Quality systems
Work processes are usually documented in standard operating procedure (SOP) manual which is one subject addressed in this particular area.
Work processes - The company’s most important internal value-creation processes. They may include product design, production, and delivery, customer support, supply-chain management, business, and support processes. They are the processes that involve the majority of the company’s workforce.
To improve process performance and reduce variability, the company may implement a Lean Enterprise System, Six Sigma methodology, use standards from the International Organization for Standardization (ISO; e.g., 9000 or 14000), Plan-Do-Check-Act (PDCA) methodology, decision sciences, or employ other process improvement tools.
7. Management capabilities
Describes how effectively the management team puts into practice its combined competencies to deliver business results.
A high functioning management team will effectively harness its different abilities, preferences and strengths to meet the changing demands of the operating environment and achieve its outcomes.
Vision can be defined as the company’s desired future state. The vision describes where the company is headed, what it intends to be, or how it wishes to be perceived in the future. The company’s vision should set the context for the strategic objectives and action plans.
The values guide the perspective of the organization as well as its actions. Values can help an organization define its culture and beliefs.
A mission statement is a statement of the purpose of a company or organization; its reason for existing; a written declaration of an organization's core purpose and focus that normally remains unchanged over time.
A sustainable company is capable of addressing current business needs and, through agility and strategic management, is capable of preparing successfully for its future business, market, and operating environment.
A sustainable company also ensures a safe and secure environment for its workforce and other key stakeholders. A sustainable company is capable of addressing risks and opportunities arising from environmental considerations and climate change.
Communication mechanisms should be two-way and use simple or understandable language, and they may involve in-person contact, e-mail, the internet, or the telephone. For many companies, these mechanisms may vary as marketplace, customer, or stakeholder requirements vary.
Organizational structure is the reporting relationships among the company governance board (Board of Directors), senior leaders (MD or CEO), and parent companies.
For some non-profit organizations, governance and reporting relationships may include relationships with major funding sources, such as granting agencies or foundations.
Understanding the characteristics of high-performance work environment, in which people do their utmost for their customers’ benefit and the company’s success, is key to understanding and building an engaged workforce.
Compensation, recognition, and related reward and incentive practices include promotions and bonuses that may be based on performance, skills acquired, and other factors. Recognition can include monetary and nonmonetary, formal and informal, and individual and group mechanisms.
Responses should include how the company addresses any unique considerations for workforce development, learning, and career progression that stem from the company.
Organizational and Personal Learning
Achieving the highest levels of organizational performance requires a well-executed approach to organizational and personal learning that includes sharing knowledge via systematic processes.
Learning is directed not only towards better products but also towards being more responsive, adaptive, innovative, and efficient—giving the company marketplace sustainability and performance advantages and engaging workforce to increase satisfaction and the motivation to excel.