Measuring organizational performance and organizational excellence of SMEs – Part 2: an empirical study on SMEs in India

Purpose – The purpose of this paper is to empirically establish an indigenously developed model for measuring organizational performance and organizational excellence, and to examine the relationship between organizational performance and organizational excellence. Design/methodology/approach – The paper presents a model based on seven variables, at the overall and work unit level, for measuring organizational performance and organizational excellence – tested by using a large sample. A structured questionnaire is developed for collecting data from 407 respondents from 230 organizations. Summated scale average method is used for calculation of organizational performance and a total correlation method is used for the calculation of organizational excellence. Findings – It is established that organizational performance and organizational excellence could be measured by consolidating performance variables, using two different methods: performance can be measured by averaging the performance variable scores, and excellence can be measured by averaging the correlations of performance variable scores. Based on the study, a new general definition for organizational excellence is proposed, as “the outstanding measure of relationship of all performance variables influencing an organization's functioning”. Practical implications – The model, developed and tested for measuring performance and excellence, can be used by small and medium enterprises to evaluate their performance and excellence separately and periodically. The study helps managers to recognize organizational excellence as a measure needing special attention instead of taking it as an outstanding value of organizational performance. Originality/value – The definition and model developed and tested for measuring excellence can contribute significantly to existing literature on excellence measurement. This will help researchers to study organizational excellence as a separate organizational behavior, instead of limiting it as a terminal value of organizational performance.