Measuring business performance: A case study

Abstract

Most studies consider business performance to be a multidimensional construct. Four dimensions (namely, business growth, profitability, image and customer loyalty, and product service innovativeness) were hypothesised to validate a measure for business performance in the South African context. Using partial least squares, 22 responses from top executives of banks in South Africa were analysed to test the validity of the four dimensions of business performance. The results of the study suggest that the nonfinancial dimensions (namely, image and customer loyalty, and product service innovation) are not valid dimensions for measuring business performance, while the other two dimensions (namely, business growth and profitability) show a high degree of correlation. This indicates that business growth is aligned with profitability, that growth for profitability is a major concern, and that profitability still remains the key measure of business performance in the South African banking sector. Parameters such as customer loyalty and innovativeness are not regarded as important for business performance, although these could be pressing issues for banks. The paper also validates a questionnaire that can be used to measure business performance and reviews various methods for measuring business performance.