Enterprise value management: WHY KPIS are not effective

Abstract

The article discusses one of the most relevant methods of enterprise management - cost management. It is noted why "cost" is an important criterion in management. The main advantages of this management method are indicated. It is determined that cost is a complex indicator that takes into account the state of an enterprise: all assets, liabilities, debts, intellectual property, reputation, personnel, work with partners and counterparties, competitors and the level of development of the market as a whole. It is revealed that cost management is closely related to key performance indicators (KPIs). The article pays special attention to the application of KPIs. The article explores the reasons for the inefficiency of KPIs in business value management. For this purpose, 53 companies of the Udmurt Republic engaged in the service sector were analyzed, of which 19 companies are Limited Liability Companies (LLC), 34 companies are Individual entrepreneurs (IE). Based on a survey of employees and personal interviews of decision makers. It has been established that business value management is not applied in companies, and the cost is considered solely for the sale of the business. It was also noted that the lack of cost management is directly related to the unsatisfactory practice of applying KPIs. The question is raised about the importance of the correct application of key indicators for each interested participant in the process within the enterprise. The vision of what solutions to problems with the inefficiency of KPIs can be used in the enterprise is proposed. The emphasis is placed on the fact that performance indicators require constant attention, revision, and changes. Using the research results in the practical field of activity will increase the efficiency of the company's employees, and the company itself, as a business, will increase its value. The information will be useful to both entrepreneurs, shareholders, business leaders, and managers who face strategic objectives for the company's development.