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assess current performance by analysing an organisation’s strategic…

- - - - an organisation can have stakeholders who have different views on the purpose and objectives of the organisation. These differences lead to two quite divergent views about the purpose of the organisation, what constitutes strategy and, consequently, how operational performance should be measured. These alternative views can be termed the shareholder and the stakeholder view, of the organisation.
        
        Shareholder view:
        organisations exist to maximise monetary return for shareholders
        
        drawbacks:
        Not all orgs have shareholders
        Not all companies have shares that can be measured
        stock values can fluctuate for no real reason
        
        Stakeholder view:
        organisations exist to serve the needs of stakeholders and output or
        activity is measured rather than dollar outcomes.
        
        This approach involves much more complex measurement issues such as:
        CBA
        What measures are appropriate for each stakeholder group? How does the organisation balance performance between these measures? What does the organisation do when there is conflict between measures?
      - Many types of performance measures exist and they generally focus on the operational drivers of an organisation, such as:
        OIAMOAEE
        input measures (time, cost and resources used); activity measures (how often an event or activity occurs); output measures (quantity of goods and services produced, revenues booked); efficiency measures (ratios and relationships of outputs with respect to inputs, such as cost efficiency and savings); effectiveness measures (measures of output and outcome conforming to specified characteristics, such as absolute quantities, timeliness, customer satisfaction, or quality); impact measures (measures describing how the outcome of a program affects strategic organisational or mission objectives—an example is ‘reduced community obesity’); analytical measures (measures such as the proportion of products developed that are within statistical process control limits, or quality outcomes); and organisation-specific measures that might be applicable to your firm (measures such as an innovation index for a high-tech R&D organisation, or a service-quality index for a service firm).
        
        The choice of which sort of performance measure to use depends in the first instance on the performance that is desired.
        
        Effective data collection
        There have been two significant improvements in data collection for internal performance monitoring and reporting.
        
        The first improvement was based on the automation and digitisation of many areas of data collection.
        effective data collection
        
        The second area of change has been the move from after-the-event reporting to real-time reporting and action
        
        Underlying this rapid data collection and analysis is powerful IT. Previously, it was only larger organisations that could afford this type of expenditure and infrastructure, but lower costs and easier access are making it increasingly available to all.
        
        While we have the software and technology to provide this information rapidly, they are not enough to improve performance. When developing current or new systems, it is also essential to carefully plan and design effective data capture, analysis and storage. This takes a significant amount of time and effort, and poor implementation will hinder data collection and reporting. Common system design issues relating to suppliers, innovation and products/customers include:
        SIP
        suppliers—ensuring the ability to have multi-level coding of invoices; innovation—developing mechanisms for capturing hours spent on research and development; and products/customers—producing cross-referenced analyses (e.g. by segment, product, raw material inputs).
      - An analysis of the operational drivers means examining the approaches for measuring
        performance
        
        Benchmarking
        systematically identify[ing] the processes and performance outcomes of an organisation with those of its competitors as well as comparing processes and outcomes within the organisation itself, in the constantly changing business environment’.
        
        An
        organisation can gather data to analyse through:
        Researching competitor information
        Talking to customers
        Talking to suppliers, agents, distributors, industry analysts
        Product enquiries e.g. mystery shoppers
        Purchasing & examining competitors products
        Talking to competitors employees
        Hiring people from competitors
        
        Performance measures need to be evaluated in context, and that context is typically the competitive business environment and industry within which the organisation competes.
        
        profit /reven and cost
        qualitative and quantitative
        trends
        
        The balanced scorecard
        
        The balanced scorecard (BSC) approach to performance measurement and target setting (Kaplan
        and Norton, 1996) recognises that in order to achieve its strategic objectives, an organisation must
        achieve non-financial standards of performance in order to achieve its financial objectives over the
        longer term.
        
        The BSC is organisation specific.
        
        SMART objectives should be used:
        Specific
        Measurable
        Achievable
        Realistic
        Timed/Timely
        
        The Customer Perspective – To achieve our vision, how should we appear to our customers? – customer satisfaction and value proposition (satisfaction, repeat business, product loyalty)
        • The Internal Process Perspective – To satisfy our shareholders, what business we must excel at? – Measure of internal processes and performance that deliver customer expectations. (Supplier relation, production, quality, distribution, risk management)
        • The Learning and Growth Perspective – To achieve our vision, how will we sustain our ability to change and improve? – Measurement of learning as this in turn can drive internal efficiencies and processes to deliver an improved value proposition. (strategic jobs, team and skill competencies, transaction processing, analytical processes, culture, leadership, reward alignment, teamwork)
        • The Financial Perspective – To succeed financially, how should we improve efficiencies? – Factors that affect bottom line of an organization and shareholder value drivers (profit, growth, shareholder return)
        
        organized around four distinct perspectives which balance
        short-term and long-term performance,
        external and internal performance,
        financial and non-financial performance,
        and different stakeholder perspectives.
        
        In order to use BSC for assessment of current performance, it is important to carefully identify the objectives that are important to each perspective. Kaplan and Norton identify the following four steps in designing and using the BSC:
        
        Identify the organization’s mission and vision and break it down into objectives and goals;
        
        Link the vision and objectives to individual performance;
        
        Create the plan or strategy based on the findings and set goals;
        
        Obtain feedback and develop the strategy accordingly.
        
        Kaplan and Norton argue that the BSC helps organizations to translate objectives into action. This happens because the BSC communicates the goals to the managers and help to improve their understanding and commitment. In order for this to happen:
        • There must be an organizational strategy that can be expressed in an unambiguous way;
        • It must be possible for measure of the vision and strategy to be clearly articulated and their necessary data be obtainable, measure should include both outcome measures (lagging indicators), and measures of action that create outcomes (leading indicator); and
        • It must be possible to set targets for both leading and lagging indicators and assign responsibility for achieving those targets.
        
        Once the BSC analysis is complete, the organisation can then focus on setting goals and developing its strategy to improve inefficiencies and lead the organisation’s direction. A BSC of goals can be created to help keep the areas distinct and ensure focus is placed on the areas most requiring it
        
        When creating goals it is important to keep the SMART checklist in mind:
        • Specific – Goals should be both definable and easily recognized when success is realized;
        • Measurable – An organization must be able to accurately and quantifiably measure the degree of accomplishment at any time throughout goal progression;
        • Achievable – Goals should be achievable in terms of time, resources and skill-set;
        • Relevant – The goals should be relevant to the organization and linked to what it is trying to achieve; and
        • Timely – The length of time for goal completion should complement the organization’s strategy. The completion timeframe should be specific, and determined immediately in order for management to accurately monitor progress, and to make any change if goal progression is not as originally forecast.
        
        Table 3.6: Examples of BSC measures!!!!!!!!!!!!!!!!!!!!!!!
        
        Characteristics of effective performance
        
        Effective performance measures are measures that:
        CDSM
        
        help management develop and ultimately implement strategy; support decision-making; motivate managers and other employees; and communicate with, or signal to, stakeholders.
        
        ARTICVR
        These measures need the following characteristics:
        Validity (accuracy)
        Reliability
        Clarity
        Low Cost
        Timeliness
        Accessibility
        Controllability
        Resistance to gaming and manipulation
        Applicability or relevance
    - - Values
        
        core values as the system of guiding principles and tenets
        
        You must attract and then retain these people and let those who aren’t predisposed to sharing your core values go elsewhere (Collins 2000, p. 42).
        
        Collins then identifies questions which the group will ask in order to articulate the organisation’s core values:
        • What core values do you bring to your work—values you hold to be so fundamental that you would hold them regardless of whether or not they are rewarded?
        • How would you describe to your loved ones the core values you stand for in your work and that you hope they stand for in their working lives?
        • If you awoke tomorrow morning with enough money to retire for the rest of your life, would you continue to hold on to these core values?
        • Can you envision these values being as valid 100 years from now as they are today?
        • Would you want the organization to continue to hold these values, even if at some point one or more of them became a competitive disadvantage?
        • If you were to start a new organization tomorrow in a different line of work, what core values would you build into the new organization regardless of its activities? (Collins 2000, p. 42).
        
        Identification of an organisation’s core values is imperative to attract the right people and manage the culture of the organisation so that its core values are exemplified through its behaviour.
        Often strategies of an organisation will alter; however, core values should remain at the forefront of the direction in order to keep alignment and consistency across the organisation.
      - Innovation and learning—the importance of looking ahead
        
        . Innovation—creating value by implementing new ideas—can occur in two areas: in products and services, and in processes.
        
        Drucker (1986), a leading author and consultant on innovation, identified seven drivers for the creation of the future, through innovation. CUPIDS N
        The unexpected.
        The incongruity (difference between reality and what it ‘ought to be’.
        Process needs.
        Structural changes to industry and market.
        Demographics.
        Changes in perception.
        New knowledge
        
        For such innovation to occur, learning must take place at both the individual and the organisational level. How can the organisation learn in order to develop new ways of behaving? It was first proposed by Senge in 1990 that organisations should expand their capacity of thinking, communicating and leading, to allow all people within the organisation to learn together. Organisations need to be adaptive and flexible in order to not only manage and implement change, but to excel (Senge 1990). This was termed the learning organisation.
    - - In assessing current performance, the strategic drivers consider what differentiates an organisation from its competitors.
        
        The key strategic drivers of an organisation include:
        industry and markets; customers; products/services; channels; and competitive advantage.
        
        Products/services
        
        Key products/ services that the organisation offers and how those
        products/services are performing.
        What business are we in?
        
        BCG Matrix
        assess the organisation's products in terms of market
        growth and its market share
        
        makes it easier to identify any promising product areas that are either core to the organisation or the market or well positioned for growth.
        
        insert diagram!!!
        
        2 more items...
        
        Industry and markets
        
        understand the organisation's position relative to the industry
        and market in which it operates. Eg. market share
        
        Markets can be categorised into:
        customer markets and
        geographic markets—that is, geographic regions. It is important to consider geographic markets in both domestic and international regions, depending on to whom the organisation’s output is sold.
        
        Channels
        
        Channel analysis provides another method to identify potential loss or profitable areas and displays the data in a way which can identify the strong and weak channels, allowing an organisation to focus on channels that require improved performance.
        
        Product channel:
        series of intermediaries who physically handle the product on its path from its producer to the end user e.g Australia Post
        
        •Service channel: entities that provide necessary services to support the product as it
        moves through the sales channel and after purchase by the end user
        
        Sales channel:
        intermediaries involved in selling the product
        
        The key question is: Who needs to sell to whom for your product to be sold to your end user?
        
        Competitive Advantage
        
        Porter's generic strategy
        
        Differentiation
        doing something different from competitors or doing it
        better
        ‘unique selling proposition’. Other products, services and competitors are unable to compete for this particular market segment.
        
        Differentiation
        Basis of differentiation may be: to make the product unique so that customers are not required to consider alternatives
        
        2 more items...
        
        Low cost:
        producing the product or service at a cheaper cost than
        competitors
        It is important to note that a low-cost strategy does not mean that low prices will necessarily be charged. Low cost may not lower the value of the benefits to customers, so they may still be prepared to pay a reasonable price, even though it is a low-cost product.
        
        Low cost
        Be the least-cost producer (low cost leading in the market), and achieve high profit margins
        
        OR
        Sell at low prices to obtain high market share
        Types of low cost strategies:
        • No frills products (Packaging kept very basic or where all extra feature of the product are not included)
        • simple product designs (Few feature of the product, but can meet basic customer needs)
        • process innovation to reduce cost,
        • economies of scale,
        • Low cost locations for operations
        ELSIN
        
        Focus:
        concentrating on the needs of a small part of the market and providing a product or service that meets their needs better than the standard
        products produced for the industry as a whole
        
        Differentiate within the market segment (differentiation focus)
        
        Seek to be the lowest cost producer in the segment (cost focus) OR
        
        Narrow product line
        
        Narrow customer segment
        
        Narrow geographic segment
        
        figure 3.9!!!!!!
        
        an organisation’s generic strategy may have to change over time.
        
        Customers
        
        understand the different types of customers to whom the organisation's products/services are sold or provided.
        Different customers may have different needs and require different sales models or distribution channels
        
        As customers are often responsible for the generation of profits obtained by an organisation, it is important to be able to collect and display data in order to show customer trends and profitability. Issues with customers can be identified, and target areas for growth can be pursued based on the findings.