7a 3 Analysing internal position: overall position (Kaplan & Norton) Flashcards
What is ‘Big data’ and what is it used for?
- Used to describe large and complex sets of data that were not previously available to managers.
- Its increasingly used to help businesses devise strategies by enabling them to spot trends, for example in consumer behaviour, that may not have been apparent previously.
What is operations management?
What can a management team use a range of operations data to assess?
- Is an area of management concerned with planning & controlling the production process within a business.
- Assess a business’s strengths & weaknesses. This data could measure a number of aspects of a business’s operational performance including:
- -Productivity of labour & capital used in production.
- - Measures of quality.
- Capacity utilisation.
What does analysing a businesses productivity data allow stakeholders to measure?
What do higher productivity businesses use fewer of and what is the consequence of this?
- The efficiency with which an organisation coverts inputs (of resources such as labour and capital) into outputs of goods & services.
- Use fewer inputs to produce a unit of output. This is likely to allow it to produce a unit of output more cheaply, assuming it doesn’t pay comparitively high costs for its inputs. As consequence- its unit costs of production may be lower than those of its rivals- can represent a considerable competitive advantage for businesses selling in price competitive markets & will be a strength for such a business.
When measuring productivity to assess the strengths of a businesses operational performance, it is important to take what factors in mind?
- Multifactor productivity measures are preferable as they take into account all factors used in production.
- Productivity data ignores costs.
When measuring productivity to assess the strengths of business’s operational performance, why is it important to take multifactor productivity into account?
What is it & what does it do?
- Multifactor productivity measures are preferable as they take into account all factors used in production.
- It measures the efficiency with which all factors of production are used in the production process.
- It compares the volume of output over a time period with the quantity of all factors used in production - that is capital, land & labour.
- It is straightforward for managers to improve single factor productivity by using less of it in production.
Multifactor productivity
What would the effect be if a manufacturing business could replace 50% of its labour with capital equipment in the production process- if output is unchanged?
The effect would be to double labour productivity, but operational performance may not have improved.
When measuring productivity to assess the strengths of business’s operational performance, it is important to take factors into mind.
What does productivity data ignore & can you explain this?
- It ignores costs. Rising productivity may be achieved alongside increased costs of resources & the higher costs will offset the benefits of the productivity gains.
- For this reason labour costs per unit may provide a better measure of operational performance.
How can quality be judged?
- Measuring customer loyalty through the number of repeat customers.
- Measuring customer satisfaction rates through questionnaires or surveys.
- Measuring specific elements of operational performance such as the number of faulty products (for manufacturers) or response times to customer queries (in service industries)
What is the capacity of a business?
The maximum amount it can produce using its existing resouces.
What is capacity utilisation?
Why does using capacity fully help a business?
- It measures the existing output relative to the maximum figure.
It helps a business to produce its products as cheaply as possible & to offer competitive prices.
Why can capacity utilisation be a vital measure of operational & overall performance?
- For some businesses (e.g. cinemas) attracting additional customers involves few or no additional costs but generates extra revenue. The impact on profits of high-capacity utilisation is significant & can be an important measure.
- In price competitive industries (where demand is price elastic) operating at high levels of capacity utilisation is a means of keeping unit costs low, enabling the business to maintain acceptable profit margins whilst selling at low prices.
What weaknesses does capacity utilisation as a means of operational data have?
It reveals nothing about the costs that a company is paying for its resources; it simply measures the efficiency with which they are used.
What are some ways in which businesses will analyses the strengths and weaknesses of their operational data?
- insurance company.
- Oil exploration companies/
- The speed of responding to & processing claims (i.e. for insurance companies)
- Great store of info on employee safety- given the dangers of the working environment for employees.
Operational data
What is a way in which businesses use technology?
What is this?
What are the results used to do?
Operational intelligence (OI)
- It is the extraction of data from operational activities and its rapid analysis.
- The results are used in decision making to improve the organisations operational performance. The use of OI can assist businesses in identifying & developing their operational strengths.
Its important for HR to use data, statistics & numbers to show trends in a range of issues.
- What are some things HR measure?
- How can they measure these?
Employee efficiency & engagement.
- Labour productivity.
- Absenteeism rates.
- Health & safety data.
- Labour cost per unit of production.
- Costs associated with employees such as average wages & recruitment costs.
- Labour turnover & retention
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Why are financial measures of HR performance perhaps the most easily analysed & can provide data in a form that is readily comparable?
- Businesses managers can calculate labour cost per unit of output relatively easy & this is more informative than labour productivity data.
- Labour productivity data measures the quantity produced per employee per time period, but excludes the cost of labour, e.g. the hourly wage rate. Unit labour cost includes wage cost & productivity.
Financial measures of HR performance.
What comparisons can be made inside a business using this type of data and what can it be used to do?
- Comparisons can be made between different divisions of a business (or different businesses if the data is available) using this type of data to gain some idea of relative performance & to make judgements about apparent strengths & weaknesses within the HR function.
- However- its important to appreciate that labour cost per unit is affected by factors outside of a business’s HR function, such as amount & productivity of capital equipment used in production.
What are some non- financial methods of HR performance?
- Absenteeism
- Labour turnover
- Data relating to Health & Safety of a businesses workforce.
Non-financial methods of HR performance
What can high rates of absenteeism indicate about a workforce?
Indicate a workforce that lacks engagement and motivation & this can damage competitiveness.
Why is labour turnover data useful to a business?
- It provides a useful means of assessing a business’s HR performance.
- Business’s with higher than average labour turnover face additional costs to recruit & train new employees, as well as a potential short term decline in productivity.
