Measuring Business Performance

Question 1

What is performance?

Answer 1

It refers to output results and their outcomes obtained from processes, products and services that permit evaluation. It can be expressed in non-financial and financial terms.

Question 2

What is measurement?

Answer 2

Numerical information quantifies input, output and performance dimensions.

Question 3

What is performance management?

Answer 3

It is a process for setting goals and regularly checking progress towards achieving those goals. It includes activities that ensure organizational goals are consistently met in an effective and efficient manner

Question 4

What are the variety of applications of performance management?

Answer 4

Staff performance
Business performance
Outcome performance measures

Question 5

What are the differences in measurement and management in the context of performance?

Answer 5

Measurement:
- Deals with quantitative measures that track an organization’s performance
- It measures the performance of the business

Management:
- It is doing things to improve the performance of the business.
- Deals with the management of the strategy to achieve the intended performance

Question 6

What are the examples of performance management techniques?

Answer 6

• Empowerment of employees
• Providing continuous coaching
• Equipping employees with the correct tools and resources
• Conditional appraisals

Question 7

What are the common terms concerning performance management?

Answer 7

Efficiency
Effectiveness
Quantitative
Qualitative
Productivity

Question 8

What is efficiency?

Answer 8

It compares what is actually achieved with what could be.

Question 9

What is effectiveness?

Answer 9

It assesses how successfully objectives are being achieved.

Question 10

What is productivity?

Answer 10

It describes the efficiency of production and is a measure of output per unit of input.
eg: land, labor, capital, enterprise

Question 11

Explain the input-process-output-outcome model?

Answer 11

• What is to be achieved?
• What is produced or delivered?
• What action is taken?
• What is used?
• What is the impact?

Question 12

What is the importance of having performance management systems?

Answer 12

• It can provide valuable insights that will inform broader human capital management decisions.
• Increased workforce productivity
• Higher employee engagement
• lower turnover
• maximized revenue per employee

Question 13

What is the Balance Score Card?

Answer 13

It is a strategy performance management tool that can be used by managers to monitor the progress of strategic initiatives.

Question 14

What are the balanced perspectives?

Answer 14

• Consumer perspective
• Financial perspective
• Internal perspective
• Innovation and learning

Question 15

How can we use financial data in performance management?

Answer 15

By measuring the following key factors:
- Profitability
- Revenue
- Growth
- Costs: Cost of sales, inventory, support, production, raw materials, employees

Question 16

What are the benefits to the
organization from
performance measurement?

Answer 16

Organization:
- Better control and accountability
- Improved performance

Stakeholders:
- Have a clearer understanding of the organization

Managers:
- Clear targets to focus upon
- Team responsibility

Employees:
- Personal accountability
- Linked to bonus

Question 17

What is the importance of setting goals?

Answer 17

A goal is a broad, overarching statement of what an organization aims to achieve. It represents the desired outcome or result that the business wants to accomplish in the long term.
* Goals are usually qualitative, not easily measurable, and provide direction and purpose to the organization.

Example: A goal for a technology company might be to “become the market leader in innovative software solutions within the next five years.“

Question 18

What is an objective?

Answer 18

An objective is a specific, measurable, and time-bound target that supports the attainment of a broader goal. It is more focused and concrete compared to a goal.

• Objectives are SMART (Specific, Measurable, Achievable, Relevant, Time-bound) and provide a clear roadmap for achieving the desired outcomes.

Example: Based on the aforementioned goal, an objective could be to “increase market share by 20% within the next three years through the development and launch of three new cutting-edge software products.”

Question 19

What are targets?

Answer 19

Targets are precise, quantifiable benchmarks or metrics that indicate the level of performance required to achieve specific objectives.

• Targets provide clear criteria for evaluating progress and success, serving as checkpoints along the journey towards objective fulfillment.

Targets are often expressed in numerical terms and are closely aligned with specific objectives.

Example: Achieve a 10% increase in market share for each new software product within the first year of its launch.

Question 20

What is the goal theory?

Answer 20

Goal setting theory constituents:

What is a goal?
The object or aim of an action.

Goals have two main attributes content and intensity.

Content: refers to the object or result being sought (e.g. increase profit by 20%)

Intensity: refers to effort needed to set a goal, the position of a goal in an individual’s goal hierarchy, and the extent to which a person is committed to goal attainment.

Setting Goals:
Clarity: Measurable goals, Timeline for completion

Challenge: A level of difficulty creates a motivating factor (without being unachievable)

Commitment: Effort and accountability increases performance

Feedback: Receive regular updates and prepare to change targets throughout

Complexity: Ensure the measure reflects the complexity of a task

Question 21

What is the relationship between entrepreneurship and goals?

Answer 21

Successful entrepreneurs set goals as they explore markets for product and business model opportunities.
*human and financial resource gathering
*business start-up planning and organizing
*market entry
*technical development and proof of concept
*external financing

Example: Mark Zuckerberg founder of Facebook explained the specific growth and financing goals he set for his company

Question 22

What are the Characteristics of Entrepreneurship Goals?

Answer 22

Self set goals:
*Highly motivated.
*High challenge, self-set growth goals yielded highest venture growth (Baum and Locke, 2004)
*If venture grows and require external financing, entrepreneurs may not be alone in setting goals.

Goal difficulty
* Financiers hold that entrepreneurs should accept their challenging financial and market penetration goals.
* Difficult goals increase performance (difficulty of goals = successful entrepreneurship)

Question 23

What are the issues with goal setting?

Answer 23

Setting goals can result in
* Unethical behavior and cause harm
* Rise in unethical behavior
* Distorted risk preferences (Motivate risky behavior)
* Corrosion of organizational culture
* Reduce intrinsic behavior

Question 24

what are the challenges faced when selecting and applying performance measures?

Answer 24

• Identifying what should be measured
• Obtaining the resources for a measurement system
• Communicating the metrics
• Designing a flexible system

Question 25

What is a metric?

Answer 25

• A Metric is a system of measurement; individual metrics need to put in place for each category to be measured when it comes to performance measurement.
• These are called Key Performance Indicators (KPI’s)

Question 26

What is a KPI?

Answer 26

A KPI sets standards, how and when they will be measured. There are three aspects to a KPI: what is being measured, by who and when. Must also follow S.M.A.R.T

An example of KPIs include:
* The target to reduce customer complaints to x%
* Increase number of new customers by to y%
* Reduce employee turnover to 5%
* Increase sales by 7%
* Reduce transportation budgeted costs by 10%

Question 27

What are business drivers?

Answer 27

Business Drivers: are the factors that are vital for the success of business. Including resources and processes.

Leading indicator of financial success

Identification of drivers are important so we can maximize the growth potential of the business. More resources can be allocated to the drivers that are most influential.

Most common drivers are
*Sales
*Costs
*Customers
*Cash flow
*Profitability
*Sustainability
*Corporate Social Responsibility.

Question 28

What are key drivers?

Answer 28

Divided into profit and non-profit drivers

Examples of profit driver
*Price
*Fixed costs
*Sales

Examples of non-profit drivers
*Customer satisfaction
*Staff retention
*Accident levels

Question 29

What is sustainability?

Answer 29

Development that meets the needs of the present generation without compromising the ability of the future generations to meet their own needs.

E.g. Work force diversity, Bribery/Corruption, Community involvement, Ethical sourcing, Human rights, Product Safety, Consistent profits, Environmentally compliant processes etc.

Question 30

What is CSR?

Answer 30

Corporate social responsibility (CSR) a corporation’s initiatives to assess and take responsibility for the company’s effect on environmental and social well-being. This also goes beyond what is required by laws, regulations and trade rules. E.g. Community involvement, Creating Ecological environment, Employee Education etc