Topic 7.3 - Overall performance Flashcards
Marketing measures of business performance
- what percentage of customers are repeat
- what percentage of customers are loyal
- what’s the cost per head of gaining new customers
- market share
- new product sales as a percentage of total sales
Human resources measurement to assess performance
- job satisfaction
- diversity
- promotion data
- training per employee
Operations data to analyse performance
- quality
- waste
- productivity
- time
- growth
The importance of core competences
Something unique a business has or can do strategically well
- creates a competitive advantage
- internal strength
- provides customer benefits
- allow for higher quality products and services
Criticisms of core competences
- outsourcing has decreased competitiveness
- difficult for core competencies to be genuinely unique
- businesses may be complacent
What is short termism
Is where a business prioritises short term rather than long term performance
- share price
- revenue growth
- gross and operating profit
- unit costs and productivity
- return on capital employed
Long term performance measures
- market share
- quality
- innovation
- brand reputation
- employee skills and experience
- social responsibility and sustainability
Indicators of a short termism approach
- bonus bases on short term objectives
- low investment in R&D
- high dividends payment rather than investing profits
- overuse of takeovers rather than internal growth
Causes of short termism
- focus on short term performance indicators
- threat of takeovers
- many higher ups have a career based in finance
Effects of a short termism approach
- reluctance to invest in capacity , training , R&D , and invest in advertising
- decisions that give short term gain
The value of different measures of assessing business performance
Kaplan and Norton
- align business activities to the vision and strategy of the business, improve internal and external communication and monitor business performance against strategic goals
Features of Kaplan and Norton
- top down approach
- starts with mission and vision
- key performance indicators
- non financial measures
Four perspectives of balanced scorecard
- financial
- customer
- internal processes
- organisational capacity
Financial KPI
- ROI
- profitability margins
Customer KPI
- level of return
- service rating
Internal processes KPI
- lead time
- unit costs
Organisational capacity KPI
- employee retention
- flow of NPD ideas
Advantages
- broader view of performance
- links to long term
- involves everyone
- highly flexible
Disadvantages
- danger of too many KPIS
- need to balance all 4
- senior management could still be too concerned with financial performance
- need to be updates regularly to be useful
Triple bottom line
- profit
- people
- planet
Benefits of the triple bottom line
- encourages business to think beyond narrow measure of performance
- encourages CSR reporting
- supports measurement of environmental impact and extent of sustainability
Drawbacks of the triple bottom line
- not useful for overall performance
- hard to reliably and consistently measure people and planet
- no legal requirement to report it
