unit 9 | performance mangement systems Flashcards
Corporate Strategy
Describes a company’s long-term future vision (what does it want to become?), its purpose (why does the company exist?), outlines a company’s target customers, & the product and/or services it offers
Who sets Corporate Strategy & what do they do?
Management set strategy & make decisions aligned with corporate strategy to advance its strategic position & achieve a competitive advantage
Why is Corporate Strategy necessary?
Companies need to set strategic goals & objectives & measure its performance against these to understand if decisions are advantageous
3 Strategic Avenues to Provide Better Value
- Product differentiation
- Offer better products/services (more user friendly, better technology) at higher price points that customer are willing to pay - Cost leader
- Offer better prices for its products/services than its competitors (similar products/services) at lower price points - Customer experience
- Offer better customer service than its competitors
Performance Management System
A system that monitors & measures a company’s overall performance
Performance Management System - Strategic Perspective
- Industry key success factors include the things a company must do really well to gain a competitive advantage in the industry
- Strategic avenue management is taking to differentiate its products/services from competitors
- Business model → outlines how the company will make money
Performance Management System - Corporate Governance Perspective
Company should know its priorities from an environment & social perspectives + financial expectations of external shareholders
Key Performance Indicators (KPIs)
- Important metrics that helps executive management teams understand a company’s overall performance
- Financial & non-financial
Financial KPI Example
gross margin % to understand how much revenue is left over after considering all product costs
Non-financial KPI Example
customer satisfaction to understand how satisfied clients are with products/services & customer experience
How does modified balanced scorecard relate to KPIs
Modified balanced scorecard is used to understand which KPIs matter from different perspectives
Goal/Objective
What the company targets the KPI to be over a short or long-term period
Example of Goal/Objective
achieve 40% GM by end of fiscal year/customer satisfaction score ⅘ stars in google reviews
Employee Rewards Systems
Programs which companies put in place to motivate employees to achieve company targets
Employee Reward System Example
[money] bonuses if employee meets target by end of a period
Modified Balanced Scorecard
A tool that is used by management teams to understand company performance from the following perspectives: Financial, customer, environment, internal business processes, + learning & growth (+ social)
Modified Balanced Scorecard | Financial
Measures & monitors business performance from a financial perspective
Modified Balanced Scorecard | Customer
Measures & monitors business performance from a customer perspective
Modified Balanced Scorecard | Environmental + Example
Measures & monitors business performance from an environmental perspective
How is the company doing at being eco-friendly, achieving net zero & operating sustainably?
Modified Balanced Scorecard | Internal Business Processes
Measures & monitors business performance from an efficiency perspective
Modified Balanced Scorecard | Learning & Growth
Measures & monitors business performance from an employee perspective, including the ‘social’ aspect of ESG
How happy & engaged are the employees?
Responsibility Centers
Segments within a company that are expected to effectively manage revenue, profit, investments and/or costs
If management can only control & influence revenue (make pricing, sales decisions)
Revenue centre
If management can only control & influence costs (make costing decisions)
Cost centre
