Analysing Business PerformancePesewa

Presentat ions

An Analytical Framework

FiMO & RECOILBusiness Performance: Company’s Performance to date

FinanceFinance Marketing Marketing OperationsOperations

Resources Experience Controls Ideas Leadership

Potential: Company’s Potential/bases for Growth

Scoring the businessHeading Score (1 - 10)

Finance

Marketing

Operations

Score each aspect of the business (10-point scale)Scores of 2 or 3: something is seriously wrongScores of 5 or 6 suggest mediocrityScores of 8 or 9 suggest that the firm is good, or even “world-class”,But there needs to be some evidence to support the claim. Scores of this size are always open to challenge.

FiMO: Where we are …

FinanceFinance Marketing Marketing OperationsOperations

Turnover (sales/units)Break-even pointGross profit marginNet profit marginLiquidity ratiosROCEDebtor/creditor days Gearing/interest cover

Advertising spendSelling effectivenessCustomer retentionNew accounts wonRepeat businessNew productsBrand perception (competition)

Brand perception (customers)

Market position

Output/workerOutput/machineAge of equipmentSet-up timesDown time AbsenteeismStaff turnoverStaff trainingDefect ratePerformance advantage

RECoIL: Where we want to go …

Resources Experience Controls Ideas Leadership

Physical assetsHuman assetsFinancial assetsIntellectual property Technology (flexibility & capability)

BorrowingProduct developmentNew marketsExternal agentsManaging growth

Adequacy of info. systemsAbility to use informationDegree of delegation

Source and numberMarket orientationSystematic screeningDevelopment and testingMarket planning

Focus, vision and missionOwner-manager involvementProfessional/ occupational backgroundStyle and ambitionAttitude to changeFamilyStrategic awareness

Scoring the business

• Use 1-10 scale on the 5 components

• Build up a profile of the business’ future capabilities

• Assess the business’ strengths and weaknesses

• Identify any gaps, training needs or other deficiencies

• Use the information to inform decision-making

RECoIL into action …

Heading: Score:

Resources

Experience

Controls and systems

Ideas and innovation

Leadership

Evaluating the process …1. Work alone (score yourself), then show the scores to a

colleague or business adviser2. Have your colleague/adviser challenge the scores:

1. Where’s the proof?2. What would you need to do to get another point?3. Are you sure it isn’t a point lower?4. How are you going to get the other point?5. What is the trend behind each score?

3. Any scores less than 5 need proper discussion and analysis; these are problem areas.

4. Make recommendations based on current scores and future ambitions. Be aware of the consequences of each change.

Checklist: How good are you …?

• Do you have an agreed understanding of just how good your business really is?

• How do your scores compare with those of your competitors?

• How would your Customers score your business?• What is the trend? Are you improving, staying

where you are or getting worse?• What is the evidence to support how you have

scored the business?

Interpreting the scores …

• Be critical of too many high scores (on both activities)

• But also check to ensure the scorer is not being TOO self-critical

• Check the direction of the trend in scores (Is it 5 and rising, or 5 and falling?)

• Look for firm evidence to support each individual score

• Any outliers (scores that fall outside the norm of the rest) should be thoroughly investigated

Balanced business scorecard

• Dynamic measurement process• Measures key indicators for YOUR

business and YOUR strategy• Provides the “dials in the aeroplane cockpit”• Company-wide focus and deployment• Shows how results are to be achieved• Puts strategy, not control at the centre of business

activities

Balanced Scorecard

shareholdersshareholders

growthgrowth

internalbusinessinternalbusinesscustomerscustomers

Emphasis is placed onSTRATEGY, not finance Kaplan & Norton (2000)

Balanced Scorecard

finance(shareholders’ perspective)

finance(shareholders’ perspective)

growth(innovation and learningperspective)

growth(innovation and learningperspective)

operations(internal perspective)

operations(internal perspective)

marketing (customer perspective)

marketing (customer perspective)

Balanced Scorecard

shareholdersreturn on capital; cash flow; profitability; reliability

shareholdersreturn on capital; cash flow; profitability; reliability

growth% revenue-new; new ideas;attitude; revenue/employee

growth% revenue-new; new ideas;attitude; revenue/employee

internal businessdefects; set-up time; safety;output per man-hour

internal businessdefects; set-up time; safety;output per man-hour

marketing competitive price; service; quality;complaints

marketing competitive price; service; quality;complaints

BBS Cascade Process

vision

mission

strategy

milestones

performance measures

Managing strategy

translating the vision• clarify vision• gain consensus

business planning• setting targets• align strategic initiatives• allocate resources• set and achieve milestones

feedback & learning• articulate shared vision• provide strategy feedback• facilitate strategy reviewand learning

communicating and linking• communicating & educating• setting goals• linking rewards to performance

Review and Wrap-up

• Successful business activity comes from sound planning and strategy

• These simple tools, FiMO, RECOiL and BBS should help any business to:– See where it stands at present– Help identify where it wants to go (set future goals)– Provide guidance on how these goals may be achieved– Provide frameworks for measuring extent of success– Survive in the short-term– Prosper and grow in the medium- to long-term– Sustain its competitive advantage