ATH Micro-Technologies Assignment

Part A
Q1 Does the earn-out structure focus on the right performance goals?
The current earn-out structure is mainly focused on short-term revenue and profit maximization rather than aiming for a
sustainable overall business growth. Apart from the financial aspects, the performance goals should be focused on the
other factors such as Customer satisfaction, Internal control and management and employee innovativeness. A
wholesome performance measurement should be as parallel with the organizational objectives. Thus the proposed earnout structure is not effective enough to drive the organization and its work force towards the long term goals of the
organization.
Q2 Should Scepter Pharmaceutical put additional controls on his entrepreneurial firm?
Scepter the acquirer company needs to focus on the achievement of the proposed synergies that were supposed to be
derived from the conglomerate. ATH has every prerequisites to be a successful target company provided Scepter
Pharmaceuticals should impose effective control for operational efficiency with focusing on the optimum utilization of the
available resources of ATH at its disposal. Further it is necessary for Scepter to impose additional control on ATH in
order to achieve the
Q3 if you were president of ATH tech how would you communicate and motivate employees to achieve profit
and performance goals?
Motivating other people is always a difficult task yet without right motivation the workforce of ATH could not be able to
achieve the targets that has been set before them and it is duty of management to communicate effective motivation to
its employees. This can be done through implementing a effective goal alignment throughout your organization in
support of a well-defined strategy.
There are many reasons to implement goal alignment as it will
 Improve and accelerate the operational execution i.e. moving from strategy planning to strategy execution at
ease.
 Increase in employee morale and improves retention, resulting in more engaged employees to words a mutual
organisational goal.
It is necessary to Effectively communicate expectations to the employees while identifying their strengths and
weaknesses on the go to ensure that they understand what the organization is trying to achieve, and well aware about
his/her roll in it contributed to the organization's core mission and communication can be done through a well-defined
scorecard system both on organisation wise and individual department wise. Further it is also important to communicate
about the rewards based on performance and achievement of the targets to promote productivity, Thus by putting
together the goals and rewards are need to be simultaneously communicated to motivate employees.
Q4 what are the appropriate performance goals for employees to focus on?
There are essentially four types of goals that the company as the employer can set with employees.
1. Job Goals: goals that visibly define tasks that will be mandatory to complete the job. These goals should be very
personalized to the individual position and employee.
2. Project Goals: activities that the employee should pursue with a clearly defined beginning and end.
3. Professional Development Goals: These goals focus on the improvement of both technical and efficiency
essential for their professional growth. These goals should be helpful to develop not only the employee, but help your
organization as a whole.
4. Performance Goals: Performance goal are specific end result that are vital to the success of the unit or
organization and that an employee is ordinarily needed to accomplish or produce. Performance goals provide focus to
an employee’s work to ensure that his or her actions remain target oriented. Performance goals are differ from work
activities as they focus on improving the quality and efficiency of an employee on his particular position in the company.
Some of the basic performance goals for employees such as motivation, productivity, Efficiency, accountability and job
satisfaction. Even if performance goals are basic to any organisation yet they required to be documented in a lucid and
assessable way.
I.
Employee motivation- Performance goal of motivating employees is accomplished by identifying talent
through assigning higher level duties and tasks, as well as giving employees the opportunity to demonstrate
their leadership skills

evaluating effects of each type of risks and how they should be dealt with and implementing strategies to deal with those risks. an essential management tool for strategy measurement and communication. It also identifies who has primary accountability for managing the risk. you need a risk-management system designed to reduce the probability that the assumed risks actually materialize and to improve the company’s ability to manage or contain the risk events should they occur. External Risks: risks arise from events outside the company and are beyond its influence or control. modelling or testing risk – but in being able to communicate risk and its impact on the business. IV. leading indicators. holding employees accountable for their job responsibilities is accomplished by the use of performance evaluations to determine if employees are actually performing the job tasks they are hired to do. Sources of these risks include natural and political disasters and major macroeconomic shifts.  By Risk Event Card that is generated on the basis of the identified risk events which are related to each objective on the company’s strategy map. These require another approach to control them as companies cannot prevent such events from occurring. Strategy Risks: voluntarily accepts some risk in order to generate superior returns from its strategy. Strategy risks cannot be controlled through a rules-based control model. Business risk may be categorized in to 3 major types such as: I. unethical. methods and tools for managing these risks. Risk management is the practice of using processes. Risk is defined as the probability of an event and its consequences. but over time such actions will diminish the company’s value. Efficiency can be defined as the speed. Examples are the risks from employees’ and managers’ unauthorized. incorrect. Q5 How would you communicate and control events and employee action that could put business objectives at risk? Every business faces risks that could present threats to its success. Following are some of the ways though which business and operational risks should be communicated. but it approaches output in a different way. hence the management must focus on identification of possible risks on their hindsight and ways to mitigation of their impact. which are part of the goal-setting stage within most performance appraisals. Employee accountability – Performance goal of incorporate accountability among employees i. Employees who are satisfied with their job assignments and the support they receive from supervisors and managers often are more productive and engaged. A heat map is a two-dimensional .it can be controlled by monitoring operational processes and guiding people’s behaviours and decisions toward desired norms II. Preventable Risks: internal risks.  By established a risk review board made up of independent technical experts whose role is to challenge the various risk-assessment. A strategy with high expected returns generally requires the company to take on significant risks. and risk-mitigation decisions to ensure that evaluations of risk taken place periodically throughout the organisation. employee job satisfaction improves with employee recognition V. or inappropriate actions and the risks from breakdowns in routine operational processes these type of risks may produce some short-term profits for the firm. and potential actions for mitigation. Instead. holistic view to share while making decisions about the likelihood and impact of entity-wide risks within an organisation.e. accuracy and consistent quality with which an employee works thus a wholesome improvement of employee and in turn of its contribution to the company. that are controllable and ought to be eliminated or avoided. III. Observation and guidance are the tools normally used to hold employees accountable for the work. such as from the Balanced Scorecard. and being able to influence in that regard. Employee productivity-Performance goal of increase productive of employees consist of appraisals and evaluations used to determine productivity levels and ways to improve productivity.II. In addition. Barriers or obstacles that prevent high productivity are usually discovered through evaluating employee performance. Good communication is critical to the risk management function. Employee job satisfaction: performance evaluations that assess the level of job satisfaction can actually determine employee success in other work areas. arising from within the organization. and listing the practical effects of the event on operations. and managing those risks is a key driver in capturing the potential gains.  Visualisation of risks using a heat map presents a big picture. Employee Efficiency: Performance goal of increasing employee efficiency is a similar concept to productivity. it focuses on identifying what could go wrong. the probability of occurrence. they can then be corrected with training and development.  By developing a companywide risk perspective by focusing the discussions in strategic planning. illegal. Effective risk management is not confined to understanding. III.

The key evaluations of ATH’s performance are as follows: 1. Total Quality management c. Solvency Ratios especially the Debt-Equity ratio which is important for determination of whether the company is leveraged .Enterprise value addition or Economic value addition (EVA) is the measurement of companies future projected cash flows with discounting to present time in terms of Economic profits it likely to earn in the future.representation of data in which values are represented by colours and can be designed from being simple (qualitative only: 3x3) to very complex (both qualitative and quantitative: 5x5).Another measure is Return on Assets (ROA) which is helpful in analysing the long-term profitability .ATH from the very beginning of its operations has been driven by revenue and profit maximisation objective through large market capture thus it is essential to assess its future feasibility along with historical performances till now . though the company is in no profit zone yet it will be able to create value for shareholders in the long run. During the growth period? The objective of ATH during the growth period was to acquire as much market share as it can by its aggressive strategy of product development and frontline marketing. Financial performance and overall operational efficiency performance can be assessed by use of various type of ratios . There are different tools such as a. The key challenges with performance measurement is selecting ‘what to measure’. it completely ignored the cost of productions which needed to be optimized to earn a fair amount of contribution margin which in turn would have been helpful in meeting its huge fixed expenditures on the product developments and other establishment expenses.ROA as a key performance measurement metrics focuses on assets required to run the business including their contribution towards the bottom-line .That’s why alongside we can use the EVA margin analysis to assess the future viability of the company . The . Q2 What is the strategy of the business? The strategy of ATH at its growth phrase is to gain market share and thus it mainly focused on its revenue maximization strategy. ATH was not innovative enough as it has been revealed subsequently that a new competitive technology in Europe can dilute its market shares. The senior managers are too much possessed with acquiring market share through aggressive push of its products that they ignored the other factors such as the employee bonus scheme which was not linked systematically to individual performances rather the bonus system was more likely to be biased by the senior management thus resulting in degrading employee performance. workforce or operational performance etc. It’s a process that can greatly impact operations. A performance measurement system should provide timely information is a necessary tool in the hand of any management.All time primary measure of a company’s performance is Return on Equity (ROE).e. Their whole plan was revolving around how to achieve a bigger sales figure in short term. Q6 what are the best financial measures to asses ATH Micro Technologies performance? Why? A company’s performance can be defined in different aspects such as financial performance. Instead the development cost that were incurred on the product development were became overhead thus slicing a huge chunk of the profit for the 2001 and 02. The senior managers at ATH had a perception that gaining a large market hare ad becoming a major player in the market in terms of volume will going to solve the company’s problems of low bottom line. EVA can be defined as how much economic profit a company produces per dollar value of sales. Although Revenue has increased considerably. There are a wide variety of ways in which performance can be measured. Q3 How should performance be measured and analysed? Performance measurement is a tool in the hand of management to control the outcomes of the decisions related to operations. In simple terms it is the value created for stakeholders and lower the sales the profit will be lower or vice versa yet it EVA margin can be positive i. Customer relationship management d. 2. they were not yet ready to make the move happen in an effective way. Owing to which it spent huge amounts of money on marketing and selling expenses as well as on product development in a short span of time. Business process engineering b. neither the company was able to turn the huge revenue in to a healthy bottom line nor a breakeven contribution margin. It is important to carefully design the heat map so that the terms used to describe “potential impact” and “likelihood” are what is used in your organisation. As from the very beginning ATH’s objective was to increase revenue and the bottom line . Supply chain management etc. to assess these different types of performance. 3.Other type of ratios can be used to assess financial performance of the company such as Liquidity ratios to measure short-term liquidity position of the company . Although ATH’s senior managers were planning for such a strategic move. Part B Q1 How would you evaluate the performance of ATH Micro-Technology .

BENCHMARKING Benchmarking is a way of improving your understanding of your business performance and potential by making comparisons with other businesses i. Net profit margin and Return on capital employed (ROCE) This allows you to see how well the money invested in your business is performing in comparison to other avenues of investments. based on cost accounting information. without a proper implementation plan it doesn’t guarantee that the desired performance is reached.priority here is to focus on quantifiable factors that are clearly linked to the drivers of success in your business and your sector. Liquidity ratios. such as the shareholders. where. complaints. Operating margin. than the strategy plan itself. MEASUREMENT OF EMPLOYEES Measuring through meetings and appraisals. Both are critical to success. Focus on those areas that drive business success in your sector company’s key drivers A good performance measurement framework will focus on the customer and measure the right things.e. Implementation is the process that converts strategies and plans into actions in order to accomplish the required strategic objectives and goals. Software for customer relationship management (CRM) can be a powerful tool for capturing and analysing information about your customers and the products and services they purchase. Try to perceive the business from its customers' point of view. organisations have always measured performance in some way through the financial performance. The most commonly-used measures are sales per employee. . MEASUREMENT OF FINANCIAL PERFORMANCE Financial measures of your performance is an important part of running a growing business.Following are the ways to measure performance. traditional performance measures.  Metrics are developed to compare the anticipated performance with the actual achieved standards. and how’. Measure from customers' perspective can help the company to avoid losing valuable customers in the process of growth. In a successful total quality organisation. and discounted future net Cash flow. contribution per employee and profit per employee MEASUREMENT AGAINST COMPETITORS . performance will be measured by the improvements seen by the customer as well as by the results delivered to other stakeholders. Collection of Customer feedback about the operations and the products or services through sales data. Implementing the strategic plan is more important. Q4 Which additional measures would you use to implement the strategy? A strategic plan provides a business with the roadmap it needs to pursue a specific strategic direction and set of performance goals. be this success by profit or failure through liquidation. But Benchmarking can be done internally within the business processes. However. questionnaires and comment cards etc. when. but its implementation addresses the ‘who. compare against businesses in the same sector. it's worth asking yourself if you know as much as possible about your clientele. financial leverage or gearing ratios.  To continuously implemented the steps of performance measurement and get it reviewed: Performance measurement is a fundamental building block of TQM and a total quality organisation. companies can gain competitive advantage through implementation of strategic plans effectively. Indeed. Historically. These are known as key performance indicators (KPIs). Regular staff meetings can also be a very useful way of keeping tabs on wider developments across your business. Measuring the profitability the key standard measures are: Gross profit margin. So when looking for areas of your business to start measuring and analysing. efficiency ratios of effective asset utilisation.  To identify gaps and improvement actions initiated. A strategic plan addresses the ‘what and why ‘of actions. provide little to support organisations on their quality journey. MEASUREMENT OF CUSTOMER VALUE CREATION Finding and retaining customers is a crucial task for every business. explicit and commonly understood • Held and managed by the responsible teams within the organisation • Based on a high level of data reliability • Facilitate data collection is rooted within the normal procedures • Able to initiate improvement • Accompanying to critical goals and key drivers of the organisation There are four key steps in a performance measurement framework –  The strategic objectives of the organisation are converted into preferred criterions of performance. Performance measures must be: • Eloquent. deliver customer value. because they do not map process performance and improvements seen by the customer. . Quantitative measurement of employee performance. However. and be successful. Informal meetings and more formal appraisals provide a very practical and direct way of monitoring and encouraging the progress of individual employees.

Try to acknowledge an employee's idea and recognize them within the company for bringing a change and make the employee recognized. .  Meetings to review the progress should be scheduled monthly or quarterly. The first stage of implementing your plan is to make sure to have the right people on board. To make efficient use of scarce resources especially human resources. Be clear on what’s distracting the focus of attention of employees and deviating them from their allocated goals so that the managers could be strategic about how to shift their team away from it.  Create an environment that connects employees to the organization’s mission and that makes them feel comfortable. 3. A performance scorecard is one tool used that incorporates progress tracking and milestones. Communicate and implement the strategic plan to the whole organization Build all department annual plans around the company’s strategic plans. with a clear and open lines of communication with your employees.  Build milestones into the plan that must be achieved within a specific time schedule. Keep the communication simple and clear. 4. recruitment.  Restructure the management and define appropriate lines of authority. to include new competencies required by the strategic plan. Align company’s budget to annual goals based on your financial assessment. And stay focused on the massages that are vital for retaining employee attention. broaden employee skills through training.  Finalize the strategic plan after obtaining input from all invested parties. 2. Establish your performance management and reward system. Produce the various versions of your plan for each group. depending on the level of activity and time frame of the plan of action. what would you do to focus the attention and efforts of your employees? 1. 5. Introduce Performance incentives to create a motivation factor for the employee to reach above and beyond a goal.   Q5 If you were president of ATH tech. Establish the performance scorecard system for tracking and monitoring your plan.  To have sufficient funds and enough time to support implementation. Following the planning process.