STRATEGIC PERFORMANCE

MEASUREMENT

Subject :- Seminar Paper

Presented by :- Jenny Shah

Guided by :- Dr.Vedant Pandya

MBA Sem-3

2021-2023
Content

 Introduction

 What is Strategic Performance Measurement ?

 Objectives

 Purpose

 Important steps for effective measurement

 Techniques for strategic performance measurement

 Advantages

 Disadvantages

 Types of strategic performance measurement tools

 Strategic performance measurement of corporate level strategy

 Strategic outcomes

 References
INTRODUCTION

 Methodology to improve performance measurement, monitoring and improvement to

achieve overall organisational objectives. :- it is a business function where the business
owners and managers develop activities are tasked to measure the overall effectiveness and
efficiency of their company . it is methodology to improve performance measurement
monitoring and improvement for the achievement of overall organisational objectives.

 Help organizations align behaviours and attitudes and, ultimately, have a positive impact on
organisational performance.:- it helps the organisation to align behaviors and attitudes and
ultimately have a positive impact on an organisation

 Designed to present managers with financial and non financial measures.:- they are designed
to present managers with financial and non financial covering different perspectives which in
combination provide a way of translating strategy into a conherent set of performance
measures.

What is strategic performance measurement?

 The performance measures are quantitative indicators that have to be put in specific places
to track the progress which is made in the organization. 

  It will show whether the organization, individual, or group will achieve and accomplish their
objectives and goals.

 It becomes possible to create valuable reports around it and share the information with
important stakeholders for future growth and development. These measures include a
broad range of criteria like

• People measures

• Process measures

• Customer measures

• Financial measures
 Objectives

Purpose

1.To engage with internal and externalstakeholders

2.To communicate Transparently the Action to be Taken

3.To track progress with up to date data

4.Evaluate Subordinates performance And provide rewards :-

Over all definition the real purpose of strategy performance measurement is to engage with internal
and external stakeholders to track progress with up to the data to communicate transparently the
action to be taken and finally to evaluate subordinate performance and providing rewards.

Important steps for effective Measure

 Involve people in leadership positions in the process.

 Make sure that everyone is championing the process because half-hearted attempts will not
take it very far

 Include talks about performance measures in meetings so that every stakeholder is aware of
its importance

 Communicate the key measures to everyone in the organization so that every member can
achieve the desired goals.

Strategic Performance measurement techniques

 Create a mission statement 

 Create both a short-term and a long-term performance plan 

  Create different levels of objectives

 Define who is responsible for every goal

 Know the critical factors to the success of CSFs

 Look at the market and economic conditions

 Evaluate and re-evaluate your goals

Advantages

  it can improve and boost individuals’ and groups’ productivity and the organization.

 it helps to recognize the individuals who have proved their worth by becoming top
performers.

 it can easily identify both the individuals and the teams that are not performing at required
levels by comparing the outputs of one against another using the same chart.

  help to avoid any confusion in communication

 it provides a clear chain of command where every employee has a specific role to play in the bigger
picture.

Disadvantages

  it can result in a decrease in the output levels.

 People who do not understand the concept will avoid it, which can lead to communication
breakdowns.

  factors like change, learning, and innovation are not given their due importance

 emotional decisions and negative evaluations by supervisors and managers can easily disrupt
the data collection process.

Types of Strategic Performance Measurement Tools

 Key performance indicators (KPIs) and metrics

For those who don’t know, the key performance indicators (KPIs) and metrics are used to assess how
well corporations, business units, initiatives, and individuals are meeting their strategic goals and
objectives. The main advantage of KPIs is that they allow for more in-depth data-driven performance
talks and better decision-making. In this system, every individual’s performance in an organisation is
managed. To select an appropriate KPI, you should ask these questions “what goal or challenge will
this KPI help my organisation achieve?” and “what decisions will the KPI help drive?” Well-designed
KPIs are essential navigational tools that provide a clear picture of current performance levels and if
the company is on track.

 Performance appraisals

Performance assessments and KPIs are perhaps the most widely used performance management
tools. Performance appraisals, when utilised correctly, are extremely effective at aligning individual
goals with the organisation’s strategic objectives. Employees must believe that the evaluation
process is a regular, honest, and helpful two-way interaction to make them believe in this appraisal
tool. Otherwise, assessments can be a potent de-motivator, resulting in a drop in performance.

 360-degree feedback

This tool is designed to address the question, “How well are our people performing in the eyes of
those who are invested in their success?” It gives people a comprehensive appraisal of their
performance based on the opinions of those around them, such as their boss or manager,
subordinates, colleagues, customers, and suppliers. The results are tabulated and provided to each
employee in confidence, generally by the management. The 360-degree feedback insights are
frequently employed in staff training and development. If done correctly, this feedback tool serves
to democratise the review process by considering the perspectives of many people rather than just
the individual’s line manager.

 Management by objectives (MBO)

MBO is the process of defining particular objectives and then determining how to accomplish each
one. It’s especially useful for small tasks that must be completed one at a time, and it’s a terrific
approach to fostering a culture of collaboration. The idea is that as each goal is met, those in the
organisation become more aware of their accomplishments, which raises their morale and
motivation. The management by objectives is all about assessing individual performance and
comparing it to established benchmarks.

 Self-evaluation

Employees can utilise self-evaluation tools to grade themselves against the same or similar criteria
that their boss use. This frequently includes both qualitative and quantitative criteria. This strategy
can increase the process’s credibility in the employee’s eyes, especially if the employee’s self-
assessment score matches that of the supervisor. When the ratings differ, this program provides
discussion mechanisms that allow these disparities to be explored safely and constructively.

 Enterprise risk management (ERM)

 After management by objectives (MBO), ERM is a set of tools and methods for identifying,
assessing, and managing company risks. While risk management began as a back-room
internal control role, it has already made its way to the top of most companies’ boardroom
agendas.

 Organisations are aware that they face several business risks, which, if not managed and
controlled, could result in the type of corporate disasters seen in recent years.

 ERM should begin by identifying the most significant strategic risks the organisation faces.
After the hazards have been mapped, they can be prioritised and compared to the risk
tolerance.

Strategic Measures Performance of Corporate-Level Strategy

 There are many methods to evaluate the success or failure of corporate-level strategies. The
current trend is toward more complicated financial measures and increasing use of non-
financial measures of corporate-level strategy performance.
  Some of these methods are :-

I. traditional financial measures

II. stakeholder measures

III.   shareholder value, and 

IV.  balanced scorecard approach.

Method 1: Traditional Financial Measures

 Return on Investment (ROI) is the most commonly used measure of corporate

performance in terms of profits.:-

It is the result of dividing net income before taxes by the total amount invested in the company.
Although ROI gives the impression of objectivity and precision, it can be easily manipulated.

 Earnings per Share (EPS) involves dividing net earnings by the amount of common stock. :-

EPS has several deficiencies as an evaluation of past and future performance and also does not
consider the time value of money.

 Free cash flow is the amount of money a new owner can take out of the firm without
harming the business.

This is net income plus depreciation, depletion, and amortization fewer capital expenditures, and
dividends. 

Although cash flow may be harder to manipulate than earnings, the number can be increased by
selling accounts receivable, classifying outstanding checks as accounts payable, trading securities,
and capitalizing certain expenses.

Note :-

1. Depletion :-Depletion is an accrual accounting technique used to allocate the cost of

extracting natural resources such as timber, minerals, and oil from the earth. Like
depreciation and amortization, depletion is a non-cash expense that lowers the cost value of
an asset incrementally through scheduled charges to income.

2. Amortization :-Amortization refers to the act of depreciation when it comes to intangible

assets. 

Method 2: Stakeholder Measures

 Each stakeholder has its own set of criteria to determine how well the corporation is
performing its corporate strategy.

 These criteria typically deal with the direct and indirect impacts of corporate activities on
stakeholder interests. 

Method 3: Stakeholder Value

 Economic Value Added (EVA) measures the difference between the pre-strategy and post-
strategy values for the business.
It is after-tax operating income minus the total annual cost of capital. EVA has become an extremely
popular shareholder value method of measuring corporate performance and may be on its way to
replacing ROI as the standard performance measure.

Management can improve the company or business unit EVA by (1) earning more profit without
using more capital, (2) using less capital, and (3) investing capital in high-return projects.

Method 4: Balanced Scorecard

  Balanced Scorecard for a firm is simply a listing of all key objectives to work toward, along
with an associated time dimension of when each objective is to be accomplished, as well
as a primary responsibility or contact person, department, or division for each objective.

 A Balanced Scorecard is an approach that includes both non-financial as well as financial

measures. An effective Balanced Scorecard contains a carefully chosen combination of non-
financial and financial objectives tailored to the company’s business.

 Balanced Scorecard derives its name from the perceived need of firms to balance financial
measures that are oftentimes used exclusively in strategy evaluation and control with non-
financial measures such as product quality and customer service.

Balanced Scorecard

 The Balanced Scorecard analysis requires that firms seek answers to the following
questions and utilize that information to adequately and more effectively evaluate
strategies being implemented.

 They are: 

(1) How well is the firm appearing to shareholders?

(2) How well is the firm continually improving and creating value along with measures such as
innovation, technological leadership, product quality, operational process efficiencies, and
so on?

(3) How well is the firm sustaining and even improving upon its core competencies and
competitive advantages? And

(4) How satisfied are the firm’s customers?

Benchmarking

 Benchmarking involves openly learning how others do something better than one’s own
company so that the company not only can imitate but perhaps even improve on its
techniques.

 Benchmarking generally involves the 6 following steps

 Step 1: Identify the area or process to be examined. It should be an activity that has the
potential to determine a business unit’s competitive advantage.

 Step 2: Find behavioral and output measures of the area or process and obtain
measurements.
  Step 3: Select an accessible set of competitors and best-in-class companies against which to
benchmark.

 Step 4: Calculate the differences between the company’s performance measurements and
those of the best-in-class and determine why the differences exist.

 Step 5: Develop tactical programs for closing performance gaps.

 Step 6: Implement the programs and then compare the resulting new measurements with
those of the best-in-class companies.

Strategic Outcomes

References

 All About Types of Performance Measurement Tools (unacademy.com)

 Strategy Performance Measurement (onestrategy.org)

 objectives of performance measurement - Bing images

 Performance Measurement - Techniques, Advantages and Disadvantages | Marketing91

 Performance Reference Model - Performance measurement - Wikipedia

THANK YOU …