Managing Organizational Performance

Chapter 8, Managing Performance by Michael Armstrong & Angela Baron

Managing Organizational Performance

Top most and continuing responsibility of top managers Critical factors proper use of effective measures and
the ability of managers to sensibly use these measures Daily Huddles (analyzing available data, discussions, strategies, focus on what needs to be done) Types of Measures Organizational
Three basic considerations 1. Customer Satisfaction 2. Employee Satisfaction 3. Cash Flow

The Balanced Scorecard

(Kaplan & Norton)
No single measure to measure business performance; what is
needed is a balanced presentation of both financial and operational measures Balance Scorecard: a fast but comprehensive view of business by top measures

Looking at the business performance from 04

perspectives 1. How do customers see us? (Customer Perspective) 2. What must we excel at? (Internal Perspective) 3. Can we continue to improve and create value? (Innovation & Learning Perspective) 4. How do we look at shareholders? (Financial Perspective)

The Balanced Scorecard

(Kaplan & Norton)

Discussion
Holistic approach: puts vision and strategy, and not control, at the
centre Compatible with new approaches(cross-functional integration, continuous improvement, team accountability etc.) Goal Setting Alignment of personal goals (personal scorecards) with Company's goals 1. Corporate objectives, measures and targets 2. Business unit targets (translated from corporate targets) 3. Team/Individual objectives and initiatives

The European Foundation for Quality Management Model (EFQM)

Business results are achieved through focus on: 1. People (employee) Satisfaction 2. Customer Satisfaction 3. Impact on society (Corporate Social Responsibility, CSR) These can be achieved if there is an effective leadership
which ably mange in the following areas: 1. People Management 2. Resources 3. Policy & Strategy 4. Organizational Processes (Procedures)

How EFQM helps in Performance Management

Better understanding of how to achieve business
objectives/continuous improvement Tackling system problems at the workplace Promoting performance management as a two way dialogue Job and Role description in a positive and holistic framework Alignment of individual and business objectives Identifying, defining and building the needed employee competencies

Other Measures of Organizational Performance

Economic Value Added (EVA)
EVA = Post Operating Profit Cost of capital invested Cost of Capital invested includes Cost of Equity (shareholders opportunity cost) It is not good enough for a company simply to make a profit it has to justify the cost of its capital Other Economic Measures of Value: 1. Added Value = Market value of Company output cost of its inputs 2. Market Value Added: Company market capitalization total capital investment