Analysing Business Performance

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Transcript Analysing Business Performance

Pe s e w a Pr e s e n t a t i o n s

Analysing Business Performance

An Analytical Framework

FiMO & RECOIL Business Performance: Company’s Performance to date Finance Marketing Operations Potential: Company’s Potential/bases for Growth Resources Experience Controls Ideas Leadership

Scoring the business

Score (1 - 10) Heading Finance Marketing Operations

Score each aspect of the business (10-point scale) Scores of 2 or 3: something is seriously wrong Scores of 5 or 6 suggest mediocrity Scores 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 …

Finance Turnover (sales/units) Break-even point Gross profit margin Net profit margin Liquidity ratios ROCE Debtor/creditor days Gearing/interest cover Marketing Operations Advertising spend Selling effectiveness Customer retention New accounts won Repeat business New products Brand perception (competition) Brand perception (customers) Market position Output/worker Output/machine Age of equipment Set-up times Down time Absenteeism Staff turnover Staff training Defect rate Performance advantage

RECoIL: Where we want to go …

Resources Experience Controls Ideas Leadership Physical assets Human assets Financial assets Intellectual property Technology (flexibility & capability) Borrowing Product development New markets External agents Managing growth Adequacy of info. systems Ability to use information Degree of delegation Source and number Market orientation Systematic screening Development and testing Market planning Focus, vision and mission Owner-manager involvement Professional/ occupational background Style and ambition Attitude to change Family Strategic 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 …

Score: Heading: 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 adviser 2. 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 customers shareholders internal business

Emphasis is placed on STRATEGY, not finance


Kaplan & Norton (2000)

Balanced Scorecard

finance (shareholders’ perspective) marketing (customer perspective) operations (internal perspective) growth (innovation and learning perspective)

Balanced Scorecard

marketing competitive price; service; quality; complaints shareholders return on capital; cash flow; profitability; reliability internal business defects; set-up time; safety; output per man-hour growth % revenue-new; new ideas; attitude; revenue/employee

BBS Cascade Process

vision mission strategy milestones performance measures

Managing strategy

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

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