Analysing Business Performance

Report
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
Heading
Score (1 - 10)
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
Output/worker
Advertising spend
Output/machine
Selling effectiveness
Age of equipment
Customer retention
Set-up times
New accounts won
Down time
Repeat business
Absenteeism
New products
Staff turnover
Brand perception (competition)
Staff training
Brand perception (customers)
Defect rate
Market position
Performance advantage
RECoIL: Where we want to go …
Resources
Experience
Controls
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
Ideas
Source and
number
Market
orientation
Systematic
screening
Development
and testing
Market planning
Leadership
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 …
Heading:
Resources
Experience
Controls and systems
Ideas and innovation
Leadership
Score:
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
shareholders
internal
business
customers
Emphasis is placed on
STRATEGY, not finance
growth
Kaplan & Norton (2000)
Balanced Scorecard
finance
(shareholders’ perspective)
marketing
operations
(internal perspective)
(customer perspective)
growth
(innovation and learning
perspective)
Balanced Scorecard
shareholders
return on capital; cash flow;
profitability; reliability
marketing
internal business
competitive price; service; quality;
complaints
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
translating the vision
• clarify vision
• gain consensus
communicating
and linking
feedback & learning
• articulate shared vision
• provide strategy feedback
• facilitate strategy review
and learning
• communicating & educating
• setting goals
• linking rewards to performance
business planning
• setting targets
• align strategic initiatives
• allocate resources
• set and achieve milestones
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

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