Deck 18: Performance Measurement to Support Business Strategy

Question 1

What is a business model

Answer 1

Business strategy
It is an approach used by a company for deploying its resources, assets and capabilities to provide maximum returns to its investors and meeting customer expectations. It is component of high-level strategy plan and defines value preposition.
Business model
It is framework that establishes link between various employees and levels within the company in such a way that their job accomplishments result in meeting organizational goals and objectives.
Roles and responsibilities of all employees are inter related and they work towards common objective to reduce cost and maximize profitability.
For example, sale team responsibility is to generate revenue by selling products and production team responsibility is to produce units and controlling costs. Both teams work towards achieving maximum returns and profits for their division or center.
Business model also defines responsibilities like how teams shall be hired, trained and motivated to work within the organization. Business model of a hospital, service-oriented company, manufacturing firm, consulting firms etc. are different and where roles and responsibility for each employee and level is defined clearly to generate revenue or control costs.
Hence, business model are important for any organization to achieve its business goals.

Question 2

"I know how to satisfy customers-give the product away." Is this a flaw in the idea of measuring customer satisfaction Why

Answer 2

The customer satisfaction performance measure includes the details of information related to quality control, delivery performance; time taken for order fulfilment etc. whereas the customer service is a non financial aspect.

Question 3

Functional Measures
Write a report to the president of an airline recommending the use of functional measures of performance. Include specific examples of how they can be used to improve performance.

Answer 3

The report to the president of an airline containing recommendation for the use of functional measures of performance should be written as follows:
To
The president
ABC Airline
Use of functional measures of performance is an effective way of evaluating the efficiency of business operations of an airline. Such measures direct the employees' attention to things that they can control and provide timely feedback about their performance.
In case of an airline business the focus should be on the lowering the cost without compromising with customer satisfaction. The organization can minimize cost by minimizing the ground time which starts when the plane enters the gate and ends when the plane leaves the gate. The measure that should be used to check the ground time would be a percentage of time the planes are flying.

Question 4

What are the advantages of financial measures of performance What are the advantages of nonfinancial measures of performance

Question 5

Different Performance Measures across the Organization
At one time, a well-known communications firm measured all managers at all levels on return on net assets (RONA). Write a report to the firm's CFO indicating why you believe that the use of a single performance measure for managers at all levels will not be effective.

Question 6

Performance Measures
Student evaluations are commonly used as performance measures for faculty in colleges and universities. Write a report identifying the advantages and disadvantages of student evaluations as a measure.

Question 7

What is a critical success factor

Question 8

Balanced Scorecards and Strategy Maps
Crane Company has decided to adopt a balanced scorecard to monitor performance. The company's strategy is to be the low-cost leader in the industry. The initial scorecard recommended by a consultant includes the following measures in each of the perspectives:

Required
Comment on the scorecard and make recommendations about adding or deleting measures to align the scorecard with the company's strategy.

Question 9

Operational Performance Measures
Zuma Company manufactures surfboards. The controller prepares a weekly production efficiency report and sends it to corporate headquarters. The data compiled in these reports for a recent six-week period follow:

Required
a. Write a memo to the company president evaluating the plant's performance.
b. If you identify any areas of concern in your memo, indicate an appropriate action for management to take. Indicate any additional information you would like to have to make your evaluation.

Question 10

Why do effective performance evaluation systems measure different things at different levels in the organization

Question 11

Balanced Scorecards and Strategy Maps
TechMasters, Inc., has the following mission statement:
To be the leader in innovation and new products for the industrial control instruments market.
TechMasters's CFO, who has just returned from an executive seminar on performance measurement, tells you that she has developed the following initial balanced scorecard as part of an exercise during class:

Required
Comment on the scorecard and make recommendations about adding or deleting measures to align the scorecard with the company's strategy as defined by its mission statement.

Question 12

Objective and Subjective Performance Measures
A common method of measuring performance in accounting courses is to combine objective measures (test scores, for example) with subjective measures (class participation measures, for example). These scores are weighted and combined to determine a final grade.
Required
a. Write a memo that discusses the advantages and disadvantages of using multiple measures of performance, including some that are objective and some that are subjective.
b. Can you identify a situation in which you would prefer to be evaluated using a purely objective measure (exam scores) A purely subjective measure (class participation)

Question 13

What is benchmarking

Question 14

Benchmarks
Match each of the following specific measurements to its benchmark category.

Question 15

Operational Performance Measures
Mid-States Metal Finishers produces steel tubing at its Akron plant. The plant's quality assurance officer prepares a monthly report and sends it to headquarters. The data compiled in these reports for a recent six-month period follow:

Required
a. Write a memo to the company president evaluating the plant's performance.
b. If you identify any areas of concern in your memo, indicate an appropriate action for management to take. Indicate any additional information you would like to have to make your evaluation.

Question 16

How is benchmarking used

Question 17

Benchmarks
Match each of the following specific measurements with its benchmark category.

Question 18

Balanced Scorecards and Strategy Maps
Following several years of tight budgets, administrators at the University of California, Davis, looked for ways "to do more with less." Janet Hamilton, vice chancellor of administration, researched books and articles, met with consultants, and talked to her counterparts at universities across the United States to find new management methods that could change the university from a bureaucratic to a customer-oriented organization. She learned about reengineering, total quality, and a variety of other management techniques. None of the management techniques appealed to her, until she came across articles about the balanced scorecard. She believed that the balanced scorecard was the right tool for the Davis campus, and she set about implementing it.
At first, Hamilton did not call her approach a "balanced scorecard," because she feared that employees would think of this as just another management fad to endure until the administration went on to something new. Instead, she pilot-tested the balanced scorecard ideas in one service department, environmental health and safety (EHS), until it worked. With the success of EHS behind her, she moved to implement the balanced scorecard in other service departments, such as police, fire, and printing services.
Each department developed its own particular performance measures to achieve the following objectives (we have shortened the list to save space):

Required
a. Was the vice chancellor overly cautious in not calling her approach a "balanced scorecard"
b. Comment on the wisdom of beginning a balanced scorecard with a pilot project. Would it be possible to extrapolate the experience of a service department, such as environmental health and safety, to an academic unit, such as a college of business
c. What opportunities and difficulties do you see in applying a balanced scorecard to a university setting
Source: Adapted from interviews with university administrative staff.

Question 19

What is the difference between an organization's mission and its strategy

Question 20

Performance Measures
Observe the operations of a restaurant and identify an important nonfinancial performance measure for it.

Question 21

What performance factors do measures related to customer satisfaction attempt to evaluate

Question 22

Manufacturing Cycle Time and Efficiency
Lancaster Metals has the following average times (in hours):

Required
Calculate the manufacturing cycle efficiency.

Question 23

Why is manufacturing cycle efficiency important to most organizations

Question 24

Functional Measures
For each category of functional measures listed in Exhibit 18.7, add one additional specific measurement that is not already listed.

Question 25

Why measure delivery performance

Question 26

Specifying Nonfinancial Measures
Write a memo to Jordan Carr outlining how you would recommend measuring customer satisfaction for JYC Investments. Be sure to discuss the advantages and disadvantages of your proposed measure.

Question 27

Why is worker involvement important to an organization's success

Question 28

Manufacturing Cycle Time and Efficiency
A manufacturing company has the following average times (in days):

Required
Calculate the manufacturing cycle efficiency.

Question 29

How do companies evaluate their own performance in getting workers involved and committed

Question 30

Balanced Scorecards and Strategy Maps
Hill Street Company (HSC) manufactures plastic parts for the home construction industry. The market is extremely competitive and margins are thin. The company recently adopted a balanced scorecard for performance evaluation. As part of that exercise, managers at HSC developed the following strategy map.

Required
a. Using the strategy map, comment on the performance measures used for each of the four perspectives of the scorecard. Would you recommend any changes to the measures If so, what changes would you make Why
b. What are the strengths and weaknesses of the strategy map as developed by HSC
c. Recommend changes to the map that will better communicate the strategy for HSC and incorporate your recommendations from requirement ( a ).

Question 31

Consider your campus bookstore. Who do you think are the stakeholders What do you think are its critical success factors How would they differ from those of a retail bookstore in a city without a college

Question 32

Balanced Scorecards and Strategy Maps
Monroe Corporation makes precision parts for boats and aircraft. Quality is an important competitive advantage in the industry and the company prides itself on the quality of its products. The company recently adopted a balanced scorecard for performance evaluation. Monroe uses the following strategy map to communicate its strategy to its managers and line employees:

Required
a. Using the strategy map, comment on the performance measures used for each of the four perspectives of the scorecard. Would you recommend any changes to the measures If so, what changes would you make Why
b. What are the strengths and weaknesses of the strategy map as developed by Monroe Corporation
c. Recommend changes to the map that will better communicate the strategy for Monroe Corporation and incorporate your recommendations from requirement ( a ).

Question 33

What are three specific measures of quality control and delivery performance for Bose speakers

Question 34

Benchmarks
Write a report to the CEO of Borders Books and Music recommending specific benchmark measures. Include specific competitors against which to measure.

Question 35

If customers are satisfied, they will buy your products and profits will increase. Therefore, you only need to measure profit. Comment.

Question 36

Mission Statement
Write a report to the president of your college or university indicating the factors that you believe should be included in its mission statement. If your college has a mission statement, are the factors you listed included

Question 37

A balanced scorecard is a set of two or more performance measures. Do you agree Why or why not

Question 38

Consider the number of customer complaints as a measure of customer satisfaction. How does this measure customer satisfaction How does it fail to measure customer satisfaction

Question 39

Performance Measures, Drawing a Business Model
Garnet Electronics discloses to you that it uses a balanced scorecard with the following performance measures:
Profit
Training hours
Percentage of defects
Employee turnover
Customer satisfaction
Patents awarded
Required
a. Link the measures to the perspectives of the balanced scorecard by filling in the following table:

b. Present a business model as in Exhibit 18.1 that would lead the company to choose this set of measures.