Analysing Business Performance

1. Analysing Business Performance Pesewa Presentations

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

3. Scoring the business 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.

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

5. Resources Experience Controls Ideas Leadership RECoIL: Where we want to go … Physical assets Human assets Financial assetsIntellectual property Technology (flexibility & capability) Borrowing Product development New markets External agents Managing growth Adequacy of info. systems Ability to use informationDegree 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

6. 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

7. RECoIL into action …

8. Evaluating the process … • Work alone (score yourself), then show the scores to a colleague or business adviser • Have your colleague/adviser challenge the scores: • Where’s the proof? • What would you need to do to get another point? • Are you sure it isn’t a point lower? • How are you going to get the other point? • What is the trend behind each score? • Any scores less than 5 need proper discussion and analysis; these are problem areas. • Make recommendations based on current scores and future ambitions. Be aware of the consequences of each change.

9. 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?

10. 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

11. Balanced business scorecard • Dynamic measurement process • Measures key indicators for YOURbusiness 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

12. shareholders customers internal business growth Balanced Scorecard Emphasis is placed on STRATEGY, not finance Kaplan & Norton (2000)

13. Balanced Scorecard finance (shareholders’ perspective) marketing (customer perspective) operations (internal perspective) growth (innovation and learning perspective)

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

15. BBS Cascade Process vision mission strategy milestones performance measures

16. Managing strategy translating the vision •clarify vision • gain consensus communicating and linking • communicating & educating • setting goals • linking rewards to performance feedback & learning • articulate shared vision • provide strategy feedback • facilitate strategy reviewand learning business planning • setting targets • align strategic initiatives • allocate resources • set and achieve milestones

17. 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