Ojijo 6 s business performance measurement matrix

¥ BUSINESS PERFORMANCE MEASUREMENT (OJIJO 6S PERFORMANCE MATRIX)

(extracted from Ojijo’s Sell Something: Hoe Do Entrepreneurs Think? How Do I Build A Business System?)

Introducing Performance Measurement ق

Ojijo writes in his all time classic, The Gift of e11even Moves to Make Me Wealthy, ‘The purpose of every activity is results.’ The organization that exists to conduct business has results that it should meet. And

the results of a business entity are profits. Indeed, Milton Friedman, the great American economist noted,

‘the responsibility of business is profits; the bottom line of business is returns to

shareholders.’

He further went ahead and said, ‘the business of business is business.’ However, in order to earn profit, the business must carry out various activities,

targeting various stakeholders, and realizing different direct and immediate or long term results, results, which are all meant to feed into the final result, which is profit. The progress of there activities need to be measured, so that as the owner of my business, I know whether I am on track, off-track, or stagnating, not moving at all towards my goals and desired results.

Performance measurement is the process whereby an organization establishes the

parameters within which programs, investments, and acquisitions are reaching the desired results.

Performance measurement is the process of monitoring and evaluating the achievement of results in various departments of the business. It is based on the philosophy that whereas the end result of business enterprise is to make profit, there are other intermediate, immediate and short/medium/long term indirect goals that will need to be achieved in order to make the profitable sale and earn return on investments (ROI).

The company hence sets performance measures, called matrices, based on which results must be achieved by the six stakeholder of the company, for the company to ultimately make profit. The key areas are as below:

Shoppers (clients): What must the company do to achieve high quality قproducts (high return for clients); at low prices (competitive costs); and with quick delivery (timely)?

,Suppliers: are they delivering the best quality products, at the least price قand timely;

Shareholders: are the shareholders and investors getting increasing return قon investments, cash flow, and net profit through increased sales, sales growth, market share increase;

Staff: is the staff skilled, experienced and motivated? Is the board قprofessional and run as per corporate governance standards?

State: is the company compliant with legal, policy and regulatory قrequirements for the particular industry, including labour, environmental, health and safety requirements, licensing, etc?

,Society: is the company contributing to the community through, inter alia قstrategic partnerships with public, private, civil society, and community; internships placements, and volunteering activities by staff; etc.

Benefits of Performance Measurement ق

Measuring an organization’s performance is both necessary and vital. An

organization operating without a performance measurement system is like an airplane flying without a compass. The purpose of measuring performance is not only to know how a business is performing but also to enable it to perform better. Indeed,

‘The fundamental purpose behind measures is to improve performance.’ Even measures that are not directly connected to improving performance (like

measures that are directed at communicating better with the public to build trust) are means to achieving that ultimate purpose, which is improved performance. If one ‘gets’ performance measurement right, the data generated will tell the user where the business is, how it is doing, and where it is going. In short, it is a report card for a business that provides users with information on what is working well and what is not. As the old management adage goes,

‘If you cannot measure it, you cannot manage it.’

The ultimate aim of implementing a performance measurement system is to improve the performance of an organization so that it may better serve its

stakeholders, and the stakeholders are classified as per the elements of corporate governance, being the 6s, namely, staff, shareholders, shoppers, state, suppliers and society.

6S Performance Measurement Matrix ق

Performance in organizations is based on the stakeholders to the organization. A

traditional organization has six (6) stakeholders, namely:

€ Shoppers

As Mahatma Gandhi noted decades past, ‘the customer is the reason why we (the company) are here’ The three main areas of customer concern are time, quality and cost. If customers are not satisfied, they will eventually find other suppliers that will meet

their needs. However, despite the central importance of the customer; customer capital is startlingly the worst managed of all intangible assets. My goal will be to retain the one I have, and then get the one I do not have. Indeed, research indicates that it costs five (5) times more to get a new customer, then to retain the old one. Customer loyalty is key.

Metrics based on this perspective allow the managers to know whether the products

(goods and services) conform to customer requirements (the mission). In the olden days, the seller told the buyer, ‘quality, speed and cost, choose any two.’ Today, a company that cannot deliver all the three is out of the race. The metrics to be measured include: Time

- On time deliveries of service

- Online order entry form/query - Distribution efficiency

Quality

- High quality & niche based products

- Technology leadership - Research & development/new products - Products customization (to meet client needs) - Assistance in solving technical problems/ability to respond to quality problems

(customer service)

Cost

- Competitive pricing - Automated financial system (webERP based) - Reduced inventory costs - Cost saving initiatives

€ Shareholders

The shareholders are the owners of the company. Their main interest is in the

bottom-line of the business, through growth and profitability. However, as shareholders, they also need to exercise their shareholder rights in the running of the organization.

Metrics to be measured include: Shareholders Rights - Communicating information - Participate in general meetings - Effective and efficient board /sound board management practices Growth - Expand into global markets

- Sales growth - Increased orders - Increased market share

Profitability - Return on assets / investment

- Return on equity/earnings per share - Low cost base (unit cost vs. Competition) - Reduced overhead expenses

€ Suppliers

The organization should have streamlined relationships with the suppliers. As an

entrepreneur, I should work with the high-quality, low-cost supplier, while also supporting the supplier. And in working with the supplier, I will verify that they can deliver on time, high quality, and reasonably priced products. However, good the supplier is, or however close we are in personal relationships, I will be reminded of the age old advice of Donald Trump, the billionaire real estate mogul, socialite and celebrity,

‘trust but verity.’

Metrics to be measured include: Cost

- Competitive pricing - Automated financial system (webERP based) - Reduced inventory costs - Supplier cost saving initiatives Quality

- High quality & niche based raw materials

- Technology leadership - Research & development/new products - Products customization (to meet client needs) - Assistance in solving technical problems/ability to respond to quality problems Time/delivery - On-time delivery of supplies - Effective supply chain system - Supplier’s booking in procedures

€ Staff

For the organization to achieve its bottom line, it needs people; the employees, or human resource. In a knowledge-worker organization, people -- the only repository of knowledge -- are the main resource. The policy for human resource should hence make sure that the employees have skills (both job/trade specific skills and transferrable skills); motivation to work and enabling environment for work. A skilled staff who is motivated in an enabling environment will produce optimum results.

The performance metrics include the following:

Skills

- Job skills development program for employees - Transferable skills program (communication, team work, ICT, public speaking,

leadership, management, etc) - Staff mentorship & coaching - Training fund for capacity building - Annual assessments / quarterly reviews

Motivation

- Competitive salaries - Non-financial reward schemes (Promotion/upward career movement, etc) - Benefits/bonus pay per personal performance - Incentives

Enabling Environment

- Conflict resolution - Capacity utilization - ICT/technological environment (paperless/green office) - Corporate Governance (The Board, Leaders/Directors, Managers &

employees)

€ Society

The organization should have a socially responsible mode of conducting business, including production, including waste disposal and product quality. Further, the organization should engage in giving back to the community through corporate social responsibility (CSR) initiatives.

The organization should have a clear checklist of other organisations or individuals

who partner with it in the realization of its goals. Through strategic partnerships, the organisation will build her institutional capacity and also add value to other

stakeholders in the field for mutual benefit to leverage strengths and achieve objectives.

The performance metrics include the following:

Company Engagement

- Ethical /environmentally sustainable practices - Contributions to community projects/disaster - Provision of internship and volunteer placement

Staff Engagement

- Employees Support Outside Activities Company Strategic Partnerships - Partnerships with the government/public sector (public private partnerships)

- Partnership with private sector

- Partnerships with civil society, including donors - Membership in trade/industry associations

€ State

The organization should have a clear checklist of playing by the rules. The legal

compliance should be up to date, with periodic reviews. The performance metrics include the following:

Business registration, licenses, and permits ق Tax, accounting and auditing compliance ق Other reporting and due diligence compliance ق

€ Business Performance Measurement Matrix (Ojijo 6s Matrix)

Performance Matrices Measurement

Performance

Matrix

Thematic Areas/

Parameters

Activities/ Strategies Results

Staff

Skills

Job skills development

program for OjijoGroup Ltd

staff has a skills development

program

Transferable skills program (communication, team work,

ICT, public speaking,

leadership, management,

etc

staff has participated in transferable skills training

OjijoGroup Ltd mentorship

& coaching

staff has an assigned mentor

Training fund for capacity

building

staff has a fund for capacity

building

Annual assessments / quarterly reviews

staff has participated in quarterly review

Corporate Governance (The

Board, Leaders/Directors,

Managers & OjijoGroup Ltd

)

The board complies with

corporate governance

requirements of the

Companies Act & regulations,

and board manual

OjijoGroup Ltd , Knowledge

Management

(Organisational Learning)

staff was trained and shared

knowledge on intranet, or

through learning session

Motivation Competitive salaries staff is satisfied with salary

Promotion/upward career

movement

staff

Benefits/bonus pay per

personal performance

staff has benefits

Incentives Virat staff has incentives

Enabling

Environment

Conflict resolution staff understands and uses

the grievance reporting,

dispute resolution and

disciplinary procedures

Capacity utilization staff fully utilizes his skills

ICT/technological

environment

(paperless/green office)

staff uses the technological

systems at work

OjijoGroup Ltd Liability

Insurance fund

staff liability is covered by

liability fund

Shoppers Time On time deliveries of

service

OjijoGroup Ltd meets

deadlines

Online order entry

form/query

OjijoGroup Ltd uses and

responds to online forms

Distribution efficiency OjijoGroup Ltd delivers

services to clients on time

Quality High quality & niche based products

OjijoGroup Ltd delivers the product to the niche market

Technology leadership OjijoGroup Ltd uses

technology with clients

Research &

development/new products

OjijoGroup Ltd participates in

research and development of

new products

Products customization (to

meet client needs)

OjijoGroup Ltd understands

products customization

Assistance in solving technical problems/ability to

respond to quality problems

OjijoGroup Ltd assists clients in solving technical problems

Cost Competitive pricing OjijoGroup Ltd understands

and explains to client the

competitive pricing model

Automated financial system

(webERP based)

OjijoGroup Ltd urges clients to

use the webERP system

Reduced inventory costs OjijoGroup Ltd minimizes

inventory

Cost saving initiatives OjijoGroup Ltd implements

cost saving initiatives.

Shareholders Shareholders

Rights

Communicating information OjijoGroup Ltd communicates

information to shareholders

Participate in general

meetings

OjijoGroup Ltd invites

shareholders to meetings

Effective and efficient board

/sound board

OjijoGroup Ltd ensures the

board is effective and efficient

management practices OjijoGroup Ltd implements

board governance as per law

and board polices/manual

Security of investment OjijoGroup Ltd ensure security

of investment

Growth Expand into global markets OjijoGroup Ltd ensures

expansion of enterprise

Sales growth OjijoGroup Ltd ensures sales

growth

Increased orders OjijoGroup Ltd ensures

increase of orders

Increased market share OjijoGroup Ltd ensures

increased market share

Profitability Return on assets /

investment

OjijoGroup Ltd ensures return

on assets

Return on equity/earnings

per share

OjijoGroup Ltd ensures return

on equity

Low cost base (unit cost vs. Competition)

OjijoGroup Ltd implements measures to ensure low cost

base compared to competition

Reduced overhead

expenses

OjijoGroup Ltd ensures

reduced overhead expenses

Suppliers Cost Competitive pricing OjijoGroup Ltd chooses

supplier with competitive

prices

Automated financial system

(webERP based)

OjijoGroup Ltd chooses

supplier who uses web and IT resources

Reduced inventory costs OjijoGroup Ltd chooses

supplier with reduced

inventory costs

Supplier cost saving

initiatives


supplier with cost saving

initiatives

Quality High quality & niche based

raw materials


supplier with high quality niche supplies

Technology leadership OjijoGroup Ltd chooses

supplier with technology

leadership

Research &

development/new products


supplier with new products

Products customization (to

meet client needs)


supplier with customized

products

Assistance in solving

technical problems/ability to

respond to quality problems

OjijoGroup Ltd chooses that

assists OjijoGroup Ltd staff

with queries

Time/delivery On-time delivery of supplies OjijoGroup Ltd chooses

supplier with on-time delivery

record

Effective supply chain

system


supplier with effective supply

chain system

Supplier’s booking in

procedures


supplier with efficient booking

in procedures

Society

Company

Engagement

Ethical /environmentally

sustainable practices

OjijoGroup Ltd engages in

ethical practices, did not

engage in unethical practice

OjijoGroup Ltd

Engagement

Contributions to community

projects/disaster

OjijoGroup Ltd participated in

community service initiative

Provision of internship and volunteer placement

OjijoGroup Ltd mentored an intern, volunteer placement

OjijoGroup Ltd support

outside activities

(volunteering)

OjijoGroup Ltd volunteered in

an activity outside office work

Strategic Partnerships with the OjijoGroup Ltd established &

Partnerships government/public sector

(public private partnerships)

engaged in/participated in

strategic partnerships

Partnership with private

sector

OjijoGroup Ltd participated in

partnership with private sector

Partnerships with civil society, including donors

OjijoGroup Ltd participated in partnership with civil society

Membership in

trade/industry associations

OjijoGroup Ltd ensured

membership with trade

association/industry

association

State Registration &

Licensing

Business registration,

licenses, and permits

OjijoGroup Ltd has ensured

legal business registration,

licensing, and permits

Insurance Regulations

Compulsory insurance OjijoGroup Ltd has ensured compliance with laws

Employee

Interests

Pension scheme for

OjijoGroup Ltd


pension scheme for staff

Environmental And

Occupational

Health & Safety

(EOHS)

Environmental Health and

Safety Regulations (EHS)


environmental, health and

safety regulations are followed

Tax Tax, accounting and

auditing compliance


tax, audit and accounting compliance

Reporting

requirements

Other reporting and due

diligence compliance


due diligence in business

operations