EVALUATING PERFORMANCE - TSFX · EVALUATING PERFORMANCE ... the use of Key Performance Indicators. ... How would you describe the organisational structure of BHP-Billiton

The School For Excellence 2011 The Essentials – Business Management – Book 1 Page 23

EVALUATING PERFORMANCE Organisations are increasingly measuring and evaluating their performance. It is imperative measures are used to gauge both individual and team performance, to ensure their organisational objectives are being met. Performances can be effectively gauged through the use of Key Performance Indicators. Benchmarking is essential to ensure continuous improvement. This is a major feature of the Japanese idea of ‘kaizen’. It is a system of detailed statistics and close monitoring of these measures. Benchmarking will give an organisation and indication of what is “best practice”

Key Performance Indicators specifically mentioned in the Study Design

Percentage of market share

The % of the sales that an organisation controls in the total market. It is used as a measure of growth and competitive advantage.

Net profit figures

A measurement of revenues less expenses. It indicates the ability of the business to earn more profit from each sale.

Rate of productivity growth

This is an efficiency measurement by producing more at the lowest possible cost and can be achieved through technical efficiency.

The number of sales

The volume of sales/services multiplied by the selling price or fees charged.

Results of employee satisfaction surveys

A survey that requires employees to respond to questions that evaluate their enjoyment in the workplace.

Results of customer satisfaction surveys

A survey that requires customers to respond to questions that evaluate their satisfaction with the product or service.

Level of staff turnover

The rate that employees leave an organisation over a period of time, expressed as a % of the total workforce. This is used a measurement of employee satisfaction.

Level of wastage

The rate that waste occurs in the production of a good or service. It is usually expressed as a %. A reduction in waste means a reduction in costs and an increase in productivity.

Number of customer complaints

Customer complaints received by the organisation indicate issues with quality & service related to their expenditures.

Number of workplace accidents

An indicator of health & safety issues in the workplace. It is usually measured as the number of lost time injuries per month.


QUESTION 11 Select and discuss Key Performance Indicators that could be used to evaluate the performance of an organisation after a decision to outsource its training and development program? How do they measure success? Give comparisons to previous periods.

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Profit should be your Last Resort!! Also avoid surveys of staff satisfaction. Remember it is the results of the survey that represents the KPI’s, not the survey itself. Use specific measurable indicators that relate to the stimulus material. Identify what the direction, size or value of the KPI indicates about performance. Eg. If the KPI increases then it means ............................


Key Performance Indicators are measurable (units, $, %, numbers etc.) They relate to the management role of CONTROLLING. The KPI’s are compared against appropriate benchmarks to enable the evaluation of performance. Measures can be quantitative (numerical) or qualitative (descriptive). Quantitative measures will be measurable (%, $ or units). Qualitative measures will be narrative based on interviews and descriptions. EMOTIONAL There is often confusion between the method and the Key Performance Indicator (KPI). A method is a technique for gathering information and results. For example, a survey is a technique not a KPI. The actual ‘results of a survey’ and what data the survey was trying to elicit would be the KPI. For example, increased worker satisfaction would be the KPI. There are many other Key Performance Indicators that are used by organisations to monitor performance.

Human Resource Management

Operations Management

Corporate Sales/Service

Employer of choice rating

Machinery breakdowns

Environmental complaints

Web site hits

Absenteeism

Product returns Community involvement

Defective products

No. of training days Stock levels Corporate ethics & social responsibility

rating Call times

Days lost through strikes

No. of defects Share price Waiting times

EFFECTIVENESS & EFFICIENCY Effectiveness (CONTROLLING role of management) Effectiveness relates to the organisations ability to achieve its corporate goals and objectives. This is determined by comparing results against benchmarks and industry standards. “We will have a man on the moon by the end of this decade” John F. Kennedy US President 1962.


Efficiency (ORGANISING role of management) Efficiency relates to how well an organisation uses its resources. Time, money, equipment, employees, capital, materials are all allocated to maximise the output and minimise costs. Organisations will always strive for the best possible combination and usage of resources to increase productivity.

PRODUCTIVITY A quantitative measure of the relationship between inputs and outputs. It is a measure of efficiency. Organisations will continually strive to increase productivity with the same amount or even less inputs. How can we do things better? Reduce waste, improve training, invest in new technology, introduce TQM, empower employees, restructure organisation are strategies to improve productivity.

PRODUCTIVITY RATIO

Quantity of tomatoes produced Number of hydroponic plants


QUESTION 12

Measuring Productivity

Pie Factory Input

(employees per shift) Output

(pies per shift) Productivity

(pies per employee)

Patties Pies 40 1800 45

Four n Twenty 60 2400 40

Mrs Macs 80 2600 32.5

Calculate the productivity at each factory. List some of the factors that could explain a difference in productivity between the factories.


QUESTION 13 Identify and explain some strategies that could be implemented to improve productivity at Mrs Mac’s pies.

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ORGANISATIONAL STRUCTURE Organisational structure refers to the degree of complexity, formalisation and centralisation within an organisation. Organisational structure traditionally deals with authority relationships and the level of centralisation/decentralisation in the decision making process. It depicts the chain of command within the organisation and the accountability of managers. Organisations are continually restructuring to get the best performance structure to achieve their corporate objectives: Areas that will be addressed in an organisation structure will be: Span of control – Number of employees being supervised.

Responsibility – The focus on delivery of goals.

Authority – The power to command and direct.

Delegation – Assigning tasks to other employees.

Communication flow – The exchange of information informally and formally.

Chain of command – The line of authority to determine reporting and accountability.


HORIZONTAL SPECIALISATION This refers to the degree of specialisation, division of labour and the allocation of decision-making authority throughout the organisation. Flatter structures are more prevalent than vertical structures in the current climate. Benefits: Faster and more efficient in decision-making. Time is not wasted.

Makes better use of employees skill and expertise. More ideas and innovations.

Employees are empowered to make decisions leading to an increase in morale and productivity.

Reduces costs as it identifies employee surpluses.

Communication is more streamlined and direct.

Business is able to respond quicker to changing circumstances in the external environment.

Develops and builds teams. Examples of horizontal specialisation: 1. Functional structure

The functional structure groups employees together according to the tasks they perform. Separate departments may be created with separate managers responsible for each department. This is usually supports a vertical reporting structure. For example the Sales Manager would control all people within the Marketing function. This structure may inhibit fast responses and impact on communication channels throughout the organisation.

2. Geographic or Divisional (product) structure

This form of structure will group jobs/people according to their location or activity. Within an organisation there may be a human resources department which may be responsible for each location or activity. This structure is very common today and encourages responsibility and accountability of each profit centre.


3. Matrix structure

The matrix structure involves bringing together specialists from different parts of the organisation to solve specific problems or to undertake specific projects. The purpose is to support more cross-functional communication between departments. The grouping is according to product /activity and function. This structure may be advantageous because: there may be greater flexibility when operations can be altered quickly when

operating/macro environments change

Greater communication, cooperation and teamwork

Enhanced decision making

Pooled expertise

4. Hierarchical structure An older and conservative style that has evolved from bureaucratic structures where there was considerable “red tape” and slow decision-making. It is a top-down structure with decision-making being centralised and past down the line by senior management. There are inflexible lines of communication and control is clearly defined. This structure would suit organisations that depend on discipline and control such as the military and the police. It is less popular in the corporate world where employee empowerment and delegation are seen as vehicles for increased productivity. 5. Organic structure In this structure the organisation has outsourced several of its functions such as information technology, finance, payroll, employee training and some of their manufacturing processes.

This gives the organisation greater flexibility and enables management to concentrate on their core activities. It also can improve productivity and quality as many functions are now being completed by experts and specialists.

The loss of control can be a concern and may expose the organisation to problems if they cannot rely on these other businesses to fulfil their commitments.


MANAGEMENT LEVELS

VERTICAL SPECIALISATION The hierarchy of formal decision-making and authority. It outlines the chain of command. Organisations must decide how much control top management should have.

The level of vertical specialisation will depend on the culture of the organisation and the extent to which democratic management styles are practiced.

Overview of organisation

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QUESTION 14 How would you describe the organisational structure of BHP-Billiton?

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QUESTION 15 Outline the reasons for adopting this organisational structure.

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QUESTION 16 Compare and contrast a vertical and horizontal organisational structure.

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QUESTION 17 What type of organisations would benefit from a matrix structure?

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OFFICIAL CORPORATE CULTURE Corporate or organisational culture may be defined as the set of values and norms that

are shared by all members of an organisation which substantially influence members’ behaviour.

Can be observed in dress/uniform, slogans, traditional events and physical

environment. Management defines culture by establishing organisational structures that dictate the

way an organisation functions – particularly by determining the degree of centralisation/decentralisation.

Management must also model the values and norms to avoid mixed messages being

sent throughout the organisation.

REAL CORPORATE CULTURE The culture experienced by employees within the organisation. This may differ from the

statements and slogans and the way the organisation is marketed to the community. Management styles, corporate circumstances and employee tensions can have

adverse effects on the “unofficial” culture of an organisation.


Identify indicators that HR managers could use to evaluate the corporate culture following the takeover of Coles by Wesfarmers.

Identify strategies that HR managers could implement to develop the corporate culture following the takeover of Coles by Wesfarmers.

Theory stands alone Examples are used to support the theory. Do not just use an example to describe a key performance indicator. Use the theory first.

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EVALUATING PERFORMANCE - TSFX · EVALUATING PERFORMANCE ... the use of Key Performance Indicators. ... How would you describe the organisational structure of BHP-Billiton