Individual End-of-module Report: Go Ahead Plc - Essay Example

Individual End-of-module Report Go Ahead Group Plc Table of Contents Topics Page Executive Summary______________________________________________________ 3 Introduction____________________________________________________________ 4 Vision & Strategy________________________________________________________ 5 Balanced Scorecard_______________________________________________________ 7 Strategy Map____________________________________________________________ 12 Recommendations to the Board_____________________________________________ 16 Use of Balanced Scorecards________________________________________________ 18 Works cited_____________________________________________________________ 22 Executive Summary This report has been designed to meet the needs of board of directors of Go Ahead Plc. to analyze business prospects of the company and to determine how far the company has been successful in meeting its vision and corporate strategy. This in turn has been made possible through the use of a tool called Balanced Scorecard. The report has been structured in a logical flow starting with the vision statement and the strategy the company needs to adopt in order to be en route of achievement of its vision in the long run. Later, the report provides a detailed balanced scorecard tailored according to the vision and the needs of company. It provides all four perspectives where organization needs to focus on in a proportionate and balanced manner. This is followed by a Strategy Map which is merely an extension of the scorecard, highlighting the strategies required to be implemented in order to meet each goal identified therein. Afterwards, the report contains recommendations made to the board of directors which are shaped to reflect all the prior observations, targets and strategies determined in the scorecard and strategy map. Additionally, the report provides an insight of the practical uses of balanced scorecard in various industries and companies of all sizes, alongwith its pros, cons and limitations. To: The Board, Go Ahead Group Plc. From: Subject: Vision statement, balanced scorecard and strategic map along with recommendations The following report covers all agendas to be considered, including balanced scorecard, vision statements, strategy gaps, recommendations to board and further discussion over how balanced scorecards can be used effectively in a company along with their limitations that render them lesser effective. Introduction Go Ahead Group Plc is engaged in the business of public transportation and currently holds largest market share in its sector. The entity visualizes itself to be a cost leader in the future market with a loyal customer following and a quality brand name. It is a profitable concern and conducts its business in a socially and environmentally responsible manner. It aims at securing market niches in urban and other similar areas and has an ever-growing clientele due to prime focus on customer satisfaction, quality standards and strict punctuality. The organization has been concentrating more on non-financial indicators lately to improve in those areas, enhancing its public profile instead of merely emphasizing on financial measures like profitability. The entity also has good liquidity position and no going concern issues. Vision & Strategy Vision At Go Ahead, customer satisfaction is our biggest motivating factor! We believe in providing reliable services on timely basis at lowest fares without compromising the quality standards. We take our business seriously and enforce safeguards against any ripples, created in the process, affecting our precious environment, our employees, our customers and the public at large. Strategy Our vision has been strategically incorporated into our business dealings and our practices and processes are designed precisely to reflect our ideology. These include: Objective Strategy Cost reduction Controlling costs by breaking down all processes into activities and identifying non-value adding activities thereby eliminating them. Customer satisfaction Facilitating customers through establishing online integrated booking systems, complaint hotlines and random surveys. Market share Maintaining its largest market share by continuous innovation in new ways of providing services to customers that makes our company unique from others in the market and creating customer loyalty. Environment, health and safety Implementing strict safety policies and training all staff to adhere with them regularly to avoid accidents and ensuring security of customers, public and employees themselves. Frequent evaluations of employees driving the vehicles including their routine medical checkups and any other conditions that might endanger him and the passengers in vehicle. Procuring environment-friendly vehicles and discovering measures to reduce carbon emission into the atmosphere. Balanced Scorecard Financial Perspective (How shareholders see us?) Goal KPIs Target Initiative / Action Revenue Revenue per vehicle Increase revenue per vehicle by 10% each year Develop maintenance programs for routine checkups of vehicles Regular training of staff and drivers Enlarge traveling routes to cover more territories Profitability Net profit margin Increase net profit margin by 5% per annum Reduce costs by cutting on slags, delays, idle times and non-value adding activities Increase revenue per vehicle Shareholder’s value Dividend cover Increase dividend cover to 5 times Develop policy for retaining profits in business to provide long term return to shareholders Increase profits and control costs to save more surplus available for distribution Utilization of resources Return on net assets Increase return on net assets by 20% each year Establish asset evaluation program whereby all idle and obsolete assets are disposed off on timely basis and all assets are maintained regularly to avoid breakdowns and stoppages Customer Perspective (How customers see us?) Goal KPIs Target Initiative / Action Number of customers Market share (%) Increase market share and maintain top position in industry Training staff on relationship building and maintaining customer loyalty Innovating new products and new ways of doing business thereby creating monopoly and market leadership Number of customers Number of passengers per vehicle Increase number of customers per vehicle by 10% each year Developing maintenance programs for routine checkups of vehicles Regular training of staff and drivers Enlarging traveling routes to cover more territories Customer satisfaction Number of customers lost and repeated Increase number of repeated customers by 200 each year Decrease number of lost customers by 50 each year Conducting customer surveys regularly identifying major problems and resolving on a timely basis Putting in place a 24-hours accessible customer complaint hotline Training staff on relationship building and maintaining customer loyalty Public profile and image Advertising and Marketing expenses Increase advertising expenses by 5% each year to enhance sales Establishing additional advertisement and promotional campaigns to gain customer attention and enhance public profile Increasing budgets allocated to marketing and compute efficiency of such expenses by carrying out ratio analysis between sales volume and marketing expenses to identify the pattern of influence of such expenses on sales made Internal Business Perspective (What must we excel at?) Goal KPIs Target Initiative / Action Automation Increasing number of IT equipment involved Automate entire booking and fare systems by 2015 Designing easy-to-use online booking and ticketing systems Environmental responsibility Carbon emission (%) Reduce carbon emission by 20% till 2015 Introducing new technologies to run vehicles on low-carbon-emitting vehicles Personnel costs Administrative expenses incurred per employee Reduce administrative expenses per employee by 5% each year Without demotivating the employee, eliminating all unnecessary expenses incurred on employees by introducing incentives, budget cappings and strict policies Efficiency of trips Average time taken to complete one journey Reduce wastages by 5% each year Sampling of times taken to complete same journey each day, identifying the least time required to complete it. Paying incentives to drivers to complete journeys in time Establish standard arrival and departure times to be complied with but should not be rigid and have cushion for delays so as to avoid accidents or rash driving Innovation and Learning Perspective (How can we continue to create value?) Goal KPIs Target Initiative / Action Research and development R&D expenditure each year Increasing R&D expenses by 10% each year Enhancing budgets for R&D for innovating new products and new methods of doing business more efficiently and effectively Staff Training Average training expenses per employee Increase expenses incurred on staff training by 10% each year Making policies for continuous professional development of employees Holding regular mandatory training sessions to be attended by all employees Tie promotions and incentives with professional development of employees Cost control Non value adding expenditure per passenger Decrease non value-adding expenses per passenger by 5% each year Curtailing on all activities or parts of services that do not add any value to company Establishing costing systems that are activity based Creativity Number of creative ideas and developments per employee Increase number of ideas coined by each employee as much as possible Training staff and developing them professionally to enable their minds to reap new ideas of how to make business dealings more efficient and effective Establishing rigorous hiring procedures to ensure the workforce is adequately qualified and have creative minds Strategy Map Perspective Goal Strategies Financial Revenue Develop maintenance programs for routine checkups of vehicles Regular training of staff and drivers Enlarge traveling routes to cover more territories Financial Profitability Reduce costs by cutting on slags, delays, idle times and non-value adding activities Increase revenue per vehicle Financial Shareholder’s value Develop policy for retaining profits in business to provide long term return to shareholders Increase profits and control costs to save more surplus available for distribution Financial Utilization of resources Establish asset evaluation program whereby all idle and obsolete assets are disposed off on timely basis and all assets are maintained regularly to avoid breakdowns and stoppages Customer Number of customers Training staff on relationship building and maintaining customer loyalty Innovating new products and new ways of doing business thereby creating monopoly and market leadership Customer Number of customers Developing maintenance programs for routine checkups of vehicles Regular training of staff and drivers Enlarging traveling routes to cover more territories Customer Customer satisfaction Conducting customer surveys regularly identifying major problems and resolving on a timely basis Putting in place a 24-hours accessible customer complaint hotline Training staff on relationship building and maintaining customer loyalty Customer Public profile and image Establishing additional advertisement and promotional campaigns to gain customer attention and enhance public profile Increasing budgets allocated to marketing and compute efficiency of such expenses by carrying out ratio analysis between sales volume and marketing expenses to identify the pattern of influence of such expenses on sales made Internal Business Automation Designing easy-to-use online booking and ticketing systems Internal Business Environmental responsibility Introducing new technologies to run vehicles on low-carbon-emitting vehicles Internal Business Personnel costs Without demotivating the employee, eliminating all unnecessary expenses incurred on employees by introducing incentives, budget cappings and strict policies Internal Business Efficiency of trips Sampling of times taken to complete same journey each day, identifying the least time required to complete it. Paying incentives to drivers to complete journeys in time Establish standard arrival and departure times to be complied with but should not be rigid and have cushion for delays so as to avoid accidents or rash driving Innovation and Learning Research and development Enhancing budgets for R&D for innovating new products and new methods of doing business more efficiently and effectively Innovation and Learning Staff training Making policies for continuous professional development of employees Holding regular mandatory training sessions to be attended by all employees Tie promotions and incentives with professional development of employees Innovation and Learning Cost control Curtailing on all activities or parts of services that do not add any value to company Establishing costing systems that are activity based Innovation and Learning Creativity Training staff and developing them professionally to enable their minds to reap new ideas of how to make business dealings more efficient and effective Establishing rigorous hiring procedures to ensure the workforce is adequately qualified and have creative minds Recommendations to the Board The nature of business of Go Ahead Plc. is very customer-centered: If the customer isn’t happy travelling through company’s provided transportation then revenue will deteriorate eventually. Therefore, it is of utmost importance to be customer-focused. Surveys should be carried out to identify any customer complaints, problems faced by them during their journey or in making bookings, lost customers and their reservations and repetitive passengers. This would help the management to allocate resources to its weaker areas. The primary activity of the entity involves running several heavy vehicles that emit excessive amounts of carbon into atmosphere thereby creating air pollution and contaminating the natural surroundings. Consequently, there may be retaliation from passengers and eventual loss of customers. Furthermore, the company may be subjected to penalties for non-compliance with environmental regulations. Therefore, the company should proactively take serious measures in mitigating carbon emission from vehicles and, if practicable, procure environment-friendly vehicles. The company should establish regular routine checkups of its vehicles to ensure business continuity, to avoid breakdowns and stoppages and ensure customer doesn’t suffer due to any such turbulence. Management should focus on becoming the cost leader in the market by eliminating any non-value adding activities and finding new methodologies to carry out business in most efficient manner without compromising quality. This can be aided by tools like activity-based costing and total quality management. Organization should seek new dimensions to diversify or expand the current business in order to maximize its revenue and benefit from economies of scale by utilizing any idle resources. It may enter new business lines within or outside its supply chain or otherwise, extend its traveling routes into new territories. Since it is a service industry, the quality of staff recruited is very vital since they are in direct contact with the customers and hence they are the face of the company. Rigid HR procedures should be in place for hiring new staff to ensure they are professionally qualified, bear relevant experience and have good communication skills. Current staff should be trained rigorously on a regular basis and be subject to mandatory continuing professional development. Use of Balanced Scorecards Practical use Scorecard has been so widely used in several corporate eras that it has become one of the key procedures in most of the organizations benefiting from it. The splendid part of this fact is that this approach is not restrained to any specific organization(s). It can be seen practically being applied by organizations of all industries, structures and sizes. In his article, Hoque suggested that the larger the organization, the better utilization and more benefits are derived from this tool. Also, for all those entities which innovate continuously to develop newer products are more likely to put this tool to a better use. Hoque, along with James, were able to conclude that 3 major benefits that can be derived from using scorecard include: enhanced corporate performance over the years, taking into account non-financial performance indicators which no other tool caters so comprehensively and parallel focus on increasing shareholder’s value (Hoque, 2012). Authors like Dumond and Sandt et al were of the view that decision making capabilities are also favorably influenced via use of scorecard approach. The employees of the organization are much happier when being assessed against a balanced performance measurement system which seems most true and fair and thus it motivates them. Accordingly, when targets are set through scorecard approach, relevant compensations schemes are also developed for achieving them. Thereafter, the managers are motivated to achieve those individual targets, to attain entitlement to the offered incentives, which in turn achieve the organizational goals. At the end of the day, the employees are satisfied on achieving their targets and extra compensatory allowances while the company’s overall goals were attained as well: a win-win situation! Thus, linking these targets of scorecard to employees’ bonuses etc. generate appealing results (Dumond, 1994; Sandt et al, 2001). Limitations Any tool or mechanism, no matter how effective, has its unavoidable demerits. Nevertheless, for balanced scorecard, it can be comfortably claimed that its benefits outweighs its disadvantages. According to Bowen, scorecard requires tedious planning and vision and cannot be prepared overnight. All the organizational goals have to be agreed at, which are most prior for the organization to prosper. Thereafter, targets and performance indicators have to be carefully established which are specific, realistic and attainable. Drafting own goals and targets may seem a difficult task and therefore many organizations end up considering performance measures taken from scorecards of other entities, getting wrong picture of their business prospects and thus they get steered in irrelevant and ineffective direction not applicable to the company’s case (Bowen, 2011). Scorecards are although applicable to all sizes of organizations, there are complications which are to be accounted for when using it for smaller entities as compared to larger ones. In smaller enterprises, Rompho in his article suggests, there are strategic alterations taking place often resulting in changes required in metrics of scorecard frequently and thus the scorecard fails in such a dynamic scenario since it is a tool for stable long-term goals and strategies to achieve them. Though this can happen similarly in larger companies too which are operating in a highly dynamic environment, it is mostly seen in cases of newly incorporated concerns where there are no standard policies or strategies established yet (Rompho, 2011). Evaluation Balanced scorecard was developed to help organizations achieve a detailed analytical picture of its business in financial and non-financial terms. Seppala, in her article, suggests that the scorecard emphasizes management’s focus on crucial areas of business where improvement is of utmost necessity in order for the business to grow in the long term. It also helps set priorities in some perspectives of business as the management may please. The management can assess how improvement in one perspective can compromise the other one and can allocate its limited resources on pro rata basis accordingly. The distinguishing factor of this mechanism is the equivalent emphasis on financial and non-financial / operation side of the business. This helps the organization to grow proportionately in all areas instead of steering in single direction only affecting others (Seppala, 2010). According to Balanced Scorecard Institute, scorecard is often misinterpreted by organizations and therefore is not used as it was intended to be. This gap needs to be mitigated by making the balanced scorecard stronger and tailoring it to specific needs of one’s organization instead of taking commonly used measures. The scorecard needs to be assessed against best practices in two aspects: how well the scorecard has been structured to address each perspective and how precisely the strategies have been designed and developed to achieve the targets identified (Balanced Scorecard Institute, 2000). References BALANCED SCORECARD INSTITUTE (2000). Evaluation of a BSC System and its Implementation. Balanced Scorecard Institute. Retrieved from http://www.balancedscorecard.org/portals/0/pdf/Evaluation_Step_9_CR2.pdf BOWEN, R. (2011, August 8). Advantages & Disadvantages of Balanced Scorecard Usage: Do They Really Make a Difference? Bright Hub. Retrieved from http://www.brighthub.com/office/finance/articles/70687.aspx Course Work 1, Introduction to Finance and Accounts, Finance and Accounting Class (February 2013) DUMOND, E. J. (1994). Making best use of performance measures and information. International journal of operations & production management, 14(9), 16-31. GO AHEAD GROUP PLC (2011). Annual Report and accounts. Go-Ahead Group plc. Retrieved from http://www.go-ahead.com/~/media/Files/G/Go-Ahead/ir/presentations/2011pres/AR-2011.pdf GO AHEAD GROUP PLC (2013). Annual Report and accounts. Go-Ahead Group plc. HOQUE, Z. (2012). Celebrating 20 years of the Balanced Scorecard: relevance lost or relevance gained and sustained? Etusivu: Vaasan yliopisto. Retrieved from http://lipas.uwasa.fi/~mhl/Hoque%20(2012)%20BSC%2020%20years.pdf Rompho, N. (2011). Why the balanced scorecard fails in SMEs: a case study.International Journal of Business and Management, 6(11), p39. Sandt, J., Schäffer, U., & Weber, J. (2001). Balanced Performance Measurement Systems and Manager Satisfaction: Empirical Evidence from a German Study. WHU, Lehrstuhl für Betriebswirtschaftslehre, insbesondere Controlling und Telekommunikation. Seppälä, J. (2010). The effect of balanced scorecard on strategy participation. Read More