Cost and Performance Management: Achieving Targets - Coursework Example

Cost and Performance Management: Achieving Targets Name Tutor Unit Code Date Introduction The current business environment is characterised by stiff competition. Organisations have to muddle through tough business conditions to deliver good returns to the shareholders and ensure business growth and sustainability. As such. In recent times, business executives have found themselves in a tough corner. Some have succumbed to the pressure and opted to use awkward strategies to paint an affirmative image of their company. The top leaders have used unorthodox means such as “cooking the books”. Although such actions have been committed in secrecy some have come to the open leading to severe consequences for the company as well as the executives (Lee & Yang, 2011). Most of the cases entangle companies in the United States and the Europe. Companies such as Enron, Worldcom, HIH, among others have been driven down to their knees. The case of Toshiba indicates that indeed this is a widespread problem globally. There have been issues in Africa as well, particularly in Nigeria where big banks have gone under. In this paper, I discuss authentic approaches ways in which companies can set and realise performance targets along with the different strategies that executives can use to drive growth and profitability. Performance Management and Targets Businesses need to be managed well as they grow and expand their investments. The best way to monitor a business is through performance measurement. Performance management simply means the realisation of set performance targets. The performance targets are clear goals set for the organization to be achieved by a specific date. The targets form the backbone of performance management (Elzinga, 2009). Performance management is an integral part of any company since it enables the owners and the managers to track the progress of the business. This will also facilitate an understanding of what has triggered any changes in performance. However, performance measurement can be challenging particularly when you do not know what to measure. This can be captured if the organisation has well thought of key performance indicators (KPIs). Once the areas of performance are identified targets are then set in order to propel the performance of the business and be able to measure it. Performance cannot be improved if there are no explicit targets that will provide a clear definition of success for the company. The targets signal what is important and they tell people what is expected. The targets draw everyone’s attention and enable people to create performance. For a company to be successful, the top leadership has got to identify the most important targets, make them very visible, in order to pull other people. The leaders must also make these targets real. The targets should be set out with a clear focus and personal synergies. The targets ought it be set up with a sense of urgency. The leaders have to make these targets visible (O’Boyle, 2013). The different people in an organisation are assigned individual targets but they must work together for a common purpose. Organisations largely set their goals at the start of the year from which individual employee targets are derived. The employees ought to be assessed at least once a year on how well they have met their individual targets. A rating is given which can also be used in making remuneration and promotion decisions (Ramani & Kumar, 2008). The employees’ objectives may not be limited to those needed to realise annual corporate targets. They cover a broader agenda which includes personal development that is set to meet training needs recognised in performance appraisals. These training objectives have a direct effect on the corporate performance. This is because value-added conducts and improved proficiency produce better throughput and employee involvement. Besides, personal development helps to ready the staff for promotion. It is essential to have a succession plans for key people in the organisation. This should as well capture the assessment of individual potential and spotting of future business leaders which entails the judgement of managers and human resource business partners (Ambler & Roberts, 2008). Having regular meetings with employees is also vital as it enables the management to be alive to the detailed developments across the business. This also provides an early indicator of key issues and happenings that could have taken time to come to the attention of the top management. The meetings as well enable the management to track the performance of individual employees. The exchange of opinions can be helpful in driving up the performance and productivity of the employee. Approaches to Realising Performance Targets Even though companies set profitability and growth targets, it is becoming harder to achieve these targets. One of the key reasons as to why businesses fail to realise these goals is because they do not sufficiently consider the opportunities that are connected to their core activities. Ordinarily, people believe that business in “hot” industries is the most profitable and drives trends upwards. However, this is not always true. Many of the leading companies which have sustained their profitability growth apparently participate in mature industries, such as Nike. A solid position in a typical industry is more or less all the time a better stand for cost-effective, continued growth than a fragile position in a high-growth industry. Therefore, if Toshiba could concentrate on a core activity such as the production of PCs, which is a mature industry, it could realise sustained profitability other that venturing in new areas. Indeed the company’s venture in the areas such as nuclear energy have led to massive losses in excess of one billion US dollars. Furthermore, a detailed probe into the most successful growth strategies point to two key elements. First, a consistent market share can be gained through a solid, or even dominant, competitive position in a core business area or segment which is actively managed, year in, year out, against the main rivals. And, secondly, a reinvestment strategy into the core business or segment at an appropriate rate sustains competitive advantage. This implies that leading companies can gain control of an industry’s profit pool and even eat into their competitors’ profitability levels if they use their influence to make sure that they re-invest at a higher rate than the rivals. A better result is realised in higher levels of market control and grander levels of competitive power. This paves way for additional investment to shape positions in the “periphery” of the core business or segment (Armstrong & Baron, 2005). Some people believe that it is a wise decision and a key business strategy to daunt the competitors from investing in the products or segments that are vital to your own business, just like the military focuses on cutting an enemy’s enemy supply lines is a key standard in victorious military wars (Kumar & Rajan, 2009). Another key impediment to the realisation of the performance targets is the lack of the required infrastructure to support the realisation of these targets. As the levels of competition escalate, companies are faced with scarce resources, and more demanding customers. However, the business leaders can increase the profitability growth by becoming more customer-centric. This enables the organisation to have centralised activities focused on the customers rather than on products. This enables the organisation to strike the right accord between company profit and customer experience (Kumar, 2009). The company can also be able to penetrate the current market by focusing on operational excellence advantages that cut costs. Lower costs mean higher profits on products being sold. Conclusion Amid the increased competitiveness and challenging business environment some business leaders resort to engage in accounting fraud to paint a good picture to the shareholders and the larger public. However, this is a situation that can be avoided if the management manages the company’s growth through proper performance management. It is proper to set targets that should be met through the coordinated actions of many people working with individually, but to a common purpose. This can be largely realised through setting organisational KPIs from which organisational and individual employee targets are developed. To facilitate the realisation of targets there should be organisation wide consciousness and the visibility of the targets. The management can also boost performance through a concentration on the core activities. It should be focused on edging out competition so as to retain a solid position in the industry (Holloway, 2009). References Ambler T, Roberts JH. 2008. Assessing marketing performance: don’t settle for a silver metric. Journal of Marketing Management, 24(7/8): 733–750. Armstrong, M. and Baron, A. 2005. Managing performance. Performance management in action. London: Chartered Institute of Personnel and Development. Elzinga, T., Albronda, B. and Kluijtmans, F., 2009, Behavioural Factors Influencing Performance Management Systems’ Use, International Journal of Productivity and Performance Management, 58(6), 508-522. Holloway, J., 2009, Performance Management from Multiple Perspectives: Taking Stock, International Journal of Productivity and Performance Management, 58(4), 391-399. Kumar V, Rajan B. 2009. Profitable customer management: measuring and maximizing customer lifetime value. Management Accounting Quarterly 10(3): 1–18. Lee CL, Yang HJ. 2011. Organization structure, competition and performance measurement systems and their joint effects on performance. Management Accounting Research, 22(2): 84–104. O’Boyle, I. 2013. Individual performance management: A review of current practices. Asia- Pacific Management and Business Application, 2, pp. 1–22. Shirvani, A. 2011. Performance management, Puyesh Andishe publishers. Ramani G, Kumar V. 2008. Interaction orientation and firm performance. Journal of Marketing, 72(1): 27. Read More