Performance Management Of The Employees - Essay Example

Balance Score Card Contents Contents 2 Introduction 3 Performance management 3 Concept of balanced scorecard 4 Perspective 5 Objectives 6 Metrics 7 Balance scorecard of the company 7 Financial perspective: 7 Customer perspective: 8 Internal process perspective: 9 Learning perspective: 10 Reference 11 Introduction Every company periodically analyses its performance from time to time. Every company has its own vision and mission. The management takes much strategic decision to achieve the mission of the company. The achievement of the mission of the company depends upon the attainment of the strategic objectives of the organization. The strategic objectives are planned by the management as per the goals and mission of the company. The proper implementation of these plans is very important for achievement of the organizational objectives. To analyze the performance of the management in terms of implementation of the strategy balance scorecard is often used by the management to analyze whether the objectives have been properly implemented or not. Balanced score card is the most popular tool of performance management. Balanced scorecard helps the manager in keeping a track on the progress of the activities and matching them with the desired level. In this project the balance scorecard of the Coca-Cola Company has been made on the basis of the four different perspective and objectives of each perspective. Different types of metrics have also been used to let in building the balanced scorecard. Performance management Performance management is very important for every company. It enables the management to assess the performance of the company and also helps the company to analyze the loop holes or the room for improvement. It helps the management to identify the direction in which the organization is moving. It helps the organization to perform better by enabling the organization. The performance management is done on the basis of various tools of performance management system. The performance management system helps the organization to plan control and measure the performance of activities of the organization beforehand. The different performance management system used for performance management are balanced scorecard, activity based management, quality management, economic value added etc. among the various performance management system the most popular methods are balance scorecard, activity based management and economic value added. Activity based management is done by analyzing those activities which adds value to the organization. This is done on the basis of activity based costing. It mainly focuses on reducing the cost and increasing the value received by the customers. The economic value added method enables the organization to analyze the overall performance of the organization. In this method the financial measures are used to measure the performance of the organization. The economic value added can be defined as the excess of net operating profit after tax over total cost of investment (Johnson, n.d, p.2). Concept of balanced scorecard Balance scorecard is a very popular management system which incorporates both financial and nonfinancial parameters. The financial measures are used to assess the financial performance of the organization. With the help of balance scorecard the management can convert the mission of the organization into different objectives and targets. It provides different measures to analyze the achievement of the targets. Balance scorecard was developed by David Norton Robert Kaplan to measure the performance using both the financial and non financial measures. As per the balance score card, the performance of the organization is measured on the various perspective. The different perspectives have individual objectives which have different targets and have measures which measure those targets. The balanced scorecard includes the financial performance indicators which were used by the traditionally with the use of other relevant nonfinancial performance indicators like customer satisfaction, innovation, product development etc (Pienaar and Penzhorn, 2000, p.2). Figure 1: Balanced Scorecard Source: Balanced Scorecard Institute The balance score card proposed by Norton and Kaplan has four perspectives. Each perspective has different objectives, measures, targets and the ways in which these targets are to be achieved. The objective of every perspective is based on the vision of the organization and the strategic goals. Perspective The perspectives are the different point of views or the areas from which an organization is viewed and analyzed. In balance scorecard the organization is viewed from four different perspectives they are financial, customer, internal process and learning and growth. From financial perspective the company’s performance is measured on the basis of the financial objective of the organization. Whether the company is able to achieve the financial objective is judged from financial perspective. The customer is also one of the important assets of the organization. The customer is the main source of revenue for every organization. Therefore customer satisfaction is utmost important for every organization. Hence for every organization the performance of the organization is also measured from this perspective too. If the organization does not perform well from this perspective then the organization will not be able to achieve the organizational mission. The performance of the organization from this perspective is measured on the basis of customer satisfaction; increase in the number of customer etc. apart from theses two objectives, the performance of the company is also measured from the perspective of the internal process of the business and the learning. Internal process refers to the internal activities of the business. These activities are related with the organizational efficiency. Learning refers to the training of the employees and the knowledge imparted to the employees who enable both the organization and the employees grow in the long run. Objectives Objectives refer to the specific goals of the various perspectives which are all related to the mission of the organization. Every perspective have different objective which are measurable, specific, achievable, realistic and time bound. These objectives are interlinked with the strategic objectives of the organization. Financial objectives can be raising the revenue of the organization or the shareholders’ fund, lowering the external liabilities of the enterprise, increase the cash inflow etc. the objective of the customer perspective can range from increase in the customer satisfaction, achieving new customer base etc. the objective of the internal growth are focused on the various strategic mission of the enterprise. The objective can vary from increase in operational efficiency or reduction of the cost of the organization etc. an organization can have various types of learning objectives like increase in the skills of the employees, increasing the adaptability of the employees to the new technology etc. it can be said that the mission of the organization is divided and grouped into various objectives of the perspective. Metrics Metrics are the measures used to evaluate the performance of the organization from different perspectives. As discussed earlier the performance of the organization is measured from various perspectives. Each perspective has different objectives to be achieved. The organization has achieved these targets or not is measured with the help of various metrics. Therefore metrics can be defined as the measurement system which includes the activity which is to be measured, the unit to be used for measurement and also the value (Sloan Work and Family Research Network, n.d). Metrics helps the organization to measure the progress of the organization towards the achievement of the organizational goals. Balance scorecard of the company Development of the balance scorecard depends on the mission of the company. Therefore first of all the organizational mission of Coca-Cola Company has to be defined. The vision and mission of the company is value creation, profit maximization, achieving high productivity, creating a magnetic and inspiring work place, being the leader in customer satisfaction and brand equity and to be an active member in sustainable development (The Coca-Cola Company, 2011). The performance of the company will be measured from four different perspectives the financial, customer, internal process and the learning. Hence the balance score card is as follows: Financial perspective: Objective Increase in sales growth. Increasing the profits. Increasing the liquidity position of the company. Measures and targets: Measures to be used for measuring the performance are percentage of sales growth, net profit margin and current ratio. The performance will be measured against certain targets. These targets will be formed after analyzing the present situation. In last twelve months the sales grew by 13.30% (MSN Money-a, 2011). The net profit margin was 29.8% and current ratio was 1.1(MSN Money-b, 2011). Therefore the target for the next year will be more than the present values. Metric: Increasing the sales by 14%, net profit margin > 30%, current ratio to be 1.2. Initiative: The Company will increase the revenue from operation and at the same time will try to reduce the costs. The company will increase the current assets too. Customer perspective: Objective: Increasing customer base Increasing in customer satisfaction Improving transaction size Measures and targets: The measures to be used for measuring the performance are number of consumer served per day, customer satisfaction rate and transaction size. Presently the number of consumer being served per day is 1.7 billion. Therefore the target of the company in the next year will be serving more than this figure per day. In terms of customer satisfaction its target will be achieving more than 90 point in American Customer Satisfaction Index. Presently about 1.6 billion of product is sold per day. The target for the next year will be more than 1.6 billion. Metrics: Consumer serving per day > 1.7 billion, score in American Customer Satisfaction Index >90, transaction size per day > 1.6 billion. Initiative: Company will promote the products to the target customer and also improve the quality of the products. Internal process perspective: Objective: Improving the product Increasing the market share Reducing cost of operations Measures and targets: For measuring the performance from this perspective, the measures which will be used are ratio of new product to old product, market share and cost of operations. Presently the company is having 159.28 billion of market shares. Therefore the target of the company will be to increase the market share by 5%. The cost of operation of the company for 2010 was $8449000 thousands. Therefore the target of the company for the next year will be to reduce the cost of operations by 5%. Metrics: Raising the new product to old product ratio by 2%. Increasing the market share by 5% and reducing the cost of operations by 5%. Initiatives: Company will minimize the cost of operations as the measure to increase the operational efficiency. The company will try to concentrate in launching new products in the markets with the help of research and development activities. Learning perspective: Objective: Employee training hours to be raised Increasing the number of employees Higher employee compensation Measures and targets: The measures which will be used are number of employees undergoing training, employee turnover and employee compensation. In 2010 the total training hours were 34,645 and the percentage of increase in the number of employees was 51%. Therefore the target of the company for the next year will be increasing the number of employees by 55%, increasing the number of training hours to 35000 hours and raising the compensation by 2%. Metrics: Employee training hours will be 35000. Increasing the number of employees by 55% and raising the compensation by 2%. Initiatives: the company will try to recruit more number of employees and at the same time will also try to retain them. More training will be provided to the employees and also more amounts will be allocated to the budget as employee benefits. With the help of the balance score card the company will be able to achieve its vision and mission. Thus a successful balanced score card will have well defined objectives, metrics and the target values. Reference Johnson, C. C. (No Date). Introduction to the Balanced Scorecard and Performance Measurement Systems. Retrieved on September 9, 2011. from http://www.adb.org/Documents/Books/Balanced-Scorecard/chap1.pdf. MNS Money-a. (2011). Financial highlights. Retrieved on September 10, 2011. from http://investing.money.msn.com/investments/stock-price?Symbol=ko&ocid=qbeb. MNS Money-b. (2011). Key ratios. Retrieved on September 10, 2011. from http://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=FinancialCondition&symbol=KO. Pienaar, H. and Penzhorn, C. (2000). Using the Balanced Scorecard to Facilitate Strategic Management at an Academic Information Service. Retrieved on September 9, 2011. from http://www.librijournal.org/pdf/2000-3pp202-209.pdf. Sloan Work and Family Research Network. (No Date). Reference and Research. Retrieved on September 9, 2011. from http://wfnetwork.bc.edu/glossary_entry.php?term=Metrics,%20Definition%28s%29%20of&area=All. The Coca-Cola Company. (2010). FAQS. Retrieved on September 9, 2011. from http://www.coca-cola.co.uk/faq/products/how-many-cans-of-coca-cola-are-sold-worldwide-in-a-day.html. The Coca-Cola Company. (2011). Mission, Vision & Values. Retrieved on September 9, 2011. from http://www.thecoca-colacompany.com/ourcompany/mission_vision_values.html. Read More