Performance Measurement and Management at Windows and Joinery Limited - Coursework Example

PERFORMANCE MEASUREMENT AND MANAGEMENT AT WINDOWS AND JOINERY LIMITED EXECUTIVE SUMMARY Performance mesurement systems are among core keys in determining the alignment of business with set objectives. Performance measurement systems are present in every organization irrespective of implementation being formal or informal. In contrast to traditional format of measuring performance with exploring insight from financial measure contemporary system give significant attention to non financial measures as well. Therefore, performance management field developed various methodologies for the purpose with Balance Score Card being one of them. BSC develops assessment for the frim in strong linkages with strategy and hence direct employees to achieve desired company objective. Underlying report, therefore, develops guideline for performance measurement system for Windows And Joinery Limited specifically in reference to BSC. PERFORMANCE MEASUREMENT METRICES (FINANCIAL AND NON FINANCIAL METRICES) Businesses along with setting goals requires to develop some performance measurement systems that enable firm to identify the percentage of set objectives achieved. Performance measurement system is employed for two meeting two primary functions; first, system shall provide review of activities performed and highlight the areas of performance that requires improvement while the second function that performance measurement system is centrally assigned is to direct the employees activities to be in accordance with the company’s goal (Hoffman, 2001). Series of metrices hve been can be employed by WJL for measuring the performances of each department. These measures include internal performance measures such as Total Quality Measurement (TQM) for production process, Costing measurement techniques as well as cost and benefit technique for every component of business etc. Alongwith internal measures assessment external techniques include benchmarking tools, market share assesment, customer preference rating as compare to competitors etc, dence, exploring the performance of company internally as well as externally. As evident from the above discription range of tools include financial and non financial measures. Financial measures are ones that deal with investment as well as generation of revenues. Important to mention, revenue generation refers to profitable revenue generation specifically as rofitability leads to maximizing share holders value that is defined as key objective of evey business. Role of non-financial measures in performance measurement of organization needs no emphasis as there are large numbers of factors that affect organization yet are not accounted in financials. Some non-financial measures include external measurement of customer satisfaction for company product, website, after sales services as well internally employee perspective related to rating company on preference of scale to work. Combination of financials and non-financial measures based on the suitability to the department as well as industry is crucial and critical as an incorrect sellection of measure may result in misleading company position while directing employees in greater deviation to company objectives. Hence, all measures are required to meet the following KPI measures presented in the research of PWC (Price Waterhouse Coopers, 2006): Link with strategy of the organization Clear details of the measurement that includes purpose, source, definition, calculation, targets, assumptions and limitations. Continuity and capability to provide trend. Procedures for updating measures along with reconciliation and comparison capability with international standards such as GAAP rules etc. BALANCED SCORECARD Balance Score Card (BSC) is performance measurement technique that is considered most valuable and preferred among the performance measurement techniques in business world. Importance of balance scorecard is increases with fact that matrix provides combination of the financial and non financial measures; instead significant attention is given to the non-financial measures as central theme of performance measurement (Hofmann, 2001). BSC as a performance measurement technique is considered concrete for the critical attention matrix deploys in linking performance incentive with the objectives set while the objectives are set in core consensus between the levels of management and employees involved. As BSC covers various aspects, broadly financial and non-financial measures, the sytem allows top management to introduce measures that enable organization to align company strategy as well as employees on similar pace and page to meet the set objectives and goals. Incorporating qualitative and qunatitative measures of assessing operations BSC also enables management identifying areas of operations that require improvement with respect to efficiency and effectiveness. Four areas covered in balance score card include: Financial perspective Customer perspective Innovation and learning perspective Internal processes perspective (Martin) While aspects are detailed with respective measures that add value to each other as well as overall strategic vision of the firm as follows: (Martin) Example of various measures to assess the contribution of each aspect is as follows: (Martin) BSC IMPLEMENTATION FOR WINDOWS AND JOINERY LIMITED Balance Score Card being comprehensive measure of performance measurement hence implementation also requires detailed approach. Implementation of BSC requires meeting the following three stages in sequential manner: Developing Strategic Foundation: Development of strategic foundation requires firm to pin down strategic vision and objectives for the firm. The critical phase as name implies from the foundation stone for the BSC. The phase along with development of startegy also requires it to be transcended to all levels of organization. The stage also requires identifying key areas of performance among all (usually four to five key areas selection is recemmended). Hence, the stage concludes with developing a strategic map that provides BSC perspectives linked with strategy as given below: (Evans, 2002) Forming Critical Components: Once the strategy and key areas of operation have been defined with great assessment, the succeeding step requires establishig measurement. For instance, developing at least single measure for each ojbective. This stage also requires developing targets to be achieved for each objective and providing way for gap analysis for actual performance and target. This segment is also responsible for identifying program or practices that will be made part of overall business functions to achieve the set targets. For instance, image below provides sample of BSC upon completing second stage: (Evans, 2002) Hence, each objective set in light of the overall organizational strategy has been provided with the performance measurement, targets and programs adopted to achieve the set targets. Deployment or implementation. BSC implementation is critical phase and requires similar efforts as required in case of strategy implementation. Well designed BSC cannot gain requires results in case of lost implmentation phase while a middle standard BSC with strengthened implementation can do wonders in pulling in entire organization on single page. Deployment phase suggest developing cross functional teams to achieve the set targets at various management levels that also undertakes alignmnent function of objectives to strengthen linkages with upper level objectives and hence overall strategy as presented below: (Evans, 2002) Successfully, meeting all three stages defined above results in balance of performance in following areas and extreme those are often mistakenly adopted as core objectives: Internal vs external objetive extremes Short Term and long term objectives extremes Performance drivers (leading) and results determining (lagging) extremes Subjective and objective extremes objectives. PROS AND CONS OF THE BSC BSC being a comprehensive measure of performance measurement system offers range of benefits to the firm. However, the mechanism also has some problems associated with it. BSC provides complete segmented assessment guideline of the entire strategy connected with operations in details. It also allows firm to view the combined four aspects of firm and saves resources requried to be deployed for various measures for each aspect. Breakdown of strategy enable firm to set and review the short term and long term measures of the firm set for achieving such goals. Reviews on frequent intervals also benefits firm to develop insight about the firm’s capacity in seeking set tasks and hence accordingly take strategic measures to align. BSC’s benefit of combining financial and non financial measures while taking contribution from every operational level enhances its diffrentiation from other measure (Langfield-Smith, Thorne, & Hilton, 2009). The issues associated with BSC model includes requiring comprehensive input from all levels of human resources hence requiring extensive time, money and efforts in meeting consensus on goals and measures. Further, consensus on one aspect only leads to moving to other while model does not provide any solution to discrepencies. The measure though includes all aspect yet each aspect’s contribution is to certain extend and in full. For instance, only few financial measures included does not provide full picture (Hilton, 2010). RECOMMENDATION Windows And Joinery Limited intention to incorporate non-financial measures in the performance measurement systems along with financial metrices is expected to add significant value to the firm. For vision to develop comprehensive measure Balance Score Card’s details has been presented along with reference to wide options available to firm. BSC being complete measure that binds together the performance with strategy through four perspectives have been discussed. Further, the report has also broadly outlined the procedural steps crucial to be attented while developing BSC for firm. The report has also highlighted the benefits that BSC brings to business while attention has been deployed in determing the issues associated with its implementation. BSC adoption recommendation is subject to the agility of organization with respect to adopting such comprehensive and technical measure that requires extensive material and non-material willingness from employees individually and organization as whole. References Evans, M. (2002). The Balanced Scorecard. Excellence in Financial Management, retrieved March 25, 2013 from http://www.exinfm.com/training/pdfiles/course11r.pdf Hilton, R.W. (2010). Managerial Accounting – Creating Value in a dynamic business environment. (9th ed.). McGraw – Hill, New York. Hoffman, C. (2001). Balancing Financial and Non-Financial Performance Measures. Retrieved March 25, 2013 from http://www.econbiz.de/archiv/h/uh/controlling/performance.pdf Langfield-Smith, K., Thorne, H., & Hilton, R. (2009). Management Accounting 6E, (6th ed). McGraw-Hill. Martin, J. The Balanced Scorecard Concepts. Management and Accounting Web, retrieved March 25, 2013 from http://www.maaw.info/BalScoreSum.htm Price Waterhouse Coopers. (2006). Guide to key performance indicators. Retrieved March 25, 2013 from http://www.pwc.com/gx/en/corporate-reporting/assets/pdfs/UK_KPI_guide.pdf Read More