Maximising Project Value - Assignment Example

ACCOUNTING ADVICE Balanced Scorecard A balanced scorecard is a kind of management guide that brings out an organization's objective into real attainment. This focus on four major factors of production. These are; financial, internal processes, customers, and learning and growth. A manageable balanced scorecard that is used to manage a business has got three key areas of general few. These areas are; 1. Customer Satisfaction 2. Business Processes 3. Learning & Growth Customer Satisfaction On this part we see on customer interests. These include delivering in time, production of quality products, providing price worth products and being constant in the market. Performance and quality are implicit: if they are not met, the delivery will be shifted. Indicators of customer satisfaction include fast sale, increase in demand and receive of new orders. Business Process Every business project is profit oriented and return on capital employed stand as the main goal. That is why I consider that Finance perspective should focus on the cost control to ensure that in the long run income is more that input. In business process, the steps of what to do is provided to ensure that the end goal of profit making is achieved. It works with a target of minimising cost so as to maximise returns. The ways of cost minimising are wage cutting, reduction of advertising cost and reduction of employees. Learning and Growth This is the level of deployment of the best practices an organization has defined for its Project Management process (Galliers & Leidner 2003). A lot of collaborative tools have to be designed in order to reach recommended standard of Capability Maturity Model Integrated, a best practice framework for businesses dedicated to product development (Galliers & Leidner 2003). This part work with a clear set framework that covers areas like objectives, measures, target and initiative. This gives everyone in the system a guide on what to do and the target goal is always indicated. For this case of study I can bring out the best frame work of a balanced scorecard as below. Financial performance customers Learning and growth Internal process objective objective measures measures strategy measures measures target target target target initiative initiative initiative initiative A balanced scorecard is used to evaluate the performance and future improvements of an organization. "Scorecard" signifies quantified performance measures in process, financial performance, internal process, customers and learning and growth. Balanced is an indicator showing if the system is balanced between short-term objectives and long-term objectives, financial measures and non-financial measures lagging indicators and leading indicators and internal performance and external performance perspectives (Goodpasture 2010). An appropriate balanced scorecard for the volunteers is the one that covers all the four categories as have indicated in the diagram above. The group should focus on both financial and non-financial goals if it is to succeed. It must understand the benevolent goals of the donors in order to raise funds successfully. To satisfy donors’ objectives, the group must ensure that internal processes are effective and efficient. This calls for growth and learning of volunteers in the group in order to perform their duties effectively and efficiently (Kerzner 2010). Getting into detail of the four perspectives of the appropriate scorecard, we will consider finance, customer, internal planning and learning and growth. Finance Financial performance of a firm gives the shareholder who in this case is the grantor a picture of the performance of the group. It gives the grantor a view of the financial goals targeted. This financial performance can be measured as in the table below Objective Specific Measure Growth Revenue growth in percentage to capital employed Profitability Return on equity employed Cost Unit cost The above measures gives the investor a picture of how the group is performing and areas to be improved are easily identified to keep the group stable. Customer In customers’ perspective, the group get to know the customers view of the firm. It concerns how best the group can understand the loyalty of its customers. The following metrics will help the volunteers to know how customers perceive the group: customer service, customer retention, new products, availability of market and customer satisfaction. Customer measures can be summarised in a table as below Objective Specific Measure New products Percentage of sales from new products Responsive supply On time delivery to the marketers To be preferred supplier Share of key customers and consumers Customer partnerships Number of cooperative efforts made by customers to ensure constant supply to them Internal Process This process indicates the most viable steps to take to meet the shareholder and customer expectation. It includes improvement of product quality, supply in time and reduction of cost as profit is maximised. The table below shows the measure indicators of performance Objective Specific Measure Manufacturing excellence Cycle time, yield Increase in design productivity Engineering efficiency in the product sector Reduce product launch delays Actual launch date according to planned time Learning and Growth One of the aims of the group is to help the disabled in the community, hence learning is a key factor. This disabled people should be able to learn and work appropriately in the garden for the group to be considered successful. The learning process should help employees to be innovative and creative so as to produce quality products, which are competitive in the market. Learning and growth measures can be tabulated as follows; Objective Specific Measure Manufacturing learning Time for new process to mature Product focus Percentage of products represented in the sales Time to market Time compared to that of competitors Benefits Of Using Balanced Scorecard To the Volunteers For the group to implement its strategic plan effectively and comprehensively, a balanced scorecard is an inevitable tool that must be put into use (Kaplan & Norton 1996). Balanced scorecard touches on all the four aspects of group performance: learning and growth, internal processes, customers as well as finance. So what benefits can a balanced scorecard bring to the group volunteers? First, a balanced scorecard would help the group to save costs and resources. A balanced scorecard quantifies the strategic plan of the group into measurable terms. This is crucial because it enables the group to develop success indicators that they can track. Consequently, the group will be able to quickly and conveniently determine the viability of their strategic plan by reviewing the success markers. In case the strategic plan is not not feasible, the group can make radical adjustments before problems aggravate, costs escalate and the resource bank of the group drained (Breyfogle 2008). Second, a balanced scorecard will enable the group to balance between competing objectives such as financial and non-financial objectives as well as long-term and short-term objectives of the group. Competing objectives of the group will be integrated into the balanced scorecard and are therefore balanced (Marr 2009). Without a balanced scorecard, the group would focus on some objectives at the expense of others, for example, financial objectives at the expense of learning and growth of volunteers. Similarly, if the group focused excessively on non-financial objectives, it would deemphasize fundraising, which is very fundamental for the survival and sustainability of the group’s project. The balanced scorecard ensures that the group addresses these competivng objectives simultaneously. Third, balanced scorecard builds capabilities in the early stages for future growth of the group’s project. Because the balanced scorecard acknowledges the importance of learning and growth, volunteers stand a chance of becoming more effective in executing their tasks by attending seminanrs and workshops. According to Niven (2010), this is crucial for the overall performance of the group in the long-run. Fourth, a balanced scorecard would help in quick and clear disseminanation of the group’s strategic plan to all stakeholders. Besides being a crucial measurement tool, balanced scorecard is also a very critical communication tool. The group can use a balanced scorecard to clearly communicate its strategic goals to all stakeholders. Therefore, a balanced scorecard helps in aligning and keeping everyone informed about the group’s achievements and targets (Rohm 2002). Lastly, a balanced scorecard is crucial for the group in managing performances. The balanced scorecard ensures transparency and accountability within the group, which is likely to increase the performance of the volunteers (Berman 2007). The balanced scorecard would encourage volunteers to prioritise activities that are aligned with the balanced scorecard. Balanced scorecard will also ensure that the group’s routine operations are in line with its mission. Ten Key Perfomance Indicators To Be Employed By Grant Doner Key performance indicator is a measure used to monitor the success of key activities in a firm. In this case the case indictors to be employed include; 1. Total Sales This is an indicator of how the products of the volunteer group is fairing on in the market. If there is a high level of sales, the grant donor will actually know that the garden greenhouse is doing well. Sales determine the amount of income attained in the firm (Gattorna 2008). Sales then become appropriate key performance indicator since it alarms the management on how their products are flowing in the market. This prompts the managers to making decisions which promote the sales in regions not doing well like promotions, advertising both internally and online so as to increase the sales. 2. Number Of Trainees In The Group Who Have Learning Problem The volunteer group was targeting to help those people in community with difficulty in learning. The number of these people will indicate if there is a constructive learning taking place. If the number is large, the grant donor will know that the project are successful and has attracted many individuals. This is a very appropriate key performance indicator to the grantor. It will help to answer the questions like: is the project beneficial to the community as intended? Are the learners gaining some skills? And at what rate are new trainees with learning difficulties admitted over a given period, say weekly or monthly? In general the grantors get to know the performance of the green house firm as a return to the community. 3. Gross Margin This is total amount of earnings obtained before any deduction of tax and other required deductions. This is an indication of capital performance of the firm both finance wise and labor wise. If the gross margin is big it shows that the firm is meeting its financial objective. This is a more general indicator combining both inputs and outputs of the project. It is an appropriate indicator since it signals the management of the percentage of profit made. If the firm is running at a loss or profit gross margin indicator shows giving an alarm to management to take any appropriate step. 4. Product Affinity It is a measure of the products that are purchased together with your product. It gives a picture of the rate of demand of your product and how fast the product is selling in the market. A high product affinity is a good indication of immediate and future performance of the volunteer group. In case the plants produced by the volunteer group have low product affinity the grant donor can think of changing the type of plants or change the objective of the group. What is the rate of product affinity? This becomes appropriate question indicating how the product is selling with other products in the market. It is an appropriate key performance indicator since it is used to evaluate the number of sales of the plants in a given period. 5. Sustainable Transport This is a measure of how easy it is to access the market for the products from the garden. Does the surrounding community consume the plants and food staff from the greenhouse? What is the cost of transport for both inputs and products to the target market? These questions are a measure of how effective transport is. If the transport cost is too high, it can be decided that the greenhouse facility be relocated to cut down this transport cost. Is the transport cost sustainable? Is the question the management should consider in this scenario so that transport cost becomes appropriate performance indicator? Since the goal of almost every investment is profit maximization, the transport cost should be maintained sustainable in order to minimise cost hence profit is maximised. 6. New Markets The grant funder should considered exploring new markets and tasking an analysis of how the food and plant is fairing on. If it has a positive response, then quantity of production should be increased. If the product is not doing well in new markets then a survey to find out the problem should be done. For market to be appropriate key performance indicator, the question “is the product (plants) attracting new customers? And at what rate?” should be considered. This will give the marketing performance of the marketing team. The management will then be able to know and make decisions on the steps to be taken if more customers are to be reached. The appropriate steps will include; promotions, price cut or advertising. 7. Environmental Effects The greenhouse activity produces a lot of carbon and other gases. The effect of his emission to the environment is a factor to be considered. If it has a negative effect then either relocation of the site or ways of reducing the effect should be done (Norrie 2008). This might also be so costly and may lead to underperformance. Environmental effects fall under legal issues that are considered in running the business. It is an appropriate key performance indicator because it is used to check whether the environmental laws have been breached or not. It adds up the learning objective since it requires training on ways of control of greenhouse gas emissions and environment maintenance. 8. Cycle Time This is the period taken from the time income is invested to the time its output is sold in the market. If this period is too long grant funder is subjected to a lot of risks due to market price and demand fluctuations. Cycle time is an appropriate key performance indicator since it shows the frequency in which return on capital is got. If the cycle time is long, the indication is that more cash is used in monitoring and follow up of the business activities before the actual profit is got so that the business can be considered to run on its own. In the second case where the cycle time is short, the business is a short-term investment associated with more risks and quick returns. Cycle time actually shows how capital invested is fairing on. 9. Reject Ratio This is a measure of waste products from the production. This can be dead plants, low quality foods, plants attacked by disease and broken plants. The amount of waste limit the amount of income attained so it should be kept in track to t o ensures that it is in tolerable limits. This qualifies as a key performance indicator since it gives a true picture of the quality of the products produced. This falls under customer satisfaction indicators and also can give a picture of how the plants arre competing with others produced in other firms (www.redlion.net). 10. Maintenance Cost A greenhouse is a structure prone to breakages and so it requires regular maintenance. Also the plants need to be maintained healthy by use of farm chemicals. This cost should be sustainable to grant funder. Maintenance cost is a good key performance indicator because it falls under the finance sector. It makes up the total cost invested which is an amount to be compared to total income attained in the end of the cycle (www.cometis-publishing.de). Bibliograpy Berman, J 2007, “Maximising project value : defining, managing, and measuring for optimal return,” American Management Association, cop.,New York. Breyfogle, FW 2008, “Integrated enterprise excellence. Volume III, Improvement project execution : a management and black belt guide for going beyond lean six sigma and the balanced scorecard,” Bridgeway Books,Austin, Tex. cometis - Management Kennzahlen. 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Niven, PR 2010, “Balanced Scorecard Step-by-Step: Maximising Performance and Maintaining Results, 2nd Ed,” John Wiley and Sons, Hoboken, New Jersey. Norrie, J 2008, “Breaking through the project fog : how smart organizations achieve success by creating, selecting and executing on-strategy projects,” John Wiley & Sons Canada, Mississauga, Ont. RED LION CONTROLS ::. (n.d.), “RED LION CONTROLS,” Viewed April 8, 2013, from Rohm, H 2002, “Developing and Using Balanced Scorecard Performance Systems.” Viewed on April 16, 2013 from Read More