Case Study: Refer to core text: Bourne, M. and Bourne, P., 2011. Handbook of Corporate Performance Management. West Sussex: John Wiley & Sons.
Using an organisation of your choice, prepare a management consultancy report describing the organisation's current system of organisational performance management (OPM) and make recommendations for improvement to its OPM system informed by the undernoted Pervasive Characteristics of Organisational Performance Management.
- High Level Aspirations Expressed as Outputs and Outcomes
- Strategic Business Plan
- Performance Measurement Tools and Techniques
- Measuring Results
- Review and Evaluation
- Continuous Sensitivity
Introduction to case study organization
This report will use Marks & Spencer as a case study to evaluate the performance of organization and how this performance can be measured. M&S is a British company dealing in the clothing retail industry. The company was formed in the 1884. it specializes in selling of men`s clothes, women`s clothes and luxury food products. The measurement if performance for the organization is important in determining how health or unhealthy an organization is and therefore corrective action can be taken if the organization is found out to be unhealthy.
Organization performance management refers to the process of reviewing the goals and objectives of the organization to establish the progress that the organization has made towards achieving it predetermined goals and objectives. The assessment helps in comparing the recent and ongoing performance of the organization against what the organization planned to achieve. The recurring activities of the organization such as daily sales that the organization is making is compared with what the organization wanted to achieve (Quick, 2008). Therefore, it is important for the organization to determine and measure its performance. If the organization finds that the current performance of the organization is not in line with what it had planned before, it should take action to correct the situation. The continuous monitoring of how an organization is performing on various aspects help and comparing this performance with what had been planned in order to take corrective action in case of discrepancies is what is referred as operational performance management. Several criteria can be used to measure the performance of an organization. The business organization should create strategic performance measures. Key business processes such as sales, profits, and customer satisfaction can be quantified to provide a basis for measuring the performance of an organization
The performance of the organization will be communicated to the stakeholders through various means. One of the best and most common methods of communicating the performance of the organization to the stakeholders is through financial reports. Financial reports are documents that are prepared by an organization to show the financial performance of the organization for a given period of time, usually one year. For instance in our case study for Marks & Spencer, the performance of the organization will be communicated to the shareholders through financial reports. Financial reports are prepared by the finance department of the company. All the activities of the organization involving finance are usually recorded in different books of account. These records are known as books of original entry. After the information has been recorded initially, the information is then transferred into financial reports such as balance sheet, statement of financial position and profit and loss appropriation account. These statements are prepared every year and they are presented at the stakeholders at the Annual General Meeting (AGM). This information is audited to determine its authenticity. The shareholders analyze the information to compare what the results show with what the company targeted to achieve. There are however other methods of communicating the performance of an organization to shareholders. Marks & Spencer for example communicates its performance through providing the shareholder with customer feedback data. The shareholders are then able to evaluate whether or not the organization has achieved its target concerning levels of consumer satisfaction.
Organizational performance management and performance measure
Risk management refers to the practice of putting in place all the necessary measures, steps and policies that help to prevent or reduce the amount of loss or damage that may occur in case unforeseen negative events occur. There are various methods of managing risk used in different organization. The method that an organization chooses depends on many factors such as the probability of a particular risk occurring, the industry the organization is operating in and the value of property or asset in question. Marks & Spencer have various methods of managing risk in their organizations. One of these methods is having a supply chain system that emphasis on manufacturing only what is needed in the market. This is very helpful in ensuring the company avoids risk of loss due to dead stock. Another method that Marks & Spencer use in managing risk Is insuring all its business activities and assets. This means that in case of loss, the company will be compensated by the insurance company. This is the most popular method of managing risk among many organizations. Insurance policies can cover different aspects of the organization such as employees, assets and insurance against loss of business (Dana &Allen, 2008). Marks & Spencer has insured all its assets and employees to help reduce the risk of loss as well as get compensation in case the risky situation happens. Another method of reducing risk among organization is by co-ownership. This is a technique where two companies can buy/poses an asset of high value or undertake a high risk venture with high expected returns. The companies decide to contribute capital in order to reduce the risk of loss of capital in case the venture fails. This is risk distribution as well as a method of managing risk. The best way of managing risk is by putting all the necessary and sufficient prevention strategies and steps to prevent the risk from happening.
The quality of goods and services that an organization offers its customers is very crucial in determining how successful that organization is. This is because, quality is the epicenter of all that a customer’s needs or requires when they buy a good or service. Quality management therefore refers to the process of monitoring and evaluating the quality of goods and services produced and sold by an organization. Poor quality goods for an organization can lead to losses in the organization in the short term. In the long term however, the consequences of offering customers poor quality goods are more profound (Lencioni, 2012). If the trend continues customers eventually lose faith in the organization and due to this reason, the revenue of the company will reduce. The loss making period comes in and the end result will be retrenchment of the employees and closure of the company.
Communicating performance to stakeholders
Companies should therefore do anything in their power to ensure the quality of goods and services offered to the consumers is always high and standardized. To due to this reason and the stiff competition in different industries that many organizations have set up the Quality Control and assurance department. The general role of this department is to make sure that every single product that is manufactured in the factory meets the quality standards that have been set. A product that does not meet quality standards is referred back for improvements to be made or it becomes waste. This process ensures that no faulty product reaches the final consumer. Marks & Spencer has this department in all its manufacturing factories to ensure that only the best reaches the finished goods inventory stage (Stanford,2013). Another method of managing quality used by Marks & Spencer is control of the initial stages of the supply chain process. This begins by ensuring the quality of raw materials that the organization either produces or procures is the best. Since the quality of inputs that a company uses in its production affects greatly the quality of final product. This is the reason why Marks & Spencer puts a lot of emphasis when it comes to choosing its suppliers. M&S always ensures that its suppliers continuously produce high quality textile and fiber. This always ensures that the best quality products reach the market. As organizations try to manage quality, they should always strive to improve the quality of both goods and services. This is done by carrying out market research to determine the needs and gaps in the quality of goods and services offered by the company. Once these gaps have been identified, the organization can then embark on a process of trying to improve the product by making all the necessary changes to the product. Improved quality of products promotes customer loyalty (Cooper, 2011). It also increases the number of customers for the products hence resulting to increased sales revenue. For organizations that offer services, it’s important that they get feedback on consumer experience. This will help the organization to act and make changes to improve the quality of services they offer their consumers. Quality management and improvement is the main reason for success of Marks Spencer to the organization.
Financial performance of an organization is very crucial measure of performance in an organization. An organizations` financial statement are prepared by the accounting department of M&S. financial reports for M&S are prepared on a quarterly basis but the final financial statements are prepared at the end of the financial year. The financial reports reflect/contain information such as the value of an organization’s` assets, value of the companies liability both long term and short term as well as the profits and loss made by the company during the financial years. Financial reports also contain information on the costs incurred by the business organization on such aspects such as wages, operational costs and fixed costs. There are various users of financial information. These users include; lenders and other creditors, shareholders, employees, government and suppliers. These users measure the performance of an organization using the financial statement presented by the organization (Burk, &Richardsen, 2014). Each group of users have different uses of this information, for instance, lenders and creditors use financial reports to gauge the ability of the organization to meet its financial obligation when they fall due. Marks & Spencer ensures that its financial reports are prepared in regard to all the accounting guidelines and principles. This guarantees all the stakeholders of the organization that the information in those reports is true and represents the true and fair value of the organization. M&S has very strong policies that govern accounting and internal control systems to ensure all the standards are met when it comes to accounting of every cent in the organization. This is very key to good financial performance of any organization.
Customers of any organization have different perspectives on what performance of an organization means. Theses perceptions and beliefs depend on a lot of factors and variable that customers face during the process of buying goods and services. In most instances, customers view/measure the performance of the organization by reflecting on the experience they have had with the organizations in all the dealings. If a customer had or enjoys good experience when buying from the company, he/she will gauge the organization as being a good performer. Customer’s perspective of an organization can depend on other factors such as prices of commodities. Customers who are price sensitive will view an organization favorably and think of it as a better performer than its competitors. The customer’s opinion on quality of goods offered by an organization can determine the customer’s perspective of good performance (A. arokiasamy, 2016). They compare their expectations before buying and their experiences after buying and using the product. M&S customers perspective of its performance Is mainly determined by the quality of products offered in its stores and how the quality meets or exceeds their expectations. Most of products offered by M&S exceed the expectations of many consumers and therefore many view the organization as a good performer. The quality of services offered by an organization also helps to shape the perspective of the consumer on the performance of the organization.
People’s perspective of organization performance measurement is concerned with how employees affect the performance of the organization. Employees are one of the most important assets of any organization. This means that the performance and success of an organization depends to a very large extent on employees (Quick,2007). Employees help to coordinate other factors of production to achieve the desired result for the organization. Employees are involved in each and every stage of the production process and the supply chain. The level of motivation among the employees will be vital in determining their performance levels. Highly motivated employees are able to work better towards achieving the desired performance by the organization. Employee motivation can be attained through proper remuneration procedures and policies. Organizations should also motivate employees by having reward criteria that encourages good performance. The performance of individual employees in an organization is determined by measuring the per unit cost of production in terms of wages incurred(Chauvin,2010). M&S has a very effective reward criterion that encourages its employees to be focused on achieving the goals and objectives of an organization. The organization is able to adequately reward highly performing employees and encourage them to work more towards achieving the overall performance of the organization.
Quality management and improvement
The implementation of the plans of an organization faces various challenges. These issues include resistance from employees and other stakeholders. Many of an organizations plans are meant to bring change in an organization because, in order to achieve different results from the current, change has to be implemented.(Wilson,2012) Its the nature of human beings to resist change and due to this reason, the management should put in place change management strategies in order to aid in the implementation.
To improve the financial performance, M&S should reduce its operational costs. This can be done by outsourcing the functions of the business that are not core to the business. Outsourcing of these functions help to reduce the costs of production of the company is reduced (Karadag,2015). The organization will therefore be able to concentrate on the core activities and therefore improve the overall performance of the organization. Cost reduction is an important measure of performance of an organization.
For M&S to improve its performance financially, it should implement an aggressive growth and expansion strategy. This strategy will increase the companies` stores and therefore the customer base will increase. Increase in customer base means that the overall sales volumes of the business will improve (Borkowski,2016). Opening of more stores will mean that the company will be able to reach more customers. The main revenue for the company are generated from the sale of the companies` products and therefore an increase in sales revenue will increase in increase in the gross profit of M&S. It will also make it convenient for customers who found it difficult to visit stores far away.
The performance of M&S can be improved by improving the working conditions of employees. Employees working in a better working environment are found to be more productive than employees working in a bad working environment (Stanford,2013). Although M&S working conditions are very favorable and some of the best in UK, there is still room for improvement. Employees should work in a pressure free environment to ensure that their performance is improved. Employees working in stores will be able to interact with customers well and this will help in building the profile of the company.
M&S can improve its performance financially through product differentiation. The company should produce different closely related products in order to help expend the product portfolio. By doing this, it means the number of products available for customers to buy will increase. Increasing consumer choice is important because it offers consumers more alternatives and therefore more flexibility. The customers will also spend more when the product portfolio is expanded and therefore increase the performance of the organization.
There are many factors that affect the performance of an organization. This factors include the level of experience of employees, their skill set, and the motivation that the employees have. Highly motivated employees will be more productive for the organization than employees whose morale level is low. The financial strategies put together by the management of an organization are essential in determining the performance of the organization.
There are various methods of measuring the performance of an organization. These methods will depend upon the industry in which the organization is operating; most organizations measure their performance by evaluating the financial reports. This is the same case with M&S. Financial measurement of performance is used among many organizations because the primary objective of any business is profit making. The performance of M&S is measured using different methods and the organization is seen to perform in all aspects.
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