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Performance Measurement and Strategic Issues
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Detailed explanation on performance measurement and strategic issues.
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From Performance Measurement toStrategic Issues
Summary of Strategic Analysis
Strategic analysis is comprised of the use of strategic analytical tools (e.g. PESTEL, strategic group
analysis, competitor analysis, resource-based view etc.) and performance indicators (will be outlined
in this section of notes).
Strategic analysis provides an organisation with insight into its current strategic position.
Performance
What is Good Performance?
It depends on the stakeholder. Different stakeholders have different perspectives on what
constitutes good performance on the behalf of a business.
• Employee
o Job satisfaction
o Wages (level and growth rate)
o Employee benefits
o Job security / minimal employee turnover
o Opportunities for development (both skill and career wise)
• Supplier
o On time payment
o Length of contract with company
o Reliability of demand
• Customers / Consumers
o Quality of product / service
o Product safety e.g. safety recalls
• General Public
o Ethical / socially responsible behaviour
o Being customer friendly
• Shareholder
o Profit and growth – in turn will increase dividends and raise share prices
Where Can Information on Performance be Found?
Information on the performance of a business can be found in various places, including:
• Financial Statements
• Intellectual Capital Statements
• CSR / Environmental Reports
• Press releases
• Media (mainstream i.e. news)
• Social Media
, • Analysts’ reports
• Market research companies / sites
• Recent journal articles
• Britain’s Most Admired Companies (https://www.managementtoday.co.uk/bmac-
2017/criteria) – has a range of measurements based on various criteria
What Can a Business Compare Itself With?
Note: beware issues of comparability when using reports produced for different purposes.
• Tracking tends
o Over a span of time
o One-off events i.e. are they one-off events?
• External comparisons
o Close competitors
o Strategic groups (e.g. the one the business is in or one the business wishes to enter)
o Benchmarking (benchmarking is comparing one’s business processes and
performance metrics to industry bests and best practices (methods, procedures,
processes, or rules employed or followed by a company in the pursuit of its
objectives) from other companies).
• Internal comparisons
o Other divisions (a collection of functions (e.g. R&D, HR etc.) working together to
develop and sell a product or service. Divisional structures can be based on product
(divisions are organized by products e.g. tool manufacturer may have power tools
division, hand tools division etc.), geography (divisions are organized by the
company's geographic operating areas e.g. countries, regions etc.) and market
(divisions are organized by the customer segments served by the company e.g. if a
product manufacturer sold its products to individuals, small businesses, and medium
businesses, it may set up a separate division for each one of those customer
segments)).
o Other functions (divides the company based on common functions / similar activities
e.g. marketing, human resource, research and development etc.)
o Other strategic business units (SBUs) (an independently managed division or
organisational unit of a large company, having its own vision, mission and objectives,
whose planning is done separately from other businesses of the company) (also
known as business units).
o Mission
The Role of Management and Leadership and the Importance of Performance
Measurement
Creating good performance is not an exact science. A business can set out what needs to be done,
agree standards and can its measure progress. The business can have an excellent process in place
but without good leadership you will not achieve sustainable results.
• Leadership is about creating the culture and environment in which good performance is
delivered. This includes setting the tone for the organisation (i.e. setting the standards of
behaviour expected from everyone working within the organisation). It also includes setting
values (i.e. how customers, staff, and suppliers will be treated), as well as setting the
direction of the organisation and creating a vision of success.
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