1

Performance Management

Your Name
Name of Institution
Course Code and Title
Instructor
Date
 2

Table Of Contents
 3

Introduction
The report mentions that Traditional techniques are useful for assessing a company's
success, but they only consider the company's financial performance, not the
employees' performance, that is satisfaction, needs, motivation, or engagement. For
example, if SBK is profitable, but its workers continue to leave because the firm is only
focused on operational performance and success rather than employee performance
and development. If well thought out and reviewed by a scorecard at each level,
scorecards may be a beneficial tool at all levels of a business. Then we look at how
balanced scorecards and performance measures aren't mutually incompatible and may
really complement one other. Because the personnel or employees had just recently
been employed. As a result, operational training and knowledge of the negative
repercussions on the body are required. As a result, it is the top management's
obligation to develop a balanced performance indicator to aid in the analysis of business
plans that will assist SBK in bettering its work. The report's primary goal is to offer the
fact sheet, which aids in describing the internal and external issues that businesses
confront and the possibilities that arise with the implementation of these scorecards.
The firm is subject to a lot of difficulties. These might be internal organizational issues or
external challenges. As a result of the exodus of previous personnel, challenges arise
inside the business. Peer s and management must have a strong knowledge of the
company's objective since the corporation is under pressure to hire new personnel. This
contributes to increased productivity. As a result, one of the most significant obstacles
the organization must confront and overcome is the inability to predict the future. As a
result, the organization must always deal with and be prepared for any unforeseen
event.

Traditional Performance measurement techniques at SBK

The conventional approach to performance is based on financial accounting, cost
accounting, and management accounting information and methodologies. Financial
indicators such as contribution margin, ROI, RI, net profit, and EPS are the most
common approaches employed by businesses. Traditional methods are backwards in
 4

nature. That is, they are more concerned with previous financial results than with what
management is doing to generate future shareholder value.

Limitations of traditional performance measurement:

Both SBK staff circles and the SBK organization have expressed concern about the
limits of the present performance measurement method.

Drawbacks that led to the non-traditional approach

All of the measurements are focused on the near term. Only financial and operational
data is collected by the SBK organization. All kinds of financial and operational
information may be found in the SBK organization. The accounting system can inform
you of the organization's overhead expenditure, income, profit, and any other statistic.
One of the reasons that organizations fail to survive in the long run is that they focus
solely on the short term. These groups frequently succeed for a year or two before
eventually collapsing.

Long term measures that SBK must consider

i. Customer satisfaction.

ii. Employee satisfaction.

iii. Product/service quality.

iv. Public responsibility measures.

2. Traditional metrics are frequently founded on out-of-date and outmoded ideas, and
they are typically ineffective in meeting the needs of today's economic environment.

3. Performance metrics are more concerned with cost and revenue statistics than with
the process. The majority of the time, it gives inaccurate or irrelevant information. It's too
 5

late to take effective remedial action based on performance measurements that include
bottom-line financial outcomes.

4. Performance measurements lack activity and process analysis, which are required to
determine which activities and processes create value and which do not. SBK Business
sector must determine whether procedures are capable of consistently meeting client
needs.

5. Performance measurements are focused on tracking specific characteristics of

performance and do not give a comprehensive or integrated picture of performance.
Managers sometimes find it difficult to judge whether their ideas have been executed
properly since performance is only monitored in select areas.

6. Traditional performance measurements promote competitiveness while discouraging

collaboration. Rather than comparing one business unit's performance to that of
another, performance reports frequently measure each to its own performance and
goals. This is a subtle way of dissuading people from working together. Whoever is in
charge enjoys being in charge and does not want to divulge information to other
corporate divisions or locations. The greatest risk is in informing employees how they
compare to their counterparts. Learning how you rank versus others, whether you're
number one or fifteen, is detrimental to teamwork.

Most performance rating systems also include elements that encourage

competitiveness and inhibit collaboration among teams of employees. In most systems,
individuals are evaluated rather than teams. Individuals, not teams, receive promotions
and raises. In an organization seeking to develop a culture of collaboration and sharing,
focusing solely on metrics of individual achievement is a frequent but harmful approach.

Characteristics of the non-traditional approach must be

i. Concentrate on monitoring the critical few key variables rather than the insignificant
numerous.
 6

ii. Metrics should be related to success criteria, such as major business drivers.

iii. To guarantee that the SBK is concerned with all three viewpoints, measures should
be a combination of past, present, and future.

iv. Measures should be focused on consumer, shareholder, and other key stakeholders'
demands.

v. Measures should begin at the top and filter down to all levels of the SBK's personnel.

vi. Multiple indices can be combined into a single index to give a better overall
assessment of performance.

vii. As the environment and strategy change, measures should be modified or at the
very least adjusted.

viii. Targets or goals must be developed for measures that are based on research rather
than arbitrary figures.

Using Balance Score Card (BSC) to align SBK requirements

The SBK can use the BSC to identify internal and external problem areas as well as
enabling elements that will drive strategic design and approach to reach future goals.
SBK may also utilize a Balanced Scorecard to assess personnel in a number of critical
areas using a variety of metrics based on statistical or financial data as well as
qualitative or non-financial data. Statistical or financial measurements focus on historical
performance, which is generally based on financial statements, whereas qualitative or
non-financial measures analyze current outcomes or actions in order to assess actions
that will have an influence on upcoming business performance. Managers and workers
frequently attempt to create and maintain an ethical workplace. To develop such an
environment, employees should be aware of the organization's ethical values and
beliefs, as well as the rules and regulations that are applicable to them. If employees
 7

are unfamiliar with the standards by which they are rated, they may not realize that their
behaviors are ethical. Balanced scorecards may also be used by SBK to assist workers
comprehend their organization's duties and analyze their own. SBK may represent a
successful strategy from the perspective of consumers and stakeholders through BSC,
which includes an awareness of client demands, product and service characteristics,
desired relationships, and the organization's intended "corporate image." that
can examine the strategy in a variety of ways. The strategic viewpoints, important
strategies, and expected outcomes of the company can all be described in the balanced
scorecard. The major emphasis areas or "pillars of excellence" that turn a business
strategy into operations and make it work for all personnel are key strategies. The
building blocks of strategy are strategic objectives, and the goals connected in a logical
context form a strategic map that depicts how a business produces value for its
customers and stakeholders. The BSC has characteristics that help organizations
match their tactics with their goals which are as follows:

Engaged Leadership, Interactive Communications and Change Management.

Creating a scorecard system may revolutionize an organization....all it's about

influencing hearts and minds. The discovery process, communication through two-way
discourse, and planning and managing change are all critical early phases in the
process.

Organization Mission, Vision, and Values

A well-defined goal, a shared vision, and organizational principles based on strong

personal beliefs are all essential components of an aligned company. Most firms have
these components, but there is frequently no connective tissue between them that
allows employees to quickly "understand it." The scorecard building process begins with
a compelling and unambiguous "image of the future" (shared vision). ...employee buy-in
follows, as hearts and minds are drawn to developing and implementing the company's
strategies.

Organization Weaknesses and Enablers Strengths

 8

Internal and external pains and enablers will be identified during an organization's
environmental scan ("climate assessment"), which will guide strategy design and the
way to obtaining future goals.

Customers and Stakeholders, and the Value Proposition

Effective strategy encompasses a customer and stakeholder viewpoint, as well as a

grasp of client demands, product and service characteristics, intended connections, and
the organization's desired "corporate image."

Perspectives, Strategic Themes, and Strategic Results

The company must identify strategic viewpoints, important strategies, and expected
results in order to examine strategy through several performance lenses (balanced
scorecard perspectives). The primary emphasis areas or "pillars of excellence" that
transform corporate strategy into operations and make strategy actionable for all
workers are referred to as key strategies.

Strategic Objectives and Strategy Map

The building blocks of strategy (strategy "DNA") are strategic objectives, which are
connected together in cause-and-effect linkages to form a strategy map that depicts
how a business delivers value for its customers and stakeholders.

Performance Measures, Targets and Thresholds

Performance metrics are related to objectives, allowing the business to assess progress
toward strategic goals and measure what matters. Targets and thresholds serve as the
foundation for visualizing performance data and turning it into business insight.

Strategic Initiatives

Initiatives integrate strategy into practical terms and serve as a foundation for prioritizing
the budget and identifying the organization's most essential tasks.
 9

Performance Information Reporting

To display performance data and better assist decision-making throughout the

enterprise, automated data collecting and reporting methods are employed.

Cascade Scorecards to Departments and Individuals

Align the organization by leveraging the strategy map, performance measurements and
goals, and activities to align the organization. Scorecards are used to promote
accountability by assigning ownership to objectives and performance measures.

Rewards and Recognition

Incentives are linked to performance in order to make strategy actionable for individuals
and to assist establish buy-in for the behavioral adjustments required to achieve a high-
performing company.

Evaluation

The outcomes of the organization becoming more strategy-focused are assessed, and
modifications in strategy, measurements, and projects reflect the learning of the
organization. Each component of the scorecard is created in a logical order, following a
disciplined framework of research and strategic thinking.

 Perspectives of Balance Scorecard (BSC)

These areas were picked at BSC as a business performance is immediately tied to its
financial behavior that is directly related to the internal operations of the company, how
the customer views and behaves and acts with the organization, and in what direction
organization is performing. The implementation of a balanced performance indicator
enables the organization to consider stakeholders in addition to maximizing shareholder
value. Shareholders own stock in the firm and are frequently more concerned with its
profitability, hence earnings are their primary concern. Stakeholders are persons who
are affected by a business's choices, such as debtors, creditors, executives, regulatory
 10

bodies, concerned persons, employees or workers, customers, vendors, and even

ordinary people who are concerned about whether or not the firm is working decently in
performance. That is why CSR elements are incorporated in balanced performance
indicators.  Here are 4 components or sub categories of the Balanced Scorecard
framework. Let's see where these sorts of elements could fall in.

The financial performance or perspective element of the balanced performance

indicator follows the performance criteria already established by businesses. The
scoreboard's particular criteria vary depending on the sort of firm and who is being
assessed and measured. It discovered that performance may be measured using ROI,
RI, and EVA. Other financial measures, such as profits per share (EPS), revenue
growth, sales growth, inventory turnover, and so on, can also be employed. Financial
metrics should be used to reflect the components of the examined person's decision-
making duties. Financial indicators can be broad and general, such as sales growth, or
specialized, such as meeting rental rates. Using SKB as an illustration, financial
measurements may include a rise in income, and product cost regulation of the
organization. The internal business viewpoint or perspective entails that a
successful business must run like a well configured machine. This enables the company
to monitor and evaluate internal operations to verify that they are meeting the
company's main and important strategic objectives. Different elements or factors may
be utilized as internal business metrics, such as the number of failures, machine down
time, efficiency, and the number of items produced per employee every day, as well as
finer metrics like the proportion of plans. Internal measures for SBK may include the
 11

time between product production and sale, and the quantity of waste. Considerations
or perspective for Customers includes every business has consumers or clients -
without them, a firm would die - thus it's essential for an organization to track how well
it's working against customers or client. Customer happiness, percentage of repeat
customers, rate of new clients, percentage (%) of new customers through customer
feedback, and market share are all common characteristics that may be measured.
Factors like industry first place among clients and creating a safe diving environment
are more business-specific criteria. Customer loyalty, customer happiness, and the
amount of new customers may all be used as benchmarks for product purchasers.
Learning, growth and development entails the business condition is dynamic, and in
order to exist, firms must constantly change and develop, a. Management must
concentrate on strategies for the organization to grow in order to achieve strategic goals
such as market share. Workers and management can utilize learning and growth
measurements to identify how they collaborate to build a firm and grow the number of
employees. The number of employee suggestions approved, the degree of turnover, the
number of hours of workforce training, the range of process and techniques
improvements, and the quantity of new products are all examples of this area. SBK can
benefit from learning, growth and development strategies like training for customer
service and employee relationship training.

The Balanced Scorecard is made up of four components, the balanced scorecards for
SBK are developed as it begins with an organization's strategic plan or goals that may
be productive and successful. The Balanced Scorecard is then used to create those
objectives based on the company’s standards and activities. In terms of goals and
activities, an organization-wide balanced scorecard is wider and more generic than a
balanced scorecard for a department head. Individual employee balanced scorecards
can be created as an assessment and evaluation tool or a tool for defining and tracking
personal goals. Once the organization's strategic goals at the appropriate level for which
the Balanced Scorecard is being developed have been established, criteria for each
Balanced Scorecard category should be made, with particular areas in which the
department or individual will be examined. Finally, the evaluation criteria must be
 12

relevant, which means that the data gathered should be indicative and act as a
reference point - for example, company standards or specific objectives are connected
or not, long- and short-term measures, as well as quantitative and non-quantitative
performance indicators, may be very beneficial in motivating staff and giving a clear
structure for how they are following the company's strategic aim and objectives.

Application of BSC to R&D

SBK Balance Score Card

Strategic Objectives Strategic indicators at Measures at R&D

company level department level

Financial Perspective Return on capital R&D value creation at

employed innovation stages
Customer profitability R&D value creation at
Revenue growth rate commercialization stages

Customer perspective Customer retention rate Percentage of sales from

Market share new products
Customer acquisition Product market life cycle
(number and quality) Customer satisfaction with
new products

Internal Business Process New product profitability Number of new products

Perspective R&D efficiency (time to approved for market
market) launch
Percentage of resources to Average development
sustain existing products cycle time
Other metrics not related to Average development cost
R&D per product
 13

Percentage of ideas
approved for test and
validation phase
Pricing and planning
accuracy
New product acceptance
rate
Safety incidents

Potential Perspective Employee retention Number of patents

(Learning & Growth) Employee development awarded
Strategic skill coverage Strategic skill coverage
ratio by competency ratio by competency
category category
Employee survey R&D competency vs.
measures competitors (innovation
Innovative culture surveys level)
Employee survey
measures
Employee training (hours)

It's worth mentioning that the overall business purpose is listed first on this rating card.
The four areas are then divided into extremely broad goals and criteria: financial,
customer, internal, and organizational learning. For each of the four categories, this
scoreboard provides three general objectives. Customer goals, for example, include
improving customer happiness, increasing customer loyalty, and increasing market
share. A generic criterion for judging whether a goal has been achieved for each
objective. In this case, we'll look at how customer satisfaction surveys may be used to
improve customer satisfaction. Keep in mind, however, that measures are only valuable
as a management tools technique if you have a specific vision in mind. The target in this
 14

case is to obtain a 95 percent total customer satisfaction percentage. In fact, due to

their broad nature, the scoreboard's aims and accompanying criteria appear virtually
ambiguous. These objectives, on the other hand, are in keeping with the overall
company strategy and offer direction to senior management on how to break down
these objectives into more particular objectives for their region or division. This will
enable them to develop more thorough balanced scorecards to aid in the achievement
of the corporate scoreboard's overall goals. The area also includes the best way to
convey the corporate balanced scorecard to the head of the manufacturing department.

The BSC Model & Innovative Potential Development

Because its interpretation of the company's value is based on the mutual interaction of
four perspectives of change: change in workers' behavior, change in the company's
internal environment, and change in the company's external environment, the BSC
methodology can also be used to characterize the company's development potential.

● Customers' consumer behavior is changing.

● The economy of the firm has changed.

Increased employee happiness with their own job, greater levels of expert competence,
and more efficient motivation drive business development, which is reflected in
increased productivity and creativity in the company's internal environment. As a
consequence of this evolution, customers may now choose from a wider range of items
with greater value. Growing sales revenues result from increased demand for the
company's high-quality, user-friendly, conveniently accessible, and fairly priced
products. Higher revenues improve profit, and hence the company's earning ability and
worth. Simultaneously, they generate resources to finance investment and operational
capital for the company's effective financial management.

Discussion

Implementing BSC may have significant and enticing consequences and possibilities.

● The BSC indicator system will allow for continuous control of strategic goals
through the achievement of performance indicators. This generates significant
 15

feedback, allowing an unrealistic plan to be updated quickly. BSC will offer an

overview of the real performance of all internal corporate processes, allowing for
efficient process performance enhancement management, as well as the
evaluation of actual investment efficiency. BSC gives an overview of the
company's causal structure, as well as the primary performance determinants,
their evolution, and mutual relationships.
● During the execution of a strategy, BSC will allow for effective communication
between all organizational units of the firm, as well as feedback for aligning
organizational units and individual goals with the company's goals.
● BSC focuses the attention of management and all other employees on achieving
the strategy and, as a result, creating future opportunities. Past development
analysis is only a technique.

A well-implemented BSC system enables a company's innovation strategy to be

followed more efficiently. However, it must be appropriately implemented in terms of the
company's goals, strategy, sophisticated management system, information support, and
communication.

Conclusion
Traditional techniques are useful for assessing a company's success, but they only
consider the company's financial performance, not the employees' performance,
satisfaction, needs, motivation, or engagement. For example, if SBK is profitable, but its
workers continue to leave because the firm is only focused on operational performance
and success rather than employee performance and development. If well thought out
and there are purchases at each level that are reviewed by a scorecard, scorecards
may be a beneficial tool at all levels of a business. Then we look at how balanced
scorecards and performance measures aren't mutually incompatible and may really
complement one another.

The Balanced Scorecard is made up of 4 components, the balanced scorecards for

SBK are developed as it begins with an organization's strategic plan or goals that may
be productive and successful. The Balanced Scorecard is then used to create those
 16

objectives based on the company’s standards and activities. In terms of goals and
activities, an organization-wide balanced scorecard is wider and more generic than a
balanced scorecard for a department head. Individual employee balanced scorecards
can be created as an assessment and evaluation tool or a tool for defining and tracking
personal goals. Once the organization's strategic goals at the appropriate level for which
the Balanced Scorecard is being developed have been established, criteria for each
Balanced Scorecard category should be made, with particular areas in which the
department or individual will be examined. Finally, the evaluation criteria must be
relevant, which means that the data gathered should be indicative and act as a
reference point - for example, company standards or specific objectives are connected
or not, long- and short-term measures, as well as quantitative and non-quantitative
performance indicators, may be very beneficial in motivating staff and giving a clear
structure for how they are following the company's strategic aim and objectives.
17