TUTORIAL PMS NON-FINANCIAL MEASURES

QUESTION 1

a) The implementation of a balanced scorecard can help in monitoring the company’s

strategy and performance by providing better alignment of projects and initiatives as
it helps companies to map their projects and capabilities to different strategic objectives.
Balance Scorecard also helps in better management of information as such it acts as
a design key performance indicator for the various strategic objectives so that
companies are able to measure primary factors to achieve the best performance
resulting in companies able to provide good quality management information and better
decision-making. For example, companies are able to measure customer satisfaction on
its products/services with the use of a balanced scorecard under the customer
perspectives. Hence with this information, companies are able to improve their
products/services quality which then leads to having customer loyalty towards the
products/services. The balanced scorecard also helps companies to have better
strategic planning as the strategy map helps managers to think about the cause and
effect of various strategic objectives

b) Financial perspective
Financial objectives reflect the view of the shareholders or other stakeholders of the
organization. The performance measures chosen to support the financial objectives will
summarize the financial outcomes of decisions and activities. Performance measures
may include cost and profit measures, return on investment, measures based on cash
flow and shareholder value measures.

Customer perspective
Specific customer objectives may focus on market or sales performance. Achievement of
customer objectives may include measures of customer satisfaction, customer
profitability, market share and the number of new customers, on-time delivery, the
number of new products launched and the number of product defects.

Internal business processes

Objectives are formulated for specific processes that contribute to achieving customer
and financial objectives. The internal business processes may be those in the areas of
 product design, operations, marketing, sales, distribution and customer service. It
includes measures of cost, product quality, time-based measures, and new product
development.

Learning and growth

This perspective focuses on the capabilities of the organization that must be developed
to achieve superior internal processes that create both customer value and shareholder
value. This perspective concentrates on the infrastructure that firms put into place to
deliver long-term growth and improvement. Performance measures focus on employee
capabilities, information systems capacities and organizational climate.

c) One of the primary benefits of the balanced scorecard is that it provides a holistic view of
an organization's performance. It goes beyond traditional financial metrics like revenue
and profit and incorporates other critical factors, such as customer satisfaction, internal
business processes, and learning and growth. By considering a range of perspectives,
the balanced scorecard enables organizations to evaluate their performance more
comprehensively. This, in turn, helps to identify strengths and weaknesses in various
aspects of the business, making it easier to set strategic priorities and allocate resources
effectively.

The balanced scorecard helps align an organization's strategic objectives with its
operational activities. It does this by translating high-level strategic goals into specific
performance measures for different parts of the organization. This alignment ensures
that everyone in the organization is working towards the same strategic objectives, which
can improve coordination and increase the likelihood of achieving those goals. When
employees at all levels understand how their work contributes to the organization's
strategic success, it can boost motivation, engagement, and a sense of purpose.
Additionally, it facilitates communication and collaboration among different departments,
breaking down silos and fostering a more integrated and cohesive approach to achieving
strategic goals.
QUESTION 2

a) Balanced scorecard for Apple Incorporation:

Perspective BSC Objective Lag indicators Lead indicators

Financial Improve profitability ROI Cost per product

Customer Expand the Number of new Number of product

customer base customers variations available

Internal business Improve the quality Number of products Product

processes of products under development development time

Learning and growth Improve employee Employee Improvements

satisfaction satisfaction survey made to employee
facilities

b) The importance of lead indicators and lag indicators in a balanced scorecard are:

For the lead indicators, the first importance is it is future-oriented. Lead indicators enable
organisations to focus on the activities and processes in the organisation as a guidance
to come up with strategies that are aligned with the long-term strategic goals of the
organisation. When issues arise, the organisations will be able to detect it earlier due to
constant and proactive monitoring, leading them to be able to take immediate corrective
action, improving their performance. Lead indicators also often focus on the key drivers
that lead to succeed. Continuous monitoring and improvement of the drivers can
increase the chance for the organisations to achieve their long-term goals. The next
importance is being able to make proactive decision making. Since the issues that arise
are being detected early due to the constant monitoring, decision makers are able to
make timely solutions to solve the issues before it becomes more significant to the
organisations.
Meanwhile, for lag indicators, it measures the outcomes of past actions and decisions.
This is useful to assess whether the past strategies applied in the organisation are
effective or not and does it align with the organisation's goals. The decision to continue
applying the strategy or not is depending on its effectiveness. Lag indicators serve as a
source of feedback and learning for the company to make better decisions for future
strategic planning.
c) Financial Perspective
This angle revolves around the organization's fiscal health and sustainability,
encompassing traditional financial metrics. It assesses factors such as revenue growth,
cost management, profitability, and adherence to budgets. The financial perspective
ensures that financial objectives align with the organization's broader strategic goals.

Customer Perspective
This perspective is all about comprehending and fulfilling customer needs and
expectations. Key indicators in this domain include customer satisfaction, loyalty, market
share, and customer retention rates. A robust customer perspective provides insights
into how effectively the organization delivers value to its customers.

Internal Processes Perspective

Here, the focus is on evaluating the efficiency and effectiveness of the organization's
internal operations and processes. It involves assessing indicators such as cycle time,
process quality, and resource utilization. Concentrating on enhancing internal processes
ultimately leads to overall improved performance.

Learning and Growth Perspective

This perspective emphasizes the organization's capacity for innovation, adaptability, and
continuous improvement. It involves metrics related to employee training, skill
development, and the ability to cultivate an innovative culture. This perspective
underscores the significance of nurturing the organization's human capital and
knowledge resources.
QUESTION 3

a) The 5 steps that need to be undertaken by the management of Eufori Bhd to implement
benchmarking are:
1) Identifying the functions or activities to be benchmarked and appropriate
performance measures
The management should identify functions or activities that are vital to the
achievement of the objectives of the business which may include areas that the
Eufori Bhd is experiencing performance problems such as cost, quality, customer
service and delivery performance.

2) Choosing benchmark partners

Management needs to choose partners that are regarded as the best performers
in certain areas and it is not specifically always in the same industry.

3) Data collection and analysis

Management is to identify any performance gap (the extent to which a business
needs to improve to reach the best practice). The management also needs to
visit benchmark partners to study their processes and practices on how they
achieved their best performance.

4) Establishing performance goals

The management to plan new processes and practices to achieve performance
goals and narrow the performance gap.

5) Implementing plans
Management need to do ongoing measurement of performance to assess the
extent of the performance gap and take corrective actions to improve
performance where necessary
b) Proposal to the management of the company on how their performance management
system can be improved:

- The management of the company, Eufori Bhd can apply contemporary performance
management systems such as balanced scorecard (BSC) and benchmarking.
- To design contemporary performance management systems, Eufori Bhd needs to
encourage goal congruence by ensuring the strategies done are aligned with the
objectives of the system to achieve the company’s strategic goals. Eufori Bhd needs
to ensure that its objectives are well-defined to avoid confusion.
- The management also needs to avoid complex performance measurement to make it
easier for the employees to understand their roles.
- Apart from that, management has to ensure that the responsibilities to achieve the
measures determined should be within what the employees are able to control.
- Management of Eufori Bhd also has to be timely in applying the system. This means
that the measures reported must be as close as possible to the period which they
relate. Timeliness is critical to enable real-time feedback, quick corrective actions,
performance improvement and enhances the decision making, leading to effective
performance management.
- The management can also offer rewards to the employees. This can build their
motivation level to work effectively towards achieving the goals of Eufori Bhd and
also can encourage employees to engage in the implementation of PMS.

c) Three (3) possible reasons that may lead to unsuccessful implementation of balanced
scorecard are:

Inadequate employee engagement

It is important for all employees in the organisation to understand their roles to achieve
the strategic goals of the organisation, hence, employees need to be fully engaged in the
process to create an effective balanced scorecard. If less participation from employees,
the balanced scorecard may fail to be effective to be implemented into daily operations.
Employees may be hesitant to engage in implementing due to several reasons, including
lack of understanding of the purpose and benefit of a balanced scorecard, fear of the
unknown on what is going to happen with their roles in the organisation and
misalignment with personal goals. Organisations need to address employees’ concerns
to ensure an effective balanced scorecard.

Inadequate data and measurement systems

If the data is unreliable or inconsistent, the performance measurement against the
chosen metrics may be inaccurate. This is because less data means that the evaluation
done is incorrect, leading the decision making process to be difficult. Aside from that, the
balanced scorecard will also lose its credibility and the stakeholders lose trust in the
accuracy of the performance assessment, leading them to not be interested in investing
in the company since the organisations will not be able to make informed decisions for
their future. Having accurate and adequate data is important to have a successful
implementation of a balanced scorecard.

Poorly defined objectives

Unclear or vague objectives make it harder for employees to know the exact things that
they need to achieve. Employees may be confused and inconsistent interpretation of
objectives might happen, leading to inconsistent assessment. This will create
misalignment with the organisations’ strategic goals, causing them not to be achieved. It
is important for organisations to have well-defined objectives to provide a strong
foundation for the balanced scorecard, making it easier for employees to know what they
need to do.
QUESTION 4

a) Malay Jamu Herbs Berhad (MJHB) is a traditional herbal tea manufacturer in the
process of improving its performance through benchmarking activities. They are focusing
on benchmarking with their best-performing plant, located in Temerloh. The
benchmarking team, consisting of a manufacturing manager, a human resource
manager, two manufacturing team leaders, and a supervisor, has identified several
functions for study at the Temerloh plant:

Internal Benchmarking
This involves comparing performance and processes within different units or
departments within the same organization. In this case, the team could benchmark
various functions within the Senawang plant against those in the Temerloh plant.

Competitive Benchmarking
This form of benchmarking entails conducting a comparative analysis of an
organization's performance against that of its immediate industry rivals. The assessment
may involve an examination of the Senawang plant's performance at MJHB concerning
its counterparts within the herbal tea industry.

Functional Benchmarking
Functional benchmarking focuses on specific functions or processes, comparing those
processes in your organization to similar functions in other organizations. In this
scenario, the benchmarking team is looking at specific functions, such as employment
contracts, self-managed teams, safety processes, and cycle times.

Strategic Benchmarking
This type of benchmarking goes beyond individual functions and examines the overall
strategic direction and performance of the organization. It involves comparing the
long-term strategies and goals of MJHB's Senawang plant with those of the Temerloh
plant.

The type of benchmarking that the Senawang plant is choosing to undertake appears to
be Functional Benchmarking, as the team is focusing on specific functions or processes
 like employment contracts, self-managed teams, safety processes, and cycle times
within the organization and comparing them to corresponding functions in the Temerloh
plant to learn and adopt best practices.

b) The advantage of internal benchmarking to Senawang plant is the management of

Senawang plant has the ability to obtain detailed operational information and so to apply
the best practice fromTemerloh. It will be much easier to implement the operational
system since the Senawang plant and Temerlong plant are from the same company.

The disadvantage of internal benchmarking to the Senawang plant is the low potential of
innovation to the operational and internal control. Since both plants are part of the same
organization, they might share similar organizational culture, constraints, and practices.
Hence, the management of Senawang plant will just absorb the best practices of
Temerloh which can result in a lack of exposure to innovative ideas and practices that
external benchmarking might offer.