Assessing Organizational

Performance
Chapter 2
FOUNDATION OF STRATEGIC MANAGEMENT
• Where are we?

• Where are we going?

• How are we going to get there?

FOUNDATION OF STRATEGIC MANAGEMENT
• Where are we?

Financial Performance
Quality Measures
Productivity Measures
Human Resource Measures
Customer Satisfaction and Retention
FOUNDATION OF STRATEGIC MANAGEMENT
• Where are we going?

Vision (projection to become)

Mission (purpose of being)
Goals (plans into bits)
Core Values (principles to believe)
FOUNDATION OF STRATEGIC MANAGEMENT
• How are we going to get there?

Strategies are developed toward

achieving its vision
To determine the best road map to
advance the organization in the
marketplace
ORGANIZATIONAL PERFORMANCE
• Performance Measure is a metric by
which an organization's progress can
be gauged (pro ts, stock price, and
sales)
• Performance Benchmark is used to
assess an organization's standing
compared to its own or competitors
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BALANCED SCORECARD
• Prof Robert Kaplan and Prof David Norton of
Harvard University developed a tool called the
Balanced Scorecard (1992)
• This helps managers resist the temptation to xate
on nancial measures and monitor a diverse set of
important measures to provide a "balance"
understanding of organization's performance
• Four Key Measures: nancial, customer, internal
business process and sta learning and growth
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FINANCIAL MEASURES
• Financial measures of performance
relate to organization e ectiveness
and pro ts (pro ts and stock price)
• Three Approaches to Quantitative
Analysis: nancial, market-based,
and general
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 FINANCIAL ANALYSIS
• This is ratio analysis or apple to
apple comparisons between
rms, annual trends, variable
volumes, sales, expenses and
pro ts.
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MARKET-BASED ANALYSIS
• This analysis helps determine how the rm
compares to its competitors in the market

• TWO MEASURES TO ANALYZE A FIRM'S

POSITION IN THE MARKET:
market share = rm's total product revenue/
total revenue in the industry or market
price-earnings ratio = stock price/ earnings
per share
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GENERAL QUANTITATIVE ANALYSIS
• This analysis used to determine
how much volumes are changing
each year, or extrapolate
economic data to make
predictions.
 PERFORMANCE INDICATORS
• CUSTOMER MEASURES - relates to
customer attraction, satisfaction,
satisfaction and retention
• INTERNAL BUSINESS PROCESS
MEASURES - relates to organizational
e ciency (what must we excel at?)
Example: time to produce a new product
and distribute, productivity and quality data
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PERFORMANCE INDICATORS
• LEARNING ANG GROWTH MEASURES
relates to the future (can we continue
to improve and create value?), it
focuses on innovation and proceed
with an understanding that strategies
change over time, and developing new
ways adds value to the organization.
MEASURING PERFORMANCE
• TRIPLE BOTTOM LINE is a
framework that emphasizes the
three Ps: people (socially
responsible), planet
(environmentally sustainable), and
pro t (economically viable)
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COMPETITIVE ADVANTAGE
• Economic Value Creation (EVC)
• Willingness to Pay (WTP)
• Cost to produce the product
(Cost)
EVC = WTP - Cost