Customer Aquisition and Retention Insights, Amplify Your Marketing Performance Management, Gain Market Traction With Fast-Track Your Business, Best Practice Marketing Programs – Inspire Your Team. Illustration 1 - BAA plc's service quality. Strategies – What strategies do we need to put in place tosatisfy the wants and needs of our key stakeholders, while satisfyingour own requirements too? You’ve figured out how to monitor and report on financial metrics related to demand generation and revenue, slicing and dicing data by campaign, region, sales rep/territory, channel, media and more. In 2016JMP predicts a more significant decline in export sales this must beaddressed. profitability may increase in the short-term through a reduction in product development. All courses are run onclient premises and, in the case of clerical training courses, arelimited to 8 participants per course. The commitment of JMP is good but if this is from increasedborrowing, then banks and other financial intermediaries will be gettingworried about JMP's ability to repay. The risk is still quite high during the growth phase because the ultimate size of the industry is still unknown and the level of market share that can be gained and retained is also uncertain. Problems with product or service quality can have a long-termimpact on the business and they can lead to customer dissatisfaction andloss of future sales. To be effective, the measures contained in the scorecard shouldbe limited in number, reasonably consistent and ranked in some order ofpriority. The relative importance of different factors will vary from company to company and between customers, but achieving high quality means ensuring all the factors of the product or service package meet customer requirements. Suggest two measures (KPIs) for each of the three categoriesat the the business operating systems level, i.e. Ashas been seen throughout the discussion of performance measures in thistext, the selection of appropriate indicators and measures is critical.The selected measures form the goals that management communicates tostaff as being important. Your company is considering replacing its currentproducts with a new range which will use different productiontechniques. The score indicates the likelihood of failure: Using the data below calculate the Z score for each of the four companies and comment on your findings. Commitment to research and development in a high tech business iscrucial to continued product innovation. This field is for validation purposes and should be left unchanged. If unchecked, the situation is likely to lead to an inability of the company to pay its obligations as they become due. Non-Financial Indicators. The measures may not always be prioritised. 7.4 Fitzgerald and Moon's building block model. customersatisfaction, flexibility and productivity. Argenti suggested that the failure process follows a predictable sequence: (1)  Defects - include management weaknesses (such as anautocratic chief executive) and accounting deficiencies (such as nobudgetary control). Thirdly, it may be that management is entirely aware that thestrategic situation is worsening, but be unable to see opportunities toinnovate or diversify out of trouble. Discuss the disadvantages of the balanced scorecard. 5. JMP has had some success when marketing spend was relatively low. Further investigation is needed for those organisations with scores between 1.81 and 2.99. More revolutionary change must damage theparadigm before it can begin. Suppliers will be affected by changes to production which require different raw materials or delivery schedules. Monitoring KPIs shows whether a business is achieving its long-term goals. qualitative, nature. For example: an automobile firm can have measures of defects, ability to perform to specifications, durability and ability to repair, a bank might be concerned with waiting time, accuracy of transactions, and making the customer experience friendly and positive. Cost overrun as percentage of budgeted cost. Between 2013 and 2015 there is an upward drift in cost of sales,which may be due to supplier issues or production scheduling problems.The inevitable result of falling sales and increased costs of sales isfalling gross margin. Three basic strategic objectives identified by the company were market leadership, sales growth and profitability. Often the most sensitive and insightful information comes from those who have decided to leave a brand or firm. a computer manufacturer can examine relative performance specifications, and product reliability as reflected by repair data. Qualitative information often representsopinions of individuals and user groups. Poor communication to employees/managers - organisations which adopt the balanced scorecard but continue to reward managers on the basis of a narrow range of traditional financial measures are likely to be disappointed with the results. However there are issuesrelated to its use. The actual means of motivation may involve performance related pay, a bonus or a promotion. The measures chosen may not align with the strategy and/or vision of the organisation. How are the measures of product and service quality related to brand awareness and company profile? FPIs and NFPIs. The best strategy to prevent failure is to have effective management systems in place to begin with. The new product sales ratio: this was the percentage of total sales achieved by products introduced to the market within the previous six quarters. company E. A score of 3 or above companies are financially sound, i.e. There is always atemptation to try to retain share, by reducing price, rather than makefundamental changes to a product of its method of production and riskescalating costs. Suggest some performance measures for a buildingcompany involved in house building and commercial property and operatingin a number of different countries. The number of new products introduced to the market. For example, airlines use on-time performance, percent of bags lost, and number of customer complaints as nonfinancial performance measures. The pyramids and pitfalls of performance measurement - September 2005. However, businesses have started to view staff as a major asset and recognise that it is important to attract, motivate and retain highly qualified and experienced staff. This is particularly importantfor a high profile company, about which everyone will have an opinionwhether or not they have any experience as a customer. Non-financial metrics are quantitative measures that cannot be expressed in monetary units. Fully satisfying thosedemands has a cost and sometimes compromises may have to be made inorder to contain that cost. (For instance, onefinancial principle is that 'companies should have performanceevaluation and incentive systems to provide managers with an incentiveto deliver long term shareholder value'). This Product includes content from the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for. Therefore, Marketing professionals must gain more experience measuring non-financial metrics. Companies with a Z score of below 1.81 are in danger and possibly heading towards bankruptcy, i.e. They show the financial health of a business against internal benchmarks, competitors, and even other industries. While these aren’t the only non-financial metrics you can measure, these metrics help communicate Marketing’s contribution and impact to the business. Public correspondence is alsoanalysed in detail, and comment cards are available in the terminals sothat passengers can comment voluntarily on service levels received. There is a mixture of signals in terms of progress being made withinternal processes. Two Thirds of the amounts spent on these initiatives are payroll related. The performance management system will need to reflect the performance improvement strategies: You have been asked to recommend actions which need to be taken toprevent failure of an electronics manufacturer which is in financialdifficulties. Only in hindsight are thedynamics clear. Marketing Needs Both Financial and Non-Financial Measures for Performance Management. The standards set, i.e. For example, amanager may decide to delay investment in order to boost the short-termprofits of their division. Having a complete understanding of these factors can add another layer to financial metrics and help frame financial results. Some examples of these cost centers are "Building inclusive cities"/"Creating Digital Opportunities"/"Field evaluation and feasibility studies" etc. Without key indicators, responsibility and accountability cannot possibly be optimized. This method helps assess not only the financial … Mistakes include high gearing, overtrading or failure of abig project. It recognises the need to work with stakeholders to ensure that their needs are met. The company may still have an excess of assets over liabilities,but if it is unable to convert those assets into cash it will beinsolvent. The CFO Indicator Q3 2016 survey results reinforce what finance teams are already experiencing: Successful measurement and analysis of corporate performance must include both financial and non-financial KPIs. The following table gives examples of possible FPIs and NFPIs: There are a number of areas that are particularly important forensuring the success of a business and where the use of NFPIs plays akey role. There are a number of problems associated with the exclusive use of financial performance indicatorsto monitor performance: Suggest a measure for each of the performance criteria listed below: The Performance Prism poses five questions. Failing to adapt to changes in the environment, Created at 5/24/2012 4:31 PM  by System Account, (GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London, Last modified at 5/25/2012 12:55 PM  by System Account, discuss the interaction of non-financial performance indicators with financial performance indicators, discuss the implications of the growing emphasis on non-financial performance indicators, discuss the significance of non-financial performance indicators in relation to employees, identify and discuss the significance of non-financial performance indicators in relation to product/service quality, e.g. This isparticularly the case when individuals possess knowledge which can beexploited by direct competitors, e.g. It includes external aswell as internal information. Indoing this it takes a broader approach to stakeholder interests thanmany other performance management models which pay limited attention tostakeholders other than customers and shareholders. The final part of the chapter covers the separate topic of corporate failure. Any decision which affects working practices will have a morale effect on employees. Finally, a large part of the problem is caused by the mental modelsof those who have control of the strategy within an organisation. In certain types of organisation the loss of key personnel can'spell the beginning of the end' for an organisation. However, R & D is difficult to predict in terms of its success and timing of breakthroughs. Insureme was the market leader in home and motor vehicle insurancewith a 28% market share. Level 4: The status of the level 3 driving forces can bemonitored using the lower level departmental indicators of quality,delivery, cycle time and waste. This for anorganisation to decide to finance itself with debt during thedevelopment stage would represent a high total risk combination. the target is to 'achieve four product innovations per year' rather than to simply 'innovate') and linked to controllable factors. Question focus: Many of the areas covered in this chapterhave already been touched upon in Paper F5. It is important to have both financial and non-financial measures for Marketing. One of the most important assets of many firms is the loyalty of the customer base. companies B and D. The evidence suggests that the company has problems in financial management, production, purchasing and marketing. The 'classic' life cycle for a product has four phases, with different CSFs. The dimensions are the goals, i.e. PFM assesses such companies interms of communication, financial, strategic and ethical performanceagainst certain principles it has developed. Non-financial performance indicators (NFPIs) - these measures will reflect the long-term viability and health of the organisation. The manufacturing time for the products is30 days and raw materials inventories are generally held for two weeks.There are also high levels of finished goods inventories. Different costs as a percentage of sales – e.g. Measures of brand awareness can either look at the direct link between the brand and overall results, e.g. What qualitative issues will you need to consider? The answers to thesequestions form the starting point for defining performance measures. As mentioned, so far we have concentrated on financial performancemeasures. How will it compare with competitor offerings in the future given competitive innovations? Failure to focus on a specific market because of poor research. Copyright 2020. Illustration 3 - The Performance Prism at DHL, Example of application of the performance prism at DHL. Gearing has increased from 42% in 2013 to 160% in 2015 and forecast to be 190% in 2016. Returns andcustomer complaints are high. A modern business performance measurement tool is the Balanced Scorecard (BSC) method. Metric No. Any decision to change product specification or pricing will affect competitors who will then choose whether or not to respond. In such companies, a high-level view of key indicators is missing. In order to achieve target financial performance (and hence theirreward), managers may be tempted to manipulate results, e.g. Fitzgerald and Moon's building block model, financial and non-financial performance measures are included, include external as well as internal measures, include all important factors regardless of how easy they are to measure, show clearly the tradeoffs between different dimensions of performance. reduce manufacturing time and stock levels to reduce the requirement for working capital and save costs. 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