For the benefit of the Management Board, prepare a briefing paper based on the following approaches to performance measurement
Non-financial indicators that are used in performance evaluation
Non-financial indicators can provide the Management Board a much broader perspective of performance than financial performance. Financial indicators can be limited in their approach (eg. There may be more customers entering the botanical garden’s, but they may not be spending as much as previous years) for example.
Performance evaluation Systems serve a number of purposes, such as communication as to what is important to the organisation and providing feedback on performance levels and assessing whether objectives are being met. This allows management to communicating priorities, providing feedback on progress against targets and assessing the performance of employees, managers and organisational business units.
Visibility of what is important to an organisation helps focus employee effort and personal goals of employees with the organisations strategic objectives will ideally optimise achievement. If employees understand their measures, this is further enhanced.
For a performance evaluation system to effectively drive performance, it should have these attributes:
Employees understand the system.
Employees can clearly drive actual performance.
Performance targets are seen to be realistic and achievable.
The standard of performance expected is clearly communicated to employees.
The reward for meeting performance targets is understood by employees.
Bench marking can simply be comparing the company performance against another competitor or against a performance goal/number/budgeted figure and there is expectation for the company to meet or beat that.
The process for benchmarking generally follows this approach:
Identify the functions/activities to be benchmarked, and performance measures
Select benchmarking partners
Data collection and analysis
Establish performance goals
Benchmarks are measured as standards against an aspect of where the business is measured. The level where the target or benchmark should be at, while it isn’t the clearest indicator is used by organisations to identify best practice processes or metrics that are worked towards.
The benefits of benchmarking in today’s competitive environment is that organisations that undertake benchmarking exercises use best practice processes and metrics that they work towards achieving.
Some of the specific benefits of benchmarking are that it:
Helps to identify specific problem areas and eliminate guesswork.
Enables management to prioritise improvement opportunities.
Can be used to generate incremental change and reform.
Can be used to educate and train management and employees on the latest and best practices being used and achieved.
Challenges employees to work smarter instead of harder.
Shows that performance targets are achievable (since others are already achieving them).
Serves as a performance measurement tool.
The benchmarking process can also be linked to organisation strategy through six steps:
Identify the product, service or process to be benchmarked.
Identify and select the benchmarking target.
Collect and analyse data to identify underperforming areas below the standards of best practice.
Set benchmark targets.
Implement changes to achieve best practice.
Follow up to ensure that best practice is being achieved.
Balanced scorecard provides the traditional financial measures for company performance but provides little to no information with relation as to how it is performing in the future.
In the early 1990’s, the Balanced scorecard approach was developed by Robert S. Kaplan and David P. Norton, which to this day remains the more popular performance measurement systems in organisations. It measures organisational performance across four perspectives and are measured by the form of SMART KPIs
Specific: Confirms that the KPI that is developed should link to outcomes or goals, be clearly defined and understood and without multiple variables
Measurable: Provide an effective performance management mechanism which is measurable, achievable and in a timely and efficient manner.
This assesses not only whether the KPI is measurable but also if it is practical and cost effective to gather the information.
Action-oriented: Used to define an action or behaviour and to consider an action that is being measured by the KPI to change results.
Realistic: Based on facts, data collectable and achievable.
Timebound: Measured over a period of time and important for the period to be clearly defined to allow for results analysis.
Any KPI needs to reflect the organisation’s goals and be critical to its success. This is assessed against a target to understand how the goal is being delivered or achieved. These targets can be budget or forecast result, past performance achievement, goals or objectives and industry benchmarks.
These are measured over a period of time to assess trends, such as for example a number of customer complaints a month being measured to determine over the course of a year if there has been improvement or deterioration in the result.
This becomes a balanced scorecard when all the organisations strategic objectives can turn into multiple perspectives and link to the achievement of the organisations strategy through financial and non-financial measures, short-term and long-term focused measures and lead and lag measures.
Discuss at least eight non-financial indicators that can be used to evaluate the usefulness for The Royal Botanical Gardens.
Financial performance – Profits, Efficiency, Capital Structure
Competitiveness – Market Share, Position, Sales Growth
Resource utilisation – Productivity, Efficiency
Service Quality – Reliability, comfort, courtesy, communication
Innovation – Ability to provide new products, high level of service
Flexibility – Measured by Volume and delivery speed
Staff Turnover – Rate of Staff departures and/or sick days
Employee Satisfaction – High job satisfaction = Productivity
In the case of The Royal Botanical Gardens, this can be assessed through the following ways and through asking the necessary questions for example:
Financial performance: Are the performances that the Botanical Gardens host providing the necessary profits and sustainability as well as any renumeration from hosting flower shows etc.?
Would this boost the capital structure going forward if these events continued or does there need to be increased funding to the TRBG?
If yes, then there is no major need for changes.
If no, then there would need to be improvements made that can boost the Profitability, Efficiency and Capital of the events held at the TRBG. Whether through much more focus on the bigger events compared with the smaller events is an option that is worth considering.
Competitiveness: How is the TRBG positioned in terms of market share in comparison with other TRBG’s and Parks?
It is hard to compare TRBG’s with each other in a certain area as there tends to be one in each major city. Therefore, the only real barometer that can be used for comparative success is market share against local parks for a local perspective. For a national perspective, using comparative measures against other TRBG’s would be the best indicator for competitiveness.
Resource utilisation: Are the resources at TRBG being used in a productive and efficient manner for all events?
With all events, especially high profile at TRBG, there would be an expectation that resources would be used in a manner of higher priority to ensure that that all events are a success, especially the high-profile events. Ensuring that all events are successful is the key, as the impact of the events can not only impact within the organisation, but also outside of that if the events are extremely successful, as the flow on effects impact internally and externally.
Service Quality: Are events at TRBG providing comfort to all customers? Are staff communicating effectively and being courteous to all customers? Is the TRBG a reliable place to hold events?
With all organisations, the key aspect to success is the service quality that is delivered to ensure that the event is a success. If the customers are happy and enjoying the event and that all staff are providing high level service to ensure that the event is being delivered successfully for the customer’s, then that would be the major barometer that has been met.
Innovation and Flexibility: For repeat events, how can you provide innovative products to attract new and retain old customers?
Running an event first time can be an unknown as there wouldn’t have been the experience of having the event at the location. Evaluating the event via a review and providing new and innovative products to ensure that the customers not only come back but also the potential for new customers to come through is also the key. The best approach is doing this year by year.
Staff Turnover and Employee Satisfaction: What is the best measure as to staff departures and/or sick days?
This is a measure that would be set and evaluated year by year (or even month by month if necessary). The best approach would be comparing this to other TRBG’s and Parks along with potentially other businesses locally, given that TRBG’s are “regularly visited throughout the year by many local families and are an internationally well-known tourist attraction”
Evaluate the process you would employ to develop a suitable balanced scorecard for The Royal Botanical Gardens and give examples of measures that would be incorporated within it.
The best approach to develop the balanced scorecard would be to:
Clarify Strategy – Through Objectives and measures that clarifies the understanding of the strategy to develop a consensus throughout
Strategic Objectives – Translating high level objectives to operational objectives and communication of the strategy throughout.
Planning and Target Setting – Aim for ambitious but achievable targets and ensure they are set for each perspective.
Strategic Feedback – Feedback recorded to executives and ensuring the strategy is proceeding as planned
All of these perspectives need to be considered in the balanced scorecard objectives.
For the customer, this perspective considers areas for example such as customer satisfaction and how this adds value to customers within the organisation. This includes all inquiries of both minor and major scale to all visitors.
Internally, the processes within the organisation needs to perform well to ensure its success and how the procedure would be in relation to enquiries. Learning is an area where constant improvement is required, especially through training and investment for example in modern equipment. Clarifying the strategy to implement the policy and consistent review of the policy is important.
Implementing a longer-term strategy outlining the short, medium and longer-term goals also provides a critical part to the success, which can be outlined through communication, evaluation and review along with goal setting. This and subject to regular review can provide TRBG staff and clients the necessary goal setting that gives the best opportunity to implement the policies set.
Amongst the regular review, the ability to plan and set targets that are ambitious and achievable and that they are set for each perspective in place is another crucial aspect in relation to the TRBG success. Flexibility and an ability to provide clear and concise guidelines without confusion or ambiguity is also key to success.
When regularly reviewing the company policy, ensuring that feedback is supplied amongst reviewing allows TRBG to provide clear guidance on the implementation of previous policy/ies and gives TRBG the best chance to either adjust, keep or even in the worst case scenario, scrap a policy.