Aligning Performance To Organizational Goals and Objectives

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Aligning Performance To Organizational Goals and Objectives

  1. 1. Aligning Performance To Organizational Goals and Objectives
  2. 2. Common Obstacles to Performance Alignment… • Organizational culture resists performance management efforts • Departments don’t share information • Lack of vendor integration • Insufficient information • Access to information •FREE Performance Management Kit at www.performance-success.com Lack of accountability
  3. 3. The Performance Lifecycle FREE Performance Management Kit at www.performance-success.com
  4. 4. Linking Corporate Strategy to Executive, Managerial, and Individual Goals FREE Performance Management Kit at www.performance-success.com
  5. 5. 4 Performance Alignment Areas • Division/departmental performance alignment • Workforce performance alignment • Financial performance alignment • Resource performance alignment FREE Performance Management Kit at www.performance-success.com
  6. 6. Aligning Business Units to Organizational Objectives Define organizational goals Organizational Mission & Goals Identify how each business unit contributes toward reaching organizational goals Information Other Business Human Resources Accounting Develop strategy to achieve goals Technology Units within each business unit Identify bottlenecks and improve inter-connected processes among Processes Processes Processes business units Align employee performance to maximize business unit support in reaching organizational goals Ensure that technology investments support organizational goals Technology Optimize system performance, utilize business intelligence, automate reporting capabilities Group Server Develop performance measures Decisions that drive decision making and Knowledge Performance Reports progress toward organizational Mgmt goals FREE Performance Management Kit at www.performance-success.com
  7. 7. Aligning Workforce Performance to Organizational Objectives Functions within workforce performance management include: • Recruit and Hire Management • Compensation Management • Incentive Management • Goals Management • Learning Management • Competency Management • Performance Measurement FREE Performance Management Kit at www.performance-success.com
  8. 8. Aligning Workforce Performance to Organizational Objectives (cont) FREE Performance Management Kit at www.performance-success.com
  9. 9. Aligning Financial Performance to Organizational Objectives Steps to Maximize Financial Performance: 3.Identify which divisions within your organization are most responsible for carrying out the success of each metric. 4.Examine the processes for each those divisions 5.Redefine the processes that are out of date, or those which tools exist for automation or process improvement 6.Baseline the performance for the processes that have the most effect on the outcome of the financial metric 7.Set performance measures for those processes and monitor how the improvement of those processes affects the overall financial metric over time FREE Performance Management Kit at www.performance-success.com
  10. 10. Aligning Financial Performance to Organizational Objectives Common Financial Metrics • Return on Net Assets Ratio • Net Operating Revenues Ratio • Viability Ratio • Debt Burden Ratio • Primary Reserve Ratio • Customer Profitability Metrics FREE Performance Management Kit at www.performance-success.com
  11. 11. Additional Financial Metrics – Financial Performance Ratios Financial Performance Ratios Return on Net Assets = Change in Net Assets / Total Beginning Net Assets Net Operating Revenues Ratio = Income before Other Items / Adjusted Net Operating Revenues Viability Ratio = Expendable Net Assets / Total Debt Debt Burden Ratio = Debt Service / Total Expenses Primary Reserve Ratio = Expendable net assets / Total Expenses FREE Performance Management Kit at www.performance-success.com
  12. 12. Return on Net Assets = Change in Net Assets / Total Beginning Net Assets Net Operating Revenues Ratio Metrics – Additional Financial = Income before Other Items / Liquidity Ratios Adjusted Net Operating Revenues Viability Ratio = Expendable Net Assets / Total Debt Debt Burden Ratio = Debt Service / Total Expenses Primary Reserve Ratio = Expendable net assets / Total Expenses Liquidity Ratios Current Ratio = Current Assets / Current Liabilities Quick Ratio = (Current Assets – Inventory) / Current Liabilities Cash Ratio = Cash & Equivalents / Liabilities Activity Ratios FREE Performance Management Kit at www.performance-success.com
  13. 13. Primary Reserve Ratio = Expendable net assets / Total Expenses Liquidity Ratios Additional Financial Metrics – Activity Current Ratio = Current Assets / Current Liabilities Ratios Quick Ratio = (Current Assets – Inventory) / Current Liabilities Cash Ratio = Cash & Equivalents / Liabilities Activity Ratios Total Asset Turnover = Sales / Total Assets Fixed Asset Turnover = Sales / (Net, Plant, Property, Equip) Capital Turnover = Sales / (Interest Bearing Debt + Stockholder’s Equity) Accts Receivable Turnover = Sales / Accounts Receivable Accts Receivable Days Outstanding = 365 days / (Accts Receivable Turnover) Inventory Turnover = Cost of Goods Sold / Inventory Inventory Days Outstanding = 365 days / Inventory Turnover FREE Performance Management Kit at www.performance-success.com
  14. 14. Capital Turnover = Sales / (Interest Bearing Debt + Stockholder’s Equity) H Accts Receivable Turnover = Sales / Accounts Receivable H Additional Days OutstandingMetrics/ – Receivable Accts Receivable Financial = 365 days (Accts Leverage Ratios Turnover) L Inventory Turnover = Cost of Goods Sold / Inventory H Inventory Days Outstanding = 365 days / Inventory Turnover L Leverage Ratios Debt to Equity = Total Liabilities / Stockholder’s Equity L Financial Leverage = Total Assets / Stockholder’s Equity L Capitalization Ratio = (STD + CPLTD + LTD) / (Interest Bearing Debt + Stockholder’s Equity) L Interest Coverage = (PTI + Interest Expense) / Interest Expense H Profitability Ratios FREE Performance Management Kit at www.performance-success.com
  15. 15. Additional Financial Metrics – Profitability Ratios Profitability Ratios Net Margin = Net Income / Sales Pre-tax Margin = Pre-Tax Income / Sales Operating Margin = Earnings Before Interest and Taxes / Sales Gross Margin = (Sales – COGS) / Sales Return on Assets = Net Income / Total Assets Return on Net Assets = Net Income / Net Assets Return on Capital = Net Income / (Interest Bearing Debt + Stockholders’ Equity) Return on Equity = Net Income / Stockholders’ Equity FREE Performance Management Kit at www.performance-success.com
  16. 16. Additional Financial Metrics Market Ratios Price Earnings = Stock Price / EPS Market to Book = Market Capitalization / Stockholder’s Equity Dividend Yield = Dividend / Stock Price t (t-1) (t-1) Shareholder Return = ((P - P ) + D) / P FREE Performance Management Kit at www.performance-success.com
  17. 17. Aligning IT/Systems to Organizational Objectives FREE Performance Management Kit at www.performance-success.com
  18. 18. Questions to Ask Regarding IT Strategic Alignment • Which of your business unit’s processes support the organization’s mission the most? Do the metrics we report on drive those processes? • Are you satisfied with the current performance throughout your organization? • Do our metrics address the company's critical needs? • Do our reports provide the required information to make business decisions? Do they identify areas of misalignment? • Do IT initiatives appear to be prioritized appropriately? FREE Performance Management Kit at www.performance-success.com
  19. 19. Common Pitfalls to Avoid When Aligning Performance to Strategy • Inflexibility • Insufficient vertical alignment • Insufficient horizontal alignment FREE Performance Management Kit at www.performance-success.com

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