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Corporate performance analysis


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Corporate performance analysis

  1. 1. Corporate Performance Analysis Prof. Dr. Ali Elsalmi
  2. 2. Contents <ul><li>Introduction </li></ul><ul><li>Course objectives </li></ul><ul><li>Course contents </li></ul><ul><li>Course requirements </li></ul><ul><li>Assignments </li></ul><ul><li>Course evaluation </li></ul>
  3. 3. Introduction <ul><li>The crucial role of corporations in modern business systems, </li></ul><ul><li>The limited value of function/ department/ individual performance evaluation systems, </li></ul><ul><li>The multiplicity of stakeholders and the need for a fair, objective, and comprehensive corporate performance evaluation system, </li></ul><ul><li>The inadequacy of traditional financial-based performance evaluation systems, </li></ul><ul><li>The risks and disasters that could happen in the absence of a total corporate performance analysis and evaluation system. </li></ul>
  4. 4. Objectives <ul><li>Introduce the concept of corporate performance as a measure of total corporate effectiveness and efficiency, </li></ul><ul><li>Analyze the components of total corporate performance and define the critical variables affecting each of them, </li></ul>
  5. 5. Objectives <ul><li>Compare different approaches to the issue of corporate performance analysis [evaluation], </li></ul><ul><li>Study cases of corporations applying successful and less successful total performance schemes. </li></ul><ul><li>Develop an integrated approach to corporate performance analysis and define its organizational, informational, and behavioral requirements. </li></ul>
  6. 6. Concept of Corporate Performance Analysis
  7. 7. Concepts of Corporate Performance Analysis <ul><li>Why Measure Performance? </li></ul><ul><ul><li>The basic purpose of any measurement </li></ul></ul><ul><ul><li>system is to provide feedback, relative </li></ul></ul><ul><ul><li>to corporate goals, that increases the </li></ul></ul><ul><ul><li>corporation’s chances of achieving these </li></ul></ul><ul><ul><li>goals efficiently and effectively. </li></ul></ul><ul><ul><li>Measurement gains true value when used as the basis for timely decisions. </li></ul></ul>
  8. 8. Concepts of Corporate Performance Analysis <ul><li>The ultimate aim of a performance measurement system: </li></ul><ul><li>To improve the performance of the </li></ul><ul><li>organization. If management can get </li></ul><ul><li>performance measurement right, the </li></ul><ul><li>data it generates will tell managers where </li></ul><ul><li>the company is, how it is doing, and </li></ul><ul><li>where it is going. </li></ul>
  9. 9. Concepts of Corporate Performance Analysis <ul><li>Enterprise Performance Management (EPM) </li></ul><ul><li>For competitive reasons, management </li></ul><ul><li>needs to measure the end-to-end </li></ul><ul><li>performance of the enterprise directly. </li></ul><ul><li>Enterprise Performance Management </li></ul><ul><li>( EPM ), that can be defined as the Business </li></ul><ul><li>Process Management System (BPMS), </li></ul><ul><li>provides the foundation for new enterprise </li></ul><ul><li>architecture. </li></ul>
  10. 10. Concepts of Corporate Performance Analysis <ul><li>Traditionally, business measurement - what analysts call &quot;business intelligence&quot; - has been based on the analysis of data extracted after the fact from past operations of implicit business processes. </li></ul>
  11. 11. Concepts of Corporate Performance Analysis <ul><li>The BPMS , on the other hand, enables business analysts to do real-time process analysis - to directly measure the business value of explicitly defined business processes . </li></ul><ul><li>These processes can now be optimized on the fly without the need for additional software development, tremendously simplifying the management of their design over their lifetime. </li></ul>
  12. 12. Concepts of Corporate Performance Analysis <ul><li>Balanced Scorecard </li></ul><ul><li>The Balanced Scorecard is a framework </li></ul><ul><li>for designing a set of measures for </li></ul><ul><li>activities chosen by management as being the </li></ul><ul><li>key drivers of the business. </li></ul><ul><li>By having four distinct perspectives (financial, </li></ul><ul><li>customer, internal process and innovation </li></ul><ul><li>and learning) it promotes a more holistic </li></ul><ul><li>View of the business. </li></ul>
  13. 13. Concepts of Corporate Performance Analysis <ul><li>Benchmarking </li></ul><ul><li>Benchmarking is the approach of </li></ul><ul><li>continuously measuring products, </li></ul><ul><li>services, and practices against </li></ul><ul><li>Tough standards set by competitors </li></ul><ul><li>or renowned leaders in the field. </li></ul>
  14. 14. Concept of Corporate Performance Analysis <ul><li>Economic Value Added (EVA) </li></ul><ul><li>Economic Value Added (EVA), or economic rent , is a widely recognized tool that is used to measure the efficiency with which a company has used its resources. In other words, EVA  is the difference between return achieved on resources invested and the cost of resources. Higher the EVA, better the level of resource utilization. </li></ul>
  15. 15. Concept of Corporate Performance Analysis <ul><li>Measuring Coach's Effectiveness </li></ul><ul><li>In coaching , the coach's effectiveness is measured by the success of those he or she coaches. </li></ul>
  16. 16. Concept of Corporate Performance Analysis <ul><li>Measuring Cleaner Production </li></ul><ul><li>Measuring cleaner production (CP) is of critical importance. Management must use appropriate indicators, which are generally applicable, yet specifically measurable, and address both the productivity and environmental aspects of the system in an integrated fashion. The indicators should enable not only estimation of the CP of a product or process and its comparison with other equivalents, but also improvement of the existing process or product and the development of new products. </li></ul>
  17. 17. Concept of Corporate Performance Analysis <ul><li>Life Cycle Assessment (LCA) and Total Cost Assessment (TCA) are two types of CP indicators that help managers understand the practical implications of CP and make right decisions. </li></ul>
  18. 18. Concept of Corporate Performance Analysis <ul><li>Jack Welch , the former legendary CEO of GE,  made quality the job of every employee . Senior manager's bonuses were tied to Six Sigma results. Welch credits the Six Sigma quality initiative with &quot;changing the DNA of the company&quot;, meaning that it has had a greater impact on the productivity of GE than any other program. To help their businesses to track progress in the six sigma program, GE designed five corporate measures : Customer satisfaction ; Cost of poor quality ; Supplier quality ; Internal performance ; and Design for manufacturability . </li></ul>
  19. 19. Inputs Processes Outputs The Corporate Performance Analysis System Information on Actual vs. Planned Performance Measurement Comparison Diagnosis Inference Deciding Evaluations Corrective actions Internal Environment External Environment
  20. 20. Approaches to Corporate Performance Analysis
  21. 21. Approaches to Corporate Performance Analysis <ul><li>The advantages and disadvantages of each approach, </li></ul><ul><li>The prerequisites of each approach, </li></ul><ul><li>Are the different approaches mutually exclusive? </li></ul>
  22. 22. Approaches to Corporate Performance Analysis <ul><li>Use Lagging indicators, </li></ul><ul><ul><li>after the fact based on historical data], </li></ul></ul><ul><li>Single-tracked, </li></ul><ul><ul><li>focuses only on financial measures, </li></ul></ul><ul><li>Strategically isolated, </li></ul><ul><ul><li>Not linked to corporate strategies and strategic plans, </li></ul></ul><ul><li>Output oriented, </li></ul><ul><ul><li>Stresses processes an utilized resources [inputs] and achieved production, but neglect OUTCOMES. </li></ul></ul>
  23. 23. Modern Approaches <ul><li>Concurrent , </li></ul><ul><li>Multidimensional measurements of ongoing operations in all segments of the business, </li></ul><ul><li>Balance financial and non-financial measures, </li></ul><ul><li>Balance inputs, processes, outputs and outcomes measures, </li></ul>
  24. 24. Modern Approaches <ul><li>Balance tangible and intangible results, </li></ul><ul><li>Balance leading [future performance drivers] and lagging indicators, </li></ul><ul><li>Establish cause – effect links between inputs, outputs and outcomes, </li></ul><ul><li>Measure performance against strategic mission, vision, goals, and objectives, </li></ul><ul><li>Aims at performance improvement. </li></ul>