ojijo 6 s business performance measurement matrix
TRANSCRIPT
¥ BUSINESS PERFORMANCE MEASUREMENT (OJIJO 6S PERFORMANCE MATRIX)
(extracted from Ojijo’s Sell Something: Hoe Do Entrepreneurs Think? How Do I Build A Business System?)
Introducing Performance Measurement ق
Ojijo writes in his all time classic, The Gift of e11even Moves to Make Me Wealthy, ‘The purpose of every activity is results.’ The organization that exists to conduct business has results that it should meet. And
the results of a business entity are profits. Indeed, Milton Friedman, the great American economist noted,
‘the responsibility of business is profits; the bottom line of business is returns to
shareholders.’
He further went ahead and said, ‘the business of business is business.’ However, in order to earn profit, the business must carry out various activities,
targeting various stakeholders, and realizing different direct and immediate or long term results, results, which are all meant to feed into the final result, which is profit. The progress of there activities need to be measured, so that as the owner of my business, I know whether I am on track, off-track, or stagnating, not moving at all towards my goals and desired results.
Performance measurement is the process whereby an organization establishes the
parameters within which programs, investments, and acquisitions are reaching the desired results.
Performance measurement is the process of monitoring and evaluating the achievement of results in various departments of the business. It is based on the philosophy that whereas the end result of business enterprise is to make profit, there are other intermediate, immediate and short/medium/long term indirect goals that will need to be achieved in order to make the profitable sale and earn return on investments (ROI).
The company hence sets performance measures, called matrices, based on which results must be achieved by the six stakeholder of the company, for the company to ultimately make profit. The key areas are as below:
Shoppers (clients): What must the company do to achieve high quality قproducts (high return for clients); at low prices (competitive costs); and with quick delivery (timely)?
,Suppliers: are they delivering the best quality products, at the least price قand timely;
Shareholders: are the shareholders and investors getting increasing return قon investments, cash flow, and net profit through increased sales, sales growth, market share increase;
Staff: is the staff skilled, experienced and motivated? Is the board قprofessional and run as per corporate governance standards?
State: is the company compliant with legal, policy and regulatory قrequirements for the particular industry, including labour, environmental, health and safety requirements, licensing, etc?
,Society: is the company contributing to the community through, inter alia قstrategic partnerships with public, private, civil society, and community; internships placements, and volunteering activities by staff; etc.
Benefits of Performance Measurement ق
Measuring an organization’s performance is both necessary and vital. An
organization operating without a performance measurement system is like an airplane flying without a compass. The purpose of measuring performance is not only to know how a business is performing but also to enable it to perform better. Indeed,
‘The fundamental purpose behind measures is to improve performance.’ Even measures that are not directly connected to improving performance (like
measures that are directed at communicating better with the public to build trust) are means to achieving that ultimate purpose, which is improved performance. If one ‘gets’ performance measurement right, the data generated will tell the user where the business is, how it is doing, and where it is going. In short, it is a report card for a business that provides users with information on what is working well and what is not. As the old management adage goes,
‘If you cannot measure it, you cannot manage it.’
The ultimate aim of implementing a performance measurement system is to improve the performance of an organization so that it may better serve its
stakeholders, and the stakeholders are classified as per the elements of corporate governance, being the 6s, namely, staff, shareholders, shoppers, state, suppliers and society.
6S Performance Measurement Matrix ق
Performance in organizations is based on the stakeholders to the organization. A
traditional organization has six (6) stakeholders, namely:
€ Shoppers
As Mahatma Gandhi noted decades past, ‘the customer is the reason why we (the company) are here’ The three main areas of customer concern are time, quality and cost. If customers are not satisfied, they will eventually find other suppliers that will meet
their needs. However, despite the central importance of the customer; customer capital is startlingly the worst managed of all intangible assets. My goal will be to retain the one I have, and then get the one I do not have. Indeed, research indicates that it costs five (5) times more to get a new customer, then to retain the old one. Customer loyalty is key.
Metrics based on this perspective allow the managers to know whether the products
(goods and services) conform to customer requirements (the mission). In the olden days, the seller told the buyer, ‘quality, speed and cost, choose any two.’ Today, a company that cannot deliver all the three is out of the race. The metrics to be measured include: Time
- On time deliveries of service
- Online order entry form/query - Distribution efficiency
Quality
- High quality & niche based products
- Technology leadership - Research & development/new products - Products customization (to meet client needs) - Assistance in solving technical problems/ability to respond to quality problems
(customer service)
Cost
- Competitive pricing - Automated financial system (webERP based) - Reduced inventory costs - Cost saving initiatives
€ Shareholders
The shareholders are the owners of the company. Their main interest is in the
bottom-line of the business, through growth and profitability. However, as shareholders, they also need to exercise their shareholder rights in the running of the organization.
Metrics to be measured include: Shareholders Rights - Communicating information - Participate in general meetings - Effective and efficient board /sound board management practices Growth - Expand into global markets
- Sales growth - Increased orders - Increased market share
Profitability - Return on assets / investment
- Return on equity/earnings per share - Low cost base (unit cost vs. Competition) - Reduced overhead expenses
€ Suppliers
The organization should have streamlined relationships with the suppliers. As an
entrepreneur, I should work with the high-quality, low-cost supplier, while also supporting the supplier. And in working with the supplier, I will verify that they can deliver on time, high quality, and reasonably priced products. However, good the supplier is, or however close we are in personal relationships, I will be reminded of the age old advice of Donald Trump, the billionaire real estate mogul, socialite and celebrity,
‘trust but verity.’
Metrics to be measured include: Cost
- Competitive pricing - Automated financial system (webERP based) - Reduced inventory costs - Supplier cost saving initiatives Quality
- High quality & niche based raw materials
- Technology leadership - Research & development/new products - Products customization (to meet client needs) - Assistance in solving technical problems/ability to respond to quality problems Time/delivery - On-time delivery of supplies - Effective supply chain system - Supplier’s booking in procedures
€ Staff
For the organization to achieve its bottom line, it needs people; the employees, or human resource. In a knowledge-worker organization, people -- the only repository of knowledge -- are the main resource. The policy for human resource should hence make sure that the employees have skills (both job/trade specific skills and transferrable skills); motivation to work and enabling environment for work. A skilled staff who is motivated in an enabling environment will produce optimum results.
The performance metrics include the following:
Skills
- Job skills development program for employees - Transferable skills program (communication, team work, ICT, public speaking,
leadership, management, etc) - Staff mentorship & coaching - Training fund for capacity building - Annual assessments / quarterly reviews
Motivation
- Competitive salaries - Non-financial reward schemes (Promotion/upward career movement, etc) - Benefits/bonus pay per personal performance - Incentives
Enabling Environment
- Conflict resolution - Capacity utilization - ICT/technological environment (paperless/green office) - Corporate Governance (The Board, Leaders/Directors, Managers &
employees)
€ Society
The organization should have a socially responsible mode of conducting business, including production, including waste disposal and product quality. Further, the organization should engage in giving back to the community through corporate social responsibility (CSR) initiatives.
The organization should have a clear checklist of other organisations or individuals
who partner with it in the realization of its goals. Through strategic partnerships, the organisation will build her institutional capacity and also add value to other
stakeholders in the field for mutual benefit to leverage strengths and achieve objectives.
The performance metrics include the following:
Company Engagement
- Ethical /environmentally sustainable practices - Contributions to community projects/disaster - Provision of internship and volunteer placement
Staff Engagement
- Employees Support Outside Activities Company Strategic Partnerships - Partnerships with the government/public sector (public private partnerships)
- Partnership with private sector
- Partnerships with civil society, including donors - Membership in trade/industry associations
€ State
The organization should have a clear checklist of playing by the rules. The legal
compliance should be up to date, with periodic reviews. The performance metrics include the following:
Business registration, licenses, and permits ق Tax, accounting and auditing compliance ق Other reporting and due diligence compliance ق
€ Business Performance Measurement Matrix (Ojijo 6s Matrix)
Performance Matrices Measurement
Performance
Matrix
Thematic Areas/
Parameters
Activities/ Strategies Results
Staff
Skills
Job skills development
program for OjijoGroup Ltd
staff has a skills development
program
Transferable skills program (communication, team work,
ICT, public speaking,
leadership, management,
etc
staff has participated in transferable skills training
OjijoGroup Ltd mentorship
& coaching
staff has an assigned mentor
Training fund for capacity
building
staff has a fund for capacity
building
Annual assessments / quarterly reviews
staff has participated in quarterly review
Corporate Governance (The
Board, Leaders/Directors,
Managers & OjijoGroup Ltd
)
The board complies with
corporate governance
requirements of the
Companies Act & regulations,
and board manual
OjijoGroup Ltd , Knowledge
Management
(Organisational Learning)
staff was trained and shared
knowledge on intranet, or
through learning session
Motivation Competitive salaries staff is satisfied with salary
Promotion/upward career
movement
staff
Benefits/bonus pay per
personal performance
staff has benefits
Incentives Virat staff has incentives
Enabling
Environment
Conflict resolution staff understands and uses
the grievance reporting,
dispute resolution and
disciplinary procedures
Capacity utilization staff fully utilizes his skills
ICT/technological
environment
(paperless/green office)
staff uses the technological
systems at work
OjijoGroup Ltd Liability
Insurance fund
staff liability is covered by
liability fund
Shoppers Time On time deliveries of
service
OjijoGroup Ltd meets
deadlines
Online order entry
form/query
OjijoGroup Ltd uses and
responds to online forms
Distribution efficiency OjijoGroup Ltd delivers
services to clients on time
Quality High quality & niche based products
OjijoGroup Ltd delivers the product to the niche market
Technology leadership OjijoGroup Ltd uses
technology with clients
Research &
development/new products
OjijoGroup Ltd participates in
research and development of
new products
Products customization (to
meet client needs)
OjijoGroup Ltd understands
products customization
Assistance in solving technical problems/ability to
respond to quality problems
OjijoGroup Ltd assists clients in solving technical problems
Cost Competitive pricing OjijoGroup Ltd understands
and explains to client the
competitive pricing model
Automated financial system
(webERP based)
OjijoGroup Ltd urges clients to
use the webERP system
Reduced inventory costs OjijoGroup Ltd minimizes
inventory
Cost saving initiatives OjijoGroup Ltd implements
cost saving initiatives.
Shareholders Shareholders
Rights
Communicating information OjijoGroup Ltd communicates
information to shareholders
Participate in general
meetings
OjijoGroup Ltd invites
shareholders to meetings
Effective and efficient board
/sound board
OjijoGroup Ltd ensures the
board is effective and efficient
management practices OjijoGroup Ltd implements
board governance as per law
and board polices/manual
Security of investment OjijoGroup Ltd ensure security
of investment
Growth Expand into global markets OjijoGroup Ltd ensures
expansion of enterprise
Sales growth OjijoGroup Ltd ensures sales
growth
Increased orders OjijoGroup Ltd ensures
increase of orders
Increased market share OjijoGroup Ltd ensures
increased market share
Profitability Return on assets /
investment
OjijoGroup Ltd ensures return
on assets
Return on equity/earnings
per share
OjijoGroup Ltd ensures return
on equity
Low cost base (unit cost vs. Competition)
OjijoGroup Ltd implements measures to ensure low cost
base compared to competition
Reduced overhead
expenses
OjijoGroup Ltd ensures
reduced overhead expenses
Suppliers Cost Competitive pricing OjijoGroup Ltd chooses
supplier with competitive
prices
Automated financial system
(webERP based)
OjijoGroup Ltd chooses
supplier who uses web and IT resources
Reduced inventory costs OjijoGroup Ltd chooses
supplier with reduced
inventory costs
Supplier cost saving
initiatives
OjijoGroup Ltd chooses
supplier with cost saving
initiatives
Quality High quality & niche based
raw materials
OjijoGroup Ltd chooses
supplier with high quality niche supplies
Technology leadership OjijoGroup Ltd chooses
supplier with technology
leadership
Research &
development/new products
OjijoGroup Ltd chooses
supplier with new products
Products customization (to
meet client needs)
OjijoGroup Ltd chooses
supplier with customized
products
Assistance in solving
technical problems/ability to
respond to quality problems
OjijoGroup Ltd chooses that
assists OjijoGroup Ltd staff
with queries
Time/delivery On-time delivery of supplies OjijoGroup Ltd chooses
supplier with on-time delivery
record
Effective supply chain
system
OjijoGroup Ltd chooses
supplier with effective supply
chain system
Supplier’s booking in
procedures
OjijoGroup Ltd chooses
supplier with efficient booking
in procedures
Society
Company
Engagement
Ethical /environmentally
sustainable practices
OjijoGroup Ltd engages in
ethical practices, did not
engage in unethical practice
OjijoGroup Ltd
Engagement
Contributions to community
projects/disaster
OjijoGroup Ltd participated in
community service initiative
Provision of internship and volunteer placement
OjijoGroup Ltd mentored an intern, volunteer placement
OjijoGroup Ltd support
outside activities
(volunteering)
OjijoGroup Ltd volunteered in
an activity outside office work
Strategic Partnerships with the OjijoGroup Ltd established &
Partnerships government/public sector
(public private partnerships)
engaged in/participated in
strategic partnerships
Partnership with private
sector
OjijoGroup Ltd participated in
partnership with private sector
Partnerships with civil society, including donors
OjijoGroup Ltd participated in partnership with civil society
Membership in
trade/industry associations
OjijoGroup Ltd ensured
membership with trade
association/industry
association
State Registration &
Licensing
Business registration,
licenses, and permits
OjijoGroup Ltd has ensured
legal business registration,
licensing, and permits
Insurance Regulations
Compulsory insurance OjijoGroup Ltd has ensured compliance with laws
Employee
Interests
Pension scheme for
OjijoGroup Ltd
OjijoGroup Ltd has ensured
pension scheme for staff
Environmental And
Occupational
Health & Safety
(EOHS)
Environmental Health and
Safety Regulations (EHS)
OjijoGroup Ltd has ensured
environmental, health and
safety regulations are followed
Tax Tax, accounting and
auditing compliance
OjijoGroup Ltd has ensured
tax, audit and accounting compliance
Reporting
requirements
Other reporting and due
diligence compliance
OjijoGroup Ltd has ensured
due diligence in business
operations