1. EVALUATING PERFORMANCE, MONITORING NEW DEVELOPMENTS AND INITIATING CORRECTIVE ADJUSTMENTS By: SANDRA G DOFITAS MBA-Ex11 MBA-Ex11

2. PERFORMANCE EVALUATION a periodical assessment & analysis of the performance of an organization or some of its units a periodical assessment & analysis of the performance of an organization or some of its units look for ways to measure the financial & economic consequences of past management decisions that shaped investments, operations & financing over time look for ways to measure the financial & economic consequences of past management decisions that shaped investments, operations & financing over time

3. PERFORMANCE EVALUATION Important Questions: Important Questions: – Were all resources used effectively? – Was the profitability of the business met? Or did it exceed expectations? –Were the financing choices made prudently?

4. Performance Evaluation (Internal): ACTIVITIES Financial Analysis Financial Analysis Organization’s Performance, Review and Analysis (PRA) Organization’s Performance, Review and Analysis (PRA)

5. PERFORMANCE EVALUATION basis for the evaluation is the pre- determined performance standard set by the organization basis for the evaluation is the pre- determined performance standard set by the organization

6. Ratio Analysis Ratio analysis is primarily used to compare a company's financial figures over a period of time Ratio analysis is primarily used to compare a company's financial figures over a period of time an excellent method for determining the overall financial condition of a business an excellent method for determining the overall financial condition of a business puts the information from a financial statement into perspective, helping to spot financial patterns that may threaten the health of your company. puts the information from a financial statement into perspective, helping to spot financial patterns that may threaten the health of your company. In isolation, a financial ratio is a useless piece of information In isolation, a financial ratio is a useless piece of information

7. By definition, a ratio can relate any magnitude to any other – the choices are limited only by the imagination. By definition, a ratio can relate any magnitude to any other – the choices are limited only by the imagination. To be useful, its meaning & limitations have to be understood. To be useful, its meaning & limitations have to be understood. Ratio

8. Ratio Analysis Analyst must first define the following elements: Analyst must first define the following elements: –The viewpoint taken –The objective of the analysis –The potential standards of comparison

9. Ratio Analysis 3 Major Viewpoints of Financial Performance: 3 Major Viewpoints of Financial Performance: –The Managers –The Owners (Investors) –The Lenders & Creditors

10. Ratio Analysis Manager’s Point of View: Manager’s Point of View: –Operational Analysis –Resource Management –Profitability

11. Ratio Analysis Owner’s Point of View: Owner’s Point of View: –Investment Return –Disposition of Earnings –Market Indicators

12. Ratio Analysis Lender’s Point of View: Lender’s Point of View: –Liquidity –Financial Leverage (the use of borrowed funds to acquire investments) –Debt Service

13. Monitoring New Developments ACTIVITIES Organization’s Performance, Review and Analysis (PRA) Organization’s Performance, Review and Analysis (PRA) Appraisal of Employees’ Performances Appraisal of Employees’ Performances Regular Auditing Regular Auditing Implement Computer System to Manage the Company’s Performance Implement Computer System to Manage the Company’s Performance

23. Performance Evaluation (External): Turbulent Changes in the organization’s external environment Turbulent Changes in the organization’s external environment - competitor’s tactical moves - disruptive technology - changes in economic & political conditions conditions - sudden regulatory changes

24. Performance Evaluation (External): Competitive-Response Competitive-Response –to “sense & respond” to changes in its external environment

25. Competitive-Response Sense & Capture Sense & Capture Create Intelligence Create Intelligence Analyze & Inform Analyze & Inform Deliberate & Decide Deliberate & Decide Respond & Engage Respond & Engage Measure & Correct Measure & Correct Intelligence Repositories Intelligence Repositories Alerts & Broad Access Alerts & Broad Access Reporting Based on Pattern Recognition Reporting Based on Pattern Recognition Escalation Escalation Scripting Scripting Competitive Scorecards Competitive Scorecards ACTIVITIES BEST PRACTICES

26. Identification of Deviations (Actual Performance vs Standards) Pay attention only to exception (ex. areas where deviations are significant) Pay attention only to exception (ex. areas where deviations are significant) Analyze the underlying causes of deviations from the required level of performance Analyze the underlying causes of deviations from the required level of performance

27. Corrective Adjustments/Actions Changing certain conditions (like replacement of a machine, better service to customers, search for more reliable suppliers) Changing certain conditions (like replacement of a machine, better service to customers, search for more reliable suppliers) Training, transfers, organizational adjustments in authority (deviations caused by ineffective supervision or lack of adequate expertise, interpersonal conflicts, etc.) Training, transfers, organizational adjustments in authority (deviations caused by ineffective supervision or lack of adequate expertise, interpersonal conflicts, etc.)

28. Corrective Adjustments/Actions Revision of objectives, strategies, policies, procedures, etc. (deviation caused by defective standard of performance) Revision of objectives, strategies, policies, procedures, etc. (deviation caused by defective standard of performance) Note: Changes in standards may be required by factors beyond management’s control – e.g. net profit fell below expectation due to rise in prices of raw materials)

29. “I am careful not to confuse excellence with perfection. Excellence, I can reach for; perfection is God's business.” Michael J. Fox Michael J. Fox Michael J. Fox