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STRATEGY MAPS
Graphical representations of main objectives or measures within a BSC
Show causal linkages between measures and perspectives
Communicate the strategy to managers and employees (what and how)
They set out cause and effect relationships that form an action plan for implementing strategy and evaluating performance
Evaluating Effective performance measurement systems
integrated PM Link to strategy and goals of the organization > Recognise controllability
systems. Embrace participation and empowerment > Be simple
Emphasise the positive > Be timely
Include benchmarking > Include only a few PM
Link to rewards
LECTURE 6: PLANNING
Why plan ahead? Planning is what connects strategy to action
Planning is basically the process of deciding about the goals of an organization as well as the means to attain those goals.
Planning involves decision-making in advance: provides information, identifies information gaps, clarifies assumptions of
decisions
Planning helps to coordinate activity and manage interdependencies: aligns goals of different functional areas of an
organization; identifies and manages interdependencies in work activities of different group/individuals.
Planning directs effort and behavior: sets out the goals/expectations of different functional areas of the organization;
provides the standards/targets to be achieved; clarifies the behavior expected from employees
Using PMS for Planning happens before anything else does
planning Planning involves choosing goals and setting targets in relation to them
Budgeting: a budget is a detailed plan summarizing the financial consequences of an organisations operating activities for
a specific future time period.
What are the different types of budgets?
OPERATING BUDGETS:
1. Specifies how operations will be carried out to meet the forecasted sales demand
Includes
2. Sales budget: estimated sales units and revenues from the organisations products:
3. Internal factors: past sales levels, new products panned, intended pricing policy and planned advertising and
promotion
4. External factors: general economic trend, specific trends, , politics and legal events, expected activities of competitors
and customers.
5. Costs budget:
6. Purchase budget: quantity and costs of goods it needs to purchase to satisfy expected sales revenue
7. Production budget: number of production units to be manufactured to meet sales and satisfy inventory requirements,
including budgeted costs for direct materials, direct labour and overheads.
8. Cost of service delivery budget: shows how the expected demand for services will be met
9. Expense budgets: details the costs of operations needed to support forecast sales demand
Just as manufacturer, retailers/wholesalers and service firms have different types operations resulting in different profit and
loss statements, they will have different types of operating budgets.
Previous periods actual performance Previous periods actual performance + Previous periods actual performance
x% adjusted for expected changes to
operations
Rolling average of past performance Rolling average of past performance + Rolling average of past performance
(e.g. previous 5 periods) x% adjusted for expected changes to
operations
Negotiated Negotiated Negotiated
Benchmarking Relevant benchmark +x % Relevant benchmark adjusted for
differences from source of comparison
Benchmarking Internal benchmarking: comparison with similar business unit inside the organization
approaches Competitive benchmarking: comparison with performance of competitors
Industry benchmarking: comparison with similar companies
Best in class or process benchmarking: comparison with best performers in the industry by activity or process