Different measures of assessing business performance

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In its 2014 annual report Tesco included various non-finacial measure of performance. They had

  • colleague retention: 90 per cent in the UK. 1 per cent down
  • colleagues being trained for their next role: 6.2 per cent 
  • supplier agreement with the question "I am treated with respect" 67 per cent

There are two main methods for assessing performance 

  • Kaplan and Nortons balanced scorecard model
  • Elkingtons tripple bottom line

Kaplan and Norton didtn like how businesses were so fixated with profit and felt that they should have a broader view of performance measures for sucess. So they created the balanced score-card. They found 4 key areas

  • The financial perspective, "how do we look to our shareholders?" KN acknowledged that shareholders would always want to know about profit, growth, return on capital and cash flows. But they though that the historic nature (looking backwards) was a huge flaw
  • The customer perspective "How do we look to out customer?" measurements such as customers satisfaction, the rate of repeat purchase, and market share are ways of checking if your strategy is working for customers
  • The business process perspective "How effective are we internally?" This is primarily a check on operations management. The precise measures depend on the nature of the business. Service businesses are likely to use different measures than manufacterers would use
  • The learning and growth perspective "how can we change and improve" This category shows the need to choose the right measure. training hours per employee may seem like a valid measurement, but captures quantity rather than quality. 

Strengths of the balanced score card

  • gives a more all round view of the company and its achievements or…

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