BSBMGT517 Task 2.pdf
Sheet1 DataBudgeted 2016Actualvariance variance % Sales$480,000$514,000-$34,000- 7.08 Cost of goods sold$215,000$200,000$15,0006.98 Gross margin$265,000$314,500-$49,500- 18.68 Gross margin %55%61%-$0- 10.91 rent$6,000$6,200-$200- 3.33 wages$35,000$25,000$10,00028.57 utilities$2,000$2,500-$500- 25.00 consumables$4,000$4,800-$800- 20.00 Misc Exp$10,000$12,000-$2,000- 20.00 Operational Expenses$57,000$50,500$6,50011.40 Operating Profit$208,000$264,000-$56,000- 26.92 Learning Guide [Unit/Cluster Name, Delivery Mode] Unlock your Potential It starts here BSBMGT517 Manage Operational Plan: Monitor and Review Operational Performance Learning Guide Northern Sydney Institute Learning Guide Bsbmgt517_Learning_Guide_Topic 3 V1 Page 2 of 14 Revision date: 06/08/2016 Table of Contents Table of Contents ................................................................................................................................. 2 Topic 3 – Monitor and review operational performance .................................................................... 3 References.......................................................................................................................................... 14 Learning Guide Bsbmgt517_Learning_Guide_Topic 3 V1 Page 3 of 14 Revision date: 06/08/2016 Topic 3 – Monitor and review operational performance Performance management can be analysed at several levels in an organization: strategic, operational, team and individual. If the first one deals with the company’s organizational objectives and the last two with the team’s and each employee’s performance results, the operational performance has a more functional purpose. Although aligned with the corporate strategy, it mainly focuses on how each department conducts its daily activities in order to contribute to the company’s goals. Is there any difference between performance monitoring and performance management? Firstly, in order to monitor performance, it is sufficient to identify the Key Performance Indicators (KPIs) that are relevant for the company and to put them on a performance management instrument (e.g. dashboard or scorecard). Data is then collected and centralized over periods of time, allowing a clearer image over the company’s progress. However, when performance is not meeting the required levels, actions need to be taken, so as to put the company back on track. This is the beginning of performance management. The person responsible for improving companies’ results, be it manager or director, has to identify the key people and processes that are not functioning properly and to direct them on the right path. The linkage between the two concepts is given by decision management, which is crucial in moving from performance monitoring to performance management. Once vulnerable people and processes are identified, decisions need to be taken regarding the steps to be further implemented. The appropriate actions can lead the company towards development. Otherwise, it may be difficult to identify the right solutions. Practically, the difference between these two concepts is that performance monitoring has to do with the strategy formulation, while performance management is connected to strategy execution. The objectives companies set need to be put in practice. They need to become realistic targets employees have to achieve, and the day-to-day activities create the framework for strategic goals to be met. So, companies should first establish their objectives then monitor the performance in reaching them and, if necessary, take action to improve the existing performance. This is basically the performance monitoring – performance management flow. Developing operational performance systems and processes Developing operational performance systems and processes involve: Identifying and describing essential job functions and relating them to the mission and goals of the organisation Developing realistic and appropriate performance standards Giving and receiving feedback about performance Writing and communicating constructive performance appraisals Planning training and development opportunities to sustain, improve or build on employee work performance We implement operational performance systems and processes because we need to assess the progress of the operational plan towards achieving its performance targets. We need to know at every moment how we are doing and what we can do better. Learning Guide Bsbmgt517_Learning_Guide_Topic 3 V1 Page 4 of 14 Revision date: 06/08/2016 Operational performance systems and processes provide a systematic approach to assessing operational performance. They enable the operational manager and staff to: Align operational activities and processes to the goals of the organisation Focus on results rather than activities Focus performance reviews on contributions to organisational goals Maintain ongoing communication and feedback about organisational goals Optimise operations in the organisation because goals and results are more closely aligned It’s important to understand the benefits of such a system, because this will enhance its implementation and, at the same time, contribute to buy-in. That’s a rule of thumb: we cannot accept something we don’t understand and don’t consider useful. Assessing progress in achieving profit and productivity plans and targets In order to assess operational performance we need to be able to measure it. The challenging question here is: how can we measure operational performance? The answer to this question lies in the ability of the operational manager to implementing an effective performance monitoring process and using appropriate operational monitoring tools. Monitoring and measuring operational performance Monitoring helps you to measure progress towards your goals and compare actual results with planned performance. You must be able to use control techniques to identify potential problems and take corrective action to keep operations on target. You also need to adapt when changes occur to schedules and resources due to variations in activities. There are five characteristics of an effective monitoring process. These are: Accuracy: The information gathered must be accurate. Timeliness: The information gathered must be in time to allow corrective action to be taken. Economy: The benefits of gathering the information must be greater than the cost of gathering it. Ease of understanding: The information should be understandable by the target audience. Meeting needs: the information must meet the needs of the organisation and the individuals involved in the process. The results of monitoring may be to: reschedule activities allocate resources differently modify the operational plan acquire additional resources The three steps of the monitoring and measuring process are: 1. Establish where monitoring is needed The key point for a manager in monitoring the implementation of operational plans is identifying where monitoring is needed. Learning Guide Bsbmgt517_Learning_Guide_Topic 3 V1 Page 5 of 14 Revision date: 06/08/2016 In order to identify and establish the areas that require monitoring, ask yourself the following questions: What are the most important areas in my operational plans? Are they: − Cutting costs? − Improving quality? − Reducing waste/electricity/water/paper? − Improving employee productivity? − Improving customer satisfaction? − Lowering employee turnover? − Other? What would be their impact on the operational plan if they went wrong? How do these areas support the organisation's mission, vision an goals? 2. Establish the performance measures The performance measures you set should allow you to monitor and review the key areas that you have identified in the first step, including those that support the organisation's goals. There are two types of performance measures that are commonly used in the workplace. Lag indicators: These measures quantify the success of a process after it has completed a cycle. An example is the measure of trainee satisfaction after a training program has been completed. The negatives of using lag indicators include the fact that they are retrospective and do not therefore allow you to take corrective action during the process. Lag indicators may not assist in helping you to identify what went wrong and how the process could be run with more success in the future. Lag indicators tell you only what a process has achieved. Lead indicators: These measures are more effective than lag indicators as they allow you to monitor a process in real time. An example is evaluation of the effectiveness of a training program conducted during the program. If a process is failing, action can be taken immediately to improve the process. Lead indicators tell you if the target of a process is being achieved. Carefully chosen lead indicators can also help you to identify the type of corrective action that should be taken. These types of indicators are usually set in the form of performance standards and key performance indicators, and used to monitor time, costs, quality and productivity. If the development of your operational plan