Performance Measurement in Business
Performance Measurement in business refers to output results and their outcomes obtained from the process, products, and services that permit evaluation and comparison relative to goals, standards, past results and other organizations. Performance can be expressed in non-financial and financial terms.
Performance Measurement refers to numerical information that quantifies input, output, and performance dimensions of processes, products, services, and the overall organization (Outcomes). Performance Measurement might be simple ( derived from one measurement) or composite.
The challenge for organization’s today is how to match and align performance measures with business strategy, structures, and corporate cultures, measures so that the results are used and acted upon.
To know how the performance can be measured, we have the data from Unilever Company.Co.Uk. Following are the detailed analysis of present year growth and previous five years income. We will also observe how the company has managed to grow and what are the procedures and measures it took for the growth.
From the table above we can easily understand that in 2013 growth was highest at 66 billion, but in the next few years it went on declining till 2016. These declines have many factors behind, which we will discuss in detail.
But again in 2017, the company has managed to get its peak again and the gross income has raised up to the level of 60.71 billion dollars.
Performance Measurement is a key to better performance management.
Who uses Performance Measurement?
All organizations measure performance to some extent. However, there is a large disparity among organizations in terms of which performance measures are used with many primarily focusing on financial measures. There has, however , been a general move away from financial measurement since the early 1980’s and 2000’s by the worldwide acceptance of business excellence modules and performance measurement frameworks that the system is effectively working in monitoring, communicating and driving performances.
A recent report presented by the Performance Measurement Association (PMA) on one of the new Performance Measurement frameworks, the Balanced Scorecard, demonstrated the popularity of method. The PMA presented evidence that 39 % of FTSE 100 companies were actively using the scorecard. With the movement away from financially based measurement systems only gaining momentum in the early 1990’s this presents a significant change in organizational practices in such a short piece of time.
Problems faced By Unilever to achieve the growth targets?
With its strong clutch of category-leading consumer brands and growing emerging-market presence, Unilever is a business with very definite attractions. A 67 billion pounds on revenues of 47 billion pounds last year. And with margins like that, no wonder this defensively positioned business is popular with many investors. Better still, with its shares changing hands today at 2,334 pence, the company offers income investors a reasonably tempting forecast dividend yield of 3.4%. But how safe is that share price? And __ of vital importance to income investors? How safe is that dividend? In short, how could an investment in Unilever adversely impact investor’s wealth?
In this series, I set out to answer just these questions or problems which is preventing growth.
Risk management and Solutions to the Performance Measurement
One immediate thing i am looking for is an acknowledgment that risks do exist and need managing. The good news is that from a business of Unilever size and caliber, the company has in place a risk management policy, a system of regular reviews, and a number of high-level committees tasked with monitoring the risks that the business has identified. What are those risks which can lay down growth rate again? Let’s take a look at three of the biggest.
Unilever operates in one of the world’s toughest marketplaces, selling premium branded products to supermarkets such as Tesco, Sainsbury’s and Morrison’s . And not only are these supermarkets tough negotiators, capable of delisting brands and shrinking available shelf space, but they are also competitors too. Competing against almost every Unilever brand is a cheaper supermarket “own label” offering, As the company puts it. Here, Unilever’s strength in emerging markets — where it makes 54% of sales, helps significantly. As the company points out, it aims to build and maintain trading relationships across a broad spectrum of channels ranging from centrally managed multinational customers through to small traders accessed via distributors in many developing countries.
And speaking of sustainability, Unilever has set itself a tough challenge. Sustainability, it recognizes, is important to consumers — and so it is important to Unilever. But can this importance be reflected without impacting growth and profitability? As the company puts it: “ Unilever’s Vision to double the size of our business while reducing our environmental impact will require more sustainable ways of doing business. This means increasing the positive social benefits of Unilever’s Activities while reducing our environmental impact” .
To me, the risk here is around growing the business . In terms of ensuring sustainability, the company can point to the Unilever Sustainable Living Plan, which sets clear long-term commitments for environmental impact, underpinned by specific targets in areas such as sustainable sourcing, water availability, and usage, waste and greenhouse gases. These, in turn, are monitored by the Unilever Sustainable Development Group, comprising five external specialists in corporate responsibility and sustainability.
But growing the business and profit at the same time? Beyond an acknowledgment that progress towards the Unilever Sustainable Living Plan, is mentioned by the Unilever leadership executive team and the board, nothing is said.
3. Supply Chain Risk
Unilever is a global business with global supply chains. But what happens to profit and revenue when those supply chains are disrupted? As Unilever puts it: “ Our business depends on securing high-quality materials, efficient manufacturing, and the timely distribution of products to our customers. Our Supply chain network is exposed to potentially adverse events such as physical disruptions, environmental and industrial accidents or bankruptcy of a key supplier which could impact our ability to deliver orders to our customers. How are these risks dealt with? By Policies designed to ameliorate risks in the first place and contingency plans to deal with the aftermaths of whatever disruption does materialize. Such plans, for instance, are designed to enable the company to secure alternative material suppliers on short notice, to transfer or share production between manufacturing sites, and to use substitute materials in our product formulations and recipes. Additionally, these contingency plans also extend to an ability to intervene directly to support a key supplier should it, for any reason, find itself in difficulty or at risk of negatively affecting a Unilever.
A slow down in the emerging markets and heavy foreign exchange fluctuations during the last two years have taken a toll on the fortunes of global consumer processed goods companies. Unilever is no exception- Sluggish sales and currency headwinds dragged its revenues down by 3% in 2013 as well as 2014. The recent economic downturn and uncertain growth prospects in the emerging markets raise the questions as to what Unilever is doing to overcome the adverse macroeconomic environment.
To revive the growth, Unilever has pinned its hopes on a three-pronged strategy involving portfolio optimization, changing the focus of innovation, and sustainable practices. In this report, we look into each of these aspects of Unilever’s growth strategy in detail.
Performance Measurement: Focus on premium personal care
Performance Measurement is the main pillar of Unilever’s Long-term growth strategy. Under this plan, Unilever is strengthening its position in the premium personal care segment under its “Prestige” category of brands. Towards this end, Unilever has sped up its acquisitions in the high-end personal care products segment since last year. In the last one month alone, it acquired three skincare brands: Murad, Dermalogica and Kate Somerville.
Unilever’s acquisition in the personal care space so far has been relatively small in size. For instance, Dermalogica had revenues of $241 million in 2014. While Murad’s revenues were $115 million. Comparatively, we estimate that Unilever’s total revenues from skin care stood at $15 billion in 2014. This puts incremental revenues from the two aforementioned acquisitions at a mere 2% of Unilever’s skin care division. The company has not disclosed the term of any of its acquisitions, making the purchases at a bargain or overpaid for them.
Unilever’s increased focus on the personal care business is clear from the persistent increase in personal care’s share of revenues in the company. In 2008, personal care accounted for 28% of the company’s total revenue. Which increased to 37% in 2014.
On the other hand, the revenue share of Unilever’s food business steadily declined from 35% in 2008 to 28% in 2014. This had raised speculation that Unilever may be planning to exit from its business completely.
However, Unilever recently stated that it is focusing on driving volume growth in its foods business by addressing new opportunities. Unilever may still continue to divest its underperforming foods brands, but it may be safe to assume that the company intends to retain its presence in the food business for the near future.
Oxfam provided the following Performance Measurement, discussed in-depth in the report, to mitigate these issues:
Adjust policies and business models to deliver better-quality jobs for workers by paying a living wage and minimizing precarious work.
Better align business processes with policy.
Strengthen due diligence processes to take account of people’s vulnerability to speak out.
Work with others to promote scalable ways to realize rights and increase collective leverage.
Apply changes specific to your operations in a particular country.
Integrate into the “sustainable living plan” and/or public reporting process measurable targets for labor rights and job quality.
Unilever responded in the report by vowing to continue to take initiatives to mainstream the integration of human and labor rights on the global and locals levels. These initiatives, listed by Unilever Chief Executive Officer Paul Polman, will be jointly reviewed with Oxfam in two years:
Ensure that Unilever promotes sustainable livelihoods for all workers and those in the company’s “value chains.”
Mitigate the “casualization” of labor within Unilever’s workforce wherever possible.
Invest in ensuring that Unilever’s “supplier code” is understood and acknowledged by all of the company’s tier-1 suppliers by the end of 2014.
Ensuring that Unilever meets the same standards Performance Measurement expected from its suppliers.
Partner with others to mainstream the integration of human and labor rights by business.
The report is the latest step in Oxfam and Unilever collaboration, which goes back 10 years. Among its joint projects include the 2004–5 Unilever Indonesia socioeconomic impact study, “Exploring the Links Between Business and Poverty Reduction: A Case Study of Unilever Indonesia.” To summarize the report the main points are
The performance measurement showed the clear picture of how the company is running.
We can better speculate the next targets for the coming year.
The problems are evaluated better with Performance Measurement Tools
The main source of this report is Unilever.co.uk
Unilever selected as it is world’s largest multinational company.
The problems faced are directly connected with Performance Measurement and reducing cost of production.
It is also noticed that Unilever spends much on Environmental protection
It is highly effective in providing the best nutrition
The focus from food items has been shifted to skin care products.
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