Performance

How to improve performance is an issue that concerns every manager in every business. Performance in this context can mean financial or non-financial performance. In fact, it is now widely accepted that the key drivers of future financial performance are non-financial.

Capabilities are frequently designed in response to one of three strategic intents that serve to differentiate a company's market offering

These are:

For example, employee satisfaction and supplier reliability today will affect the level of customer service delivered. If suppliers let you down with late deliveries or poor quality materials and components or if your own internal processes are weak and poorly co-ordinated; then customer satisfaction will be adversely impacted.

Their satisfaction with today's transactions will, in turn, affect whether they award repeat and additional business. So one of the best ways to ensure good financial performance in the future is to provide excellent products and services to customers today.

Of course, it may not be that simple and there are numerous other considerations to take into account along the way, but that is the essential business philosophy and approach that every forward thinking company has to adopt.

Customers pay the bills. If companies don't generate sufficient Free Cash Flow they will soon be wound up by the administrators. A loyal core of regular customers is often the antidote to such drastic action. But research has shown that only those customers that describe themselves as 'very satisfied' are likely to show loyalty characteristics by placing repeat orders.

The best companies provide quality and service to their customers that is 6 to 8.5 times better than the worst.

The majority of customers don't bother to complain... they just take their business elsewhere.

Whatever their business, firms need a range of skills in sufficient quantity in order to plan and manage the business, create new products, generate demand for them, and to fulfil customer orders and enquiries.

However, if employees are dissatisfied with their employer's people policies and practices or their working environment, they will leave. And it is usually the best people that go first too. Symptoms are the levels of employee attrition and, epidemics apart, the absenteeism rate.

Companies that care for their employees apply rigorous health and safety procedures in order to minimise the number of accidents at work. Firms that adopt a cavalier attitude towards their workers' welfare simply won't attract and retain the best people.

For every person that leaves you will have to recruit replacements and provide the training they need to do the job properly. The more vacancies you have to rehire for, the more it costs. Fed-up and overly work-stressed employees take a 'sicky' more often too.

In practice, however, companies need to have a better handle on employee satisfaction than just the 'lagging' measures of attrition and absenteeism. They need to find a way to monitor and capture employee morale.

Employee morale has a direct impact on customer satisfaction

Traditional arm's-length relationships with suppliers are still commonplace within many industries today. But, increasingly, companies are realising the benefits of building closer reciprocal relationships with their major suppliers. The results are better quality goods and services, more reliable deliveries and lower levels of inventory.

To be successful, companies need to assemble a range of capabilities - i.e. bundles of people, skill-sets, best practices, leading technologies and physical infrastructure - in specific parts of their business that collectively allows them to beat their competitors.

* Source Cranfield School of Management