chapter 4 internal assessment a framework for organizational diagnosis

CHAPTER 4

INTERNAL ASSESSMENT

A FRAMEWORK FOR ORGANIZATIONAL DIAGNOSIS

FIRST LEVEL: EVALUATING PERFORMANCE OUTPUTS AND

OUTCOMES

OUTPUTS

are the products and services which the enterprise has resolved to deliver to its customers.

OUTCOMES

are the desired performance indicators like sales attained, profits earned, and customers satisfied as to their quality specifications, delivery time expectations and quantities ordered.

EXAMPLES OF OUTPUTS AND OUTCOMES

OUTPUTS OUTCOMES OR PERFORMANCE

INDICATORS1. Strict safety measures implemented. Preventive maintenance of machines. Workers forced to follow safe production.

1. Zero accidents.

EXAMPLES OF OUTPUTS AND OUTCOMES

OUTPUTS OUTCOMES OR PERFORMANCE

INDICATORS

2. Number of students who have been graduated from a school

2. High level of skills and competencies learned. Job in chosen field is found by students who have graduated.

THROUGHPUT RATIO(TRANSFORMING PROCESS)

the processing of the products or service over a period of time. It can be measured in terms of cycle time.

EFFICIENCY MEASURES

1. The number of wastes and rejects produced.

2. Input-throughput Ratio

a machine input, along with its technological characteristics, can be assessed as to how long it takes to process a specified quantity of products.

Throughput is the amount of "work" the factory is doing.Input is the proportion of goods needed per unit of work.Output is the proportion of goods produced per unit of work.

The total amount of goods required is Input * Throughput * Base. Where base is determined by the type of good and the type of factory.

The total amount of goods produced is Output * Throughput * Base. Where base is determined by the type of factory.

3. Throughput-Output Ratio

the organization can measure how many outputs are produced over one processing hour (or any time period).

EXAMPLE

ECONOMY MEASURES

1. Cost-benefit ratioComparison of the present value of an investment decision or project with its initial cost. A ratio of greater than one indicates that the project is a viable one.

2. Investment-return ratioReturn of Investment

The earning power of assets measured as the ratio of the net income (profit less depreciation) to the average capital employed (or equity capital) in a company or project.

Source: http://www.businessdictionary.com/definition/return-on-investment-ROI.html#ixzz23PEVAYZg

Expressed usually as a percentage, return on investment is a measure of profitability that indicates whether or not a company is using its resources in an efficient manner. For example, if the long-term return on investment of a company is lower than its cost-of-capital, then the company will be better off by liquidating its assets and depositing the proceeds in a bank. Also called rate of return, or yield.

How is the Return on Investment ROI ratio used?

It is used as a general indication of the company's efficiency; in other words, how much profit the company is able to generate given the resources provided by its investors.

Investors usually look for companies with Returns on Investment that are high and growing.

Decision makers often look for ways to improve ROI by reducing costs, increasing gains, or accelerating gains.

It is also a measure of how well a company used reinvested earnings to generate additional earnings.

EFFECTIVENESS MEASURES

The organization can then asses and relate the overall efforts it exerts and the resources it spends (people, pesos, and physical assets) to the performance indicators or outcomes.

EFFICACY MEASURES

it can be measured from the customers’ or beneficiaries’ point of view

SECOND LEVEL: EVALUATING ORGANIZATIONAL

COMPETENCIES AND CAPABILITIES

Enterprises and organizations endeavor to craft the best strategies, programs, activities and tasks (SPAT)

STRATEGIEStop management

PROGRAMmiddle management

ACTIVITIESfirst line managers

TASK- staff

THIRD LEVEL OF ASSESSMENT: EVALUATING UTILIZATION OF

RESOURCES

It examines where the resources of the enterprise or organization have been allocated to, and whether or not they have been efficiently, economically and effectively utilized.

OTHER THREE MEASURES OF ENTERPRISE SUSTAINABILITY

1. LIQUIDITY RATIOS

Measures the firm’s ability to meet current obligations as they fall due.

LIQUIDITY

refers to the cash or the availability of the means of payment.

2. ACTIVITY RATIOSare used to gauge the

efficiency, effectiveness and economy of the enterprise operations by measuring asset turnover ratios (cash, receivables, inventory, fixed assets and total assets turnover).

3. SOLVENCY RATIOLooks at long term

sustainability by calibrating the company’s capital structure in terms of short-term debt and stock holder’s equity.

The solvency ratio measures the size of a company's after-tax income, excluding non-cash depreciation expenses, as compared to the firm's total debt obligations. It provides a measurement of how likely a company will be to continue meeting its debt obligations.

Source: http://www.investopedia.com/terms/s/solvencyratio.asp#ixzz23PLzFQ5X

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