icici organizational appraisal kt
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ICICI
MANAGEMENT
PERFORMANCE APPRAISA[Type the document subtitle]
KEERTI MANNAN
10/7/2010
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ORGANIZATIONALAPPRAISAL
Internal Environment -strength & weakness infunctional areas
Organization capability-Capacity & ability to use distinctive compete
excel in a particular field
-Ability to use its S& Wto exploit O& faexternal environment
Organization resources
-Physical & human
cost, availability -strength / weakness
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ORGANIZATIONAL APPRAISAL
Organization behavior
Identity & characterofanorganization leadership, Mg
values,culture, Qltyofwork environment, Organizatio
organization politicsetc.
Resource Behavior
Distinctivecompetence -Any advantage a companyh
competitor -itcan dosomething whichtheycannotoopportunityfor anorganizationtocapitalize -low cost
Quality, R&D skillsetc.
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METHODS & TECHNIQUES USED F
ORGANIZATIONAL APPRAISAL
Comprehensive, long term
Financial Analysis -Ratio Analysis, EVA Key factor rating -Rating of different fac
different questions
Value chain analysis VRIO framework
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METHODS & TECHNIQUES USED ORGANIZATIONAL APPRAISA
BCG, GE Matrix , PIMS, McKinsey 7S Balanced Scorecard Competitive Advantage Profile Strategic Advantage profile Internal Factor Analysis Summary
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SWOT ANALYSIS
Identify & classify firms resources
Combine firms strength into specif
capabilities Corporate capability-m
distinctive competenceStrategy that best exploits the firms
Identify resource gaps & Invest in u
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ORGANIZATIONAL APPRAISAL
Organizational Capability Profile (OCP) -Weakness(-5), Norma
Financial Capability Profile
(a) Sourcesoffunds
(b) Usageoffunds
(c) Managementoffunds
Marketing Capability Profile
(a) Productrelated
(b) Pricerelated
(c) Promotionrelated
(d) Integrative & Systematic
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ORGANIZATIONAL APPRAISAL
Operations Capability Factor
(a) Productionsystem
(b) Operation & Control system
(c) R&D system
Personnel Capability Factor
(a) Personnel system
(b) Organization & employeecharacteristics
(c) Industrial Relations
General Management Capability
(a) General Management Systems
(b) External Relations (c) Organizationclimate
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EXAMPLES OF ORGANIZATIONAL CAPABILITY
Financial Capability
Bajaj -Cash Management
LIC -Centralized payment, decentralized collection
Reliance -high investorconfidence
Escorts -Amicablerelation with Fis
Marketing Capability
Hindustan Lever -Distribution Channel
IDBI/ICICI Bank -Wide varietyofproducts
Tata -Company / Product Image
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EXAMPLES OF ORGANIZATIONAL CAPABILIT
Operations Capability
Lakshmi machine works -absorb imported techno
Balmer&Lawrie -R&D -New specialtychemicals
Personnel Capability
Apollotyres -Industrial relations problem
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EXAMPLES OF ORGANIZATIONAL CAPABILI
General management capabilityMalayalam Manaroma -largestsellingnewspa
Unchallenged leadership -Unified,stable
Bestedited & most professionally produced
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VRIO FRAMEWORK
Resource-asset,competency,skill,knowledge
e.g. patents, brand name,
Value: Does it providecompetitive advantag
Rarity: Doothercompetitors possess it?
Imitability: Is itcostlyforothersto imitate?
Organisation: Isthefirmorganised toexploit
resource?
VRIO FRAMEWORK . . .
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A resource is an asset,skill,competencknowledgecontrolled bythecorporation
A resource is a strength ifit providesco
advantage
e.g. patents, brand name,economieso
idea-driven,standardized mass producti
VRIO STEPS
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Identifyfirmsresources-S&W
Combinefirmsstrength intospecificcapabiliAppraise-profit potential,sustainablecompe
advantage, abilitytoconvert itto a profitable
Selectstrategy -firmsresources& capability
external opportunity
Identifyresourcegaps and invest in upgradin
BALANCED SCORECARD-KAPLAN & NO
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4 performancemeasuresCustomer perspective
Internal business perspective
Innovation &
learning perspective
Financial perspective
Balanced Scorecard
Balanced Scorecard A model integratingfnon-financial measures. (Kaplan & Norton
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Causal link betweenoutcomes and performofsuchoutcomes
Translatesthe vision and strategyofa busiobjectives and measures in 4 distinct areas
FinancialCustomerInternal Business processLearning and growth
The Balanced Scorecard
Purpose of Balanced Scorecard:
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A method ofimplementing a businesstranslating it into a setofperformance
derived fromstrategicgoalsthat allocat
executives and managers based onthei
meetingorexceedingthe performance
The Balanced Scorecard
(Source: Kaplan & Norton, 1996
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Reasons for the Need of a Balanced S
1. Focusontraditional financial accountingsuch as ROA, ROE, EPS givesmisleadingsig
executives withregardsto quality and inno
importantto look atthemeans used to ach
outcomessuch as ROA,not justfocusonth
themselves.
The Balanced Scorecard
(Source: Kaplan & Norton, 199
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Reasons for the Need of a Balanced S
2. Executive performanceneedsto be jsuccess atmeeting a mix ofbothfinanc
non-financial measurestoeffectivelyo
business.
The Balanced Scorecard(Source: Kaplan & Norton, 19
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Reasons for the Need of a Balanced
3. Somenon-financial measures are dri
financial outcomemeasures whichgive
managersmorecontrol totakecorrect
quickly.
(Example: controls in jetcockpitfor pilo
The Balanced Scorecard
(Source: Kaplan & Norton, 19
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Reasons for the Need of a Balanced
4. Toomanymeasures,such ashundredscost accounting index measures,canconf
distract anexecutivefromfocusingon im
strategic priorities. The balanced scorecar
anexecutivetofocusonseveral importan
that drivethestrategy
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Balanced ScorecardAn
Experience of ICICI Ba
(source: iciciwebsite)
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Key challenges
Rapid growth inemployee base fresh and lateral recr
Building knowledge and skill base
Ensuring adequatefocusonmultiple perspectives
Growth, profitability,service levels, buildingtalent
Ensuringconsistent implementationofstrategy across
Aligningorganisational, business-level and individual g
Incentivisingachievementofthegoalsset
We were seeking a strategic framework that
this..
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Earlier performance management fra
Primarilyfocused onfinancial aspect
Other perspectivescovered qualitatively
Input ratherthan output based: focuson
ratherthan goals achieved
Did notmeettheneed for additional perspect
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Balanced scorecard at ICICI Bank -Stag
Re-defined and expanded financial perspective
Growth,marketshare, profitability and creditcosts
Introduced customer perspective: conceptofservice leve
performanceevaluation
Customersatisfactionscores
Introduced process perspective: focuson building a proce
theorganisation
Learning perspective: focusonre-skillingforexistingempl
to-job fornew recruits
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Balanced scorecard at ICICI Bank -Stage
Further development and detailingofcustomerservice a
perspectives
Specificmeasuresofperformance introduced
Branchservice qualityscores
Turn around time (TAT) benchmarks
Good order index forclient bankers
5S achievement
Focused measuresserved asenablersformeetingfinanci
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Balanced scorecard at ICICI Bank -Stage
Learning and development perspective
Sofarfocused primarilyon businessskills
Commenced activityon building leadership pool
Reducingthenumberofscorecard templates
Alreadyreduced from 750 to 230 intwoyears
Planned reductionto about 150
New challenges
Scorecardsforoperations innew geographiesoutside Ind
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Lessons from ICICI Bank experience
Performancemeasuresshould beoutputratherthan inpu
Peopleshould be assessed ongoalsnotontransactions
Removes ambiguityfrom performancemanagement
Scorecard need not be balanced for individuals butfor bu
whole
All perspectivesmaynot applyto all people
Need forscorecard templates
Ensuresconsistency
Numberoftemplatesshould berationalized based onnu
job descriptions
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Lessons from ICICI Bank experience
Banks, likeother businessorganisations, areoperating in
complex environment
Inthiscompetitive paradigm,optimally directing all resou
organizational goals in a focused manner isthe keyto acce
Having a strategy isnotgood enough
Thestrategymust be
Articulated
Understood
Executed
The balanced scorecard is a tool thathelpscommunicate
goals acrosstheorganization
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Lessons from ICICI Bank experience
The balanced scorecard at ICICI Bank hashelped achieve:
Rapid businessgrowth
Strategicconsistency despitegrowingscale and diversity
Systematic and objective performanceevaluation
The balanced scorecard canhelp to build a platformfors
growth and valuecreation
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FINANCIAL ANALYSIS
Ratio Analysis
Economic value added NOPAT-WACC
Activity Based Costing
activity in Valuechain
_ specific activities
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COMPETITIVE ADVANTAGE PROFILE: A Case of B
Marketing Factors
Market leader -35% share inorganized sector
Closestcompetitor -lessthanhalfofAPsmarketshare
>20 yrsleaderWidest productrange -productshades, pack sizes
40 different decorative paints -150 shades, 8 different
sizes in packing,no.ofbrands -all segments
Brands -quite powerful
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COMPETITIVE ADVANTAGE PROFILE
Marketing Factors
high quality MR & MIS , 90% accuracy inforecasting, 100 f
Stock Keeping Units,monitored daily
Countrywide distribution -13000 dealers (comp-
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COMPETITIVE ADVANTAGE PROFILE
Manufacturing/Operations Factors
Size advantage inrelationtocompetitors
Finesse in production planning,scheduling,matching with
requirements
In house production -nooutsourcing -highreliabilitysupp
quality assurance
Four production location -spread benefits
Human Resources
Highcaliber HR
Professionals -MBAsmore
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COMPETITIVE ADVANTAGE PROFILE
Finance factors
Leader in profits & operatingmargins, ROI 40%,restofind
Networth 204 cr, 58 cr -Nerolac, 41 crBerger
Cashrich
Corporate factors
Awards
High profilecorporate image
Enviabletrack record in breaking awaythe positionofMNpaint Industry
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PORTFOLIO ANALYSIS
27% offortune 500 companies use it instrategyformulation
Top management views its product lines andbusiness units as a seriesofinvestmentreturnProduct lines/Business units -a portfolioof
investment -companyconstantly juggle -togetyield
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STRATEGIC ADVANTAGE PROFILE
(SAP)
A pictureofthemorecritical areas whichcanhave a r
thestrategic postureofthefirm inthefuture.
Capability Factor Competitivestrengths / Weakness
FinanceHighcostofcapital,reserves & surplus
MarketingFiercecompetition,company positionsecure
OperationalP&M -excellent -parts & components availa
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STRATEGIC ADVANTAGE PROFILE (S
Capability Factor Competitivestrengths / Weakness
PersonnelQualityofmanagement & personnel
par withcompetition
General High Qualityexperienced top
management -take proactivestance
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BCG GROWTH -SHARE MATRIX
Matrix of
-Growthrateofthe industry -% ofincrease
insales
-Marketshare
Relative market share of a firm= Market
share in industry/marketshareofthe
largestothercompetitor
> 1 indicatesmarket leader
Assumption : Otherthingsequal -growing
market is attractive
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BCG GROWTH -SHARE MATRIX
Lineseparatinghigh & low competition
positionset at 1.5 times (needed tohave
dominant position & to becalled as
star/cashcow),
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BCG GROWTH -SHARE MATRIX
Star-Market leader, peak ofproduct life
cycle,enoughcashtomaintainhigh
share (market), Growthrateslow -
becomescashcows,Moreresources -investmenttosupporthighgrowthNo
immediate profits -great potential
futureMediumrisk categoryQuestion
Marks-(Problemchildren/wild cats) -New
products with potential forsuccess -
Moreresources bitfuture uncertain -
highrisk categoryMoneytakenfrom
mature products & spenton?Slow
growth dogs
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BCG GROWTH -SHARE MATRIX
Cashcows-moremoneythanneeded for
maintainingmarketshare -Decliningstageoflife
cycle
Cashmilked fromfor investment in?
Higher profit
Dogs-Weak marketshare, low growthmarketcash
trap ofthecompany
Identify Issues -current position & future position
withoutchange inthestrategy
Goal-Maintain balanced portfolio -selfsufficient in
cash
Limitations -Low share businessmay also be
profitablemarketshare -relativetoone (market
leader/competition) otherfactorsthat determine
success
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GE PORTFOLIO MATRIX
Industry attractiveness
Companys businessstrengths/Competitive
position
Industry attractiveness-marketgrowthrate,
industry profitability,size, pricing practices,opportunities/ threats
scale 1 -5 Very unattractiveto very attractive
Business strengths-Marketshare,technological
position, profitability,size,strengths & weakness
scale 1-5, 1-very weak, 5 -verystrong
Product line-a letter,circle -area -(size -scales)
pie -marketshare
Identify performancegroup -current & projected
portfolio without anychange instrategy
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PIMS
Profit ImpactofMarket Strategy (PIMS)wasstarted at General Electric, and was
later used by Strategic Planning Institute
(SPI).
SPI usesmulti-dimensional cross-sectional
regressionstudiesofprofitabilityofmore
than 2000 businesses. Itthen develops
industrycharacteristics, Business Average
Profitability, and compares it with
performances intheconcerned company
Profitability isclosely linked withmarket
share. A 10% improvement in profitability is
linked with 5% improvement in Returnon
Investment
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MCKINSEYS 7S FRAMEWORK
StyleOneoftheseven levers whichtop
managementcan useto bring about
organization Change
Withchangeofsystems & procedures
-styleoffunctioningchanges
-Cultureoforganizationchanges
Staff
Update knowledge & skillsto keep pace
withchange
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MCKINSE
YS 7S FRAMEW
ORKStrategy
Includes purpose,mission,objectives,goal,
action plans & policies7S model emphasize -
Developmenteasy execution
Systems
Procedures & methodsframed by
organization & followed byoperationalpersonnel intherespectivefunctional area
Traditional systems Change in view of
advanced technology & processes
developed
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MCKINSEYS 7S FRAMEWORK
Structurerelationship between/among various
positions and activities
Designofstructure -critical task fortop
mgmt.
Need based structural changes -tocope
withspecificstrategictasks without
abandoning basicstructural divisionsthroughouttheorganizations
Skills
Acquainted withstateofthe arttechnology
& improvised methods & practices
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MCKINSEYS 7S FRAMEWORK -SKILLS
Procter & Gamble -Best known -Skills inproductmanagement
Hindustan Lever & Richardson Hindustan -
Marketingskills
BHEL, TELCO, L&T -Engineeringskills
DCL, Mecon& M.N. Dastur& Company -
projectconsultingskills
Dominant Skill in anorganization -Partoforganization acquired throughcontinuous
effort Organizationchange -acquire &
develop new skills
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MCKINSEYS 7S FRAMEWORK
Superordinate Goals Fundamental ideasofbusiness Main values Broad notionsoffuture directions
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MCKINSEYS FRAMEWORK
A setofvalues and aspirationsthatgoesbeyond theconventional formal statement
ofcorporateobjectives. All targets and
attentionofall activities and exerciseofthe
othersix leversofanyorganizationshouldbe directed towards accomplishmentofthe
best possiblegoals
-the ultimate & terminal point -where
organization will havetoreach
Effective organizational change
-May be understood as a complex
relationship between 7Ss.
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Cont.
Internalfactors
weight rating Weightedscore
comment
Weakness
R&D
Acquisition
ofcapital
Retailing
Advertising
Timetomarket
total
.10
.10
.15
.05
.10
1.00
4
4
3
1
2
.40
.40
.45
.05
.20
3.15
Improvethe
qualityof its
R&D work force
Must improve
negotiating
skills with
financial
institutions.
Improving
retailing
infrastructure
Improve brand
image
Improvespeed
ofdecision
making
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TOWS MATRIX
internal
external
(S)
List 5-10 internal
strengths
(W)
list 5-10 internalweakness
(O)
List 5-10
External
opportunities
SO Strategies
Use Stotake
advantageofO
WO Strategies
Take advantageofO
byovercoming W
(T)
List 5-10
External threats
ST Strategies
Use Sto avoid T
WT Strategies
Minimize W and
avoid T
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