icici organizational appraisal kt

8/8/2019 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


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 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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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


(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.




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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




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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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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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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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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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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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Lineseparatinghigh & low competition

positionset at 1.5 times (needed tohave

dominant position & to becalled as

star/cashcow),


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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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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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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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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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icici organizational appraisal kt

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