Effective Operations and Performance Management

257 Pages·2011·3.36 MB·English

by  Various Authors

EFFECTIVE
OPERATIONS
AND
PERFORMANCE
MANAGEMENT
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EFFECTIVE
OPERATIONS
AND
PERFORMANCE
MANAGEMENT
Copyright © Bloomsbury Information Ltd, 2010
First published in 2010 by
Bloomsbury Information Ltd
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Standard edition Middle East edition
ISBN-10: 1-84930-007-0 ISBN-10: 1-84930-008-9
ISBN-13: 978-1-84930-007-0 ISBN-13: 978-1-84930-008-7
This book is produced using paper that is made from wood grown in managed, sustainable forests.
It is natural, renewable and recyclable. The logging and manufacturing processes conform to the
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Printed in the UK by CPI William Clowes, Beccles, NR34 7TL
Contents C
o
n
t
e
Contributors vii n
t
s
Best Practice—Performance Measurement and Reporting 1
The Human Value of the Enterprise Andrew Mayo 3
How Internal Auditing Can Help with a Company’s Fraud Issues Gail Harden 7
Return on Talent Subir Chowdhury 15
Creating Value with EVA S. David Young 19
Why EVA Is the Best Measurement Tool for Creating Shareholder Value
Erik Stern 23
Multidimensional Performance Measurement Using the Balanced Scorecard
Priscilla Wisner 27
Enhance Competitive Performance via Critical Key Performance Indicators
Zahirul Hoque 33
Profitability Analysis Using Activity-Based Costing Priscilla Wisner 39
Reducing Costs and Improving Efficiency with New Management Information
Systems Beverly Goldberg 45
Incorporating Operational and Performance Auditing into Compliance and
Financial Auditing Andrew Cox 49
Starting a Successful Internal Audit Function to Meet Present and Future
Demands Jeffrey Ridley 55
The Internal Audit Role: Is There an Expectation Gap in Your Organization?
Jeffrey Ridley 61
Improving Corporate Profitability Through Accountability Marc J. Epstein and
Priscilla Wisner 67
Aligning the Internal Audit Function with Strategic Objectives Ilias G. Basioudis 71
Statistical Process Control for Quality Improvement Priscilla Wisner 77
Best Practice—Planning and Processes 85
Employee Stock Options Peter Casson 87
Fraud: Minimizing the Impact on Corporate Image Tim Johnson 91
Corporate Responsibility in a Global World: Marrying Investment in Human
Capital with Focus on Costs Angela Baron 95
Project Planning Techniques for Small and Medium Enterprises Damian Merciar 99
Reducing Costs and Improving Efficiency by Outsourcing and Selecting
Suppliers Paul Davies 103
Designing Corporate Systems for Success Leslie L. Kossoff 109
Reducing Costs through Production and Supply Chain Management Vinod Lall 113
Innovation and the Path to Growth, Profitability, and Competitiveness
John Milton-Smith 117
Managing Intellectual Capital Leif Edvinsson 123
Aligning Structure with Strategy: Recalibrating for Improved Performance
and Increased Profitability R. Brayton Bowen 127
Growing and Maximizing SME Profitability Without Compromising ROI
Neil Marriott 133
Turning Around Financial Performance David Magee 137
Everything You Need to Know About Benchmarking Robin Mann 141
How to Better Manage Your Financial Supply Chain Juergen Bernd Weiss 147 Q
How to Implement a Standard Chart of Accounts Effectively Aziz Tayyebi 151
F
Using Decision Analysis to Value R&D Projects Bert De Reyck 155 i
n
Internal Audit and Partnering with Senior Management Bruce Turner 161
Increasing the Profitability of Small and Medium-Sized Enterprises: a
A Practical Guide Tom Brown 167 n
Engaging Senior Management in Internal Control Philip Ratcliffe 171 c
The Missing Metrics: Managing the Cost of Complexity John L. Mariotti 175 e
v
Effective Operations and Performance Management
s Checklists—Performance Measurement and Reporting 181
t
n Assessing Business Performance 183
e Assessing Economies of Scale in Business 185
t
n Calculating Return on Investment in Human Resources 187
o
Creating a Standardized Process 189
C
Measuring Financial Health 191
Performing a Skills Gap Analysis 193
The Triple Bottom Line 195
Understanding Internal Audits 197
Understanding Key Financial Terms and Statements 199
Understanding Key Performance Indicators 201
Using and Understanding Financial Ratios for Analysis 203
Using Shareholder Value Analysis 205
What Is Benchmarking? 207
Checklists—Planning and processes 209
Administering Contracts Successfully 211
Applying Cost–Benefit Analysis to Project Appraisal 213
Assessing the Value of Outsourcing and Offshoring 215
Business Process Reengineering 217
Identifying Your Continuity Needs 219
Inventory: How to Control It Effectively 221
Key Components of an Optimal Enterprise Resource Planning System 223
Managing Working Capital 225
Performing Total Cost of Ownership Analysis 227
Understanding and Using the Cash Conversion Cycle 229
Understanding Crisis Management 231
Understanding Decision Tree Analysis 233
Understanding Economic Efficiency Theory 235
Understanding Root Cause Analysis in the Business Environment 237
Understanding Strategy Maps 239
Understanding the Financial Aspects of Employing People 241
Index 243
e
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F
Q
vi
Contributors C
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Angela Baron is a chartered member of the leadership development going back to 1977, when he t
r
Chartered Institute of Personnel and Development helped to create the Honeywell Aerospace Manage- i
b
(CIPD), for which she is currently an adviser on organ- ment Development Center. Today, as publisher of u
ization and resourcing. She has been responsible for BrownHerron Publishing, he has become the e-pub- t
o
numerous research programs including corporate lisher for over 50 authors and is seen as a pioneer in
r
culture, psychological testing, counseling in the 21st century publishing. s
workplace, per formance management, HR strategy
and recruitment practice. Her current research cov- Peter Casson is a senior lecturer in accounting
ers investigating the underlying links between people at the School of Management of the University of
management, productivity, and profitability. She is Southampton. He graduated with BTech and PhD
also steering work on human capital, developing degrees in psychology from Brunel University and
measures and reporting systems for practitioners. an MSc in occupational psychology from Birkbeck
Baron has co authored a number of books in the College, University of London. He is a fellow of the
field, including The Job Evaluation Handbook and Institute of Chartered Accountants in England and
Strategic HRM. Wales. After holding a number of research posts in
psychology, he trained as a chartered accountant
Ilias G. Basioudis is senior lecturer in financial before starting an academic career in accounting.
accounting and auditing at Aston Business School. His research interests are mainly in accounting for
He is also chairman of the Auditing Special Interest financial instruments, stock option compensation,
Group of the British Accounting Association, a fellow corporate governance, and company taxation.
of the UK Academy of Higher Education, and an
adjunct senior lecturer at the University of South Subir Chowdhury is chairman and CEO of ASI
Australia. Dr Basioudis has published widely in Consulting Group, LLC. A respected quality strate-
academic and professional journals and his textbook gist, Chowdhury’s clients include global Fortune 100
Financial Accounting: a Practical Introduction is companies as well as small organizations in both
recently published by Pearson. His research interests the public and private sectors. He is the author of
lie primarily in the area of empirical auditing, 12 books and has received numerous international
corporate governance, and accounting education. awards for leadership in quality management and
He is a member of various international accounting major contributions to various industries worldwide.
associations and is on the editorial board of the He has a graduate degree in aerospace engineering
International Journal of Auditing. from the Indian Institute of Technology, Kharagpur,
a postgraduate degree in industrial management
R. Brayton Bowen is author of Recognizing and from Central Michigan University, and an honorary
Rewarding Employees (McGraw-Hill) and leads the doctorate in engineering from Michigan Techno-
Howland Group, a strategy consulting and change logical University. Chowdhury is frequently cited in
management firm committed to “building better national and international media.
worlds of work.” His documentary series Anger in
the Workplace, distributed to public radio nationally Andrew Cox has been a senior executive in the
in the United States, continues to be regarded as a governance, risk management, and internal audit
benchmark study on the subject of workplace issues field with Centrelink in Canberra and the Northern
and change. A Best Practice editor and contributing Territory government in Darwin, and has managed
author to the hallmark work Business: The Ultimate eight internal audit activities over his career. Apart
Resource (Bloomsbury Publishing and Perseus Books), from internal audit, his previous experience has
he has written for MWorld, the online magazine of covered a number of areas including business conti-
the American Management Association. He currently nuity, security, strategic planning, IT planning, and
serves as executive adviser for the Center for Busi- industrial relations. Until recently he was a member
ness Excellence at McKendree University. of the Institute of Internal Auditors’ International
Committee on Quality in internal auditing. Cox has
Tom Brown served as a Best Practice editor and given presentations on internal auditing in forums
wrote the keynote essay for Business: The Ultimate both in Australia and internationally, and he has taught
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Resource, which is the largest handbook/database internal auditing in Australia and other countries.
ever assembled on modern managerial leadership. F
He has contributed to the Drucker Foundation’s Paul Davies is managing director of Onshore Off- i
n
Leader to Leader, Harvard Management Update, shore Ltd. He has been responsible for a wide range
a
London’s Financial Times, and the Wall Street of business transformation projects, whether estab-
n
Journal. He also edits the quarterly journal of the lishing companies offshore, providing consultancy
London Business School, Business Strategy Review. for entering offshore markets, managing the procure- c
Brown’s writings are based on his extensive work in ment of offshore services, transferring contracts e
vii
Effective Operations and Performance Management
s under employment legislation, or creating new busi- in a Wired World (Jossey-Bass, 1999) and coauthor
r
o ness strategies. With a management background in of Corporation on a Tightrope: Balancing Leader-
t the United Kingdom and India and sales and market- ship, Governance, and Technology in an Age of
u
b ing experience across Europe, Dr Davies has formed Complexity (Oxford, 1996) and Dynamic Planning:
i a team of professionals who can address a wide range The Art of Managing Beyond Tomorrow (Oxford,
r
t of business issues and provide solutions in manage- 1994). Goldberg was the former vice president and
n
ment, finance, business efficiency, and global talent director of publications at the Century Foundation.
o
C management.
Gail Harden is internal audit manager with
Bert De Reyck is a professor of management Specialized Technology Resources, Inc. (STR). She
science and innovation at University College London created the internal audit function at both STR and
and adjunct professor at the London Business School. her previous employer, United Natural Foods, Inc.
Previously, he held positions at the Kellogg School Harden has been the sole internal auditor at each
of Management, Northwestern University, and the company, utilizing creative and insightful ways to
Rotterdam School of Management. He is an authority meet the demands and standards of the internal
on decision-making, risk management, project audit profession with limited resources. At United
management, and project portfolio management. Natural Foods she was responsible for implementing
Professor De Reyck’s award-winning research has the Sarbanes–Oxley compliance process. Gail has
been published in numerous scientific and profes- seven years’ experience in internal audit and 13 years’
sional journals, and applications of his work can be experience in accounting. She holds a bachelor’s
found in industries such as pharmaceuticals, energy, degree in accounting and MS in business administra-
and aerospace. He is also a multiple award-winning tion and is a certified internal auditor (CIA).
educator.
Zahirul Hoque is associate dean (research) and
Leif Edvinsson is the world’s leading expert on professor of accounting in the Faculty of Law and
intellectual capital (IC). He has been vice president Management of La Trobe University in Australia,
and the world’s first corporate director of IC at Skandia where he is also deputy director of the Public Sector
of Stockholm, Sweden, and has held the world’s first Governance and Accountability Research Centre.
professorship in IC at Lund Universtiy, Sweden, since Prior to that he held a number of faculty posts at
2000. In 1996 he received awards from the American universities in Australia, New Zealand, Bangladesh
Productivity and Quality Center and from Business and Saudi Arabia. His research interests include
Intelligence in the United Kingdom for his pioneering accounting and organizational change, management
work on IC. In light of his work in both training and accounting, performance management, and public
IC, Professor Edvinsson has been a special adviser on sector accounting. Professor Hoque has published
service trade to the Swedish Ministry of Foreign two books, Handbook of Cost and Management
Affairs. He is also special adviser to the United Nations Accounting and Strategic Management Accounting.
International Trade Centre and is a cofounder of the He is founding editor of the Journal of Accounting
Swedish Coalition of Service Industries. & Organizational Change.
Marc J. Epstein is distinguished research pro- Tim Johnson is a director at Regester Larkin,
fessor of management at Jones Graduate School of a specialist reputation strategy and management
Management at Rice University, Houston, Texas. He consultancy. He advises some of the world’s leading
was also recently visiting professor and Wyss visiting public and private organizations on reputation man-
scholar at Harvard Business School. Prior to joining agement, helping them to develop their approach
Rice, Dr Epstein was a professor at Stanford Busi- to sensitive, long-term issues and respond to acute,
ness School, Harvard Business School, and INSEAD short-term reputational risks. He works extensively
(European Institute of Business Administration). He with senior executives, coaching them on their pres-
has completed extensive academic research and has entation and media handling skills.
extensive practical experience in the implementation
of corporate strategies and the development of per- Leslie L. Kossoff is an internationally renowned
formance metrics for use in these implementations. executive adviser specializing in next generation think-
Dr Epstein has extensive industry experience and ing and strategy for executives and their enterprises.
e has been a senior consultant to leading corporations Her clients include Fidelity Investments, Sony, TRW,
c
and governments for over 25 years. Kraft Foods, Baxter Healthcare, the UK National
n
Health Service, Seiko/Epson, 3M, Infonet and GM/
a Beverly Goldberg is senior fellow and editor-at- Hughes. A former executive in the aerospace/defense
n large at the Century Foundation. She is the author and pharmaceutical industries, Kossoff enjoys an
i of Age Works: What Corporate America Must Do to outstanding reputation as an invited speaker at
F
Survive the Graying of the Workforce (Free Press, conferences worldwide. She is the author of the
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2000) and Overcoming High-tech Anxiety: Thriving Executive Field Guides, the award winning book,
viii
Contributors
Executive Thinking, and more than 100 articles in management and auditing, public sector accounting, C
journals and newspapers, including the Financial and accounting education. Marriott is editor of the o
n
Times and CEO Magazine. International Journal of Management Education, t
published by the Higher Education Academy. r
i
Vinod Lall is a professor in the School of Business b
at Minnesota State University Moorhead, with teach- John L. Mariotti is president/CEO and founder u
t
ing responsibilities in supply chain management, of the Enterprise Group, a coalition of time-shared o
operations management, management science, project executive advisers. He currently serves as a director r
s
management, and management information systems. on several corporate boards, including World Kitchen,
He is active in research and publication, has published Petmate, Levick Strategic Communications, and
numerous papers in peer-reviewed journals, and has HomeCare Industries. Prior to this he was president
presented papers at national and international con- of Rubbermaid Office Products Group (1992–1994),
ferences. He is a certified supply chain professional a multinational group spanning four continents.
(CSCP) by APICS, the American Association for Before that, he led Huffy Bicycles as its president
Operations Management. Lall is the vice president of (1982–1992) to the preeminent position of industry
education for the Red River Valley chapter of APICS, leader and the world’s largest bicycle company at the
where he leads APICS certification training classes time. Mariotti is the author of eight business books,
for a number of regional manufacturing and service hundreds of articles, and is an accomplished keynote
organizations. speaker. His latest book, The Complexity Crisis, was
named one of 2008’s best business books.
David Magee is an award-winning columnist for
newspapers that include the Wall Street Journal, Andrew Mayo is associate professor of human cap-
New York Times, and Boston Globe, and he is the ital management at Middlesex Business School, where
nonfiction author of eight books, including the just he teaches human resource strategy, and his main
released The South is Round and the upcoming How research interest is in people-related measures. He is
Toyota Became #1. He is the co-owner of Chatta- also a fellow and program director for incompany
nooga’s largest independent bookstore, Rock Point programs at the Centre for Management Development
Books, and the founder of Jefferson Press, a niche at the London Business School, where he has worked
publisher distributed nationally by the Independent since 1996. He runs his own consultancy company,
Publishers Group. A former newspaper editor, column- MLI Ltd (Mayo Learning International), specializing
ist, freelance writer, business owner, and small-town in organizational strategies for growing human capi-
politician, Magee was named one of Mississippi’s top tal and translating the rhetoric of “people are our
business leaders under the age of 40 in 1998. Since most important asset” into reality. Mayo is president
1999 he has been writing full time. of the HR Society in the United Kingdom and is a
frequent speaker at conferences around the world.
Robin Mann is head of the Centre for Organisa-
tional Excellence Research, New Zealand, chairman of Damian Merciar is managing director of Merciar
the Global Benchmarking Network, advisory board Business Consulting, www.merciar.com, a niche
member of the Hamdan bin Mohammed e-University, business economics consultancy founded in 1998.
and cofounder of BPIR.com Ltd. Dr Mann’s experi- He has 20 years experience in commercial business
ence includes managing the UK’s Food and Drinks strategy. He is experienced in the transition environ-
Industry Benchmarking and Selfassessment Initiative ments of nationalized to private sector state utilities
(1995–1998), the New Zealand Benchmarking Club and the senior practice of commercial management,
(2000–2004), the Sheikh Saqr Government Excellence advisorial consultancy, and implementation. He has
Program, UAE (2005–2007), and leading TRADE also carried out policy advisory work for government
benchmarking projects in Singapore (from 2007 on). ministries. He holds an MBA from the University of
He worked in Edinburgh (1992–1995) for Burton’s Kent at Canterbury, went to the leading university in
Biscuits as a process improvement manager and the Middle East, studying international relations and
obtained his PhD in total quality management at language, for which he won a competitive interna-
Liverpool University in 1992. tional scholarship, and has a BA (Hons) in economic
history and political economy from the University of
Neil Marriott is dean of the Winchester Business Portsmouth. He is currently based in London.
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School and in 2008 and 2009 was chair of the British
Accounting Association (BAA). Professor Marriott has John Milton-Smith is a graduate of Sydney, F
also been the chair of the BAA’s Special Interest Group Monash, and Cambridge universities. He worked in i
n
in Accounting Education for 10 years. His publica- international trade, marketing, and consulting while
a
tions include five textbooks and tutor manuals cover- completing his earlier studies on a parttime basis.
n
ing financial and management accounting, as well as Between 1990 and 2007 he held appointments at
a specialized work for NHS financial managers. His Curtin University, Western Australia, as deputy vice- c
research interests include small business financial chancellor, Curtin Business School (1990–1997) and e
ix