Operation Manager Performance - Suggested Solution

SUGGESTED ANSWERS

Production Units      5,400       6,000
Profit  '000               2,970        3,600
Profit/unit                    550           600
Materials  '000         1,500        2,000
Material/ unit                2               2

Production
Volume            330,0000
Efficiency          300,000
Total                 630,000

Materials
Volume             630,000
Efficiency          0
Total                 630,000

Production efficiency has increased by RM300,00
Material efficiency is NIL

Arriffin Mansor 012-2786282

Training Manager - Performance Evaluation

What is the role of the training manager?
increasing productivity through training.

Input:        training costs
Output:     Sales, Profits, Reduce Production costs, Reduce marketing costs,

profits per employee
Sales per employee
Production cost per production employee

Marginal improvement in profit with marginal training
Marginal improvement in Sales with marginal training

Training efficiency i.e at
input phase
process phase
output phase
outcome level

Identifying the critical competency gaps for the company.
Developing the most effective and efficient delivery strategies.

Using input output to measure performance improvement as a result of training.

Arriffin Mansor 012-2786282

Finance Manager's Performance - A Case Study

What is the performance objective of the finance manager?
Obtain maximum capital at the cheapest cost.

Input =  Capital
Output = Interest
KPI =  interest per ringgit capital

Working Capital Financing - has it improved?
Fixed Capital financing - has it improved?

Has the Asset turnover ratio improved?
Has the debt equity ratio improved?  Has the financial manager taken up all loans available in the market?

Has he taken the full advantage of the suppliers credit?
Can we reduce Sales debtors?
Can we reduce stock levels? just in time?

Is there any idle assets?
Any asset not producing the minimum return?

Can we liquidate any assets?  Convert ownership to tenancy?

The accountant is achieving his goal jointly through other functional managers.

Arriffin Mansor 012-2786282

CEO performance measurement - A case study

.
With additional RM3 million investment of assets, the CEO of a company was able to increase sales to RM13 million from RM12 million last year.

The annual profit has also increased from RM2.9 to RM3.0 million behind a shareholding of RM10.2 million and a total assets of RM4 million last year.

However, costs has gone up from RM9.10 to RM10.0 million.

How do you measure the performance of the CEO?.

Answers:

            last yr       current yr
ROS    0.242        0.231
ROA   0.207        0.176
ROE    0.284       0.229

Conclusion:  The CEO has not performed.  ROS has dropped from 24% to 23%
The ROA has dropped by 3% and ROE by 5%.

Net Profit margin has dropped by 1% while turnover has reduced by 0.10 and equity multiplier has dropped by 0.07.

Arriffin Mansor 012-2786282

Performance Measurement of the CEO

Among the managers, the easiest performance measurement is that of the CEO.

The CEO's KPI is the return on equity i.e how much profit could be generated with every dollar invested in equity.

What are the generic key result areas of the CEO?  The KRAs are actually the sub-components of the ROE.

Net Profit Margin +  Asset turnover   +   Equity Multiplier  OR as ratios

NP/Sales     x        Sales/Asset       x       Asset/Equity

The above KRAs could be broken down further to discover the root cause of any change.



Arriffin Mansor 012-2786282

ROI training for the Operation Manager - A Case study

An operation manager was sent for training in six sigma and came back with the following results in his department.

Production volume has improved from 5,400 to 6,000 for the first month.  The net profit margin has increased from RM550 to RM600 per unit..

A young six sigma trained engineer for RM5,000 per month was recruited as an extra cost.

However material input has increased from RM1.5 to RM2.0 million for that month.

What is the ROI training for the operation manager?  Assume other costs remain the same.

Mansor 012-2786282

Performance measures in Operations

The following KPIs are relevant for the production or the operations department

1. Return on Assets by Production department
2. lower unit costs
3. faster turnaround through put
4. efficient output
5. Production Productivity
6. lower wastage
7. lower return or rejected goods

Arriffin Mansor 012-2786282

The performance of the accountant

The accountant has three main duties / tasks i.e

1. Producing financial statement under the law, and 
• accounting cost per paid up ringgit.
• accounting cost per sales ringgit
2. Raising funds and 
• waccat
3. Ensuring liquidity at all times.

The following KPIs are relevant for the accountant.

1. Paid up capital /costs of accounting department
2. Return on Equity
3. Equity Multiplier
4. Capital turnover
5. Cost of borrowed capital
6. Accounting costs per sales dollar
7. Accounting costs per paid up capital

Check other columns for more information on the performance of the accountant.

Arriffin Mansor 012-2786282

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COMPETENCY FROM PERFORMANCE GAPS

The HR manager went for a 3 day course on performance measurement.  On return, he introduced changes in the performance planning and appraisal systems for the whole company.  How do you measure his success?  Is his training of RM10,000 justifiable?


As a result of the change, profit has improved from RM1,000,000 to RM2,00,000 however staff has also increased from 100 to 150.  How do we measure the true performance of the manager?

In the meantime, he has been able to retain normal expenses in the HR department including the number of staff.

Any suggested answer?

Arriffin Mansor 012-2786282