MANAGING, DEVELOP & IMPLEMENT STRATEGY

MDIS MAR16 DF3.2

Bottom of Form

What are the main arguments for and against using shareholder value as the key measure for organisational performance?

How could you measure social performance, or environmental performance in an organisation?

How would the metrics differ for commercial and not-for-profit/third sector organisations

• Clara Storey9 Apr, 2016 – 16:19:04

1. What are the main arguments for and against using shareholder value as the key measure for organisational performance?
   Hubbard (2015) describes three issues with using shareholder return as the way to measure value:
   There are multiple methods to determine ‘shareholder return’ – Total Shareholder Return (TSR) or Return on Equity (ROE) (and then which way to calculate ROE) and it can be unclear which is the best one to use.
   Secondly, assessments of shareholder return o not take into account private companies, which are not listed.
   Thirdly, not all organisations have shareholders, for example public sector organisations, like the one that I work for which is a public health network, do not have shareholders and so the shareholder value measure is not applicable.
   2. How could you measure social performance, or environmental performance in an organisation?
   Internal social performance can be measured by:
   • Employment practices
   • Labour/management relations
   • Training and education
   • Employment diversity and opportunity
   • Health and safety
   • Disciplinary practices
   External social performance can be measured by:
   • Community impact
   • Customer health and safety
   • Supplier practices
   • Investment practices
   • Marketing practices
   • Respect for privacy
   • Freedom of association and collective bargaining
   • Political contributions
   • Bribery and corruption
   • Indigenous rights
   • Child labour
   (Hubbard 2015)
   3. How would the metrics differ for commercial and not-for-profit/third sector organisations?
   Public sector organisations are not generally profit driven and so have different success measures. According to Hubbard (2015) these can include customer and stakeholder satisfaction, quality, efficiency and break-even.
   Hubbard. G, Rice. J, & Galvin. P (2015), Strategic Management, Pearson, Australia

 

MDIS MAR16 DF7.2

Bottom of Form

Give an example of a situation which is considered valued in the organisation but is not measured.

Further to this, consider something which is measured, but you do not consider valuable as a measure.

Are they output or outcome measures?

 

• James Goode9 May, 2016 – 20:01:05

Yarra Valley Water is an asset management company. The level of the service we provide to our customers is directly related to the quality of our assets. Yet YVW does not measure the quality of newly constructed assets or the repair work completed on those assets very effectively. YVW’s capital program is generally around $200M per year. YVW does not measure defects post construction nor does YVW measure the cost of quality (Basu 2015, p4).

YVW also measures performance of our capital program through dollars spent and capital projects achieved each financial year. This measure does not take account of or reward savings made on capital construction projects or projects that have been successfully deferred. In this case YVW is measuring outputs ie infrastructure constructed but not outcomes ie the benefit the capital program has had on customer service (Mills Scofield 2015)