Performance Need Analysis - a total business solution

The effective financial approach to PNA and TNA.
(Do not waste money on the irrelevant subjective opinion survey)

By Arriffin Mansor

1.       Performance need analysis of a company is being conducted to identify a company’s performance problems and issues.  With this information, the management could introduce management and strategic changes so that the company could produce the desired optimum results.

2.       The main source of data would be the audited financial statements of the company.  It is objective, verified, available and comparable.

3.       For the purpose of meaningful comparison, these data are converted into relevant key performance ratios.

4.       The company could also chose and design the appropriate strategies that could sustain and win the company in the ever challenging business environment.

5.       The focus of the study is to identify the strengths and weaknesses of the company.  The strengths are the management function that shows consistent positive performance as compared to an equivalent company in the same industry.  On the contrary, the weaknesses are the negative performance areas.

6.       The comparative performance study between the company and another which is known as benchmarked company are also known as gap analysis.

7.       If the gap of an area is found to have a significant impact on the outcome of the company, that gap is called the critical performance gaps. 

8.       The critical items are identified through Pareto or sensitivity analysis.  ROE and ROA models are being simulated to test its sensitivity.

9.       Further study could be conducted on the critical gaps to identify the root cause of the performance problems and issues.

10.   This could be obtained by breaking down the performance ratio into component ratios which should highlight the source problem.

11.   Performance problems may not be caused or contributed solely by the job holders.  Other factors such as lack of authority, information and technology could be the main contributory factor.

12.   The analyst could now zoom to the individuals or team who are now identified as the critical non-performers.

13.   When competency profiling is conducted on the non-performers, and subsequently compared to best practices as found in the industry, competency gaps are identified for the purpose of training.

14.   As usual and due to time constraint, management priority and focus should be given to the critical areas.

15.   Thus, the PNA could be completed in a fast 15 days which should benefit all CEOs and his or her management team for their respective purposes.

© arriffin@gmail.com  Tel : 012-2786282

Financial Analysis for PNA and TNA

One of the key steps in uncovering the weak performance areas is through systematic comparison of performance as against the industry standards.

Training need analysis via financial approach
	Financial Statements		OWN KPI rate	INDUSTRY KPI rate	Negative Critical Gaps	Deeper Component gaps	Other performance solutions	Training
1	ROE	Profit margin
		Sales turnover
		Leverage
2	BEP	Price
		Volume
		Variable costs
		Fixed Costs
3	Working capital	Cash at banks
		Stocks
		Debtors
		Creditors
4	Fixed capital	Transportation
		Machinery and tools
		Shops
		Plant and Buildings
5	Sources  funding	Equity and
		Borrowings
6	Cash flows	Inflows
		Outflows
		borrowings
The kpi rates are always in ratios

A better approach than spending tens of thousands to survey the objective opinion of workers who generally would give the wrong and irrelevant feedback.

1. The following result could be drawn from the financial statements: return on equity and return on assets with breakdown analysis to determine the cause factors.
2. From the cost, volume, profit analysis the Return on Sales could be calculated at which time, the performance problems and issues on sales and costs could be identified too.
3. The performance of the functional departments are analyse through their respective KPIs as compared to the industry standards.
4. Performance gaps are refined and identified for their criticality.
5. Non performers could thereafter be traced where their competency gaps are identified through benchmarking with industry standard worker with their best practices.
6. The competency gaps could be clustered for the purpose of training delivery.
7. The expected ROI training could be calculated by comparing the net gains and benefits of training divided by total costs of training.

The Integrated Change to Excellence

MANAGING TRANSFORMATION Integrated change
Where	WHO	What	How	When
Priority given to Critical performance areas identified with gap analysis True performance analysis ©arriffin@gmail.com  Tel 012-2786282	Everyone participate in the setting of goals and appraisals. Individual and team accountability for results	Target set by ROE chart With clear sub-goals defined	Best practices Innovation Change strategic Kaizen – continuous improvement Efficiency and performance driven.  Measured quantitatively Model driven Benchmarking Training	All the time. Target set by business planning and HR Appraisal Performance monitoring all the time