ERP
Ch 9
Evaluation:
Key issues:
The evaluation process;
Organisational control and evaluation;
Financial evaluation;
Technology evaluation;
Human resources evaluation;
Website evaluation;
Business model evaluation;
E-business strategy evaluation.
Chapter 10 focuses on evaluation as part of the strategy process.
Although it appears after formulation and implementation, the
evaluation of strategy should be continuous throughout the strategy
process.
Managers must evaluate the performance of all activities
that take place within the organisation so that they can identify
areas for improvement, make the necessary adjustments and achieve
the objectives
Once the performance of a strategy has been measured, the
evaluation needs to address the reasons for the performance outcome
in relation to the set target.
This will reveal competitive strengths or
weaknesses and help to inform future strategy. Evaluation combines
both internal and external factors. The use of the organisation’s
resources and capabilities will be scrutinised alongside any changes
to market and competitive conditions.
The strategy evaluation should reveal whether or not change is
necessary. If change is necessary then the evaluation should also point
to the extent to which change should be implemented.
Organisational control &
evaluation:
Organisational control is a systematic process that allows managers to regulate internal
activities and match their performance with set targets.
The control function within an organisation is dependent
on the information generated on performance standards and performance achieved.
Consequently, it is necessary for managers to determine what information is required,
how it is to be generated and the
appropriate response to the outcomes based on analysis of the
information.
The three types of organisational control
Feedback control
focuses on an organisation’s outputs with an emphasis on the quantity and quality of
products and services produced (Daft, 2003). Also, feedback control is used as a basis
for matching actual performance against set targets. In e-business, targets may include
financial, customer satisfaction, sales, quality, number of
‘hits’ on the website, advertising revenue, or number of new customers.
The standard performance
may be linked to the reward system in the organisation
and should be set high enough to present a challenge to workers
but not so onerous as to make it unachievable. In some instances
it may be necessary to adjust the set standards to better reflect the
resources and capabilities within the organisation.
Measure actual performance
There are activities that take place within organisations that can be
measured quantitatively. Managers can monitor the performance of
the functional activities by preparing formal reports on the actual
outputs achieved over a set time scale.
Financial evaluation:
The finances of any business are part of the control function and it is vital that managers
keep monitoring and assessing the financial health of their organisation.
The main elements of financial control include:
g Cash flow: the level of short-term working capital or liquidity that the firm has to ensure
it can operate on a day-to-day basis.
g Assets: refers to short- and long-term assets.
g Customers accounts: refers to credit control, terms of credit and payment control.
g Suppliers: controlling the risks associated with the supply chain.
g Stock: methods of controlling and monitoring stock levels.
There are two main financial statements that provide the basic financial information for control
and evaluation of performance.
These are the balance sheet and the income statement.
The balance sheet is a financial statement that outlines the organisation’s financial
position by focusing on assets and liabilities at a given point in time.
The income statement is a summary of an organisation’s financial performance over a
given period of time. This is sometimes referred to as the profit and loss account. The
income statement outlines all sources of income coming into the firm over a period of
time and subtracts all the expenses and costs to derive the net income (profit or loss) for
the period.
Technology evaluation:
Technology is one of the key drivers of e-business so it is important for organisations to
understand their current position regarding the stage of technology adoption and what
can be achieved from it.
There are various different levels of e-business applications and organisations will adopt
those that help achieve their objectives within the constraints of finance and skills
(Daniel et al., 2002).
Human resource evaluation:
The evaluation of human resources in e-business is undertaken at four different
levels. These are:
g The evaluation of human resources policy;
g The evaluation of the recruitment process in attracting and retaining key skills;
g The evaluation of human resource performance against set targets;
g The evaluation of feedback from human resources.
.Evaluating human resource performance
When organisations recruit staff they expect a return on their investment. All staff should
add value to the organisation and be prepared to use their skills, experience and
expertise to contribute to the organisation achieving stated objectives.
Managers need to set performance targets and evaluate staff performance in the form of
appraisals. Performance appraisal is a process of observation, evaluation, recording
outcomes and providing feedback to workers.
Website evaluation:
In e-business it is the website that generates interest from customers and drives the
business model. The design and application of the website is of vital importance to
organisations engaged in e-business
and e-commerce.
The internet may offer organisations access to a global market, but their websites need
to reflect local conditions. Website design needs to take into account differences in
language, culture, technical experience and the types of products and services
demanded in different regions of the globe (Dowling, 1999).
Business model evaluation:
The business model adopted defines the types of activities that an
e-business undertakes to achieve a competitive advantage. Chapter 3
(E-business markets and models) outlined a number of examples
of commonly used business models for e-business. The performance
of the business model will be continuously monitored and evaluated.
Even though the business model may not generate much income
in the short term, managers in e-business must remain true to their
convictions and not abandon the business model too early. Unless
an e-business has first-mover or other market advantages it can take
some time for e-business models to generate income.
E-business strategy evaluation:
The final part of evaluation should focus on the longer-term aspirations of the e-business.
An evaluation of e-business strategy should determine whether or not the organisation is
heading in the right direction to achieve stated objectives.
These distinctions include:
g The need for a full understanding of the capabilities and attributes of the internet when
applied to business
functions;
g The need to change the internet architecture in order to measure relevant criteria;
g The need to clearly define business processes as a distinct E-business activity;
g The need to recognise that workgroups do not operate in isolation, but have to
recognise their impact on other groups within a network organisation;
g The need to recognise that the impact of the internet extends beyond the internal
environment.
The evaluation stage of the strategy process is continuous and in-depth. Managers
must undertake effective evaluation of performance to make better-informed judgements
and decisions about future strategy.
E-business is a technologically-based activity and, therefore, evaluation of the
performance of the technology is a high priority. Managers expect the technology to
enable the firm to operate more efficiently and at lower cost.
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