During tough times, businesses often focus on maximising efficiency rather than being innovation leaders. CPA Australia has therefore developed the following tips* to assist accountants, as strategic business leaders, advise businesses on how they could improve their efficiency during tough times.
The following tips are associated with high performance businesses that are focused on maximising maximise efficiency.
Strategic planning – while a formal process for strategic planning and encouraging employees to be continuously involved in the generation of ideas is important for success during good times, in tough times, when your business is more likely to be focused on maximising efficiency, you are more likely to be successful if your planning process is less formal and there is less employee participation.
Strategy implementation – strategy should be implemented and controlled through a combination of budgets and performance management systems (such as the Balanced Scorecard). Businesses focused on maximising efficiency should use their budgets and performance management systems to monitor and manage deviations from targets and hold management and employees accountable for targets.
Information sharing – businesses should encourage greater information sharing between management and employees by using performance management systems more intensely, rather than just budgets. Using performance management systems may also have the additional benefit of encouraging employees to direct their attention towards emerging opportunities.
Measuring employee performance – measures of performance, such as the quality of products and services and social responsibility, should be used in conjunction with measures such as financial performance and customer satisfaction to measure employee performance.
Employee compensation – research suggests that performance improves when a part of the employee compensation is contingent on the achievement of targets. Businesses with high performance management systems tend to favour objectively determined compensation based on short-term performance outcomes.
Organisational structure – mechanisms to improve coordination across an organisation should include task forces, project committees and cross-functional teams. Employee autonomy is also considered important in an effective organisational structure. For businesses focused on maximising efficiency, the structure should facilitate top-down management. This can be delivered through operating procedures and targets. Flatter management structures generally yield better results.
Management policies and procedures – employee activities and risks taken by employees should be limited by the use of codes of conduct supported by sanctions for any breaches. Businesses focused on maximising efficiency should also consider reviewing, guiding and restricting employee action on projects through frequent reviews conducted before projects begin (so that resources are only devoted to new projects that have gone through a rigorous approval process).
Human resources – if the values of individual employees are similar to those that underpin the objectives of the business, then the employee will be more likely to act in accordance with those objectives. The business should therefore endeavour to select employees with values similar to those of the organisation and ensure their ongoing commitment to those values. To help achieve this, the business should consider formally codifying and documenting their values, purpose and direction.
* These tips are taken from a collaborative research project between CPA Australia and the University of Technology, Sydney, titled Best Practice in Performance Management, which is authored by David Bedford and Professor Teemu Malmi. At the time of writing this document, the research had yet to be published.