ORGANISATIONAL APPRAISAL

ORGANISATIONAL APPRAISAL
Shanmukha Rao. Padala **Dr. N. V.S.				Critical Factors: Identification of the present
Suryanarayana				and future conditions having a bearing on the
INTRODUCTION:				achievement of objectives.
The process of observe an organizational internal
environment to identify the strengths and weaknesses				Resources: Identification and provision for resources
that may influence the organization's ability to achieve				required to meet present and future conditions for
goals. A firm can exploit its opportunities successfully,				achieving objectives.
depending on its corporate strengths. It can be said				Objectives: Clearly spelt out results and details of the
that the corporate capabilities of the firm become the				means to be used to measure accomplishment.
focal point for its performance and survival. They play				Appraisal: Comparing actual with expected
a crucial role, both in identifying the strategy and its				performance that results in timely /corrective action.
success. Corporate capabilities go beyond sales, profit				Deployment of Resources: Establishing and delegating
and net worth. It is concerned with the state of mind				areas of responsibility and authority for critical factors.
and outlook of the firm. Corporate strategy ultimately				For its strategic planning system, a firm's strengths and
means a matching game between environmental				weaknesses can be evaluated on the above
opportunities and organizational strengths to gain				dimensions.
competitive advantage. Assessment of organization's				Analysis of ‘Financial' Dimension
strengths and weaknesses is also known as				A firm's performance is largely determined through its
Corporate Appraisal. The internal environment of an				financial performance like sales revenue, profits net
organization includes forces that operate inside the				worth, divided pay out, etc. A number of dimensions
organization with specific implications for managing				within finance viz., capital structure, capital budgeting,
organizational performance. Internal environmental				dividend policy, debt policy, interest cost, credit policies,
factors, unlike external environmental factors come				management of working capital etc., need to be
from within. These factors, collectively defined both				examined to assess a firm's strengths and
trouble sports that need strengthening and the core				weaknesses.
competencies that the firm can build. An organization
can better analyze how much activity might and value				Analysis of the ‘Operations' Dimensions
or contribute significantly to shape an effective				The resource conversion process requires operational
strategy by systematically examining its internal				arrangements. The efficiency of the ‘conversion'
environment.				process reflects strengths or weaknesses. Besides
				conversion, the organisation also needs to transform
MEANING OF STRENGTHS & WEAKNESSES:				the products and services through the process of
Organizational analysis requires data and information				marketing and distribution into liquid or cash resources
about the internal environment. SWOT analysis refines				which are then recycled. Organisational audit, therefore,
this information by applying a general framework for				must include the assessment of corporate strengths
understanding and managing the environment under				and weaknesses in each functional area. In the area of
which a company operates. SWOT analysis consists				marketing, this may mean assessment of factors like
of evaluating a company's internal strengths and				familiarity with the industry breadth of the products
weaknesses and its external opportunities and threats.				services offered, quality of the marketing research,
SWOT analysis underscores the basic point that				customer pre and after sales service, consumer,
strategy must produce a good fit between a firm's				loyalty, etc.
internal capabilities. Organization strengths and				Strengths and Weaknesses Profile:
weaknesses are a matter of interpretation. Though, no				After the corporate audit on three dimensions:
definition may ever be complete, we would define				management, finance, and operation have been done.
strengths and weaknesses as follows:				Bates and Eldredge suggest consolidation of all these
				dimensions to develop a profile. This is shown below:
Corporate Strengths: A strength is a strong point for				Strengths and Weaknesses Profile
the company i.e., something a company is good at
doing or characteristic that gives it an important				Dimension
capability. Strength can be a skill, a competence, a				Basis of Comparison
valuable organizational resource or competitive				Ranking
capability or achievement that gives that company an				Existing
advantage. It refers to competitive advantages and				Strengths of weaknesses
other distinct competencies which a company can				Management
exert in the market place. The management and
performance of organization can also be analyzed
with the help of ‘7-s' Framework, developed by
McKinsey and co., a leading consulting firm of USA.
According to this framework, strategy is only one				Financial
element that determines the performance. The first
three elements: strategy, structure and systems are
consider the ‘hard' elements and the next four
shared values, skills, staff and style are considered as
the ‘soft' elements. With the help of this framework				Operations
a competitive competitor analysis can provide deep
insight on the strengths and weakness of the
competitors.

Corporate Weakness: It refers to constraints or
obstacles which check movement in certain desired				The purpose is to ensure that the strategist is aware
direction, and may also inhibit organization in gaining a				of a basis of comparison and its appropriateness to
distinctive competitive advantage. A weakness is				the factor under assessment. Ranking indicates
something the company does not have or does poorly				degree of importance of the factor under assessment
or a condition that outs it at a disadvantageous				to the orgnisation's success. All critical factors should
positions. A weakness may or may not make an				have a ranking in one in their respective dimensions. A
organization competitively vulnerable on how much it				brief description of what exists.
matters in the competition battle. THE CRITERIA				Strengths or weaknesses are coded as follows: 0-
FOR DETERMINING STRENGTHS AND				neutral; +=strength, and the more pluses, the greater
WEAKNESSES:				the strength; -weakness and the more minuses, the
				greater the weakness. The profile gives a quick view
A major problem which must be resolved prior to any				of the total situation as well as the criteria which an
analysis of corporate capabilities is the criteria that				analyst has used to arrive at conclusions. By ranking, it
would determine whether an element under				also helps in focusing attention on more important
examination is a strength or a weakness. Four types				rather than less important factor.
of criteria have been suggested to classify an element				The Grid Approach:
into strength or weakness. These are: i. Historical; ii.				The earlier framework of Bates and Eldredge
Normative; iii. Competitive parity; and iv. Critical Factors				suggested a diagnosis around three dimensions:
for Success.				Management, Finance, Operations. Almost a similar
1. THE HISTORICAL CRITERION				approach has been suggested by Ansoff. This is
Here, the analyst compares the characteristics under				shown below: GRID for Organization Audit
examination with past performances. An improvement
over the past performance may be seen as strength,				Facilities Equipment
and a decline a weakness. Before, arriving at such				Personnel Skills
conclusion, it is always advisable to check the reliability				Organisational capabilities
of the ‘past' in future. In a large number of situations				Management capabilities
‘past' may not be valid for future and this would				General Management & Finance
certainly invalidate our assessment or judgment.
2. THE NORMATIVE CRITERION
Here, the basis of judgment is ‘what ought to be'
the level of performance to classify a particular
element into a strength or a weakness. Thus, based				R&D
on theory, expert opinion, industry practices or personal
opinions, one can develop ‘norms' for evaluation.
3. THE COMPETITIVE PARITY CRITERION
As its basis for judgment, this criterion utilizes the
action successful direct competitors or potential				Operations
competitors. It is based on the premise that a firm
must, at the minimum, meet the actions of the
competitors. Thus, if the industry practice of providing
60 days credit to the trade is not followed, it may be
considered a weakness.				Marketing
				Warehousing Retail outlets Sales Offices
4. THE CRITICAL FACTORS FOR SUCCESS				Transportation equipment Training facilities for sales
CRITERION				staff Data processing equipment
Each business, in some sense, is unique. It requires a				Door-to-Door selling Retail selling holesale selling Direct
set of minimum performance standards and hence				industry selling Dept. of Defense
capabilities. This criterion helps to examine the				selling Cross-industry selling Applications
strengths and weakness in the context of meeting the				engineering Advertising Sales promotion Servicing
minimum requirements for success.				Contract administration Sales analysis Data analysis
One criterion is seldom sufficient for a complete				Forecasting Computer modelling Product Planning
evaluation of a firm. Some elements like ‘financial				Background of people Corporate culture
strengths' may be evaluated better on ‘historical'				Direct sales
and ‘competition' criteria; and ‘marketing' may be				Distributor chain Retail chain Consumer service
best evaluated on the basis of ‘competition' and				organisation Industrial service organisation Dept. of
‘critical factors for success criterion.				Defense product support Inventory distribution &
MEASURING STRENGHS AND WEAKNESSES:				Control Ability to make quick response to
Strengths and weaknesses may exist in varying				customer requirements Ability to adapt to socio-political
degrees. Some may view an organisation as very				upheavals in the market place Loyal set of
strong which others may consider it not that strong.				customers Cordial relations with media
The same may apply to its weaknesses. This would				and channels Flexibility in all phases of corporate life
call for measurement of strengths and weaknesses.				Consumer financing Discount policy Team work
There are three measures 1. Attribute Measures, 2.				Product quality
Effectiveness Measures and 3. Efficiency Measures.				Industrial marketing Consumer merchandising Dept. of
1. Attribute Measures				Defense marketing State and municipality
This statement is developed to identify or list a				marketing Well-informed and respective
characteristic or quality which an organisation				management Large customer base Decentralized
possesses or is expected to possess in the near				control Favourable public image Future
future. Thus, leaving the analysis only at the				orientation Ethical standards
‘attribute statement' level may be incomplete and
inadequate. In many situations it may however, be the				The ‘rows' contain various functions and the
only alternative to express one's strengths or				‘columns' capabilities. With the help of
weaknesses.				comprehensive checklist, you can identify the relevant
2. Effectiveness Measures				characteristics for a firm vis-à-vis various functions.
In this approach, a characteristic is represented by a				The 7 'S' Framework:
statement that identifies a capability of an organisation				The 7 ‘S' framework can be used both all the
that will help in the accomplishment of a particular task				corporate level as well as at the functional level. One
or objective.				such matrix for the corporate level is shown below:
				The 7 ‘S' Framework Functions
3. The Efficiency Measures
As the word ‘efficiency' suggests, it measures the				Dimension
productivity of an organisation in converting inputs into				Marketing
desired outputs. Apparently efficiency measure is				Finance
implementable only in quantifiable situation.				Human Resources
				Production
The use of three types of the measurements is a				1. Strategy
function of the degree of specificity possible for a
given element or characteristic. Attribute measurement
is simply a listing of the capabilities of an organisation;
an effectiveness measure relates to the abilities of an
organisation to achieve objectives; and an efficiency				2. Structure
measure is concerned with the optimum conversion of
firm's resources into desired output. The type of
measurement a firm would employ will be a function of
- the characteristic which is being measured and the
level within the organisation which is to utilize the				3. Systems
measurement.

ANALYSIS OF STRENGTHS AND
WEAKNESSES:
				4. Shared Values
A comprehensive and objective analysis of strengths
and weaknesses may be facilitated by the use of a
format or a framework. In this section we will study a
few of such formats or frameworks.
The Check List				5. Skills
Some writers have suggested the use or
organisational checklists to evaluate organisational
capabilities and weaknesses. One such checklist
contains 446 checkpoints. Pearce and Robinson
suggest the following checklist.				6. Style
Marketing

1. Firm's products/services; breadth of product line.
2. Ability to gather needed information about markets.
3. Market share of submarket shares.				7. Staff
4. Product/service mix and expansion potential; life
cycle of key7 products; profit/sales balance in produce
service.
5. Channels of distribution.
6. Effective sales organisation; knowledge of customer				a) The level at which
needs.				the exercise of corporate audits (strengths and
7. Concentration of sales in a few products or to a				weaknesses) is being
few customers.				performed.b) The
8. Product/service image reputation, and quality.				‘characteristics' which are being examined i.e.
9. Imaginative, efficient, and effective sales promotion				approach to planning, management culture, marketing
and adverting.				management, distribution system
10. Pricing strategy.				etc.c) The ‘use'
11. Producers for digesting market feedback and				which management wants to make of the strengths
developing new products/service or markets.				and weaknesses analysis. If the idea is to reformulate
12. After sales service and follow-up.				a corporate strategy, management may employ two
13. Goodwill/ brand loyalty.				or three frameworks to have different viewpoints for
				the total organisation. If the use is ‘gap analysis' in
Finance and Accounting				some specific functional area, it may confine to only
				one framework, using the various ‘measures' to
1. Ability to raise short-term capital.				come to sound decisions.
2. Ability to raise long-term capital; debt, equity.
3. Corporate-level resources (multibusiness firm).				The framework suggests that there is a multiplicity
4. Cost of Capital relative to industry and competitors.				of factors that influence an organisation's ability to
5. Tax considerations.				change and its proper mode of change. Because of
6. Relations with owners, investors, and stockholders.				the interconnectedness of the variables it would be
7. Leverage position: Capacity to utilise alternative				difficult to make significant progress in one area
financial strategies such as lease or sale and				without making progress in the others as well.
leaseback.				Organisational change may be understood to be a
8. Cost of entry and barriers to entry.				complex relationship between strategy, structure,
9. Presence of financial planning and budgeting				systems, style, skills, staff and superordinate goals.
practices.
10. Working capital.				1. Strategy and Super ordinate Goals- The concept of
11. Effective cost control; ability to reduce cost.				strategy includes purposes, mission, objectives, goals
12. Financial size.				and major action plans and policies. Super ordinate
13. Efficient and effective accounting system for cost,				goals may be considered to be the equivalent of the
budget and profit planning.				term organisational purposes. Super ordinate goals
				refer to a set of values and aspirations that goes
Production/Operations/Technical				beyond the conventional formal statement of
				corporate objectives. Superordinate goals are the
1. Raw materials cost and availability.				fundamental ideas around which a business is built.
2. Inventory control systems.				They are its main values.
3. Location of facilities.				2. Structure- The design of organisation structure is a
4. Layout and utilisation of facilities.				critical task of the top management of an
5. Technical efficiency of facilities and utilisation of				organisation.Organisational structure refers to the
capacity.				relatively more durable organisational arrangements
6. Effective use of subcontracting.				and Relationships. It prescribes the formal relationships
7. Degree of vertical integrations: value added and				among various positions and activities.
profit margin.				3. Systems- refers to all the rules, regulations and
8. Efficiency and cost/benefits of equipment.				procedures, both formal and informal that complement
9. Effective operation control procedures: design,				the organisation structure. This includes production
scheduling, purchasing, quality control and efficiency.				planning and control systems, cost accounting
10. Costs and technological competencies relative to				procedures, capital budgeting systems, recruitment,
industry and competitors.				training and development systems, planning and
11. Research and development/technology/innovation.				budgeting systems, etc.,
12. Patent, Trademarks, and similar legal protection.				4. Style- The style of an organisation becomes evident
				through the patterns of actions taken by member of
Personnel				the top management over a period of time. The
				aspects of business most emphasised by members of
1. Management personnel.				the top management tend to be given more attention
2. Employees skill and morale.				by people down in the organisation.
3. Labour relations/costs compared to industry and				5. Staff- is the process of acquiring human resources
competition.				for the organisation and assuring that they have the
4. Efficient and effective personnel policies.				potential to contribute to the achievement of the
5. Effective use of incentives to motivate				organisation's goals.
performance.				6. Skills- is one of the most crucial attributes or
6. Ability to level peaks and valleys of employment.				capabilities of an organisation. The term skills include
7. Employee turnover and absenteeism.				those characteristics which most people use to
8. Specialised skills.				describe a company. These are developed over a
9. Experience.				period of time and are a result of the interaction of a
				number of factors: performing certain tasks
Organisation/General Management				successfully over a period of time, the kind of people in
				the organisation, the top management style, the
1. Organisational structure.				organisation structure, the management systems, the
2. Firm's image and prestige.				external environmental influences etc., Hence, when
3. Firm's record for achieving objectives.				organisations make a strategic shift it becomes
4. Organisation communication system.				necessary to consciously build new skills.
5. Overall organisational control system effectiveness
and utilisation.				MATCHING STRENGTHS AND WEAKNESSES:
6. Organisational climate.				The purpose is to arrive at a ‘match' between
7. Use of systematic procedures and techniques in				corporate strengths and environmental opportunities
decision making.				for competitive advantage. The purpose is to improve
8. Top management skill, capabilities and interest.				corporate performance. A simple but powerful
				question to keep us on the right track, lest the exercise
The Conceptual Approach:				becomes unwieldy and an end in itself is to ask: ‘so
Bates and Eldredge have suggested what has been				what'?
described as conceptual approach to analyse
strengths and weaknesses. According to them, the				SUMMARY:
format for analysis can be divided into three				The analysis of corporate capabilities and weaknesses
dimensions : Management, Operations, and Finance.				becomes a pre-requisite for successful formulation
These three dimensions would be common for a				and reformulation of corporate strategies. This analysis
majority of the organisations.				can be done at various levels: functional, divisional and
'‘Management''dimension covers top management				corporate. The classification of an item or
functions and broader issues encompassing the total				characteristic in terms of strength and weakness can
organisation. Some of these could be strategic planning				be done on the basis of some criteria like historical
processes and systems, organisation climate and				criterion, normative criterion, competitive parity criterion
culture, managerial succession, top management				and the critical factor of success criterion. In order to
values etc. ‘Operations' dimension includes resource				measure the degree of strength or weakness, we can
conversion and distribution functions like production,				use three measures: attribute measures, effectiveness
material management design, marketing, etc.				measures and efficiency measures. A format like a
‘Finances' include issues like capital structure,				'checklist', a grid or a matrix helps in making a
working capital, credit policies etc.				comprehensive analysis. It also helps in consolidating
				the analysis on corporate audit. While performing the
Analysis of Management Dimension:				audit, it is important to remember than in the ultimate
At the corporate level, i.e. at the level of corporate				analysis, it is the entrepreneurial viewpoint of strengths
strategy, the strategist must begin the assessment of				and weaknesses which can make or break a
organisational strengths and weaknesses with an				company. In this view, the concept of synergy holds
analysis of firm's management. To a large extent, the				the key to enhance the pay offs from the existing
quality of top management determines and affects				corporate capabilities. A strong mind, even with limited
corporate strengths and weakness, not only the				capabilities, may build a giant organization and a weak
current but the ‘potential' strengths as well. As an				mind may cripple a sound organization by magnifying
illustration, Bates and Eldredge have suggested the				the minor weaknesses. The frame of mind, thus may
following dimensions to evaluate the strategic planning				appeal to be a more important intangible strength than
system of a firm.				all the tangible assets.

POS

ORGANISATIONAL APPRAISAL