STRAMA - Analyzing Goals, Objectives and Intellectual Capital
Transcript of STRAMA - Analyzing Goals, Objectives and Intellectual Capital
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Analyzing Goals and Objectives
and
Assessing Intellectual Capital
Garette Clyde Maisling
Charmilyn Ventic
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Charting the organizations purpose
Focuses the organizations purpose of existence,
where it is going, and where it wants to be
Hierarchy of goals: Vision ,Mission and Strategic
Objectives
Coherence is very important
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Vision Broad and desirable goals
firms aspirations of what it really wants to be
should have strong emotional appeal
Can position a company in a industry-wide
leadershipExample: CNN : To be the best and most
reliable news source of any topicanywhere, anytime -
Disneylandto be the happiest place onearth
In its 20-year battle with Xerox, Canonsslogan or battle cry was Beat Xerox.
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When vision fails
The Walk Doesnt Match the Talk
Irrelevance
Not the Holy Grail
An Ideal Future unreconciled with the Present
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Mission Statement
A companys mission differs from vision in that itis encompasses both the purpose of the companyas well as the basis of competition andcompetitive advantage
Vision that captures the organizations purposeand its ideals become more concrete andrealistic
McDonalds : Implement each of four policiesQSCV (quality. Service, cleanliness and value) tosatisfy customer
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Effective mission statements:
incorporate the concept of stakeholdermanagement, suggesting that organizations mustrespond to multiple constituencies if they are to
survive and prosper Profitmaximization not only fails to motivate
people but also does not differentiate betweenorganizations.
A good mission statement, by addressing eachprincipal theme, must communicate why anorganization is special and different.
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most successful firms mentioned values other
than profits. The less successful firms focused
almost entirely on profitability
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Comparing Wellpoint Health Networks
Vision and Mission Comparing Wellpoint Health Networks Vision and Mission
Vision
WELLPOINT will redefineour industry:
Through a new generation of consumer-friendly productsthat put individuals back in control of their future.
Mission
The WELLPOINT companies provide health security byoffering a choice of quality branded health and relatedfinancialservices designed to meet the changingexpectations of individuals, families and their sponsorsthroughout a lifelong relationship
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Strategic Objectives
Mission Statement does not provide the
tangible goals or objectives that must be met
to achieve a firms broader purpose.
Channels the efforts of each individual
throughout the organization towards common
end
Provides a means of allocating resources
effectively
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Gears to operationalizing the mission
statement
Setting objectives demands a yardstick to
measure the fulfillment of the objectives
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Criterias of effective objectives
(SMART)
Specific -this provides a clear message as to whatneeds to be accomplished.
Measurable -there must be at least one indicator(or yardstick) that measures progress againstfulfillingthe objective
Appropriate - It must be consistent with thevision and mission of the organization
Realistic - It must be an achievable target giventhe organizations capabilities and opportunitiesin the environment, doable.
Timely There needs to be a time frame foraccomplishment of the objective.
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Strategic Objectives
Strategic Objectives (Financial)
Increase sales growth 6% to 8% and accelerate corenet earnings growth to 13% to 15% per
share in each of the next fiveyears. (Procter & Gamble)
Generate Internet-related revenue of $1.5 billion.(Automation)
Increase the contribution of Banking Group earningsfrom investments, brokerage, and
insurance from 16% to 25%. (Wells Fargo) Cut corporate overhead costs by $30 million per year.
(Fortune Brands)
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Benefits of following SMART objectives
they help to channel employees throughout the
organization toward common goals.
challenging objectives can help to motivate and
inspire employees throughout the organization tohigher levels of commitment and efforts
Meaningful objectives help to resolve conflicts of
individual objectives when they arise Meaningful objectives thus help to resolve
conflicts when they arise
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Visions should evoke powerful and compelling
mental images.
Strategic objectives, on the other hand, are
much more specific and are vital to ensuring
that the organization is striving toward
fulfilling its vision and mission.
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Goal Grid
A new tool for Strategic Planning
The Goals Grid is a simple 2x2 matrix
constructed by examining the Yes and Noanswers to two very basic questions: (1) Doyou want something? (2) Do you have it? The
interplay of the Yes and No answers to thesequestions defines four basic categories forgoals and objectives (
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If you want something you dont have, (Y/N) your goal is toobtain it (ACHIEVE).
Action step: Develop a list of outcomes, conditions or
qualities the organization wants to achieve.
If you want something you already have (Y/Y), your goalor aim is to keep it (PRESERVE).
Action step: Develop a list of outcomes, conditions or
qualities the organization wants to preserve.
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Goals Grid does a first-rate job of helping
strategic planners think about goals and
objectives in terms of the categories making
up the Grid
it does not, by itself, guarantee that those
goals and objectives are consistent with the
organizations values or priorities
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once the initial set of goals and objectives has
been subjected to careful consideration,
settled on and even polished, the Goals Grid
can also serve as a convenient organizingframework for presenting and explaining them
to staff.
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If theres something you dont want and dont have (N/N), yourgoal is to avoid it (AVOID).
Action step: Develop a list of outcomes, conditions or qualities theorganization wants to avoid.
If theres something you dont want but have (N/Y), your
goal is to get rid of it (ELIMINATE).Action step: Develop a list of outcomes, condi-tions or
qualities the organization wants to elimi-nate.
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Goals Grid does a first-rate job of helping
strategic planners think about goals and
objectives in terms of the categories making
up the Grid
it does not, by itself, guarantee that those
goals and objectives are consistent with the
organizations values or priorities
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once the initial set of goals and objectives has
been subjected to careful consideration,
settled on and even polished, the Goals Grid
can also serve as a convenient organizingframework for presenting and explaining them
to staff.
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Purpose of Goal Grid
Jump-starting the strategic planning processand dialogue
Generating a set of organizational reality
check criteria against which strategic goalsand objectives can be gauged
Providing a way of checking for and managing
conflicting goals and objectives
Generating the goals and objectives
themselves.
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Purpose of Goal Grid
Jump-starting the strategic planning processand dialogue
Generating a set of organizational reality
check criteria against which strategic goalsand objectives can be gauged
Providing a way of checking for and managing
conflicting goals and objectives
Generating the goals and objectives
themselves.
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Advantages of Goal Grid
extremely effective overall organizational analysis tool
visible format
effective method for developing group consensus
logical progression of thought for goal development
analysis of current services, products, programs, and direc-tion of the organization
quick check of the alignment of valuesindividual and
organizational simplicity and usefulness of the information generated
consensual, agreed-to set of responses
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Allows comparison of the fit between a com-pleted Goals Grid for an organization and one
prepared for a single goal, project, program, ordecision
very effective, practical, engaging, and efficientactivity for an organizations board, committee,task force or project team to use in the course of
strategic planning
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Steps
have participants write their responses onindividual copies of the Goals Grid (a 15-minuteactivity).
The full group next engages in an exercise inwhich individual responses are shared, recordedon a computer, projected on a large screen, andthen discussed and analyzed.
Another option is to have small family groupsfrom functional or operational units develop astarter set of goals and then share those.
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Blank Goal GridDo You Have it?
Do you
want
it?
No Yes
Yes ACHIEVE PRESERVE
NO AVOID ELIMINATE
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live example that was produced by the board
of a conservation organization
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Do You Have it?
Do
youwant
it?
No Yes
Yes ACHIEVEWork toward sustainable growth
in the county
Provide more incentives to
property owners/managers for
program involvement
Implementation of on-farm
energy production and bio-fuels
facility
PRESERVECreativity, expertise and enthusiasm
of the current staff
Opportunities to inform and involve
residents
Working relationships with agency
partners
Working relationships and influence
with legislature
NO AVOID
Being seen as a regulator
Stagnation
Growing into a bureaucracy
Conflict of duties and
responsibilities
ELIMINATE
Barriers to progress
Narrow focus for our programs
Safety hazards
Excess expenditures
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Assessing Intellectual Capital
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Intellectual Capital refers to the collective intangible
assets that enable an organization to function,
including market assets, intellectual property assets,
human centered assets and infrastructure assets.- Brooking (1999)
Intellectual Capital is a collective knowledge of the
individuals in an organization or society. This
knowledge can be used to produce wealth, multiplyoutput of physical assets, gain competitive advantage,
and/or to enhance value of other types of capital.- businessdictionary.com
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Intellectual capital are classified as follows:
Human Capital - refers to the value that the
employees of a business provide through theapplication of skills, know how and expertise.
Structural Capital - is the supportive infrastructure,
processes and databases of the organization that
enable human capital to function.
Relational Capital is the external linkage of the
company with suppliers and customers that enables it
to procure and sell goods and services in an effortless
manner.
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Purposes of Measuring Intellectual Capital
To help organizations formulate their strategy
To evaluate strategy execution
To assist in the firms diversification and expansion decisions
For use as a basis for management compensation
To communicate with external shareholders
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Benefits of Measuring Intellectual Capital
It more truly reflects the actual worth of the company
The process of measurement gives insights into the drivers of
sustainable performance
Demands are growing for effective governance of intangibles,
of which social and environmental reporting are alreadyevident
"What gets measured, gets managed"- it therefore focuses
on protecting and growing those assets that reflect value
It supports a corporate goal of enhancing shareholder value
It provides more useful information to existing and potential
investors.
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Strategic framework for IC measurement:
Asset
Benefits
BaselineAction
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IC Measurement Models:
Economic Value Added (EVA) Market Value Added (MVA)
Tobins Q Ratio
The Balanced Score Card
Skandias IC Navigator
Intellectual Capital Services IC-Index
The Technology Brokers IC Audit
SveibysThe Intangible Asset Monitor (IAM)
Real Option Theory
Citation-weighted Patents
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Economic Value Added (EVA)
EVA is the difference between a company's net operatingincome after taxes and its cost of capital of both equity and
debt.
An equation for calculating EVA:
EVA = Residual Income (RI) + Accounting Adjustments (AcctAdj)
where:RI = Net Operating Profits After Taxes (NOPAT)Capital Charge (CapChg)
NOPAT = Earnings Before Extraordinary Items (EBEI) + After Tax Interest (ATInt)
EBEI = Cash Flow from Operations (CFO) + AccuralsATInt = Net Interest Expense x (1Tax Rate)
CapChg = the charge for use of capital. It includes interest on the debt plus a
charge for the equity capital based on a cash equivalent equity
multiplied by a cost of equity.
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MVA is the difference between the market value of a company (both equity anddebt) and the capital that lenders and shareholders have entrusted to it over the
years in the form of loans, retained earnings and paid-in capital.
As such, MVA is a measure of the difference between "cash in" and "cash out".
If MVA is positive, it means that the company has increased the value of the
capital entrusted to it and thus created shareholder wealth. If MVA is negative,thecompany has destroyed wealth.
MVA =
Market Value of Debt + Market Value of Equity - Total Adjusted Capital
Market Value Added (MVA)
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Tobins Q is essentially the same as the market-to-book ratio exceptthat Tobin used replacement cost of tangible assets rather than book
value of tangible assets in calculation.
A positive Q Ratio value can be ascribed to the intangible value of
intellectual capital which is not captured by traditional accountingsystems. If the Q Ratio is less than 1, an asset is worth less than the
cost of replacing it, and it is unlikely that a company will buy more
assets of that kind. If on the other hand, Q Ratio is greater than 1,
companies are likely to invest in similar assets that are worth more
than their replacement cost.
Tobins Q Ratio
Q = Market Value /Asset Value
Tobins Q Ratio
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The Balanced Score Card
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The total Market Value of a firm is equal to its Financial Capital
plus its Intellectual Capital. The components of IC are Human
Capital, Structural Capital. Structural Capital can be
deconstructed into Organizational Capital and Customer Capital.
Organizational Capital can in turn be deconstructed into
Innovation Capital and Process Capital (Edvinsson & Malone,1997).
The Skandia Navigator approach takes into account the same set
of financial, operational, and customer concerns as the BalancedScorecard. But, it makes more explicit the need to consider the
organization, its structure and processes for nurturing its
employees (Shand, 1999).
Skandias IC Navigator
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Skandia Navigator (Edvinsson & Malone, 1997)
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Intellectual Capital Services IC-Index
The IC-Index is a historic document which gives an account of numerous
indices and an ultimate single Index number which can be compared from
period to period.
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The Technology Brokers IC Audit
Brooking designed this model to place a definitive dollar
value of a firms IC.
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Total market value of a company consists of its visible equity and
three kinds of intangible assets. The visible equity is the book
value of the firm. The intangible assets are categorized as either
external structure or knowledge capital. The external structure
consists of brands, and customer and supplier relations.
Knowledge capital is comprised of internal structure and
individual competence. The internal structure is composed of theorganizations management, legal structure, manual systems,
attitudes, R&D, and software. Individual competence includes
education and experience (Sveiby, 1997).
SveibysIntangible Asset Monitor (IAM)
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The use of real option theory provides one solution to our
human inability to forecast complex or distant future events
accurately (Phelan, 1997). The real options approach recognizes
that the boundaries of firms are fluid with respect to adoptingdifferent kinds of projects, and attempts to value the
consequences of their possible adoption (Johnson et al., 2001).
Real Option Theory
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Citation-weighted Patents
Research using patent citations to measure IC is based on thefollowing assumptions:
1. Stock market investors hold the rational expectation that the
present value of a firms future profits varies with its stock ofknowledge
2. Valuable technological knowledge within the firm tends to
generate patents that future researchers build on and therefore
cite when doing their own innovation.
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