Evaluating corporate performance is a process of great value and potential. Professional evaluation allows seeing how well a particular company is faring in a variety of fields, including its organizational, managerial capabilities, and output (LaMarco, 2018). The process is conducted mainly to understand whether a company is capable of meeting its goals and objectives completely and efficiently (Bartle, 2017). Devised indicators can also be used to compare the performance of multiple corporate entities with a goal of improvement and competition assessment. Both simple analysis and comparison can become a valued tool for measuring performance. Evaluations can be used to attract investors or measure future capabilities for expansion (Business Plan Benefits Overview for Small Companies 2016).
There is a large variety of methods allowing to access a company’s performance. Many of them were previously discussed, including the Expanded 7-S framework Balanced Scorecard, SWOT analysis, and PESTLE analysis. All of the above will be further reviewed during this paper to see their comparative benefits and downsides. Each tool will be described and then evaluated, concluding with a general conclusion about the accomplished work. The general goal of this process is to see which methods work best for achieving a particular goal and providing a layered, deep understanding of the company’s strengths and weaknesses.
Expanded 7-S framework
The McKinsey 7-S framework is useful in a variety of situations that presuppose a need to examine the different parts of a single organization, and how they operate together. The model consists of seven main elements, which can be either be “soft” or “hard”. The hard elements are strategy, structures, and systems (The McKinsey 7-S Framework: – Making Every Part of Your Organization Work in Harmony).
The strategy describes the organization’s plans for addressing its competition and its plans for future development, while structure defines how the inside of the company is organized. The third hard element, the system, is responsible for how the mundane activities are organized to achieve work goals. Hard elements are easy to identify and evaluate, meaning that the management can make changes to them with relative ease (The McKinsey 7-S Framework: – Making Every Part of Your Organization Work in Harmony).
The soft elements, consisting of shared values, skills, style, and staff, on the contrary, are hard to describe and influence directly. Shared values are reflected in the work ethic and culture of the workplace, and reflect the attitudes of the workers and their leadership (The McKinsey 7-S Framework: – Making Every Part of Your Organization Work in Harmony).
Staff and skills are used to access the capabilities of employees and their work competency, and style describes the style of leadership used by the higher-ups. The more intangible elements of a company are influenced by the culture and the atmosphere of the workplace. Maintaining control and balance between the soft and hard elements is crucial to the continued and effective operation of a company. All of the elements are interconnected and united by the shared values of the workers and the company.
The model allows the evaluators to see which elements of the company need change and adjustment to improve performance and mood. The changes could include changes in how the company is led, organized, structured, or a wholesale introduction of new processes. The main downside of this system is that it does not follow a clear structure for enacting needed change, meaning that it is difficult for management to construct a plan of action (McKinsey 7S Model Framework: 2020: All You Need to Know 2020). Another difficulty comes from the fact that the model does not explain the meaning of organizational effectiveness and performance regarding its evaluations, and lacks empirical evidence in support of its claims.
The balanced scorecard is the next method of assessment to discuss, which can be described as a system for strategic planning and management. The balanced scorecard allows companies to effectively communicate their goals and align the approach of the workers with a general strategy the company is using (Balanced Scorecard Basics 2021). Monitoring progress and putting priority on a particular project is also possible with this model. The balanced scorecard allows the management to access business from 4 different perspectives: customer, internal, innovation, and financial perspectives (The Balanced Scorecard-Measures that Drive Performance 2014).
These four assessment points allow the company’s analytics to understand how the customers see them, what the main points the company should succeed at are, what are the opportunities for development and how the business looks from the shareholder’s perspective (The Balanced Scorecard-Measures that Drive Performance 2014). The tool offers a comprehensive and simple outlook on the most important points of business development, allowing a low bar of understanding and a minimal amount of complexity. The information is easy to organize and understand. The scorecard meets a variety of managerial needs, bringing separate elements of a company’s work into a single document and also allowing the reviewers to implement changes with all parts of the company in mind.
There are some downsides to this approach, however, because of the sheer amount of material created on the topic. Some may find the system to be too overwhelming and inconclusive in regards to moving forward (Jackson, 2020). Another difficulty is the need to adapt the structure to the particular structure of a company, which may be accompanied by some difficulty. Strong leadership and structure of management are needed to enact changes by this model, and keeping all parts of a company equally taken care of may prove to be complicated (Balanced Scorecard in 2020: Advantages and Disadvantages).
SWOT analysis is named after an acronym of its main components strengths, weaknesses, opportunities, and threats. The analysis can aid the company in understanding and identifying the key issues of their business and organizing them in an understandable manner (Benefits and limitations of SWOT analysis 2020). The structure is very cost-effective, as the analysis is cheap to produce. The approach allows the business management to deter potential threats, understand the strengths and weaknesses of the company’s work well, and take advantage of what it does best (SWOT Analysis: – How to Develop a Strategy For Success). The SWOT allows us to develop new goals following the capabilities and desires of a company while also creating a strategy for achieving them.
There are significant issues with the framework, however. For complex issues and analysis, the method may be insufficient or ill-equipped. More in-depth research is needed to understand and manage the operations of a business effectively (Benefits and limitations of SWOT analysis 2020). The SWOT analysis does not put a priority on discovered issues or provide adequate solutions for addressing them. The information provided by this tool can be plentiful, but much of it can be useless, and choosing the important part can prove difficult.
PESTLE analysis is used to understand and evaluate the outside factors that can have an impact on how a business grows and develops. The factors of the macro-environment are especially crucial to understand when the business is started or when the leadership is looking to expand into new territory (What is PESTLE Analysis? An Important Business Analysis Tool 2020). The acronym comprising the name stands for the main outside factors that have precedence over a business: Political, Economic, Social, Technological, Environmental, and Legal considerations (PESTLE Analysis: Factsheets). The framework can be further expanded to accommodate other factors, including intercultural differences, demographics, ecology, and ethics (PESTEL Analysis (PEST Analysis) 2020).
The advantages of this framework come from its relative simplicity, which allows easy replication and application. Consideration of wider trends and outside factors is also encouraged with this approach, helping business owners better consider the outside factors and strategically approach the process of leading a business. The knowledge of the macro-environment also allows business owners to better capitalize on the opportunities life presents to them.
As expected, there is also a variety of disadvantages associated with the PESTLE model. The attempts to analyze can result in oversimplification of data that leads to wrong conclusions, which are inadequate at assessing the climate of the corporation’s surroundings (Advantages and Disadvantages). Alternatively, there also exists a risk of gathering too much data and making analysis take too much time or be difficult to understand by the end. Due to the nature of many of the external factors, changes might be too quick to take into account or consider, which also complicates the matter of analyzing them further. To reach the desired results and keep them consistently relevant, the company needs to conduct the pestle analysis consistently.
Advantages and Disadvantages. PESTLE Analysis – Advantages and Disadvantages. Web.
Balanced Scorecard Basics. (2021). Balanced Scorecard Institute. Web.
Balanced Scorecard in 2020: Advantages and Disadvantages. Heartpace AB. Web.
Bartle, T., 2017. The Advantages of a Performance Assessment in a Company. Small Business – Chron. Web.
Benefits and limitations of SWOT analysis. Business Queensland. Web.
Business Plan Benefits Overview for Small Companies. (2016). Web.
Jackson, T., 2020. A Thorough List Of Balanced Scorecard Advantages & Disadvantages. ClearPoint Strategy. Web.
LaMarco, N., 2018. What Are the Benefits of a Business Plan?. Small Business – Chron. Web.
McKinsey 7S Model Framework: 2020: All You Need to Know (2020). Airiodion AGS. Web.
PESTEL Analysis. (2020). Business. Web.
PESTLE Analysis: Factsheets. CIPD. Web.
SWOT Analysis: – How to Develop a Strategy For Success. Strengths, Weaknesses, Opportunities and Threats. Web.
The Balanced Scorecard-Measures that Drive Performance. (2014). Harvard Business Review. Web.
The McKinsey 7-S Framework: – Making Every Part of Your Organization Work in Harmony. The McKinsey 7S Framework – Strategy Skills From MindTools. Web.
What is PESTLE Analysis? An Important Business Analysis Tool. PESTLE Analysis. Web.