MDC Group Assignment Autumn PDF

Preview

Summary

Download MDC Group Assignment Autumn PDF

Description

22421 Management Decisions and Control - AU Post

Table of Contents 1. Design and Operation of PMS

1

1.1 Design of PMS

1

1.2 Operation of PMS

2

2. Justification of Design (Case Organisation)

4

2.1 Organisation Overview

4

2.2 Organisational Structure

4

2.3 Justification

5

2.3.1 Market Condition

5

2.3.2 Differentiation Strategy

5

2.3.3 Delivery Experience

5

2.3.4 Response and Resolution

6

2.3.5 Online Services

6

2.3.6 Customer Satisfaction

7

2.3.7 Market Share

7

3. Justification of Design (Management Accounting Theory)

8

3.1 Alignment with Vision

8

3.2 Embrace Empowerment

8

3.3 Balance of lead and lag

8

3.4 Causal Linkages

9

3.5 Emphasis the Positive

10

3.6 Criteria of Measure Design

10

4. Design Process

12

Reference List

14

Appendix

16

22421 Management Decisions and Control - AU Post

22421 Management Decisions and Control - AU Post

1. Design and Operation of PMS

1.1 Design of PMS The performance measurement system (PMS) is designed to measure the customer performance of consumer division for AU Post, based on the typology of a frustum model. The frustum approach is the interception of strictly hierarchical and balanced architecture, showing tectonic characteristics of both models. There is a vertical synthesis of low-level indicators into high-level measures, but without the scope of transitioning non-financial performance into financial performance (De Toni & Tonchia 2001). While at the higher level there is usually a tableau of financial performance, this is eliminated as the PMS is designed merely for customer performance of AU Post.

Classification of the PMS models (De Toni & Tonchia 2001) Tailored to AU Post, the system is composed of three tiers, each of which has specific realms of customer performance. Tier 1 comprises dimensions of delivery experience, response and resolution to customer issues, and online services, with Tier 2 and 3 including customer satisfaction and market share respectively. The construction of this PMS demonstrates the causal relationship between each performance level. The improvement in delivery experience, customer interaction and online services contributes to a greater extent of customer satisfaction. Additionally, the more satisfied the customers, the larger the market share. In terms of responsibility, different levels of management are accountable for each tier of performance, including managers of Customer Contact Centre (CCC), Manager of Customer Service, Chief Customer Office and Managing Director. Within the scope of each performance objective, measures, targets, initiatives and sources of data are identified. Through the utilisation of this system, managers and employees of AU Post are eligible to understand how the organisation is valued from the perspective of customers.

1

22421 Management Decisions and Control - AU Post

PMS structure – a frustum model 1.2 Operation of PMS Because the PMS separates performance measurement into three tiers, it allows managers at each corresponding level to measure different aspects of customer performance. There are several sequent steps to operate the system as an effective mechanism for reviewing standards and targets, in order to assess the implementation of strategies (Neely, Gregory & Platts 1995). To implement this PMS, methods of data collection are first determined, after which data is collected and sorted for each performance measure. The actual results are then benchmarked against the preliminary targets so that the current performance variances are identified. Consequently, managers take specific actions to fill the performance gap and project future performance goals. Besides, the PMS includes a process of periodically revising the whole set of measures to respond to changes in circumstances (Wisner & Fawcett 1991). For example, if the number of customer complaints increased due to a rapid increase in parcel deliveries, the measure should be revised.

Phases in developing a performance measurement system (Bourne et al. 2000)

2

22421 Management Decisions and Control - AU Post

3

22421 Management Decisions and Control - AU Post

2. Justification of Design (Case Organisation)

2.1 Organisation Overview Established in 1809, Australian Postal Corporation has grown into a predominant provider of postal and parcel services in Australia. Operating as a Government Business Enterprise, AU Post is dedicated to contributing to the country’s economic growth and reinvesting in the community. The business delivers great customer experiences and keeps the customers delighted to achieve its vision – helping our people, customers and communities deliver a better future (AU Post 2017). While AU Post provides service to five customer segments, namely consumer, small business, business, corporations and government (AU Post 2017), this report provides the PMS for the consumer division only. The specific division provides delivery as well as a range of digital services by leveraging its online and in-store network. As postal companies are increasingly being customer-oriented (Chan et al. 2006), it is necessary to measure the customer performance with an appropriate PMS.

2.2 Organisational Structure

4

22421 Management Decisions and Control - AU Post

2.3 Justification 2.3.1 Market Condition The shift of customer preference to virtual communication and digital transactions has exerted a significant impact on AU Post’s letter service, substantiated by a dramatic decline in the number of addressed letters since 2008 – 50.6% per letterbox. In contrast, more individuals making online transactions means the emergence of a new peak of parcel delivering, along with a rising demand of online services to protect these interactions. Therefore, AU Post has reinvented its business model as a major eCommerce service provider (AU Post). Coinciding with the changes in market condition, the PMS puts the emphasis on the customer performance in terms of parcel delivery and online services.

2.3.2 Differentiation Strategy Ferreira and Otley (2009) indicate that the performance measures should be derived from the organisation’s competitive and operational strategies. For the consumer division, the entity decided to adopt a differentiation strategy, which grants them competitive advantages by making online shopping and services convenient, safe and personal (AU Post 2017). This is achieved by improving parcel delivery experience, digital services and customer support. Hence the PMS can be utilised to test the effectiveness of the strategies by measuring the three fundamental aspects of customer performance at Tier 1.

2.3.3 Delivery Experience Providing great parcel delivery experience is AU Post’s core business function (Loosemore & Hsin 2001). The major issue with customers is being carded, that is, receiving a card notification when AU Post is unable to deliver a parcel. To reduce the carding rate, the business has introduced an array of deliver options including SafeDrop and Collect@Post (AU Post 2017). Chan et al. (2006) suggest that access to postal service within an easy reach can lead to high level of satisfaction. Therefore, one of the 5

22421 Management Decisions and Control - AU Post

measures is the number of available delivery options as the business is expected to provide more convenience to customers and avoid the situations of carding. Furthermore, the proportion of carded customers who go to post offices to collect their parcels is measured to ensure customers can get notifications and track the parcels online. Although the mail volume has dropped dramatically, the PMS still measures the timeliness of letter delivery as it is a part of the company’s community service obligations (AU Post 2017).

2.3.4 Response and Resolution To improve response and resolution, AU Post needs to advance the effectiveness and efficiency of Customer Contact Centre regarding dealing with customer issues. To attain this objective, first contact resolution rate (FCRR) should be optimised as customers tend to be impatient when they want the problems to be solved at the initial call. Reduction in both wait times and average time spent solving issues is measured to ensure that customers do not lose their place in the queue. Besides, the percentage of customer queries tackled via social media is benchmarked as AU Post has created dedicated contact channels, such as Twitter, to make sure they are always on hand to answer queries (AU Post 2017).

2.3.5 Online Services Given that AU Post is transitioning itself to a digital service provider, it is vital to measure the customer performance with regards to online services. The number of MyPost account holders is firstly measured because it is the prerequisite for providing online services. Besides, the number of online customer visitations is included as visit frequency is a significant reflection of the value customers get from services (Rishika et al. 2013). AU Post currently provides approximately 30 online services via its website, and this is measured against the target of 35 because customers highly value the product variation. Additionally, the quantity of customers who offer testimonials is measured because customer testimonial signals trust of the business’s services and can be seen as persuasive endorsements.

6

22421 Management Decisions and Control - AU Post

2.3.6 Customer Satisfaction AU Post should prioritise customer satisfaction as a key performance indicator as it creates value by making customers happy. One of the methods to track customer satisfaction is to measure customer advocacy with the Net Promotor Score (NPS) – how likely the customers are to recommend AU Post. NPS is a widely used metric to monitor customer sentiment about what the business is doing well and what needs to be improved (Grisaffe 2007). By gauging NPS, AU Post is expected to understand the customers’ perception and experience of their services. The other measure is the number of customer complaints received, which reflects customers’ dissatisfaction with the service.

2.3.7 Market Share Market share is identified as the ultimate level of AU Post’s customer performance. According to AU Post (2017), the organisational objective is to maintain market share in the parcel delivery market. As the majority of profit earned is reinvested into the business, increasing the market share is also crucial to the growth ambition. AU Post currently accounts for 90.9% of market share in the domestic postal service market (Munro-Smith 2018). Hence the target is reasonably set at 92%.

7

22421 Management Decisions and Control - AU Post

3. Justification of Design (Management Accounting Theory)

3.1 Alignment with Vision It has been established that at the inception of designing a PMS, a fundamental requirement is the alignment with vision and mission of the organisation (Ferreira & Otley 2009). As mentioned above, the vision of AU Post is to deliver better future for customers and community, while the business defines its mission as contributing to Australia’s economic growth and prosperity. As AU Post is a customer-driven business (Loosemore & Hsin 2001), the PMS is purely structured on a customer performance basis. To be more specific, the system communicates how successful AU Post has achieved its vision by measuring how the business conducts its commitments to customers. Similarly, AU Post needs more market share to reinvest into the business to contribute to the nation’s economic growth, which is measured in the PMS.

3.2 Embrace Empowerment Hall (2008) endorses that it is significant to involve managers and employees in the operation of performance measures so that they can accept the PMS as fair and take desirable actions to improve the performance. Correspondingly, the frustum model allows AU Post to engage different levels of management to monitor and control the measures in accordance with the organisational structure. At the operational levels, managers of CCC and customer service are in charge of performance with respect to delivery experience, customer support and online services, whereas at more strategic levels, the Chief Customer Office and CEO are assigned with customer satisfaction and market share respectively. Not only does the PMS embrace participation of different managers, but also empower employees to connect to the business strategies and take actions to improve the performance (Hall 2008).

3.3 Balance of lead and lag The frustum model absorbs the attributes of the balanced scorecard (BSC). One of the essential characteristics of BSC is achieving the balance of lead indicators (performance 8

22421 Management Decisions and Control - AU Post

drivers) and lag indicators (outcome measures). This assumption is applied to each tier of the PMS for AU Post.

3.4 Causal Linkages Kaplan and Norton (2004) suggest that a sophisticated PMS must develop explicit causal linkages between measures and objectives. The aforementioned frustum structure justifies the cause-and-effect relationships between the three distinct objectives. According to Innis and La Londe (1994), customer service and experience is the cornerstone to satisfy the customers. Customer satisfaction and market share are also linked as improving customer satisfaction increases the profitability of AU Post, which in turn potentially elevate the market share. Furthermore, the individual measures in each performance cluster contribute to the measure in next level. For example, the more delivery options available and the less time it takes to solve a customer issue, the more NPS the business will obtain.

9

22421 Management Decisions and Control - AU Post

3.5 Emphasis the Positive According to LangField-Smith et al. (2015), performance measures interpreted in positive instead of negative terms are conducive to motivation of performance improvement. The customer PMS for AU Post demonstrates adherence to this principle. For instance, when measuring the timeliness of letter delivery, proportion of deliveries on time or early (>99%) is adopted, rather than proportion of letters delivered late (80%) is used to measure efficiency of solving customer issues, in place of percentage of issues which fail to be solved at the first call (...