Please, write a main discussion post about the below topic and respond to the two main discussionpostsfrom my classmates attached.
Topic: "Companies should focus on financial measures of quality because these are the only measures of quality that can be linked to bottom-line performance." Do you agree? Explain with the use of at least two appropriate examples.
Thank you for your help!
Instructions for main post (Around 200 words) Please, write a main discussion post about the below topic: Topic: "Companies should focus on financial measures of quality because these are the only measures of quality that can be linked to bottom-line performance." Do you agree? Explain with the use of at least two appropriate examples. (Citations only needed for main post) Instructions for the two classmate responses (around 150 words each) Please, respond to the below two classmate main posts. (Please, the responses need to be a discussion, not an evaluation. You can agree with them and add/comment about their response.) Thank you Classmate post #1: Cheyenne Haley Choosing the right measures is a challenge for companies because it plays a key role in developing strategy, evaluating the achievement of objectives and compensating managers (Ghosh & Wu, 2006). The financial measures include the measures of revenue and operating income growth that are impacted by quality and is mostly measured by the cost of quality. The cost of quality (COQ) are the costs that are incurred to prevent the production of a low-quality product, which are classified into the categories of either prevention costs, appraisal costs, internal failure costs, or external failure costs. Most companies use both financial and nonfinancial measures to gauge quality performance. Companies not only use financial measures of quality but also use nonfinancial measures to manage quality as well. To determine which measures of quality to use, managers must look at quality through the eyes of their customers (Datar & Rajan, 2014). For nonfinancial measures of customer satisfaction, managers should track market research information on customer preferences and customer satisfaction with specific product features, market shares, number of defective units shipped, number of customer complaints, percentage of products that fail after delivery, average delivery delays, and on-time delivery date. Managers monitor the following items to see if the numbers improve to ensure customer satisfaction. Customer satisfaction can lead to lower external failure cots, lower costs of quality and higher future revenues, greater customer retention, loyalty, etc. Additionally, managers use nonfinancial measures to understand quality from the customers viewpoints with techniques such as control charts, Pareto diagrams, and cause-and-effect diagrams to improve quality. Companies tend to combine both financial and nonfinancial information when making decisions and evaluating performance. The COQ measures help managers focus managers attention on how poor quality affects operating income and helps them aggregate costs to evaluate tradeoffs among prevention costs, appraisal costs, internal failure costs, and external failure costs. COQ measures also assist in problem solving by comparing costs and benefits of different improvement programs and sets priorities for cost reductions. Nonfinancial measures direct the attention to physical processes that help managers identify the problem areas precisely that need improvements. Together, the measures help the managers make effective decisions for the company, which is why managers need both financial and nonfinancial measures, because they complement each other. If managers didn’t use both measures, the company would be spending more money on improving than what it is worth. Classmate post # 2: Kari Grippo Although financial measures are not the “only” measures of quality that can be linked to performance, they are measures of quality which can be linked to bottom-line performance since their quality is measurable in terms of dollars. The measure of quality and performance should be linked so a causal relationship is actually established. Performance measures are implemented in order to motivate employees to work towards business goals. Many quality measures are difficult to quantitate in financial terms but a relationship must be created between them the resulting quality can be linked to performance in order to determine if the desired numbers were achieved. While companies should focus on quality measures of financial performance, they should not only focus on the financial indicators as nonfinancial quality measures also help provide a more holistic evaluation of the company’s performance whilst still contributing to the business’ bottom line. Many measures of performance that are not as directly impacted by the financials such as an increase in customers and repeat business along with competitive advantages will indirectly lead to expenses such as inspection and production costs and working capital decreasing. Key performance indicators are used to reflect organizational success or progress in a relation to a specified goal (CGMA, 2013). The purpose of KPIs is to monitor the progress towards accomplishing the strategic objectives. Such performance indicators are usually included in a reporting scorecard or dashboard or balance sheet components and may also report “change in sales growth (by product families, channel, customer segments) or in expense categories” (CGMA, 2013). Non-financial key performance indicators include measures linked to customer relationships, employees, operations, quality, cycle-time, and the organization’s supply chain. Rather than “non-financial” these measures are “extra-financial” as they contribute to the organizational success and are ultimately financial indirectly. Key financial indicators that measure a company’s performance may include operating cash flow, working capital, currents ratio, quick ratio and debt to equity ratio which measure the effectiveness of a firm’s financial efforts. Other quality measures linked to bottom-line performance may include the comparisons between actual revenues versus target revenues as well as actual expenses versus budgeted expenses. There are many additional financial performance indicators specific to the operational areas for firms. For example, marketing KPIs such as cost ratio of customer acquisition to lifetime value, lifetime vale, customer acquisition cost, customer profitability score, and relative market share. For the finance department, operational key performance indicators should also include obscure indicators such as finance error reports, payment error rates, and other indicators in areas of billing and transaction management, collections, and others – all of which relate to and effect the bottom-line performance for a company (Gerber, 2019). I do not believe that a business should have to choose between focusing on financial measures or nonfinancial measures, rather, the firm and its employees should understand that nonfinancial performance relates closely to financial performance in terms of the “bottom-line” numbers. If a company such as Publix, for example, were to act in a negative manner through making choices that did not aligned with all of their customer’s general opinions, Publix would likely lose their business as they would begin shopping elsewhere. Because their customer volume would decrease, the supermarket would experience decreases in revenue and ultimately in net income. Although customer opinions and values may be considered non-financial, they still contribute to the bottom-line performance of an organization.