12. Characteristics of Objectives S Specific Be specific in targeting an objective M Measurable Establish a measurable indicator(s) of progress A Assignable Make the objective assignable to one person for completion R Realistic State what can be done with available resources T Time related Assign a realistic timeframe
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14. Balanced Scorecard Method Vision & Strategy CUSTOMER “ To achieve our vision, how should we appear to our customers?” Objectives Measures Targets Initiatives FINANCIAL “ To succeed financially, how should we appear to our shareholders?” Objectives Measures Targets Initiatives INTERNAL BUSINESS PROCESSES “ To satisfy our shareholders and customers, what business processes must we excel at?” Objectives Measures Targets Initiatives INNOVATION AND LEARNING “ To achieve our vision, how will we sustain our ability to change and improve?” Objectives Measures Targets Initiatives
15. This is where the issue of project selection comes to the fore…what is the best alternative?
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19. Direction Execution – cross functional and concentration of resources Portfolio Management (incl. Selection)
20. Portfolio’s Management System Strategic Management Opportunities/ Needs Research Solutions Select and Determine Feasibility Projects
28. Number of years needed for a project to repay the initial fixed investment Example: Project costs R100,000 and is expected to save company R 20,000 per year Payback Period = R 100,000 / R 20,000 = 5 years Financial Models The Payback Model
29. Financial Models 15,000 10,000 3 10,000 15,000 2 10,000 20,000 1 (35,000) (35,000) 0 Cash flow project B Cash flow project A Year
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33. Financial Models Return on Investment (ROI) 55,000 55,000 Total gains 20,000 10,000 4 15,000 10,000 3 10,000 15,000 2 10,000 20,000 1 (35,000) (35,000) 0 Cash flow project B Cash flow project A Year
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35. To solve the problem of time value of money, discounted cash flow techniques (DCF) are used. Financial Models
36. Which would you prefer -- $10,000 today or $10,000 in 5 years ? Obviously, $10,000 today . You already recognize that there is TIME VALUE TO MONEY !! Financial Models
37. TIME allows you the opportunity to postpone consumption and get a RETURN . Financial Models
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41. Financial Models 0.4823 0.5787 0.6944 0.8333 1 Discount factor 20 % 2,692 Total NPV 4,823 10,000 4 5,787 10,000 3 10,416 15,000 2 16,666 20,000 1 (35,000) (35,000) 0 Present value Cash flow project A Year
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