Performance Improvement and Strategic Planning for Care Tech PLC

This report provides an internal memorandum for the shareholders of Care Tech Holding PLC, a social care service provider. It evaluates strategic planning models, including the Balanced Scorecard and Gap Planning, assessing their advantages and disadvantages for the care sector in England. The report also describes the usefulness of financial ratio analysis, residual incomes, and the Economic Value Added (EVA) concept for financial decisions. Furthermore, it critically evaluates non-financial and multidimensional models of performance management, highlighting their importance to Care Tech Holdings PLC. The analysis aims to improve the efficiency and management of healthcare services, ultimately enhancing the company's financial performance and stakeholder value.

PERFORMANCE
IMPROVEMENT AND
MANAGEMENT IN
HEALTH AND SOCIAL
CARE

Executive summary
Performance improvement mainly improve the efficiency of the particular process so that
it will help to provide an accurate result. In the same way it also assist in management of the
health care services. The current report is based upon Care Tech Holding PLC who provides
social care services and its segments include Adult Services and Children Services. Report will
describe and evaluate the range of strategic planning models and interpret the financial strategic
performance measures as well. It also provides deep knowledge of investment appraisal model
and evaluate the use of non-financial and multidimensional models of performance management
in the health care services.

Table of Contents
Executive summary..........................................................................................................................2
INTRODUCTION...........................................................................................................................2
Question 1........................................................................................................................................2
Appropriate strategic planning models for the care sectors of England.....................................2
Question 2........................................................................................................................................6
a. Explanation and usefulness of financial ratios for the shareholders.......................................6
b. Ratio Interpretation...............................................................................................................10
c. Residual Income after and before the investment.................................................................11
d. Benefit and economic value added (EVA) concept..............................................................13
Question 3......................................................................................................................................14
The evaluation of a multidimensional and non-financial model of performance management14
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17
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INTRODUCTION
Performance improvement is very necessary in healthcare sectors. It is a continuous and
systematic action which leads to improvement in health. Practices of healthcare tends to ensure
that the people are safe and are not facing any sort of diseases and personal problems. The
present report prepares an internal memorandum for the shareholders of Care Tech Holding PLC.
The organisation is a provider of social care services and its segments include Adult Services and
Children Services.
There were three aspects of the task such that in task 1, the report critically evaluates the
advantages and disadvantages two strategic planning models which are appropriate to the care
sector in England. Along with it, the report provides appropriate recommendations. In task 2,
report will describe the usefulness of financial ratio analysis to shareholders is discussed along
with the explanation of residual incomes. Then, study will explore the benefits of Economic
Value Added (EVA) concept while making financial decisions is also explained in the report. In
task 3, report will critical evaluation of the use of non-financial and multidimensional models of
performance management is also explained in the report briefly, along with the discussion of
importance of multidimensional and non-financial performance indicators to the Care Tech
Holdings PLC.
Question 1
Appropriate strategic planning models for the care sectors of England
Memorandum
To: Accounting Head
CC: Mr. Andrew
From: Jonas Pele
Date: May 23rd, 2019
Subject: Suitable strategic planning model
Respectively,
The strategic planning models are known for playing a major role in the organisation in order to
gain a long term success. It provides effective direction to the team of accounting and tends to
describe the method which is required to be implemented to make a strategic plan that is
effective (Kanamori, and et.al., 2015). The organisation or the business is seen to be facing
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issues of improper financial management and it is required of various strategic models of
planning so that proper decisions are taken by firm in order to support the growth of the
organisation.
1. Balance Scorecard Planning:
The model is first developed by Drs. Robert Kalpan and David Norton. The balanced
scorecard planning is a strategic management framework and the main objective of the
scorecard provide a big strategy that a company may used in order to improve the financial
performance. Therefore, by using Balance scorecard planning, Care tech holding strategically
improve its financial performance and meet the defined aims and objectives. Also, it tends to
include the key in which can provide appropriate growth and development to the organisation.
The planning is made with the help of google sheets, power-point and excel with the help of a
reporting software. Further, through this, the Care Tech Ltd gain competitive advantages and
also reassuring the stakeholder which further serve as a benchmarking indicator for its
competitors.
Advantages of Balanced Scorecard planning
 Provides structure to the strategy: It is an appropriate source to make a framework that
is powerful in building appropriate strategy of communication for Care Tech Ltd. It
helps into the identification of the complete strategy structure and provides pressure to
the manager of Care Tech Ltd building in order to think about any cause and effect of
the organisation (Pros and cons of Balance Scorecard,2018). Helps to raise financial performance: Using balance scorecard, Care Tech Ltd can
easily change its financial performance and the managers are also handle them in easy
manner and as per the case study the tool is helpful for the firm to gain financial
advantages. Makes it a strategy that is easy to communicate: From the help of the balance scorecard
the manager tends to coordinate the strategies both externally and internally to the
stakeholder effectively (Mannion and Davies, 2018). It provides brief direction to the
organisation in solving the related problems and ensure that set growth and development
is being achieved within the organisation while maintaining appropriate performance
management. Improves performance in reporting: It is a framework which is going to tell about the
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performance of the organisational behaviour. Along with the transparency that is needed
in Care Tech Ltd can be met appropriately if the organisations' manager is creating
reports which are sensible. Also, it helps the system to find out what they need to be
reporting.
Disadvantages of Balance Scorecard Planning Becomes difficult to keep everyone on the same page: It has been seen that it tends to
cause accuracy problems because many companies make their scorecard on excel and
power point. It takes place because of various formant problems. These issues tend to
create delay in time in order to create a performance report the care tech holding
company. Time and financial cost investment: The scorecard of Care Tech Ltd requires
investment which means costly and as per the case study, the financial situation is not as
strong. As an organisation, it is important for it to manage its system constantly and on
time, which comes with financial cost and time. Before working on power-point, and
excel all the employees of care tech holding needs to know in what manner they should
be operating the software's which are actually increasing the expenses of training the
employees (Tsai, Jha, Gawande and et.al, 2015). Along with it, there are software's
which requires monthly maintenance charges.
 Information lacking and external forces: The balanced scorecard tends to give more
information about the care tech holding's internal factors as compared to external ones.
This leads to incomplete submission of the information and fewer records of external
factors of the Care tech holding organisation.
2. Gap Planning:
It refers to a procedure in which current business practices and situations are examined
of an organization in order to identify the differences between growth and development and
current actual performance of the organization (Avruscio, Tocco-Tussardi and et.al., 2017). In
case when the management is not sure how and where the resources need to be allocated, to
make this happens. The procedure of gap planning guides the management about where they
need to be and how the business should be grown. Such that as per the case study, the Care
Tech Ltd wants to gain competitive advantages and also reassuring the stakeholder. Therefore,
this model will explain in what manner the objectives and goals of the organization can be
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achieved.
Advantages of gap planning Current performance evaluation: The Care Tech Ltd should focuses on gap planning
which is to be evaluate through present performance. From the help of this procedure,
the organization's management is going to know where the problems are going to be
arriving and this helps to gain competitive advantages. It will guide the management of
care tech holding company to determine how this gap planning procedure can provide
actual benefits to the business. Helps in identifying areas which require improvement: Each and every company tends
to divide their work as per the set department. Each of the department tends to face
problem issues (Pros and cons of Gap Planning, 2018). From the help of this procedure
the manager tends to find the problems easily and identifies the problem according to
the department such that currently the company neds to string its financial performance
and gain high competitive advantages. It is a time consuming process which provides
the management of care tech holding with a direction to make solution and identify
which department needs improvement. Benefits to the leaders of business: It is important for the leaders of the business of care
tech holding which desires to make plans to years and months into future (Harvey, Jas,
and Walshe, 2015). This helps the leaders in identifying the problems fast and make
ways to cure such problems by making required changes in the leadership.
Disadvantages of gap planning Limitation of cost and time: The cost and time are the major disadvantage for the
management of care tech holding. As per the management, the organization can hire a
consultant to perform the assessment and for this, and the employees which are
participating project are loosing their valuable time. For the growth of the company,
there needs to be equal participation of the managers, directors in order to evaluate and
explore the results according to condition of the business.
 Apprehension among employees: The technique is seen to be creating anxiety among
the employees and the people working in the organization feel insecure which affects
their moral as well.
Recommendation
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From the evaluation of both of the models, it has been seen that if the Care tech
company needs to enhance their business to a good level. It is important to get the benefits from
the gap planning model (Price, Baker and et.al. 2015). It can help the management of the
organization to make the reports which are going to showcase the desired future state and
current condition of the company. Along with it, personal goal of the organization. From the
help of gap planning the Care tech holding company can clearly identify where it stands in the
present market and how many improvements it requires. Also, this is going to create better
plans which will be addressing the gap between the present state and the desired state of the
care tech company. They need to use this model because each and every company needs to be
focused on the present state of the business along with the desired future targets. In case, if they
are focused in the current situation they are not going to face any problems in the future because
they are making fast decision in the present situations (Deblois, and Lepanto, 2016). The gap
planning justifies that the tool can raise the level of performance of the organization, and they
would know where they want to get to and where they are at present. This is going to be done
by comparison of the present performance with the past performance and making plans which
are going to help them in getting their desired future goals. The result of this is going to support
the maintenance of present process and care tech holding in the sector of England.
Thank you.
Regards
Jonas Pele
Question 2
a. Explanation and usefulness of financial ratios for the shareholders
Usefulness of the financial ratio and the analysis for the shareholders
The ratios which are used in finding the relative strength of the companies from doing the
simple calculation on the income statement, balance sheets and cash flows are known as
financial ratios. The ratios measure the stability, liquidity, efficiency, and company's
profitability. They are very helpful for the company's shareholders in order to make wise
decisions before investing in the company.
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Ratios tends to provide a technique that standardised which tends to compare the
companies from their industries. They put each and every company on a relatively playing field
and in the hands of the analyst. They judge the company's performance by volume, market share,
size, sales in order to compare the financial statements of two companies that belong from the
same industry. The two ratio analysis showcase in what manner the company is good in making
profits and in the funding of business which grows through sales rather that debts. These ratios
help in developing a relation between two financial statements. From the assistant of the ratio the
Care Tech Holding PLC could be helped in decision making.
Gross Profit Margin
Gross profit margin is known as ratios which tends to calculate the percentage of sales
which exceeds the cost of goods that are sold. Also, it measures the effectiveness of the
companies by using its labour and material in order to sell and produce the profitability of the
products. Its main purpose is calculating the gross profit margin in order to understand the
company's operational income.
Gross Profit Margin = Total Sales – COGS
Total Sales
= 1,66,018 – 10611
1,66,108
= 36, 085%
The industry average is 36.4% and the Care Tech Holding PLC gross profit margin is
having 36.085% which means that the company is having a good and appropriate profit margin.
The gross profit margin assess the financial health of the company and the model of the
business (Reiss-Brennan, and et.al., 2016). It is used by the company in order to determine the
product pricing, operating expenses and profitability along with the future planning. Also, it
monitors the company's performance as well.
Operating Profit Margin
It also refers as income from operations, it is important for the potential investors.
Shareholders wants to know about the track record of the company before investing. Along with
it, they can also review that ideas which are presented in the past of the sales data and other
accounting figures. The purpose of calculating the operating margin of the profit is to understand
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the operating income of the business before paying interest and tax and after paying variable
cost.
Operating Profit Margin = Operating Income
Net Sales
= 22,667/1,66,018
= 13.65%
The industry average is 12.5% and Care Tech Holdings PLC because it is having 13.65%,
because it means the company is having an operating profit margin that is appropriate.
Net Profit Margin
The net profit margin ratio is also known as return on sales ratio which measures the net
income. The investors and creditors tends to make use of this ratio in order to measure in what
manner the company convert the sales into the income. The objective of calculating this ratio is
to determine the entire profitability of the business because it includes both the non operating
and operating income.
Net Profit = Net Profit
Total Revenue
= 17849/1,66,018
= 10.75%
The industry average is 8.3% along with it the company is having the 10.75 which
showcases the organisation is having the appropriate Net Profit Margin.
Return on Capital employed
Return on capital employed is the ratio of profitability, it tends to measure the company's
efficiency which generates the profits from the employed capital. It is done through the
comparison of net operating profit to the employed capital (Wager, Lee and Glaser, 2017). This
ratio is used in the purpose to determine the amount of return on capital on the business which it
is employed.
Return on Capital Employed = Net Operating Profit
TA – CL
= 17,849/4,11,978 – 35,463
= 4.74%
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The industry average is 6.2% and Care Tech Holding PLC is having around 4.74%. This
means that the company has seen to be increasing the Return on capital employed as per the ratio
of the similar industry.
Assets Turnover
The assets turnover measures the sales of the company or the revenue with the value of
its assets. The purpose of ratio calculation refers to determine the assets' ability in order to
generate the revenue.
Assets Turnover Ratio = Total Sales/Beginning assets + ending assets/2
= 1,66,018/ (3,78,301 + 4,11,978/2)
= 1,66,018/3,95, 139.5
= 0.42
The industry average is 0.65 and Care Tech Holding PLC is having 0.42. This concludes
that it is having fewer assets turnover ratio as per their similar in the industry are having.
Trade Receivable days
It refers to the number of days from which a customer invoices is pending. As seen that,
there is not any particular day that showcases the poor accounts receivables which are varied
according to the industry. It is but more than 25% which shows that the company is requires the
improvement. Its purpose is to know the average debtor collection period in which the trade
receivables gets collected.
Trade receivable days = Account receivables/ Annual Revenue * Number of days in a
year
= 23519/ 1,66,018 * 365
= 51 days
The industry average is 41 days and Care Tech Holdings is seen to be having 51 days
which means that the company is having a below average performance.
Trade Payables Day
This refers to the financial ratio which measure the number of days that a company takes
for the payment to its suppliers. A change in the number of payable days showcases that the
altered payment terms are with the suppliers. The calculating objective of these rations is to
determine the average period of payment in which trade payments are paid back to the creditors.
Trade payable days = Accounts Payable
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Cost of sales/ Number of days
= 15709
1,06,110 /365
= 54,036 days
The industry average of Care Tech Holding PLC is seen to be having 32 days and the
company is having around 54,036 days which means that it is going to pay the payment to its
suppliers a little late (Conklin, Morris and Nolte, 2015). This explains that the company is going
to be having good performance.
b. Ratio Interpretation
Current Ratio
It measures the ability of the company to pay of f its liability of short term from its
current assets. The firm is seen to be having a fund which is very limited to raise a fund and pay
off the set liability. The currents assets are those which can be easily converted in cash or the
equivalents. These equivalents are marketable security, cash, etc. The companies which are
having a large amount of the assets which are current means that they are easily able to pay off
its current liability. This is done without selling any long term revenue generation of the assets.
The ratios objective is to assess the solvency and the liquidity in a business position.
Current Ratio = Current Assets
Current Liabilities
= 30,756/35,453
= 0.86
The industry average for the current ratio is 1.3 and the Care Tech Holding PLC is
having. 0.86 which is lower than the average of the industry. It is advisable for the company to
increase its current ratio so the company can pay off its liabilities easily.
Gearing Ratio
It is a type of financial ratio which tends to compare company's debt that relates to the
financial metrics. The investors tend to use the ratio in order to find out if the company can
survive the downturn or not. The objectives of the ratio is to measure the financial leverage of
the company. It means the interest bearing liability in the capital structure. The capital gearing
ratio is used in order to determine the capital structure of the organisation. It is compared by
dividing the common stakeholders' equity from the divided bearing funds or fixed interests. The
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