Fresh Foods is in the service industry, where it is essential to link strategy to the management of human resources. The partners would like to have…

(a) (I) Dimensions at Fresh Foods: Dimensions (goals) include financial and non-financial goals. Dimensions are further categorized as into results and determinants. Results are tracked as (a) financial performance and (b) competitive performance. Determinants are tracked as (a) quality, (b) flexibility (c) innovation and (d) resource utilization. Determinants influence results. Results: (a) Financial performance (result): Fresh Foods is a closely held partnership with 3 partners. Partners are interested in earning profits that have been benchmarked at an overall return on investment of at least 18% each year. Partners want to retain the current capital structure. They may take loans from banks for funding their expansion. They expect certain conditions to be laid down in terms of the debt service ratio and interest service ratio that may need to be maintained for the period that the loan is outstanding. Profits margins under the industry are under pressure due to inflationary trends. Hence, despite having the leverage of charging premium prices to customers due the nature of the menu offered, Fresh Food has to track the profitability of business very closely. Profits will be derived from the periodic financial statements that get prepared as part of the accounting function. In addition, other financial performance dimensions like profitability ratios like gross profit ratio, net profit ratio, operating margin, return of capital employed, cash profit and changes in cash reserves will provide information about the business profitability. (b) Competitive performance (result): Fresh Foods wants to be a niche joint in a highly competitive segment. Their basis for competition is providing healthier food choices to customers based on vegetarian and vegan diet. However, comparison of peer performance is restricted on account of limitation in terms of availability of information due to the unorganized nature of the food industry. All the same, to begin with, one of the measures that can be helpful, will be the utilization of their 50 seat capacity at their restaurant. The benchmark capacity utilization of at least 90% would indicate that there is sufficient demand for their product offerings. In due course, based on popularity and profitability of the venture, it can consider further expansion plans. Segregation of its offerings into various classes such as A, B, C and D would help the management identify a good mix of popular and profitable items. This will help it develop its competitive edge. Since the restaurant is a proposed trend setter within the industry, it will retain a competitive edge until its peers start replicating the same. Therefore, as this segment develops within the industry, one other measure for competitive performance could be re-engineer the menu to maintain variety and uniqueness as compared to its peers. Information to develop a robust menu offering could be gathered from published / researched sources like trade magazines as well as informal sources like customer feedback / word of mouth. Determinants: (c) Quality (determinant): The firm is focused on offering high quality food to its customers. High quality standards drive growth. Periodic weekly quality checks, external certifications from government food inspectors and other recognized agencies would also be required to be met. A formal record of quality issues identified by either the customer or team would help identify quality related issues. Non-compliance may require immediate attention of the management. For customer facing staff, periodic training programs can be initiated to educate the staff with people management skills. Therefore, Fresh Foods should focus on both product and service quality parameter and continuously work on improving them. (d) Innovation (determinant): Healthy yet delectable vegetarian and vegan food choices is the unique selling point of Fresh Foods. This requires innovative efforts from qualified and skilled chefs. Segregation of the menu into various classes such as A, B, C and D based on popularity and profitability would help the management identify the food choices to focus on. Innovation has to be constant and not a onetime exercise. Management may review the number of new variants that have been introduced in the menu, regularity of these introductions and customer feedback of the same. (e) Flexibility (determinant): Growth in scale of operations combined with a competitive business environment implies that the firm should have some flexibility in its operations. The ability to build a robust supply chain that can deal with disruptions is very important for continuity of business operations as well as its future growth. For critical resources such as raw material, labour etc. the firm should have multiple partners who can provide for the requirements reliably. Appropriate investment in infrastructure in the kitchen, design and décor of the restaurant should be done to build flexibility in operations in order to scale up operations if customer demand picks up. (f) Resource utilization (determinant): The ability to deliver food within 15 minutes of placing the order requires a high level co-ordination of order taking and food delivery systems. Errors in order taking process, stock outs due to unavailability of material should be avoided at all costs as it causes customer dissatisfaction. Not just this, chefs have to prepare the food economizing costs and minimizing food wastage. They would not just require the requisite skill, but also the right tools in the kitchen to make this happen. Appropriate kitchen infrastructure that can support this providing them with appropriate space, machines and tools for cooking and storage would be needed. Therefore, some non-financial indicators to be tracked can be overtime / idle time of kitchen, ordering and delivery staff, turnaround time in these functions, table occupancy rate, breakage or wastage of material etc. Social media platform represents another resource that may need to be used optimally to reach out to the maximum possible existing customers as well as potential ones. This will increase the market share of Fresh Foods. (II) Standards at Fresh Foods: (a) Standards are the benchmarks or targets related to the performance metric that is being tracked under each dimension. To be useful, standards should have the following characteristics: Ownership: A clearly defined organization structure with well-defined roles will help Fresh Food assign authority and responsibility among its staff. This creates ownership for different functions. Ajay in charge of restaurant operations, Biren in charge of finance, administration and marketing while Chand giving strategic direction and capital infusion clearly defines the role of each of the partners in the firm. They must now decide on the key performance metric that will help them track actual business performance. Ajay, representing the concerned departments like kitchen and customer service staff, will be accountable for the quality of food and service (Dimension: Determinant; Quality). The formal record of food and service quality issues can be the basis for setting up appropriate metrics. Stock-outs due to supply chain management issues, non-availability of personnel etc. may also be assigned to Ajay (Dimension: Determinant; Flexibility). Brien in charge of marketing will be in charge of generating maximum coverage for the business through social media. Number of promotional campaigns and the resultant conversion of potential customers into actual customers, may be a metric for marketing (Dimension: Determinant; Resource utilization). Similarly, ability to get the maximum credit period from suppliers, managing loans at effective rates (Dimension: Determinant; Flexibility*) etc. will be performance parameters Biren regarding the finance function. (*Can also be related with financial performance) (b) Achievability: Benchmarks and targets will be useful only if they are achievable. Being a partnership firm, each of the partners have a stake in the performance of the firm. Hence, they would need to have a clear understanding of the benchmarks and targets. For example, Certain other parameters like the quantity sold and turnover of food choices under each of the Class A, Class B, Class C and Class D categories can also be tracked. (Dimension: Results; Financial Performance and Competitive Performance). Benchmarks can be set as to how many new food choices have been developed (Dimension: Determinants; Innovation) and of those how many have been Class A categories that ones that are profitable as well as popular (Dimension: Results; Competitive Performance). Being the strategist, Chand can give inputs as to whether these benchmarks and targets are aligned with the firm's overall strategy. If the target is set very high staff can get de-motivated. If set too low, will not raise the bar for performance. If not in line with the firm's overall strategy, there will be discord or gap between the firm's performance and what it wants to achieve. (c) Equity: Benchmarks should be equally challenging for all parts of the business. Fresh Foods should customize its performance measure for each function like kitchen staff, order and customer service staff, finance staff, advertising staff etc. For example, while turnaround time to meet a customer's order would be relevant metric to the kitchen, the effectiveness of promotional campaigns would be the relevant metric for the marketing department. The rigor of the target should be uniform across departments. Otherwise, the staff would view the benchmark system as being biased towards select functions within the firm. Similarly, while Ajay and Biren are working partners, they should not view Chand, the non-working partner as a non-contributory resource. As per the current capital structure, Chand equally high stakes in business performance since his capital contribution is five times more than each of the other two partners. (III) Rewards at Fresh Foods: This relates to the reward structure within the firm that includes compensation package, bonus, rewards, awards, facilities provided to employees etc. Proper reward system is required for achievement of standards while maintaining costs at optimum levels. Fresh Foods should have a well defined HR policy for compensation, bonus, promotion and reward. A good system should have the following characteristics: (a) Motivation: Does the reward system drive the people to achieve targets and standards? It is mentioned that high staff attrition is a perennial problem within the industry. Hence, a low reward system for the sake of keeping costs low, would not induce staff to work towards the goal. While some part of compensation may be fixed, other parts can be made variable. For this, the performance measurement indicators have to be communicated and understood by the staff. For example, bonus of the marketing staff can be aligned to the sales generated, Chefs can be rewarded bonus based on turnover generated by the various categories of food choice as well quality measures etc. Keyman Insurance on key personnel is also a way of motivating and can help stem attrition to a certain extent. Better job prospects in a growing environment would also be a good motivator. Fresh Foods plans to hire specialist chefs who have scope for innovation within the business mode. Similarly, customer facing staff are going to be given period training on customer management. Management should track various metric in this regard. Reward and recognition systems should act as a good motivator for all of them. (b) Clarity: Communication and clarity are must for the staff to understand how their compensation package will be driven by the various performance measurement metrics. As regards the partners, they should also have clarity about how each of them will be individually compensated based on the performance measurement metrics. These can be defined within the partnership deed. Disputes about remuneration (salary, bonus, commission etc.) among the partners can even lead to dissolution of the partnership, which can negatively affect the continuity of business. (c) Controllability: Unlike the traditional understanding, rewards need not be based only on the financial element that the staff can control. There may be other non-financial elements for which rewards can be given. Both aspects however need to be controllable by the staff concerned. For example, the chef can come up with a popular menu. If the pricing of the product, managed by the partners, is such that it results in a loss to Fresh Foods, the chef may not get the much deserved bonus. This is not a good reward system and might lead to attrition. In the case of Fresh Foods, the partners have more control over the outcome of results than the staff. This should be used well in order keep the staff motivated while also ensuring requisite business performance.