CASE STUDY B.

THE BUILDING BLOCK MODEL

Grab and Go is a fast food joint operating in a very competitive business environment. It is a
profitable business with very good prospects for growth. A strategy development meeting is
underway to chalk out a plan to improve business growth in a very systematic measurable
manner.
The following information is given to you:
Grab and Go has the following mission statement “Derive strength to grow in scale using our
passion for the craft of cooking and service that will satisfy our customers, employees and other
stakeholders.” Grab and Go is a closely held partnership firm with five partners. It started at a
scale of operations that catered to the local demand within a locality. Reputation for good quality
food and service has help it scale up its operations in the recent years. Most of the key decisions
relating to operations like decision about the menu and its method of preparation, product pricing,
finance, marketing, administration etc. are centralized. Skilled chefs, managers for various
functions and the firm’s partners are part of this core team.
A general survey published in a food trade magazine highlighted people’s perception about fast
food diet. Predominant opinion was that the current food platter available in food joints across the
town were not healthy option. People want healthier choices in the menu when they dine out. At
the same time, they do not want to compromise on taste or presentation of the food item. The
other focal point for improvement was the order taking system. In most food joints, the current
system is manual where the order taking staff note down a customer’s order on paper, send it to
the kitchen and then delivers the order on intimation from the kitchen, which is also done manually
by the kitchen staff. This system has problems like errors in taking down orders, most times
delivery staff are unaware of the content in an item or its availability, delays in delivery leading to
customers complaining about food served cold etc. This problem takes away the pleasure of
dining out and is leaving customers dissatisfied. Another scope for improvement is that customers
want more payment options other than cash to settle their bills. With the advent of plastic money
and mobile e wallet payments carrying cash around has become cumbersome for most of them.
The partners have decided to use this as an opportunity to develop Grab and Go as the niche
food joint addressing the customer’s concerns, while managing to remain profitable.
Consequently, Grab and Go plans to expand by providing more choices along with its regular
menu to health-conscious customers. Also, revamping its ordering, delivery and payment system
would improve customer experience. A reasonable return at the overall firm level would be a
return on equity (Net Income / Total Partnership Capital) of 25% each year. Capital structure will
remain unchanged. The partners are not interested in diluting their share by bringing in new
partners or take external funding with ownership stake. They may however utilize bank financing
for expansion, but only if required.
Expansion of business will entail opening new branches in other localities as well as forging
franchise with other stakeholders. However, Grab and Go is not clear how to measure market
share since the fast food industry market is not entirely an organized sector. There is no clear
information about the overall revenue of the whole sector.

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 B.2 STRATEGIC COST MANAGEMENT AND PERFORMANCE EVALUATION

In the past, it was quality of its products that drove growth. The management wishes to maintain
high quality standards across branches and franchisee. Therefore, an internal quality control
department may be established to look into the same. External certifications from government
food inspectors and other recognized agencies would also be required to be met. Quality refers
to both product quality and service quality, in this case, service being an inherent part of customer
experience.
The staff at Grab and Go are also excited at this opportunity. Expansion of the food joint would
present a more dynamic work culture. Chefs would have the opportunity to enhance their skill by
trying out various ways to cater to the consumer’s palate. Ordering and delivery staff would have
the opportunity to enhance their people management skills. This learning opportunity would
definitely be an impetus for their career growth. With expansion chances of promotion within the
organization increase. Financially, better business leads to the expectation of better pay and
reward system.
Consequently, the management is intent on developing a performance management system that
tracks performance across the organization. Among the different models, the Building Block
Model is being considered.
Required

ADVISE the partners how the Building Block Model at Grab and Go could be implemented.

Solution
Performance management using the Building Block Model poses three questions based on which
the performance measurement system is developed:
What dimensions of performance should the company measure?
Dimensions are the goals that the company wants to achieve based on its overall strategy, those
goals that define its success.
How to set the standards (benchmarks) for those measures?
What are the rewards needed to motivate employees to achieve these standards?
Dimensions
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: Grab and Go is a closely held partnership with 5 partners. Partners
are interested in earning profits that have been benchmarked at an overall return on equity
of 25% each year. This can be derived from periodic financial statements that get prepared
as part of the accounting function. Partners want to retain the current capital structure. This
implies that they do not have any plans to go public or have other external funding with
ownership stake. They may take loans from banks for funding their expansion.

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 CASE STUDY B.3

Consequently, if they want to expand, the firm has to make sufficient profits that will yield
ample cash reserves. Therefore, Grab and Go’s financial performance dimensions should
also include profitability ratios like gross profit ratio, net profit ratio, operating margin, return
of capital employed (if bank loans are taken) etc. Cash profit and changes in cash reserves
may also be included as dimensions of performance. These measures should be tracked at
the firm’s overall level as well at the individual branch/franchisee level.
(b) Competitive Performance: Grab and Go was to be a niche joint in a highly competitive
segment. However, to measure how it compares with its peers there is a limitation in terms
of availability of information due to the unorganized nature of the fast food industry. All the
same, one of the measures that can be helpful are the number of branches / franchisees the
firm is able to open.
Grab and Go is also likely to have a competitive edge because it is foraying into providing
healthier food choices along with its regular menu. Since this is unique among its segment,
it will retain a competitive edge until its peers start replicating the same. Therefore, one other
measure for competitive performance could be the spread and uniqueness of Grab and Go’s
menu as compared to its peers. Information for this could be gathered from published /
researched sources like trade magazines as well as informal sources like customer feedback
/ word of mouth.
Determinants
(a) Quality: Quality drove past performance and it will continue to drive performance even after
expansion. For product quality, the management should track if internal quality checks and
external certifications are met periodically. Quality control should cover all branches and
franchisees. Non-compliance may require immediate attention of the management. For
service quality, periodic training programs can be initiated to educate the staff with people
management skills. Therefore, Grab and Go should determine parameters that the
management would be interested in ensuring that quality standards are met and how non-
compliance should be reviewed.
(b) Innovation: Innovation involves experimenting with the appropriate inputs which make them
healthy. At the same time, the healthier option should satisfy the taste and presentation
preference of customers. This requires innovative efforts from qualified and skilled chefs.
This will give the competitive edge to Grab and Go. Innovation has to be constant and not a
onetime exercise. Therefore, 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.
(c) Flexibility: Growth in scale of operations combined with a competitive business environment
implies that Grab and Go should have some flexibility in its operations. This could mean
ability to hire staff quickly, cater to seasonal surges in customer’s demand etc.
(d) Resource utilization: Better utilization of resources help business function efficiently.
Revamping the order, delivery and payment system would improve the way resources
(kitchen, ordering and delivery staff) operate. Lesser errors and delays would increase
capacity utilization, freeing up time to cater to more customers. Consequently, pressure on
resources decreases. Therefore, some indicators to be tracked can be overtime / idle time

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 B.4 STRATEGIC COST MANAGEMENT AND PERFORMANCE EVALUATION

of kitchen, ordering and delivery staff, turnaround time in these functions, table occupancy
rate, breakage, or wastage of material etc. Again here, the management should chart out
the appropriate dimensions that will help them track resource utilization.
Standards
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:
(a) Ownership: It is important to establish who in the organization structure is responsible for
achievement which performance metric. Grab and Go has to consider this very carefully. As
explained in the problem, many key management functions like decisions about the menu
and its preparation are determined by a core team. Similarly, the centralized core team is
handling finance and marketing. However, at the branch level, managers of various
operational functions can be held accountable for performance of that specific process. For
example, the chief at a particular branch can be held accountable for the quality of food
prepared in that branch (Dimension: Quality). Similarly, the head of the order taking staff at
a particular branch can be held accountable for the overtime that the staff at putting in at
that branch (Dimension: Resource utilization).
(b) Achievability: Benchmarks and targets will be useful only if they are achievable. The
managers who have ownership for the achievement of performance metric have to be
involved in setting benchmarks or targets. They should be clearly defined, preferably
quantifiable. At the same time, they should be in line 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. Grab and
Go should customize its performance measure for each function like kitchen staff, order and
delivery staff, finance staff, advertising staff etc. For example, while turnaround time to meet
a customer’s order would be relevant metric to the kitchen, ordering and delivery staff,
popularity of the advertisement jingle for Grab and Go would be the relevant metric for the
advertisement 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.
Rewards
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. Grab and Go 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? A
low reward system would not induce staff to work towards the goal. Goal clarity and
participation in target/benchmark setting can motivate staff to achieve standards.

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 CASE STUDY B.5

While some part of compensation may be fixed, other parts can be made variable. For
example, bonus of the advertising staff can be aligned to the sales generated, Chefs can be
rewarded bonus based on sales as well quality measures etc. Better job prospects in a
growing environment would also be a good motivator. Grab and Go’s management should
track various metric in this regard. Some of them could be percentage of bonus paid to the
overall compensation package categorized staff cadre, attrition rate, internal promotions,
cross training programs etc.
(b) Clarity: The reward package should be clearly communicated to the staff. It should be
understood by the staff concerned. They should be told what kind of performance will be
rewarded and how their performance will be measured. Grab and Go may consider having
a dedicated HR team for this purpose.
(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 central core team, is such that it results in a loss to Grab and Go,
the chef may not get the much-deserved bonus. This is not a good reward system and might
lead to attrition.
Grab and Go can design its performance measurement system along the above lines.

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